Puntland State of Somalia. Somali Urban Investment Planning Project. Project Number: P Grant Number: TFOA1754

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Number: P Grant Number: TFOA1754 Public Disclosure Authorized

2 CONTENTS PAGE GLOSSARY OF ABBREViATIONS 1 1 INTRODUCTION BACKGROUND PROJECT GENERAL INFORMATION AUDIT OBJECTiVES AUDIT SCOPE AUDIT APPROACH 4 2. STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES 5 3. AUDITOR GENERAL'S AUDIT REPORT 6 4. STATEMENT OF RECEIPTS AND EXPENDITURE 8 5. STATEMENT OF BUDGET COMPARISON WITH ACTUALS 9 6. STATEMENT OF RECEIPTS AND EXPENDITURE - CUMMULATIVE NOTES TO THE FINANCIAL STATEMENT 11

3 GLOSSARY OF ABBREVIATIONS EAFS External Assistance Fiduciary Section ISSAls International Standards of Supreme Audit Institutions IPSAS OAG UNOP International Public Sector Accounting Standard Office of Auditor General United Nations Office for Project Services PIU Project Implementation Unit SUIPP Somalia Urban Investment Planning Project 1

4 Forthe Period 29 July 2016 to 31 December INTRODUCTION 1.1 Background The International Development Association, acting as the administrator of the Somalia Multi- Partner Fund signed a Grant Agreement with Federal Govemment of Somalia on 24 February 2016 to finance the cost of the (SUIPP) in feasibility, assessment and preliminary design studies for urban investment activities in Mogadishu, Hargeisa and Garowe Municipality. The SUIPP comprises a "project to prepare a project". The main project - to be prepared by SUIPP is called the Somali Urban Development Project (SUDP). Subsequent to signing the Grant agreement, the Government of Puntland signed a Subsidiary Agreement with Federal Govemment of Somalia for the Puntland component amounting to 650,000 which was expected to run for a duration of 1 year from 30 June 2016 to 30 June However, the Project closure period has been extended to 31 December The Project in Puntland is under the supervision of the Garowe Municipality and its strategic goal is to undertake technical and economic feasibility studies and preliminary design work for portfolios of potential investments in urban infrastructure and the strengthening of urban management institutions in Garowe. The activities to be undertaken by the recipient under SUIPP comprises enhancement of the main project preparation and implementation capacity through the hiring, training and equipping core specialists who will be charged with managing the implementation of the SUDP. Garowe Municipality is implementing these activities with procurement and financial management support of the EAFS and in accordance with the Grant Agreement between the Federal Govemment of Somalia and the International Development Association (acting as administrator of the Somalia Multi-Partner Fund), the SubSidiary Agreement between the Federal Govemment of Somalia and the and the Implementation Agreement between the and the Garowe Municipality. At 31 December 2016, SUIPProject Implementation Unit (PIU) had achieved the following milestones that are in line with the Project's objectives; Recruitment of the PIU staff; Participation in UNOP&IPE Global's feasibility study and preliminary design studies on identified priority roads and bridges to estimate the costs; and Facilitation of Garowe municipality institutional assessment exercise that was focused on assessing the basic conditions of performance, strategic planning capacity, technical and operational capacity, fiduciary accountability mechanism and environmental and social management of the municipality. 2

5 For the Period 29 J4.1Y 2016 to 31 December Project General Information Registered Office Garowe Municipality, Puntland Designated Bank Account First community Bank Kimathi Street Branch Nairobi, Kenya Auditors Auditor General Office of the Auditor General Garowe, Puntland Fiduciary Management Extemal Assistance Fiduciary Section (EAFS) Office of the Accountant General Ministry of Finance Garowe, Puntland Project Management Name Role Position Contact Information Abdirizak Said Nur Accountant Accountant General General Abdirizak Hassan Director General Director General Mohamed AbdirahmanGure Project coordination Project Manager Said Ismail Said Nuh Omar Muse Abshir Abdulkadir Ahmed Finance Management FM Specialist Director of EAFS Section FM Specialist for SUIPP Head of EAFS Procurement Procurement section 3

