AUDIT SERVICE In case of reply the number and date of the letter should be quoted My Ref No: ........ ~.q.~pf.~.NPFMR/4 Your Ref No: ........................... . P. 0. Box ............ ,M~,98.................... .. Good Govemance Tel: 233 (0) 302 664920/28/29 and Acco1111tahili(r ........................ACCRA.................... Fax: 233 (0) 302 6751495 Website: www.ghaudit.org ......................27...JUNE ... 20 .......... 19 • THE PROJECT DIRECTOR, PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT ACCRA INDEPENDENT AUDITOR'S REPORT ON THE 2018 PROJECT FINANCIAL STATEMENTS We have audited the financial statements of the Public Financial Management Reform Project (PFMR) under the International Development Agency (IDA) Loan referenced 5640-GH which, comprise: • Statement of Financial Position as at 31 December, 2018, and ,/ • Statement of Financial Performance for the year ended 31 December, 2018 • Cash Flow Statement which, have been prepared under the historical cost convention and on the basis of the accounting policies set out in Note 1. Project Management's responsibility for the financial statements The Management of PFMRP is responsible for the preparation and fair presentation of these financial statements in accordance with generally accepted and accounting practice and IDA Loan referenced 5640-GH as well as for such internal control as Management determined is necessary to enable the preparation of the financial statements free from material misstatement whether due to fraud or error. This responsibility includes designing, maintaining adequate financial management arrangements and ensuring that these continue to be effective throughout the reporting period; maintaining proper accounting records, which disclose with reasonable accuracy at any time of the financial position of the Project; designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the Financial Statements and ensuring that they are free from material misstatements, • whether due to fraud or error; safeguarding the assets of the programme; selecting and whether due to fraud or error; safeguarding the assets of the programme; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility Our responsibility is to express an independent opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards / of Supreme Auditing Institutions (ISSAis) and the guidelines in the Loan Financing Agreement, Credit No. 5640-GH. Those standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the Financial Statements are free from material misstatement whether caused by fraud, other irregularity or error. An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risk of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the programme financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Project Management, as well as evaluating the overall presentation of the financial statements. We believe that we have obtained sufficient appropriate audit evidence to provide a basis for our audit opinion. Opinion In our opinion, the Project Financial Statements present fairly, in all material respects, / the financial position of PFMR as at 31 December, 2018, and the results of its operations for the period then ended in accordance with the provisions of the Loan Financing Agreement No.5640-GH and the accounting policies set out in Note 1 of the programme financial statements. Report on compliance In addition, Management has complied, in all material respects, with the covenants of the Financing Agreement (IDA Loan referenced 5640-GH) and the applicable Government Regulations, and that the funds received during the period under audit were used for the eligible purposes for which they were intended and were properly accounted for as at the year ended 31 December, 2018. Restriction of use This report is intended solely for the use of the Management of the project, IDA, and the J Government of Ghana, and should not be used for any other pur , os . --------;, I. <:__ I TABLE OF CONTENTS PAGE 1.0 INTRODUCTION ............................................................................ 1 1.1 The PFMR Project 1.2 Status of Implementation of the 2017 Audit Recommendations on the PFMR Project Accounts. 2.0 PROJECT FINANCING AND CUMULATIVE EXPENDITURE.............1-3 2.1 Financial Status 2.2 Component 1: Enhancing Budget Credibility (US$2. 