THE GOVERNMENT OF SIERRA LEONE PUBLIC SECTOR REFORM UNIT SIERRA LEONE PAY AND PERFORMANCE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 T CBDO The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2077 CONTENTS PAGE General Information 1 Background Information on the Project 2-4 Managements Responsibility Statement 5 Independent Auditors' Report 6-9 Statement of Resources and Expenditure 10- 11 Statement of Income and Expenditure 12 Statement of Financial Position 13 Statement of Cashflow 14 Notes to the Financial Statements 15 - 16 The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 GENERAL INFORMATION Office Public Sector Reform Unit 8 Wesley Street Freetown Project Coordinator Mrs Georgiana Kamara - Director Public Sector Reform Unit Implementing Agencies HRMO, PSC and Ministry of Finance and Economic Development Project Accountant Accountant General Accountant Generals Department Ministry of Finance and Economic Development George Street Freetown Bankers Bank of Sierra Leone Gloucester Street Freetown Auditors BDO Regent House 12 Wilberforce Street Freetown The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financiol Statements For the year ended 31 December 2017 BACKGROUND INFORMATION ON THE PROJECT The Pay and Performance Project is a USD 17.0 Million World Bank support programme to public sector reforms in Sierra Leone, being implemented from 2012 to 2017. It's objectives are:- 1. Undertaking pay reforms aimed at improving the competitiveness of the Civil Service, thereby attracting, motivating and retaining competent skills for effective service delivery. 2. Rationalising staffing in the Civil Service by filling existing critical skills gaps through merit-based competitive recruitment, while minimising the numbers of redundant posts and personnel in the service. 3. Minimising waste and inefficiencies by improving the integrity of the payroll and personnel records; harmonising and strengthening pay administration and management systems, and streamlining payroll management procedures, processes and accountability mechanisms. 4. Building the required capacity for driving reforms and effectively managing performance in the Civil Service. 5. Introducing and implementing a robust performance management system that links rewards to productivity. 6. Implementing comprehensive training and staff development programmes aimed at changing work ethics and culture while continuously upgrading capacities and skills in the public service. Project Components The Pay and Performance Project comprises of two main components as follows: Component 1: Support to the Government of Sierra Leone (GoSL's) Public Sector Reform Programme, specifically Pay Reform, Recruitment and Staffing, and Performance Management. Pay reform Implementing Partner: HRMO/MoFED This supports review and implementation of the GoSL's strategy for reforming public sector pay. It recognises that remuneration should be commensurate with the responsibilities of the job, which will require that a comprehensive job evaluation and grading exercise be completed before a competitive pay is introduced in a new pay structure. In addition, the strategy envisages significant decompression of the pay structure, which will allow professionals and managers to be remunerated more competitively, while will allow professionals and managers to be remunerated more competitively, and maintaining an affordable and sustainable public service wage bill in relation to the GoSLs recurrent revenues. The objective of this sub-component are: a) to attract and retain key professional and managerial staff; and b) to motivate all civil servants to perform their jobs to an acceptable standard. The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 BACKGROUND INFORMATION ON THE PROJECT (Contd) Three results are sought to achieve these objectives: (a) civil servants are paid more equitably and competitively; (b) the authority to change personnel records and payroll is vested in, and restricted to HRMO (an audit trail will be maintained); (c) the human resource database and the payroLL are directly linked. Recruitment and staffing (Implementing Partner: PSC) The objective of this sub-component is to create a capable civil service of the right size and job composition to deliver its core functions assigned by the Government. Four results are sought to achieve this objective: (a) priority vacancies in the GoSL's annual recruitment plans are filled; (b) recruitments are based on appropriate open, competitive and merit-based procedures; (c) promotions are based on open, competitive and merit-based promotion procedures; (d) vacancies are filled within three months. Performance management and accountability (Implementing Partner: HRMO) The objectives of the performance management component are to: (a) improve the performance and productivity of ministries and individual civil servants; (b) increase citizens trust and confidence in the government; (c) strengthen the accountability of ministries to the executive and citizens. Three results are sought to achieve these objectives: (a) annual staff performance appraisal reports are of an acceptable quality: (b) annual performance reports of civil service managers on