CONSELHO MUNICIPAL PELGURO DE FINANÇAS. Ao Banco Mundial Av. Kennet kaunda Att: Sr. Elves Langa

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1 Public Disclosure Authorized CONSELHO MUNICIPAL PELGURO DE FINANÇAS Public Disclosure Authorized Ao Banco Mundial Av. Kennet kaunda Att: Sr. Elves Langa Public Disclosure Authorized Nota N?Z/GVF/CMM/2017 Maputo, 29 de Junho de 2017 Assunto: Envio de relatório de Auditoria e Carta de recomendação Em alusão ao assunto em epígrafe, servimo-nos da presente, para proceder o envio do relatório de Auditoria Financeira as Contas do IDA e CMM, referentes ao exercício económico de Sem mais do momento subscrevemo-nos com elevada estima e consideração. Public Disclosure Authorized ad a d i as iam

2 Deloitte Maputo Municipal Council - (CMM) PROMAPUTO II - Segunda fase do Programa de Desenvolvimento Municipal do Municipio de Maputo Financial Statements For the period 1 January to 31 December p,!o 0 no~~~oe

3 AUDITED FINANCIAL STATEMENTS Table of contents Page Management approval of financial statements 2 Independent Auditor's Report 3 Statement of Source and Application of funds 6 Special Account Statement 7 Notes to the financial statements 8 Annex: Special Account Bank Reconciliation

4 MANAGEMENT APPROVAL OF FINANCIAL STATEMENTS The responsibility for the preparation of financial statements that present fairly the statement of receipts and payments and statement of financial position in accordance with the basis of accounting described in the notes of the financial statements applied consistently as well for the adoption of adequate accounting policies is of the management of Conselho Municipal de Maputo The financial statements have been audited by the independent accounting firm Deloitte & Touche (Mogambique), Lda which was give unrestricted access to all financial records and related data of the PROMAPUTO II - Segunda fase do Programa de Desenvolvimento Municipal do Municipio de Maputo. Management believe that all representations made to the independent auditors during their audit were valid and appropriate. The report of the independent auditors is presented on pages 3 and 5. The financial statements for the year ended 31 December 2016 presented on pages 6 to 11 have been prepared in accordance with the Basis of Accounting described in the note 2.1 of the financial statements. They are based on appropriate accounting policies which have been consistently applied and which are supported by reasonable and prudent judgement. Management is responsible for the preparation of these financial statements in accordance with the cash receipts and disbursements basis of accounting described in Note 2 to the financial statements for the purpose of reporting to International Development Association/World Bank for determining that the basics of preparation is acceptable in the circumstances 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 the fraud or error. The financial statements were approved by management and are signed on its behalf: C61ia C e (Ver dora de Finang as) 2

5 Do itte Caixa INDEPENDENT AUDITOR'S REPORT Postal 4318 Deloitte & Touche Maputo (Moi;ambique) Lda Moi;ambique Chartered Accountants and Management Consultants Registration No: 5917 Av Zedequias Manganhela 267 EdificioJAT IV 5 Andar Tel: / Fax: To Maputo Municipal Council (CMM) Maputo Municipal Development Program II Credit Number: 4811-MZ Av. Ho Chi Min 251 Praga da IndependCncia Maputo Qualified Opinion We have audited the accompanying financial statements of PROMAPUTO 11 - Segunda fase do Programa de Desenvolvimento Municipal do Municipio de Maputo executed by the Maputo Municipal Council under the Financing Agreement MZ of the International Development Association, which comprise the Statement of Source and Application of Funds as at 31 December 2016 and the Special Account Statement as at 31 December 2016 and a summary of significant accounting policies and other explanatory notes. In our opinion, except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph, the financial statements, as set out on pages 4 to 9, present fairly, in all material respects and in terms of the agreement with IDA, the financial position of the PROMAPUTO II - Segunda fase do Programa de Desenvolvimento Municipal do Munic/pio de Maputo, for the period 1 January to December 2016, and the cash receipts and payments for the period then ended in accordance with the cash basis of accounting promulgated by IFAC, and generally accepted accounting principles applicable to projects of similar size and complexity in Mozambique. With respect to applications made under the statement of expenditure procedures shown on page 7 adequate supporting documents has been maintained to support claims to the International Development Association for reimbursements of expenditure incurred and this expenditure is eligible for financing under the Financing Agreement 4811 MZ. With respect to the Government of Mozambique funds except for the possible effect of the matter described in the Basis for qualified opinion paragraph adequate supporting documentation has been maintained to justify payments made and such expenditure is eligible for financing under the Financing Agreement 4811 MZ. Basis for Qualified Opinion The cash receipts and disbursements from the Government of Mozambique (counterpart funds) are managed through bank accounts held by the Maputo Municipal Council, which include transactions other than the PROMAPUTO II transactions. The controls over the movements in these accounts are not sufficient for us to be able to conclude that the amounts shown in the financial statements as Counterpart funds amounting to USD are not materially misstated. We conducted our audit in accordance with International Audit Standards issued by IAASB. 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 accordance in terms of the code of ethics issued by the Order of Accountants and Auditors of Mozambique ("OCAM") which comply with the Code of Ethics issued by the Ethics Standards Board for Accountants (IESBA) 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. Directors: X Botha MJ Jarvis J Machado Assocate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited 3

