REPUBLICA DE MOÇAMBIQUE MINISTÉRIO DA ADMINISTRAÇÃO ESTATAL E FUNÇÃO PÚBLICA DIRECÇÃO NACIONAL DE DESENVOLVIMENTO AUTÁRQUICO Projecto de Cidades e Mudanças Climáticas - PCMC Unidade de Gestão do Projecto (Crédito - 5066 MZ) AO João Tinga - Especialista em Gestão Financeira. Banco Mundial Av: Kenneth Kaunda, N°1224 Maputo N/Refa .26o/UGP/PCMC/2o19 MapUtO, 23 de Setembro de 2019 ASSUNTO: ENVIO DO RELATORIO FINANCEIRO E CARTA DE RECOMENDAÇÃO DO MAEFP - DNDA Exmo. Sr. João Tinga, De acordo com o assunto em referência, enviamos em anexo por forma a tomar conhecimento Banco Mundial, o Relatório das Demonstrações Financeiras e Carta de Recomendação de Auditoria do Ministério de Administração Esta ale Função Pública - MAEFP - DNDA referente ao exercício econ ic do ano de 2018. Sem mais subscrevemo-nos con e e da considiação. Mar a F 1 ia (A Coorden d i do Projecto PCMC - Projeco Cidades & Mudanças Climáticas, Av. Guerra Popular, Edificiodo CP, 70Andirporta . 711. Tel.: +258 21305720, +258 21305724, +258 823080364, +258 823080366 Maputo Moçambique Financial Statements Ministry of State Administration and Public Service Cities and Climatic Changes Project Credit number 5066 - MZ 31 December 2018 EY Building a better working world MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE CITIES AND CLIMATIC CHANGES PROJECT CREDIT NUMBER 5066-MZ FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 INDEX PAGES INDEPENDENT AUDITOR'S REPORT 1-4 STATEMENT OF RECEIPTS AND PAYMENTS 5 YEARLY AND CUMULATED STATEMENT OF RECEIPTS AND PAYMENTS 6 STATEMENT OF DESIGNATED ACCOUNT 7 NOTES TO THE FINANCIAL STATEMENTS 8-12 s j \n bst A Y lig UInita nga TNl: 1258 21 3523000 IRua Beliniro Obadlias MurJnoga N2 179 Fav: +258 21 32 1984 Caisa Postal 366, Email: ernst young.eycom Building a bet(r Mmo NUIT400 006 245 working world MoamWIbique , ,oy com INDEPENDENT AUDITOR'S REPORT To the Management of Ministry of State Administration and Public Services Cities and Climate Changes Project Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Cities and Climate Changes Project - Credit Number 5066 - MZ, which comprise the Statement of Receipts and Payments for the year ended 31 December 2018, the Yearly and Cumulative Statement of Receipts and Payments and the Statement of the Designated Account for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statement of Cities and Climate Changes Project - Credit Number 5066 - MZ are prepared, in all material respect, in accordance with the basis of accounting disclosed on Note 2 of the Financial Statement and with the Donor's requirements. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the ethical requirements that are relevant to our audit of the financial statements in Mozambique, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A ,ewr rr of Frmt PYoung L-.ib tem d1 tiiliinj a IOtito woring worl d Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with basis of accounting disclosed in Note 2 of the Financial Statements and with the Donor's requirements, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Management is responsible for overseeing the Project's financial reporting process. Auditor's 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 Auditor's 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 ISA 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 ISA, we exercise professional judgment 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. 2 Outildinifl beiker v:or king worid Obtain an understanding of internal control 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 Project's internal control. 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 Organization's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's 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 auditor's report. However, future events or conditions may cause the Organisation 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. We communicate with Management 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 the Management 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. 