performance contracts are of an acceptable quality; (c) ministries Performance is evaluated jointly by the GoSL and non-state actors. Component 2: Technical Assistance (Implementing Partner: PSRU) The Technical Assistance (TA) component will complement the first component by financing selected inputs for which the GoSL has requested more intensive supervision by the Association or for which resources may not be readily available in the GoSL's budget. This component will finance goods, consultancy services, non-consulting services, monitoring and evaluation, training, study tours and workshops. Specific areas identified for financing under this component include: Sub-component 2.1: Strategic Communications Program: Given the importance of effective and continuous information sharing on the reform activities within and outside the government, the GoSL proposes to develop and implement and strategic communication program. The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 BACKGROUND INFORMATION ON THE PROJECT (Contd) Subcomponent 2.2: Enhancing Social Accountability The GoSL is already implementing measures to enhance the accountability of the public services. This component will be used to consolidate and improve the quality of some of these ongoing initiatives and to support the implementation of some new ones, including public disclosure PSR-related information, a complaint handling mechanism for recruitment, "Meet the Public' forums on P5R and Citizen's Charters. Sub-component 2.3: Job Evaluation and Labour Market Survey 1. A consulting firm has been contracted to: (i) conduct a comprehensive job evaluation exercise covering all civil service jobs based on an appropriate factor based scheme; (ii) build skills within the civil service to carry out job analysis and evaluation; (iii) obtain comparative pay data for a select number of civil service benchmark jobs; (iv) examine the future demand and supply of skills in the economy which are needed by the civil service; (v) design (a) new pay structure(s) and a new grading structure for the civil service based on the information from the job evaluation and market survey; (vi) develop and implementation for phasing in the new structure in accordance with priorities and wage bill constraints; (vii) prepare administrative, maintenance and appeals procedures; (viii) propose orgainsation and staffing structures to maintain the job evaluation system. Sub-component 2.4: Implementation Support 2. This sub-component will support implementation activities contained within Component 1 to be conducted by the PSRU, HRMO and PSC. Goods and consultancy services would support the immediate needs of new staff in the PSC, the new Performance Management Directorate in the HRMO, the coordination and MEtE responsibilities of the PSRU associated with this project. The PSRU will also engage a procurement specialist on a part-time basis to assist it as the implementing agency for component 2. this sub-component would also support additional consultancies, trainings and workshop as needed. 4 The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 MANAGEMENT'S RESPONSIBILITY STATEMENT Management is responsible for the preparation and presentation of the financial statements, comprising the statement of financial position at 31 December 2017, the statement of income and expenditure, the statement of resources and expenditure and the statement of cashflow for the period then ended and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes prepared on the basis of accounting described in note 1 and of such internal control as the director determine is necessary to enable the preparation of financial statement that are free from material misstatement whether due to fraud or error. Approved of the Financial Statements The Financial Statements were approved by Management on v- 2018 and signed on its behalf by: Director Public Sector Reform Unit 5 The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS Opinion We have audited the financial statements of the Public Sector Reform Unit, Pay Performance Project which comprise the consolidated statement of resources and expenditure, statement of resources and expenditure - World Bank funding, statement of resources and expenditure - counterpart funding, statement of income and expenditure, statement of financial position as at 31 December 2017, the statement of comprehensive income, statement of changes in equity and statement of cashflows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the state of affairs of the Project as at 31 December 2017 and its financial performance and its cashflows for the year then ended in accordance with the accounting policies adopted by the Project as stated in note 1 of the financial statements and the requirements of the Project Agreement Document. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. We have determined that there are no such matters to report. Other Information Management is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the financial statements and our auditors' report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so. consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated, If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. S00, a Sierra Leone partnership, is a member of BDO International Limited. a UK conpan, l e y guarantee. and forms part of the international BDO netwo, k of independent member irms. BDO is the brand nare for the BDO neto r fr each of the BDO Member Firrs The Governnent of'Sierra Leone Public Sector Reform Unit Pay and Performance Project REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS (Contd) Responsibilities of Management and Those Charged with Governance for the Financial Statements The project's management is responsible for the preparation and presentation of these financial statements on the basis of accounting policies for the purpose of determining the eligible expenditure and results for the year for use by the World Bank and the Government of Sierra Leone. This includes determining whether the accounting policies described in note 1 form an acceptable basis for preparing and maintaining internal controls relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibilities for the Audit of the Financial Statements Our Objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control, Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. 7 BDO, a Sierra Leone partnrtship, is a membe of BDO oer al Limited, a UK pc y mite by g artee. and forms part of the international BDO network of independent member firms. BDO s roe tand carte for the BDO neto ad f eac of B 8DO Member Firms The Government of Sierra Leone 'uhlic Sector Reform I nit 'B D O (iPal and Performance Project '1,1 /10 C// /h' 31 1kt,m,c Mf REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS (Contd) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management, Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Project to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Project to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Project audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 8 BDO, a Sierra Leone paner ship, s a membe o BDO ternationa Limted , U opany lmited by guarantee. and forms part ot the internat)onal BDO network f vndependent ember firm, BDO I.e ran name/or the BDO ne -.wor and to, each of the BDO Member Firms The Government of Sierra Leone Public Sector Reform Init PaY and Performancc Project I - - F icl F'(1r 1th1 e nC,Ci 3!' DeCme 0 0)0 " REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS (Contd) Report on Other Legal and Regulatory Requirements There are no other legal and regulatory requirements. The engagement partner on the audit resulting in this independent auditors' report is Brinsley Johnson. Freetown, Sierra Leone 2018 Me 9 BDO, a Sierra Leone partnership, is a merber of BDO Internationai Limited, a s o par limited y guarantee. and forms pat of the internationa[ BDO network of independent member firms. BDO is the brand name for the BDO netwk and for each of the BDO Memner F;rms The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project cmnanciac tamet For the year ended 31 December 20' STATEMENT OF PROJECT RESOURCES AND EXPENDITURE 2017 2016 Inception to 2017 Le Le Le Resources Designated Account-Bank of Sierra Leone 2,308,199,307 3,023,733,330 7,995,690,695 Sub Total 2,308,199,307 3,023,733 330 7,995,690,695 Fund received from DA Other Income (UNOPS) Refund (Re: Per Diem) 1,786,101 1,786,101 Withholding tax 61,145,409 Sub total 2,308,199,307 3,025,519,431 8,056,836,104 Expenditure Local Training 187,550,000 - 187,550,000 Overseas training - 390,335,131 1,141,368,986 Professional/consultancy fees 1,666,489,386 165,726,080 3,877,048,866 Public relation expenses 98,000,000 160,901,900 518,590,300 Furniture, office equipment, safe - - 151,250,000 Computers and ancillary equipment 978,050,000 Vehicles - 542,125,805 Exchange loss (15,881,388) (357,013) 21,350,758 Total: Goods, non-consulting services, consultant service, operating costs, and training under part 2 of the project (1,967,920,774) 717,320,124) (7,229,784,715) Total net funds available 340,278,533 2,308,199,307 827,051,389 Closing Balance Designated account- Bank of Sierra Leone 340,278,533 2,308,199,307 827,051,389 Sub Total 340,278,533 2,308,199,307 827,051,389 The Financial Statements were approved on 2018 Director Public Sector Reform Unit The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statemnents For the year eided 31 December 207 STATEMENT OF PROJECT RESOURCES AND EXPENDITURE Inception to 2017 2016 2016 USD $ USD S USD S Resources Designated Account -Bank of Sierra Leone 311,763 467,991 2,039.428 Sub total 311,763 467,991 2,039,428 Funds received from IDA Other Income (UNOP's) Sub total Total funds available 311,763 467,991 2,039,428 Expenditure Local training 25,332 - 25,332 Overseas training - 60,378 281,227 Professional/consultancy fees 225,089 25,635 676,966 Public relation expenses 13,237 24,888 92,999 Furniture, office equipment, safe - - 32,954 Computers and ancillary equipment 165,473 Vehicles - 123,028 Exchange loss (2,145) (55) 34.545 Total: Goods, non-consulting services, consultant service, operating costs, and training under part 2 of the project 261,513 110,845 1,407,192 Total net funds available 45,961 357.035 632,237 Closing balance Designated account-Bank of Sierra Leone 45,961 357,035 632,237 Sub Total 45,961 