Financial Statements. Audit. Conselho de Regulagio do Abastecimento de Agua (CRA) Greater Maputo Water Supply Project. Public Disclosure Authorized

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1 Audit Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Conselho de Regulagio do Abastecimento de Agua (CRA) Credit Agreement Nr MOZ For the year ended 31 December 2016

2 Conselho de Regulação do Abastecimento de Agua (CRA) Credit Agreenent Nr MOZ Index Page Report of the independent auditors 2-3 Statement of receipts and payments 4 Statement of designated account 5 Notes to the financial statements 6-9 Disbursements 10 Statement of Management Responsibilities The management of CRA - Conselho de Regulação do Abastecimento de Agua is responsible for the preparation and presentation of the financial statements of the - Credit Agreement Nr MOZ, which comprise the statement of receipts and payments, statement of designated account, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with the cash receipts and disbursement basis of accounting described in note 2. Management is also responsible for determining that the basis of accounting is an acceptable basis for preparing and presenting the financial statements in the circumstances, for such internal control as the management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and for maintaining adequate accounting records and an effective system of risk management. Management is also responsible for the other project internal controls and for compliance with the relevant project agreement terms and local laws and regulations applicable to the project. The responsibility for the prevention and detection of non-compliance rests with management. Approval of the financial statements The financial statements, were approved by the management on 23 May 2017 and are signed on their behalf by: Gi

3 Independent auditors' report KPMG Auditores e Consultores, SA Telefone: +258 (21) Edificio HOLLARD Telefax: +258 (21) Rua 1.233, NO 72 C Caixa Postal, 2451 Maputo, Morambique mz-fminformationakpmq.com Web: To the Management of CRA - Conselho de RegulaVfio do Abastecimento de Agua Opinion We have audited the financial statements of the - Credit Agreement Nr MOZ (the Project) set out on pages 4 to 10, which comprises the statement of receipts and payments, and the statement of designated account, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the statement of receipts and payments has been prepared, in all material respects, in accordance with the basis of accounting described in note 2. In our opinion, the statement of the designated account was prepared, in all material respects, in accordance with IDA's Guidelines. With respect to statements of expenditure (SOE), we confirm that an adequate supporting documentation has been maintained to support claims to the International Development Association (IDA) for reimbursements of expenditure incurred and these expenses are eligible for financing under the Loan Agreement. 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 section of our report. We are independent of the Project in accordance the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (JESBA Code) together with the ethical requirements relevant to our audit of the financial statements in Mozambique, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The Management is responsible for the other information. The other information comprises the Management' responsibility statement. The other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or 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 on the other information, 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. KPMG Auditores e Consultores, SA, u 2 a sociedade an6nima de responsabilidade linitada, 6 membro do KPMG Internacional, uma cooperativa Suiga KPMG Auditores e Consultores, SA, a Monambique limited liability company, is a member of KPMG International, a Swine sooperative Registada em Morambique sob a designaoo do, KPMG Auditores a Consultores, SA Registered in Mozambique, as KPMG Auditores e Consultores, SA

4 Responsibilities of the Management for the The Management is responsible for the preparation and fair presentation of the financial statements in accordance with the basis of accounting described in note 2 and for such internal control as the Management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the 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 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. * 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 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. KPMG 23 May 2017 Maputo 3

5 Conselho de Regulavdo do Abastecimento de Agua (CRA) Greater Maputo Statement of receipts and payments Jbr the year ended 31 December 2016 Note IDA Credit Description Receipts Reimbursements to designated account Direct payments Total receipts Payments Goods, consultants services, operating costs and training (2) Total payments Excess of receipts over payments Opening balance Closing balance as at 31 December

6 I Conselho de Regula.Vdo do Abastecimento de Agua (CRA) Greater Maputo Statement of designated account Description Receipts Note IDA Credit Reimbursements to designated account Total receipts Payments Goods, consultants services, operating costs and training (2) Total payments Excess of payments over receipts Opening balance Closing balance as at 31 December

7 Conselho de Regulavdo do Abastecimento de Agua (CRA) Greater Maputo Notes to the financial statements 1. Project background On 31 January 2014 a development Credit 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 to implement the Great Maputo Water Supply Project, Loan Agreement Nr 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 center. Part B: Investment in Water Supply Distribution System Expansion and extension of water distribution system in Greater Maputo Area through installation of approximately 300 kilometers of water supply distribution network and 100,000 new connections, including associated water meters. Part C: Technical Assistance to FIPAG Support to FIPAG, through the provision of goods, consultants' services, and Training for the purpose of: (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 Recipient; (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 Greater Maputo Area staff. 6

8 Conselho de Regulafdo do Abastecimento de Agua (CRA) Greater Maputo Notes to the financial statements 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 peri-urban areas; and (ii) reviewing the financial means - and the structure and form of subsidies for lowincome customers - to extend water and sanitation services to the urban poor, all of the above through provision of goods, technical assistance, Training and Operating Costs required for the purpose. 2. Accounting policies The following paragraphs describe the main accounting policies applied consistently by the project. 2.1 Accounting convention The statement of receipts and payments is prepared on a cash basis under the historical cost convention. 2.2 Cash basis The statement of receipts and payments has been drawn up on the cash basis from the information reflected in the financial reports and accounting records of the project. 2.3 Currencies The books of accounts of the Project are maintained in United States Dollars (). The statement of receipts and payments is also expressed in United States Dollars () unless otherwise stated. The transactions in other currencies are translated to at the official exchange rate ruling at the date of the transactions. 2.4 Cash at bank The cash at bank represents the bank balance at 31 December Fixed assets Fixed assets acquired by the Project are expensed in the year of purchase. 2.6 Procedures The disbursements of the funds, made available by the International Development Association (IDA), are carried out by direct transfers or by requests of payments sent to the Special Account, which was opened with funds made available by IDA, in a bank account of the project in Maputo (BCI). 7

9 Conselho de Regulapdo do Abastecinento de Agua (CRA) Greater Maputo Notes to the financial statements 3. Reimbursements Application number Category SDR Total reimbursements during the year Direct payments Application number Category SDR RPG Total direct payments during the year Closing balance The closing balance is represented by: 31 December 2015 Cash at bank - BCI MT 13 Cash at bank - BCI Unreconciled difference

10 Conselho de RegulaVdo do Abastecimento de Agua (CRA) Greater Maputo Notes to the financial statements (cont.) 6. Reconciliation of advance from IDA 31 December Advance from IDA Represented by: a) Cash at bank b) Expenditure submitted on 02 February 2017 under WA expenditure of November and December (reimbursed on 17 February 2017) d) Others (242)

11 Conselho de RegulaVio do Abastecimento de Agua (CRA) Greater Maputo Disbursements as at 31 December 2016 Loan Agreement Nr MOZ Expenditure Credit Disbursement Disbursement disbursement Credit agreement at 31/12/2015 during the as at available as year 31/12/2016 at 31/12/2016 SDR SDR SDR SDR SDR Goods, Consultants services operating costs and training (2) Designated account B (213252) Total

Public Disclosure Authorized. Financia Statements. Public Disclosure Authorized. Audit. Public Disclosure Authorized. Public Disclosure Authorized

Public Disclosure Authorized. Financia Statements. Public Disclosure Authorized. Audit. Public Disclosure Authorized. Public Disclosure Authorized Financia Statements Audit Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized FIPAG - Fundo de Investimento e Patrimonio de Abastecimento