3 141ilding a hotter viorldngifj world From the matters communicated with management, 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. The engagement partner on the audit resulting in this independent auditor's report is Manuel Reivas. ERNST & YOUNG, LDA Certified Auditors Firm epresente Manuel Marques Relvas (Certified Auditor NO 5) Maputo, 28 June 2019 4 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066.MZ STATEMENT OF RECEIPTS AND PAYMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (A mounts expressed in USD) Notes 2018 OPENING BALANCE AS AT 1 JANUARY Bank and advances 6 7.686868 7.686.868 RECEIPTS Disbursements from 10A 3 516.696 TOTAL RECEIPTS 516.696 TOTAL RECEIPTS AND OPENING BALANCE 8.203.564 PAYMENTS Goods, works, consultant services, non-consultant services, trainng and operaUng costs (1) 4 2.483.334 Municipal Performance Grant (3) 5 3.008.462 TOTAL PAYMENTS 5.471,796 CLOSING BALANCE AS AT 31 DECEMBER 6 2.731.770 The Project Financal Manager T rojed Coordinator 5 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066-MZ YEARLY AND CUMULATIVE STATEMENT OF RECEIPTS AND PAYMENTS CUMULATIVE FROM 6 DECEMBER 2011 TO 31 DECEMBER 2018 (Amounts expressed in USD) 2011 up 2017 Notes 2018 Reported Cumulative to date OPENING BALANCE AS AT 1 JANUARY Bank and Advances 6 7.686.868 7.686.868 RECEIPTS D(sbursements from IDA 3 516.696 31.693.373 32.210.069 TOTAL RECEIPTS 516.696 31.693.373 3Z210.069 TOTAL RECEIPTS AND OPENING BALANCE 8.203.584 31.693.373 321210,069 PAYMENTS Goods, works, consultant services, rtonconsultantservices, 4 2.463.34 15.433037 17.896,371 trainIng and operating costs (1) Municipal Performance Grant (3) 5 3.008.462 8.573.468 11.581.930 TOTAL PAYMENTS 5.471.796 24.006.505 29.478.301 CLOSING BALANCE AS AT 31 DECEMBER 6 2.731.770 7,686.868 2.731.770 The Project Financal Manager Th Project Coordinator MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CrIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 506-.MZ STATEMENT OF DESIGNATED ACCOUNT - FOR THE YEAR ENDED 31 DECEMBER 2018 (Anounts expressed im USO) Notes 2018 OPENING BALANCE AS AT 1 JANUARY Bank and advances 6 7.686.868 7.686.868 RECEIPTS Disbursements ton IDA 3 516.596 TOTAL RECEIPTS 516.696 TOTAL RECEIPTS AND OPENING BALANCE 8.203.564 PAYMENTS Goods, works, consultant services, non -consultant services, training and opefaing costs (1) 4 2.463 334 Munic;pal Performance Grant(3) 5 3.008.462 TOTAL PAYMENTS 5.471.796 CLOSING BALANCE AS AT 31 DECEMBER 6 2.731.770 The Project Financial Manager The Project Coordlnator 7 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5068-MZ NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (Amounts expressed in USD) 1. Introduction On 04 May 2012 a credit was signed between Republic of Mozambique and International Development Association (IDA) to finance the Cities and Climate Changes Project in an amount not exceeding USD 35 000 000. The overal objective of the Project is to strengthen municipal capacity for sustainable urban infrastructure provision and environmental management which enhance resiliency to climate related risks. The project consists of the following parts: Part A: Strengthening of the Municipal sector Increase municipal capacity to sustainably plan, manage and finance climate resilient urban development, including through to strengthening of the Recipient's institutions underpinning its municipal system in order to improve sustainable decentralized financing and management of the urban environment and infrastructure. Part B: Enhancing resilience of strategic municipalities in coastal cities Enhancement of selected municipalities, including those in Beira, Nacala and Maputo metropolitan area, for sustainable resilience to whether - related environmental threats. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The following paragraphs describe the main accounting policies applied consistently by the project. a) Accounting conversation The financial statements are prepared on a cash basis of accounting under the historical cost convention. b) Currencies The books account of the Project are maintained in United States Dollars (USD). The financial statements are also expressed in United States Dollars (USD) unless otherwise stated. The transactions in other currencies are translated to USD at the official exchange rate ruling at the date of the transactions. Closing balances in other currencies are translated at the exchange rate ruling at period end date. c) Fixed assets Fixed assets acquired by the Project are expensed in the year of purchase. 8 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066-MZ NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (Amounts expressed in USD) d) Funds received Funds received comprise disbursements from Internatonal Development Association (IDA) and are recorded on receipt of the funds into the designated account. 3. Funds receive Transfers from International Development Association Fund during 2018, are detailed as follows: Note 2018 21 June 2018 516.696 3.1 516.696 3. 