Ref: NAO 217/5 3rd July, 2017

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Ref: NAO 217/5 3rd July, 2017 FROM TO cc THE AUDITOR GENERAL, P.O. BOX 30045, LILONGWE 3. THE SECRETARY TO THE TREASURY, P.O. BOX 30049, LILONGWE 3. THE OFFICE OF THE PRESIDENT AND CABINET, PIBAG 501, LILONGWE 3. THE SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT, P.O BOX 30134, LILONGWE 3. THE ACCOUNTANT GENERAL, P.O BOX 30140, LILONGWE 3. THE PROGRAMME MANAGER, LILONGWE WATER PROJECT, P/BAG 353, LILONGWE. AUDIT REPORT FOR THE LILONGWE WATER PROJECT PPA FOR THE PERIOD ENDED 31 ST MARCH, 2017 I submit the audit repori for the Lilongwe Water Project PPA for the period ended 31st March, Kindly acknowledge receipt. ~ P~ange For: AUDITOR GENERAL

2 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT II PPA PI53205 IDA LOAN : Q9860MW FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 8 T MARCH, 2017 National Audit Office PO Box Capital City Lilongwe 3 May 2017

3 TABLE OF CONTENTS PAGE CONTROLLING OFFICER'S REPORT 1 STATEMENT OF MANAGEMENT RESPONSIBILITIES 3 AUDITOR GENERAL'S REPORT 4 STATEMENT OF FINANCIAL POSITION 7 STATEMENT OF RECEIPTS AND PAYMENTS 8 DESIGNATED ACCOUNT (DA) ACTIVITY STATEMENT 9 NOTES TO THE FINANCIAL STATEMENTS 10 11

4 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE CONTROLLING OFFICER'S REPORT FOR THE 9 MONTHS PERIOD ENDED 31ST MARCH, 2017 The Government of Malawi (GoM) successfully implemented the Second National Water Development Project (NWDP II) funded by the World Bank, as part of the National Water Development Programme. Bulk water supply to the city of Lilongwe, through Lilongwe Water Board, has been identified as one of the key consultancy outputs from the NWDP II, and a Feasibility Study was undertaken, followed by a detailed design of the bulk water source, by constructing the Diamphwe Multipurpose Dam and Associated Water Supply Structures to Lilongwe City. The resources for the construction phase will be sourced from the World Bank, African Development Bank, the European Investment Bank and a Public Private Partnership (PPP) arrangement through the Lilongwe Water Programme. During the idealization, conceptualization and identification of the programme, it was noted that there are information gaps to adequately design the programme such that there were no updated water demand figures, no detailed design for distribution network, there was no updated water supply and sanitation Master P lan, and also there was need for the finalization of the Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) for the Project. The GoM needs to fast track the subsequent construction of the bulk water source for the city of Lilongwe, considering that the current available water supply has not been able to meet water demand since To this effect, the GoM and the Worldbank signed a Project Preparation Advance agreement on 4th August 2015 to facilitate studies and other preliminary activities ahead of the construction phase of the proposed Diamphwe Multipurpose Dam and Associated Water Supply Structures to Lilongwe City. The amount of the Project Preparation Advance is US$3 million and has been implemented from August 2015 to March The major activities undertaken during the year under reporting are: Preparation of Environmental and Social Safeguards (ESIA) and Resettlement Action Plan (RAP) Environmental and Social Impact Assessment Study for Diamphwe Dam and Associated Water Supply Facilities Trainings under capacity building Designs for Treatment Works II Programme design The National Statistical Office, NSO, conducted an examination and analysis of the 2015 population levels in contrast with the 2008 census to as certain growth rates and future forecasting of water demand that were key inputs to the detailed design and water supply distribution systems for the City of Lilongwe up to The Consultancy for the independent ESIA was successfully concluded and the outcome was disclosed locally and internationally for information and augmentation if necessary. The ESIA outputs had minor adverse impacts, on both fauna and flora so that minimal mitigation measures were recommended. The RAP was also successfully concluded and it was disclosed locally and internationally. The major impacts of the RAP were individual and communal loss of prope1ty in the inundated area, and some cultural sites especially graveyards. All the key players in the Government including the Department of Antiquities, the Department of Lands were ful ly involved in the examination and analysis of mitigation measures that required resettlements and compensations for the property. The PPA was used to faci litate consultations with key stakeholders in provision of sanitation for the City of Lilongwe, especially the Lilongwe City Council, and draft terms of reference were drawn up for assessment and review of the 201 O Sanitation Master Plan for the City of Lilongwe. A Task Force was set up to continue with the preliminary plans that were developed during the PPA period. The PPA was also used to identify a PPP advisor to assist the Government of Malawi to assess the viability of a PPP arrangement that can successfully complement the donor resources in the operation of the Lilongwe Water Programme. The PPA resources were also used to finance a Panel of Experts that were key to augment the evaluation of the designs of the Diamphwe Dam, including the ancillary documents for tendering and overall engineering integrity of the designs.