357,035 632,237 The Financial Statements were approved on 2018 Director Public Sector Reform Unit The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Staem nt For the yea, onied 31 Dcb- 0 STATEMENT OF INCOME AND EXPENDITURE Notes 2017 2017 2016 2016 Resources USD S Le USD 5 Le Designated Account - Bank of Sierra Leone 311,763 2,308,199,307 467,715 3 023,733.30 Sub total 311,763 2,308,199,307 467,715 3023,733,330 Funds received from IDA Other Income Refund (Re: Per Diem) - 276 1,786,101 Sub total 3 1 786 101 Total funds available 311,763 2,308,199,307 467,991 3,025,519, 431 Total resources expenditure Local Training 25,332 187,550,000 Overseas training - - 60,378 390,335 131 Professional/consultancy fees 225,089 1,666,489,386 25.635 165,726,080 Public relation expenses 13,237 98,000,000 24,888 160,901.900 Furniture, office equipment, safe Computers and ancillary equipment Vehicles Exchange loss/gain J2,145l (15,881,388) 55) (35 i 013) Total: Good, non-consulting services, consultants service, operating costs, and training under part 2 of the project (261,513) (1,967,920,774) 1 10.845) 717,320.124) Total net funds available 45,961 340,278,533 357.036 2 308.199 307 Closing balance Designated account Bank of Sierra Leone 3 45,961 340,278,533 357,035 2,308.199.307 45,961 340,278,533 357,035 2.308 199,307 The Financial Statements were approved on 2018 Director Public Sector Reform Unit The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statem lnts For the year ended 31 December 2017 STATEMENT OF FINANCIAL POSITION USD $ SLL ISD $ SLL 2017 2017 2016 2016 Assets Cash and cash equivalents 45,961 340,278,533 357,035 2,308,199,307 Total assets 45,961 340,278,533 357,035 2,308,199,307 Funding and liabilities/deferred income 45,961 340,278,533 357,035 2,308,199,307 Total funding and liabilities 45,961 340,278,533 357,035 2,308,199,307 The Financial Statements were approved on ' 2018 Director Public Sector Reform Unit 13 The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Sltaements For the year ended 31 December 2017 STATEMENT OF CASHFLOW USD S SLL USD S SLL 2017 2017 2016 2016 Operating activities Cash received from donors and third parties - - 276 1.786,101 Cash paid to suppliers and employees (263,658) (1,952,039,386) (110,901) (716,963,111) Shortfall in exchange rate (2,145) (15,881,388) 155) (357,013) Net increase/(decrease) in cash and cash equivalents (265,803) (1,967,920,774) (110,680) (715,534,023) Cash and cash equivalents of the beginning of the period 311,763 2,308,199,307 467,715 3,023,733,330 Nor Cash and cash equivalents at the end of the year 45,961 340,278,533 357,035 2,308,199,307 The Goverlnmet lqf Sierra Leoie Public Sector Re/orm I nii Pa' and Perormance Proict I NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied unless otherwise stated. 1.1 Basis of preparation The statements of resources and expenditure have been prepared on a cash basis of accounting and have been presented in Leones the functional currency, with an additional column in United States Dollars for presentational and internal memorandum purposes . 1.2 Foreign currency transactions Assets including cash balances and liabilities (if any) are denominated in the Leone currency. Transactions are accounted for in Leones and translated quarterly to USD, at the rate of exchange prevailing on the date at which the transactions were translated for internal memorandum records. 2017 2016 Closing exchange rate 5,627 5,627 Spot rates 7,451 7,195 1.3 Fixed assets Fixed assets are expensed on acquisition but a comprehensive fixed asset register is maintained to account for the fixed assets and their location. 1.4 Income Funding from donors are held in a deferred income account when received and are only recognised in the Project's income statement when utilised. 1.5 Expenses Expenses are only recognised in the financial statements when paid. 15 The Government of Sierra Leone Public Sector Reform Unit Pay and Performance Project Financial Statements For the year ended 31 December 2017 NOTES TO THE FINANCIAL STATEMENTS (Contd) 2 DEFERRED INCOME Deferred income is analysed as follows: USD$ SLL USDS SLL Notes 2017 2017 2016 2016 Resource I.D.A. funding - Other Income Refund (Re: Per Diem) 1,786,101 Total - 1,786,101 Expenditure (265,803) (1,967,920,774) (110,956) (717,320,124) Released to income statement 265,803 1,967,920,774 110,680 715,534,023 Balance carried forward (265,803) (1,967,920,774) (110,956) (715,534,023) Presented by: Cash and cash equivalents (265,803) (1,967,920,774) (110,956) (715,534,023) (265,803) (1,967,920,774) i110,956) (715,534,023) 3 RECEIPTS IDA Other Income (UNOP's) - - Refund (Re: Per Diem) 241 1,786,101 276 1,786.101 Total cash received 241 1,786,101 276 1,786,101 4 RESTATEMENT OF 2016 USD FIGURES In a bid to present a true and fair view of the financials, we have restated the US Dollar figures for 2016 using exchange rates relating to that particular period. 5 CONTINGENT LIABILITIES There were no contingent liabilities at the end of the reporting period. (2017 - nil) 6 RELATED PARTY TRANSACTION There is no evidence of any related party transaction. 7 POST FINANCIAL POSITION EVENTS There is no post financial position event that needs reporting, 16