6 For the Period ~ July 2016 to 31 December Audit Objectives In line with the Grant Agreement and the Puntland Audit Law, the Office of the Auditor General was mandated to carry out external audit of the project for the period 29 July 2016 to 31 December The specific objectives of the audit were to enable the Auditor General to express an opinion as to whether; The Project funds received and expenditures incurred during the fiscal year were for the purpose intended; The Project books of accounts were kept based on the Generally Accepted Accounting Principles (GAAP) and the International Public Sector Accounting Standards (IPSAS) Cash Basis and the financial transactions therein reflect a true record of the transactions that took place during the period; Adequate Internal Control processes and systems were maintained by the implementing agencies during the period under the audit. 1.4 Audit Scope The audit report covers the statement of receipts and expenditure of Somali Urban Investment Planning Project for the period 29 July 2016 to 31 December The audit also assessed SUIPP's internal controls structure relevant to the Project Agreement and the project financial management. 1.5 Audit Approach In order to cover the scope of the financial audit for the SUIP Project for the period 29 July 2016 to 31 December 2016, we performed the audit in accordance with International Standards of Supreme Audit Institutions. The procedures involved, among others:- Tested transactions carried out during the period to ensure expenditure was supported, properly authorized and incurred for the Project. Reviewed the internal control structure and tested the controls in place to ensure that the Project funds and resources were utilized on Project activities and that goods, works and services financed by the Project funds were procured in accordance with relevant financing agreement and specific provisions of World Bank guidelines, as applicable. Reviewed the accounting system of the Project as implemented by EAFS to ensure that the Project funds and resources were utilized on budgeted activities and were fully accounted for; and all supporting documents, records and accounts have been kept in respect of all Project's activities. Tested the Project'scompliance with the Grant Agreement terms, Project Implementation Manual and applicable laws and regulations. Planned and executed the audit in accordance with Intemational Standards of Supreme Audit Institutions (ISSAls) and obtained from the implementing agency and fiduciary agency a written confirmation conceming representations made during the audit. Tested the year end cash balance and grant receipt by doing confirmations to bank and World Bank respectively. 4

7 For the Period 29 J4Jy 2016 to 31 December STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES The Project management is required to keep proper books of account and records of the Project's financial transactions adequate to reflect the operations, resources and payments related to the Project. The Project management is also responsible for designing, implementing and maintaining internal control relevant to the preparation and fair presentation of Project'sfinancial reportsthat are free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The Project management accepts responsibility for the financial reports which has been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in accordance with the International Public Sector Accounting Standards (IPSAS), Cash Basis. The Project management is of the opinion that the Project financial reports gives a true and fair view of the state of the financial affairs of the Project. The management further accepts responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial report as well as adequate systems of internal control. Abdirizak S Nu Accountant eneral Ministry of Finance...:Lf. /fj/:lp.j?t... Date /.l 5

8 3. AUDITOR GENERAL'S AUDITREPORT I have audited the accompanying financial report of Somali Urban Investment Planning Project, set out on pages 8 to 14 which comprise the statement of receipt and expenditure, statement of budget comparison with actual, statement of cumulative receipt and expenditure for the period for the period 29 July 2016 to 31 December 2016 and notes to the financial statements, including a summary of significant accounting policies. PROJECT MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL REPORT The Project management is responsible for the preparation and fair presentation of this financial report in accordance with Generally Applicable Accounting Principles and the International Public Sector Accounting Standards - Cash Basis. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITOR'S RESPONSIBILITY My responsibility is to express an independent opinion on the financial report based on the audit conducted. I conducted the audit in accordance with International Standards for Supreme Audit Institutions (ISSAls). Those standards require that i comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial report is free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers intemal control relevant to the Project's preparation and fair presentation of the 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 reliability of the Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the.. Project management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence i have obtained is sufficient and appropriate to provide a basis for my audit opinion. 6

9 OPINION In my opinion, the financial report presents fairly, in all material respect, the financial status of for the period 29 July 2016 to 31 December 2016 in accordance International Public Sector Accounting Standards (IPSAS), Cash Basis. I have communicated with Project 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 I identified during our audit. Jama Mohamed Osman Auditor General Garowe,... &.~o/

10 Project Number: E' Grant Number: TFOA STATEMENT OF RECEIPTS AND EXPENDITURE FOR THE PERIOD 29 JULY 2016 TO 31 DECEMBER 2016 Notes 2016 RECEIPTS Grant receipts , Total receipts 219, EXPENDITURE BY BUDGET COMPONENTS Component 1: Consultancy service Component 2: Goods Component 3: Operating costs , , Total Expenditure 28, GRANT BALANCE 191, REPRESENTED BY Designated bank account balance , The st I~ment of receipt ~nd expe~diture wa5~pproved by the Project Management on.:1:,/ d Signed on ItS behalf by. - Abdirizak S r ----~ Accountant eneral Ministry of Finance The accounting financial report. policies and notes set out on pages 11 to 14 form an integral part of the 8