6 Emphasis of Matter - Basis of Accounting Without modifying our opinion we draw attention to Note 2.1 to the financial statements which describe the basis of accounting. The financial statements are prepared for the purposes of reporting to the International Development Association and the Government of Mozambique. As a result the financial statements may not be suitable for another purpose. Responsibilities of the directors for the Financial Statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with Note 2.1 of the financial statements and for such internal control as the directors determine 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 directors are responsible for assessing the 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 the directors either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so. 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 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 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 directors. * Conclude on the appropriateness of the 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. 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 Company 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. 4

7 We communicate with the 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. Maputo 27 June 2017 Deloitte & Touche (Mozambique), Lda Per Aneliya Nikolova Certified Auditor - 56/CA/OCAM/2014 5

8 STATEMENT OF SOURCE AND APPLICATION OF FUNDS (Amounts expressed in US Dollars) Description Notes Cumulative to Source Initial deposit in the special account Opening cash balance Replenishments Direct payments Counterpart funds Others Applications Direct payments Counterpart direct payments Special account payments Others Closing balance Represented By Cash & Bank Page

9 SPECIAL ACCOUNT STATEMENT (Amounts expressed in Dollars) Description Notes Cumulative to Initial deposit in the special account Add: Opening cash balance Replenishments Others Deduct: Special account payments Others Closing balance Represented by: Millennium BIM Account n USD

10 NOTES TO THE FINANCIAL STATEMENTS (Amounts expressed in Dollars) 1. DESCRIPTION OF THE PROJECT In 2011 the Maputo Municipal Council launched a second phase of Municipal Development Program for Maputo (PROMAPUTO II) for the next five years as a way to meet the requirements of the level of services demanded by the citizens. In order to undertake this program the Government of Mozambique (GoM) has negotiated with the International Development Agency (IDA) a credit concession for the second Phase ( ). The implementation strategy for the program objectives entails a significant increase of the internal capacities of the Maputo Municipal Council (MMC) as a way to manage maintain and develop quality in the delivery of services to the citizens. From this strategy the structuring importance of IDA bases and the strengthening of the Municipal Finances shall bring forth results to the whole program i.e. in the delivery of services to the citizens. The program will strengthen the City Council's institutional and financial capability to support the achievement of long term services delivery goals. The program is structured in five fundamental components namely: * Component A: Institutional Development; * Component B: Financial Sustainability; * Component C; Urban Planning; * Component D; Urban Infrastructure Investment and Maintenance and; * Component E: Metropolitan Development The PROMAPUTO 11 closing date is 31 December The IDA may process eligible withdrawal applications which shall be received within four months after the closing date for expenditures made or payments due for goods works or services delivered or performed prior to the closing date. 2. Summary of significant accounting polices The following is a summary of the significant accounting policies followed in the preparation of these financial statements. 2.1 Basis of preparation These financial statements were prepared on the basis of cash receipts and disbursements and are not intended to be a presentation in conformity with International Financial Reporting Standards. Consequently funds and the related cash balances are recognised when received rather than when earned and expenses are recognised when paid rather than when incurred. The financial statements are prepared for the purposes of reporting to the International Development Association and the Government of Mozambique. As a result the financial statements may not be suitable for another purpose. 2.2 Fixed assets Fixed assets acquired on account of the Program are expensed on acquisition. 2.3 Purpose of the financial statements The primary objective of the financial statements is to report on the receipts and payments of the Program's activities to the providers of the funds: the International Development Association and the Government of Mozambique. 2.4 Currency The reporting currency is US Dollars (USD) as this is the currency agreed with the International Development Association for financial reporting purposes. Transactions in other currencies are translated at the exchange rate established by the Commercial Bank ruling at the date of the bank disbursement. 8

