Financial Statements REPUBLIC OF MOZAMBIQUE CONSELHO DE REGULA§AO DE ABASTECIMENTO DE AGUAS (CRA) INTERNATIONAL DEVELOPMENT ASSOCIATION GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ 31 December 2018 EY Building a better working world CONSELHO DE REGULAQAO DO ABASTECIMENTO DE AGUA INTERNATIONAL DEVELOPMENT ASSOCIATION GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT 1 -4 STATEMENT OF SOURCES AND USES OF FUNDS 5 DESIGNATED ACCOUNT STATEMENT 6 CREDIT ACCOUNT STATEMENT 7 NOTES TO THE FINANCIAL STATEMENTS 8 to 10 / Ernst & Young Liniltada Tel +258 21 35 3000 Rua Belmiro Obadias Muianga N' 179 Fax +258 21 32 1984 Caixa Postal 366, Email enst.young.ey.com Maputo NUIT.400 006 245 Hlllly( M btter morambicie w .ey.com wiol kiingt worldI INDEPENDENT AUDITOR'S REPORT To the Board of Directors of CONSELHO DE REGULAQAO DO ABASTECIMENTO DE AGUA Report on the audit of the Financial Statements Opinion We have audited the financial statements of Greater Maputo Water Supply Project- Credit Agreement Nr 52900- Moz, implemented by the Conselho de Regual5o do Abastecimento de Agua - CRA, which comprise the the Statement of Sources and Uses of funds, the Designated Account and the Grant Account Statement financed under IDA - International Development Association Development Greater Agreement 52900- Moz for the year ended 31 December 2018, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Company are prepared, in all material respects, in accordance with accounting basis set out in note 4. 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 Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company 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 m brnter frn of Emst & Young Global Lim d Building a better working world Responsibilities of the Board of Directors for the Financial Statements The Board of Directors is responsible for the preparation of financial statements that give a true and fair view in accordance with the accounting basis set out in note 4, and for such internal control as the Board of Directors 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, the Board of Directors is responsible for assessing the Company'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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do SO. The Board of Directors is also responsible for overseeing the Company'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 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 judgment and maintain professional scepticism throughout the audit. We also: 2 Building a better working world 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 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 the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. Conclude on the appropriateness of the Board of Directors' 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 Company's ability 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 the Board of Directors 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 Board of Directors 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 Duilding a b otter working world From the matters communicated with the Board of Directors, 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 Relvas. ERNST & YOUNG, LDA Certified Auditors Firm Represented by: Manuel Marques Relvas (Certified Auditor nr. 5) Maputo, 31 May 2019 4 CONSELHO DE REGULA9AO DO ABASTECIMENTO DE AGUA - CRA INTERNATIONAL DEVELOPMENT ASSOCIATION - GREATER MAPUTO WATER SUPPLY PROJECT CREDIT AGREEMENT NR 52900- MOZ STATEMENT OF SOURCES AND USES OF FUNDS - FOR THE YEAR ENDED 31 DECEMBER 2018 AND 2017 (Expressed in United States Dollars) Notes 2018 Opening Cash Balance IDADesignated Account 3 104.068 Add Sources of Funds IDA Funds Replenishments to Designated Account A 5 934.407 Interest 1.003 935.410 1.039.478 Less: Uses of Funds Eligibfe expenditure paid (2) Goods and Works for the part A 6 919.354 Closing Cash Balance IDA Designated Account 7 120.124 FINANCE MANAGER GENERAL DIRECTOR 5 CONSELHO DE REGULAQAO 00 ABASTECIMENTO DE AGUA - CRA INTERNATIONAL DEVELOPMENT ASSOCIATION - GREATER MAPUTO WATER SUPPLY PROJECT CREDIT AGREEMENT NR 52900 MOZ CREDIT ACCOUNT STATEMENT - FOR THE YEAR ENDED 31 DECEMBER 2018 (Expressed in Special Drawing Rights - SDR s) CATEGORY Budget per credit Used until 2017 Used during Total Usage Budget balance agreement 2018 as at 31.12.18 (2) Goods and"c W or Toe pad A 3300.000 1.344 178 642341 1.986.519 1,313.481 Desgna'e d account advnce - - (213.252) (213252) (213252) 3.300000 1.344.178 429.089 1.773.267 1.100229 FINANCE MANAGER GENERAL DIRECTOR 6 CONSELHO DE REGULAQAO DO ABASTECIMENTO DE AGUA - CRA GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 and 2017 1. PROJECT BACKGROUND 1.1. Objectives On 31 January 2014 a development Loan agreement was signed between the Republic of Mozambique and International Development Association (IDA), wherein IDA agreed to provide a Loan of an amount equivalent to SDR 118.800.000 to implement the Great Maputo Project, Loan Agreement Nr. 5290-MZ. The project consists of the following parts Part A: Investment in Water Supply Network System () Expansion and extension of water supply system capacity in the Greater Maputo Area through the construction of an abstraction point and transmission pipeline from the Corumana Dam, a water treatment plant, and a transmission pipeline to the Machava distribution centre. Part B: Investment in Water