7 million) 2.3 Component 2: Public Financial Management Systems and Control (US$32.7 million) 2.4 Component 3: Reinforcing Financial Oversight and Accountability (US$2.0 million) 2.5 Component 4: PFM Reform Coordination and Change Management (US$7 .6 million) 3.0 STATEMENT OF FINANCIAL POSITION..............................................4 4.0 STATEMENT OF REVENUE AND EXPENDITURE ................................. 5 5.0 STATEMENT OF CASH FLOWS ..........................................................6 6.0 NOTES TO THE FINANCIAL STATEMENTS ......................................7-11 1.0. INTRODUCTION The Project 1. The PFM Reform Project is consistent with and aligned to the GSGDA II - 2014- 2017, which seeks to promote, as one of its key pillars, transparent and accountable governance in Ghana. To this end, the Agenda focuses on strategic interventions including: strengthening public sector management and oversight; establishment of reliable public service HRMIS; implementation of PFM reforms through implementation and enforcement of laws to enhance transparency and accountability. The project which is developed to address some of the critical issues in the PFM strategy of Government is being implemented through the following four components: Component 1: Enhancing Budget Credibility (2.7 million). Component 2: Public Financial Management Systems and Control (32.7 million). ' Component 3: Reinforcing Financial Oversight and Accountability (2.0 million). Component 4: PFM Reform Coordination and Change Management (7.6 million). 2. The project is funded under IDA credit number 5640 OH in t~~OLU:Lt-JJ.I..US$45m, /?7. / 1pS- "7JSt.0 2.0 PROJECT FINANCING AND CUMMULATIVE EXPENDITURE The cumulative expenditure of the project as at 31st December, 2018 stood at US$ 31,358,716.26 which is 69% of the allocated amount of US$ 45,000,000. Out of the total cumulative expenditure ofUS$31,358,716.26, US $1,188,885.86 was spent on Component 1, US$ 25,333,181.31 was spent on Component 2, US$2,360,436.74 was spent on Component 3 and US$2,476,212.35 was spent on Component 4 respectively. No expenditure was made out of Just-in-Time amount of US $5,000,000.00 has been re-allocated to the various components at mid-term in November 2017. The balance unspent was US$ 13,641,283.74. INTRODUCTION I Table 1: Project Financing and Cumulative Expenditure Original allocation Cumulative Components USD) Percentage (%) Expenditure 1,188,885.86 Enhancing Budget Credibility 2,730,000.00 43 Public Financial Management Systems and 32,670,000.00 77 25,333,181.31 Control Reinforcing Financial oversight and 2,360,436.74 Accountability 2,000,000.00 1.18 PFM Reform Coordination and 2,600,000.00 95 2,476,212.35 Management Just-in time Intervention and Change 5,000,000.00 0 0.00 Management TOTAL 31,358,716.26 Special Account Cumulative Disbursements to the PFMR Project Cumulative Amount Date Amount Transferred into Special Account Transferred 2ru1 November 2015 (Retroactive Financing) 3,537,450.43 3,537,450.43 ' 16th November 15 (Advance) 7,954,000.00 7,954,000.00 19th May,2016 (Advance) 3,000,000.00 3,000,000.00 31st August,2016 (Advance) 3,000,000.00 3,000,000.00 05th Apri,2017 (Advance) 5,000,000.00 5,000,000.00 19th October,2017 {Advance) 3,000,000.00 3,000,000.00 2nd March, 2018 (Advance) 4,938,042.92 4,938,042.92 22nd June,2018 (Advance) 2,000,000.00 2,000,000.00 18th December,2018 (Advance) 2,900,000.00 2,900,000.00 Total 35,329,0~2.92 PROJECT FINANCING AND CUMMULATIVE EXPENDITURE I 1.2 Status of Implementation of the 2017 Audit Recommendations on the PFMR Project Accounts. No. RESPONSES TO GHANA AUDIT SERVICE ON SOME ISSUES ON PFMRPAUDIT Issues raised by Ghana Audit Service Project Management Responses 1. Use of Reimbursements Under Lump sum Implemented Contracts. 2. Inefficiencies Resulting from Deliverables Currently all contracts are monitored to ensure that deliverable dates are not exceeded, again the PMU has not incurred any additional cost as a result of the delayed contracts as previously stated 3. Questioned Contracts Costing of This contract has been completed US$270,000.00 J 4. Failure to Bond Students Under Project Copies of the letters bonding the beneficiaries have been filed ./ Soonsorship s. Absence of Underlying SLA With PWC The contract has been completed ,J 6. Status of IGF Rollouts in Teaching Partially completed .I Hospitals 1.2 Status of Implementation of the 2017 Audit Recommendations on the PFMR Project Accounts. I 3.0 STATEMENT OF FINANCIAL POSITION AS AT THE YEAR ENDED 31ST DECEMBER, 2018 Note 2018 2017 GH