11 NOTES TO THE FINANCIAL STATEMENTS (Amounts expressed in Dollars) 2.5 Counterpart funds and payments Counterpart funds consist of funds transferred to the Program by the Government of Mozambique and counterpart payments consist of disbursements made with these funds. For the purpose of the Statement of Source and Application of Funds these payments are presented simultaneously as cash receipts and cash disbursements. These receipts and disbursements are translated from Mozambique Metical (MZM) to USD employing the exchange rates of a commercial bank ruling on the date of the transaction. 3. Replenishments The Program money is received from the World Bank from funds made available by the International Development Agency through a special account in USD maintained at Millennium BIM. In 2016 there was no replenishments for the special accounts. 4. Direct payments The payments made directly by the World Bank through withdrawal applications can be detailed as follows: Appl. no. Beneficiary name Date USD Equivalent ESRI Portugal Sistemas e Informago 09-Aug Construg6es Gabriel Couto A.S. 14-Jul Sara Candiracci 22-Jun Construg6es Gabriel Couto A.S. 10-Jun AFAPLAN Planeamento e GestAo 10-Jun Construg6es Gabriel Couto A.S. 12-Apr Construg6es Gabriel Couto A.S. 10-Mar AFAPLAN Planeamento e Gest5o 10-Mar PTC Paula Tomas Consultoria 26-Jan re-submission ESRI Portugal Sistemas e Informa 25-Jan Sara Candiracci 25-Jan ESRI Portugal Sistemas e Informa 25-Jan ESRI Portugal Sistemas e Informa 25-Jan Construg6es Gabriel Couto A.S. 25-Jan Construg6es Gabriel Couto A.S. 25-Jan Sara Candiracci 07-Dec Counterpart funds and payments The payments made directly by the Maputo Municipal Council comprise of works goods and equipment, consultancy services operating costs and compensation for displaced people. These transactions are presented simultaneously as direct receipts and payments and can be analysed as follows: Category Maputo Municipal Council Works Goods Consulting Services 23 9

12 NOTES TO THE FINANCIAL STATEMENTS (Amounts expressed in Dollars) 341 Services Compensation for displaced people Special account payments Applications consist of payments made through the special account other than the payments made by the Maputo Municipal Council. The payments made in 2016 can be analyzed as follows: Expense Category Note Component Component Component Component Component Total s (A) (B) (C) (D) (E) Works Goods & Equipments Services Operating Costs Training Consultant Services Works Description C1 Urban Planning (Works of the Jorge Dimitrov Neighborhood) D1 Urban Infrastructure Investment and Maintenance (Rehabilitation of Av. Julius Nyerere) Goods & Equipment Description Al Organizational and Human Resource Development (Furniture equipment and vehicles) A2 Organizational and Human Resource Development (Motorcycle & vehicles) C1 Urban Planning (Acquisition of licences & maintenance) El Metropolitan Development (Acquisition of vehicles IT equipment) Services Description Al Organizational and Human Resource Development (Catering services during training) BI Financial Sustainability (Public Information campaigns -TAE & IPRA) El Metropolitan Development (Acquisition of vehicles IT equipment)

13 NOTES TO THE FINANCIAL STATEMENTS (Amounts expressed in Dollars) 6.4. Operating Costs Description Al Organizational and Human Resource Development (Bank Charges) B1 Financial Sustainability (Trainees salaries; Travel & Perdiem) C1 Urban Planning (Hole works and water supply system in Chihango Neighbourhood) Training Description Al Organizational and Human Resource Development (Training) B3 Financial Sustainability (Perdiem) C1 Urban Planning (Training and Perdiem) Consultant Services Description Al Organizational and Human Resource Development (Salaries and wages) B1 Financial Sustainability (Perdiem) B2 Financial Sustainability (Audit) C1 Urban Planning - Technical Assistance D1 Urban Infrastructure Investment and Maintenance (Inspection of the works of Julius Nyerere) El Metropolitan Development - Technical Assistance

O Dire. WORLD BANK WOZAB!QUE Received by MUNICÍPIO DE MAPUTO CONSELHO MUNICIPAL GABINETE DE DESENVOLVIMENTO ESTRATÉGICO E INSTITUCIONAL (GDEI)

O Dire. WORLD BANK WOZAB!QUE Received by MUNICÍPIO DE MAPUTO CONSELHO MUNICIPAL GABINETE DE DESENVOLVIMENTO ESTRATÉGICO E INSTITUCIONAL (GDEI) Public Disclosure Authorized WORLD BANK WOZAB!QUE Received by Datt: To: IRI34 MUNICÍPIO DE MAPUTO Public Disclosure Authorized CONSELHO MUNICIPAL GABINETE DE DESENVOLVIMENTO ESTRATÉGICO E INSTITUCIONAL