5 1. The PPA was used for community mobilization and awareness campaign in the project area to ensure consensus building and understanding by establishing local community committees and utilizing the existing hierarchy from the district councils to traditional authorities, group village headmen and village headmen. The awareness campaign was also extended to all relevant government ministries and a number of Non-Governmental Organisations (NGOs) and religious groups that were operating within the project area. The Preparation Advance has been 100% disbursed and whole amount of US$3,000,000 has been utilized and fully documented as the reporting date. All the planned activities have been successfully executed and the project is ready for appraisal.... ~~.~.~~ Erica Maganga Secretary for Agriculture, Irrigation and Water Development lq.ob-~l+ Date

6 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE 9 MONTHS PERIOD ENDED 31 5 T MARCH 2017 The management of Lilongwe Water Project is required to prepare financial statements for each financial reporting period which give a true and fair view of the state of affairs of the project as at the end of the reporting period and of the operating results for that period. The management is also required to ensure that the project keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the project and enable them to ensure that the financial statements comply with the financial agreements and statutes. In preparing the financial statements the management accepts responsibility for the following: Maintenance of proper accounting records; Selection of suitable accounting policies and applying them consistently; Making judgment and estimates that are reasonable and prudent; Compliance with applicable accounting standards when preparing the financial statements, subject to any material depa11ures being disclosed and explained in the consolidated financial statements. The management also accepts responsibility for taking such steps as are reasonably open to them to safeguard the assets of the project and to maintain adequate systems of internal controls to prevent and detect fraud and other irregularities The management is of the opinion that the financial statements give a true and fair view of the financial affairs of the project and of its operating results. The finapcia) statements have been approved by the Ministry of Agriculture, Irrigation and Water Development on..!.~./-~.(. 1.~.. and are signed on its behalf by:..,.~ " Programme Manager.. M~.~.~~ Secretary for Agriculture, Irrigation & Water Development 3

7 Telephone: I Facsimile: +265 I I I All Communications should be addressed to: National Audit Office In reply please quote No NATIONAL AUDIT OFFICE P.O. BOX CAPITAL CITY LILONGWE 3 MALAWI AUDITOR GENERAL AUDITOR GENERAL'S REPORT TO THE SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT ON THE FINANCIAL STATEMENTS OF THE LILONGWE WATER PROJECT PREPARATION ADVANCE FOR THE 9 MONTHS PERIOD ENDED 31ST MARCH, 2017 Opinion I have audited the accompanying Statement of Financial Position of the Lilongwe Water Project II Preparation Advance for the 9 months period ended 31 st March, 2017 and related Statement of Receipts and Payments and Notes to the Accounts for the period then ended as set out on pages 5 to 11. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Lilongwe Water Project II Preparation Advance as at 31 st March, 2017 in accordance with the International Public Sector Accounting Standards (IPSAS), Donor terms of agreement and financial provisions. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAis). My responsibilities under those standards are further described in the Auditor 's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Lilongwe Water Project and the Ministry of Agriculture, Irrigation and Water Development in accordance with the International Standards of Supreme Audit Institutions 30 - Code of ethics (ISSAI 30) as promulgated by the International Organisation of Supreme Audit Institutions (INTOSAI), and I have fulfilled my other ethical responsibilities in accordance with th ese requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the Consolidated Annual Appropriation Accounts as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. 4

8 I have determined that there is no need to communicate key audit matters in my report due the nature of the audited entity. I The Lilongwe Water Project Management's Responsibility for the Project's Financial Statements The Lilongwe Water Project Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSAS) Financial Reporting under the Cash Basis of Accounting, Donor term s of agreement and financial provisions, and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of the financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Project's Financial Statements My 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 repo1i that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards of Supreme Audit Institutions (ISSAis) 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 Project's Financial Statements. As part of an audit in accordance with ISSAis, I exercise professional judgment and maintain professional scepticism throughout the audit. I 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 my 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 internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by 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. I communicate with those charged with governance 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 identify during my audit. 5

9 I also provide those charged with governance with a statement that I 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 my independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, I 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. I describe these matters in my auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication The engagement auditor on the audit resulting int : dependent Auditor General 's report is: ' Signature~.. STEPHENSON KAMPHASA AUDITOR GENERAL NATIONAL AUDIT OFFICE LILONGWE MALAWI 2 i ~ 2 c, (7--- Date:.... 6