11 Project Number: P~1492 Grant Number: TFOA STATEMENT OF BUDGET COMPARISON WITH ACTUALS FOR THE PERIOD 29 JULY 2016 TO 31 DECEMBER ACTUAL BUDGET PERCENTAGE BUDGET OUTTURN VARIANCE VARIANCE RECEIPTS % World Bank(Somalia Multi-Partner Fund) 220, , % TOTAL RECEIPTS 220, , % EXPENDITURE Consultancy service 38, , , % Goods 76, , % Operating cost 71, , , % TOTAL EXPENDITURE 186, , , % 9

12 6. STATEMENT OF RECEIPTS AND EXPENDITURE - CUMULATIVE AT 31 DECEMBER2016 RECEIPTS Balance BIF Current Year Cumulative Balance Grant receipts 219, , TOTAL RECEIPTS 219, , Expenditure by budget components Component 1: Consultancy service 26, , Component 2: Goods Component 3: Operating costs 2, , TOTAL EXPENDITURE 28, , Grant Balance 191, ,

13 For the Period 29 Ju~y2016 to 31 December NOTES TO THE FINANCIAL STATEMENT 7.1 Significant Accounting Policies a) Basis of Preparation of the Financial Report The Project's financial report is prepared in accordance with the International Public Sector Accounting Standards (IPSAS), Cash Basis. The measurement basis applied is the historical cost basis, except where otherwise stated in the accounting policies below. The accounting policies adopted have been consistently used throughout. b) Foreign Currency Transactions The functional currency is the United States dollar and the reporting currency is also the United States dollar. Items included in the financial statements are measured in the currency of the primary economic environment in which the entity operates. c) Reporting Period The reporting period for these financial statements is the 2016 financial year of the Government, which runs from January 1, 2016 to December 31, However the Project period is less than a year, from 29 July 2016 to December d) Grant Receipt Receipts represent cash received by the Project during the period and comprise solely grants received from the World Bank under the Somalia Multi-Partner Fund (SMPF). These grant receipts have been recognized when received into the Projects Designated Account (DA) in line IPSAS Cash Basis. e) Project Expenditure Expenditure represents outlays of cash made by the Project and/or the World Bank for and on behalf of the Project. The expenses comprise both operating and capital expenditure and are recognized in the books of account when paid out in line with IPSAS Cash Basis. 11

14 7.2 Grant Receipt During the period ended 31 December 2016, the World Bank disbursed SUIPP as follows:- 219,990 to Date Received Reference Description Amount 10/11/2016 RV/33/11/2016 World Bank Grant 219, Total Grant Received 219, Component 1: Consultancy Service Actual Budget Sub-component 1.1: Project coordinator 13, , Sub-component 1.2: Safeguard specialist 4, , Sub-component 1.3: Financial management specialist 3, Sub-component 1.4:Procurement specialist 3, SUb-component 1.5: M&E specialist 7, , Sub-component 1.5: Project engineer 3, Component 2: Goods 26, , Actual Budget Sub-component Procurement of Equipment 76, , Component 3: Operating Costs Actual Budget Sub-component 3.1: Costs of specialized and short training for staff 2, , sub-component 2.7: Costs related to the PIU operations , , ,

15 7.6 Reconciliationbetween Application for Withdrawals and Receipts from the World Bank Withdrawal Application Actual Receipt Date of Application Amount Date of Amount Difference Application Number Receipt 03/11/ , /11/201E 219, Total 220, , Designated Bank Account Balance The designated account balance as at 31 December 2016 is detailed below:- Designated Account Reconciliation Statement Grant Number TFOA1754 Bank Name: First Community Bank Branch Name: Kimathi Branch, Nairobi Bank Account Number: Part I I I 1. Cumulative receipts to end of current reporting period 219, Cumulative expenditures to end of current reporting period 28, Outstanding advances to be accounted (1-2) 191, Part II 4. Opening balance at beginning of reporting period (per Bank statement) - 5. Add/Subtract: Cumulative adjustments, including interest earned and recoveries 6. Grants received from the World Bank during current reporting period 219, Closing balance at end of current reporting (per Bank statement) 191, Outstanding amount of advances to be accounted for ( ) 28, Total Expenditures reported for current reporting period, including this 28, Difference (if any) Remarks None 13

16 7.8 Comparatives This is the first financial reporting by the Project hence no comparative. Performance have been compared to budget, where necessary. 7.9 Events after Reporting Date There are no subsequent events that have occurred after the reporting period which are either to be disclosed that could materially affect the financial report of the Project, or curtails its activities in attaining its objectives Capital Expenditure The Project had not incurred any capital expenditure as at the end of the period. 14