Supply Network Distribution System The Part B of the Project consists of the following: (i) Expansion and extension of water distribution system in Greater Maputo Area trough installation of approximately 300 kilometres of water supply distribution network and 100,000 new connections, including associated water meters. Part C: Technical Assistance to FIPAG The Part C of the Project consists of the following: (I) Supervision of Works as well as implementation of Resettlement Action Plan and other Safeguard Documents under the Project (ii) Preparation of the second phase of the program to increase the amount of water available to Greater Maputo Area to meet residential household demand by 2025, including technical assistance for engineering, dam safety, safeguards and economic analyses; (iii) Preparation of a follow-on project to cover other select cities of the Reciplent; (iv) Project implementation including support to the transition of the operator of Greater Maputo Area in 2014; (v) Carrying out of financial and technical audits and; (vi) Carrying out of training and capacity building for FIPAG and the operator of Maputo Area staff 7 CONSELHO DE REGULA9AO DO ABASTECIMENTO DE AGUA - CRA GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 and 2017 Part D: Capacity Building and Operational Support to CRA Support to CRA TO enhance its capacity to discharge its regulatory role in the territory of the Recipient including: (i) Expanding the scope of CRA's regulatory framework and oversight capabilities, particularly in relation to pei-urban areas and; (ii) Reviewing the financial means- and sanitations services to the urban poor, all of the above through provision of goods, technical assistance, Training and Operating Costs required for the purpose. 2. Percentage of Expenditures financed by the Credit The percentages of expenditures for items to be financed by Credit are as following: %of Expenditures Cate9ory to be financed (1) Works, goods, non-consulting services, consultant services and training 100% of all expenses (Including taxes) 3. DESIGNATED ACCOUNT FOR THE IDA CREDIT The Development Credit Agreement requires the opening of a Designated Account in USD. The purpose of the Designated Account is for payment of eligible expenditures. These payments will be subsequently justified to IDA with respective documentation or issuance of SOEs (Statement of Expenditures) for replenishment of the Designated Account or refunding of the initial deposit. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial statement, compiled from CRA accounting records, was prepared on a cash basis from the information reflected in the financial and accounting reports of the Project. Under this basis, receipts are not recorded until received in cash and disbursements are assigned to the year in which the respective cash payment is made. Foreign Currency Transactions The accounting records of the Project are maintained in United States Dollars (USD). The statement of receipts and payments is also expressed in United States Dollars (USD) unless otherwise stated. Transactions in other currencies are translated to USD at the official exchange rate ruling at the date of the transaction. 8 CONSELHO DE REGULAQAO DO ABASTECIMENTO DE AGUA - CRA GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 and 2017 Fixed assets Fixed assets acquired by the Project are reflected as expenditure in the year of purchase and payment. Procedures The disbursements of the funds, made available by the international Development Association (IDA), are carried out by direct transfers or by requests for payments sent to the Designated Account, which was started with funds made available by IDA, in a bank account of the Project in Maputo (Bank BCI). 5. Replenishments to Designated Account A The following applications were used for reptenishments to the designated account A: Application amout Application number Requested Replenished Not Replenished SUR Equivalent Prior year payment 74 1 98,462 - 69.138 98.462 - 69.138 Current year payment a) 77 1 51.854 - 35.720 a) 78 1 48.122 - 33.212 80 1 53.705 - 36.998 83 1 51.503 - 35.900 86 1 69.802 - 49.359 89 1 60.310 - 42.582 94 1 45.106 - 32.112 95 1 145.019 - 103.078 98 1 60.642 - 43.273 100 1 171.604 - 123.319 103 1 78.277 - 56.513 b) 106 1 69.842 69.842 50.276 905786 - 642.341 1.004.248 - 711.479 a) Expenditure submitted and paid on January 2019, related 2018 expenditure; b) Expenditure submitted on December 2018 (not yet reimbursed) 9k 9 CONSELHO DE REGULAQAO DO ABASTECIMENTO DE AGUA- CRA GREATER MAPUTO WATER SUPPLY PROJECT - CREDIT AGREEMENT NR 52900- MOZ NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 and 2017 6. DESIGNATED ACCOUNT PAYMENTS DURING THE YEAR Designated Account payments by categories during the year can be summarized as follows: Category USD (2) Goods, Consultants services, operaing costs, traiNng Expenditure paid and reimbursed during the year 735,968 Ex penditure sutxnited on December 2018 (not yet reimbursed) 69,842 Expenditure submiled on March 2019 (not yet reimbursed) 43.943 Expenditure submi5ed on April 2019 (not yet reimbursed) 68,708 Bank charges 893 919.354 7. DESIGNATED ACCOUNT BALANCE USD Bank balance: BCI-USD 117.459 BC1-MzM 222 117.681 Difference to be investigated and justified 2.443 120.124 to 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. 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