1 Disbursements to designated account The disbursements from IDA to designated account are detailed as follows: Application number 2018 2018 Category USD SDR 108 1 670.525 476.266 Sublotal 670.525 476.266 108 3 291.676 207.173 Subtotal 291.675 207.173 74 DA (445.504) (316.436) Subtotal (445.504) (316,436) Total replenishments for ihe year 516.698 367.003 9 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066-MZ NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (Amounts expressed in USD) 4. Goods, works, consultant services, non-consultant services, training and operating cost (Category 1) Expenditures incurred in this category are analysed as follows: Note 2018 Employees' expenses 4.1 41.182 Goods 4.2 95,825 Seiv ices 4.3 2.326.327 2.463.334 4.1 Employee's expenses Employee's expenses include the following: 2018 Local allowance 41.182 41.182 4.2 Goods Goods include the following: 2018 Fuel and lubricanb 24.486 Office maleria 63.949 Others 7.389 95.825 4.3 Services Services include are detailed as follows: 2018 Communicaton 10.612 Travel ex penses 55.068 Repairs and mainlenance 23.967 Insurance 3.692 Consultancies 1.957.992 Oliers 274.996 2,326.327 10 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066-MZ NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (Amounts expressed in USD) 5. Municipal Performance Grant (Category 3) The Municipal Performance is detailed as follows: Closing balance at Reallocation of Disbursed by Expenditure Closing balance at I January2018 exchange PCMC 31 December2018 differences Catandica 47.753 623 - 48.311 265 Chibuo 47,043 2.474 45.497 90.582 4.432 Chimolo 734.317 9.338 210.783 587.269 367.169 Chokw6 City (49.051) 1.572 (48.433) 954 Gondola 77.938 1.150 - 78.952 136 Gorongosa 28.268 1.598 - 29.784 80 Inhambane City 170.253 3.349 - 172.413 1.189 Macia Village 12.195 923 - 3.969 9.149 Mandlakazi 17,416 896 - 16.564 1,748 Manhjga 235.664 3.037 - 118.154 120.547 Man*a 67.104 1,157 35,376 78.336 27,301 Mhassinga 92.775 1.015 - 91,097 2.693 MaWoa City 827.026 10.840 -531,525 306.341 Max ixe Cily 251.039 6.827 -254.448 3,408 Moalize 134.375 1.809 - 135.655 529 Namaachaa 37.214 3.104 40.208 110 Tele City 253.167 4.714 - 228.459 29.422 Ulbngub 13.169 2.099 - 14.894 374 Vilankuto Village 90.037 1.392 26.769 115.958 2.240 Xai-Xai City 195.438 4.760 - 187.513 12.685 Praia Bilene (162) 162 - - - Boane 91.999 508 - 78.389 14.118 Nhamatanda Village 38.486 383 - 38.814 55 Quissico VJage 43.120 242 - 43.247 115 Sussudenga Village 13.757 81 15.499 12.793 16.544 Nhamayabwe Village 61.815 327 - 61.561 581 Exchange differences 64.580 (64.580) - - - 3.596.733 - 333.924 3.008462 922.195 11 MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT CITIES AND CLIMATE CHANGE PROJECT CREDIT NUMBER 5066-MZ NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2018 (Arnounts expressed in USD) 6. Bank and advances ThIs calegory is analysed as follows: Note 31-Dec-2018 31-Dec-2017 Bank 1.809.575 4.090.135 Balance of advances to Muncipalites 5 922195 3.596.733 2.731.770 7.686.88 Sank balances is analysed as follows: 31-Dec-2018 31-Dec-2017 Banco de Mogambique - Desigoaled account in USD 1.010.032 2.514.313 Natonal DIreclorate of the Treasury - Forex account in USD 2.688 10.000 National Directorate of the Treasury - CUT account in MZN 796,855 1.565.822 1.809.575 4.090.135 7. Taxation According to Tax legislaton, there exists a possibility of fiscal authorities reviewing the tax position of the Project for a period of up to ten years, which may results in eventual adjustments due to different interpretation and/or non-compliance with the applicable legislation, namely: personal income tax, withholding tax and VAT - Value added tax, Management believes that eventual adjustment on the tax returns, as a result of those revisions, will not have a significant impact on the Financial Statement. 8. Subsequent events Afler the reporting period, until the dale on which the financial statement were autho sedof issuance, there have been no favourable or unfavourable events for Cities and Climate Changes Project (Credit No. 5066-MZ), at affect these financial statements or require disclosure therein. The Project Financial Man ar rolect Coordi ator 1 EY I Assurance I Tax I Transactions I Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. @ 2019 EYGM Limited. All Rights Reserved. EY refers to the global organization and/or one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.