10 LILONGWE WATER PROJECT PREPARATION ADVANCE WORLDBANK (IDA) Q9860 MWPROJECT ID No.: P STATEMENT OF FINANCIAL POSITION AS AT 31ST MARCH 2017 NON CURRENT ASSETS Notes Period Ended 31 March 2017 (FY20172 US$ MWK'OOO Period Ended 30 June 2016 (FY2016) US$ MWK'OOO Cumulative (2017) Period Ended 31March 2017 US$ MWK'OOO Work in Progress (Const. Water Supplies) Office Equipment Accounting Software (Tompro) TOT AL NON CURRENT ASSETS ,883 27,568 50,782 36,005 57,750 40, , , , , , , , ,434 50,782 36,005 57,750 40, , ,383 CURRENT ASSETS Bank and Cash Balances TOTAL FUNDS EMPLOYED , , , FINANCED BY Opening balance (IDA) IDA Q986-MW Other Finances Consultancies Training Operating costs TOT AL FINANCES 4 5,6 21,233 14,3 40 1,260, ,725 1,5 82 1,122 (851,184) (603,490) (96,139) (68, 163) (189,021) (134,016) ,518 1,739,056 1,174,448 3,000,000 2,069,173 1,5 09 1,019 3,092 2,141 (1,029,834) (695,484) (1,881,018) (1,298,974) (64,857) (43,800) (160,996) (461,959) (311,978) (650,980) 183, ,098 (1 11,963) (445,994) 214,384 Signed... ~.S.. 0-::.0:--Cz. Erica Maganga Secretary for Agriculture, Irr & Water Development Signed... ~.... Prof Zachary Kasomekera Programme Manager 7

11 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECTPREP ARA TION ADVANCE, WORLD BANK (IDA) Q9860 MW, PROJECT ID No.: Pl53205 STATEMENT OF RECEIPTS AND PAYMENTS FOR THE 9 MPONTHS PERIOD ENDED 31ST MARCH, 2017 Opening Cash Balances Project Operating Accounts IDA Designated Account Total Opening Balances Receipts IDA H6900-MAI Interest Earned Total Less: Uses of Funds by Category Demand Assessment & Phasing Optimization ESIA for Diamphwe Dam and Associated Works Detailed Design for New Distribution Network Environ & Safeguards for Dam and Distrib Network Program Design and Operational Cost Monitoring and Evaluation Capacity - Training Programme coordination consultancy fees Programme Operational cost Total Expenditures Cash Available Less Expenditure Foreign Exchange Difference Net Cash Available Closing balances Project Operating Accounts IDA Designated Account Total Closing Cash Balance Signed.. &~~~~ Erica Maganga Secretary for Agriculture,lrr& Water Development NOTE March 2017 (FY2017) USD MWK'OOO 1, ,213 13,628 21,233 14,340 1,260, , ,282, ,235 2,700 1, , , , , ,857 82,852 7,656 5,428 96,139 68, , , , ,771 1,283, ,187 (1,342) (951) il June 2016 Cumulative (2017) {FY2016} 31March 2017 USD MWK'OOO USD MWK'OOO 1,739,056 1,174,448 3,000,000 2,069, ,739,250 1,174,579 3,000,434 2,069, , , , ,117 95,061 64, , , ,894 70, , , , , , , , , , , ,825 18,116 34,482 23,544 57,655 38, , , , , , , , , , ,174 1,719,332 1,161,128 3,003,092 2,071,315 19,918 13,451 (2,658) (1,840) 1, ,657 1,840 um ~ , ,213 13, ~ ~ Signed... ~... Prof Zachary Kasomekera Programme Manager 8

12 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATERPROJECTPREPARATION ADVANCE: DESIGNATED ACCOUNT (DA) WORLD BANK (IDA) Q9860 MW PROJECT ID No.: P ACTIVITY STATEMENT FOR THE 9 MONTHS PERIOD ENDED 31ST MARCH 2017 Deposit Bank: FDH Bank, Capital City Branch Account Name : Lilongwe Water Project Account Number: Currency : USD PARTI NOTES Cumulative advances to end of current reporting period I Cumulative expenditure to end of last reporting period Outstanding Advance to be accounted (line 1 minus line 2) PART II Opening DA balance at beginning of reporting period Add/subtract: Cumulative adjustments (if any) 2 Advances from World Bank during reporting period Add lines 5 and 6 Outstanding advances to be accounted for (add line 4 and line 7) AMOUNTUSD 2,470,497 1,385,655 1,084,842 20,214 (489) 1,06 5, 117 1,064, 628 1,084, Closing DA balance at the end of current reporting period Add/subtract: Cumulative adjustments (if any) Expenditures for current reporting period Add line 10 and line 11 Add line 9 and line 12 Difference (if any) (line 8 minus line 13) 3 4a (3,092) 1,08 7,934 1,084,842 1,084,842 NOTES I This is composed of cumulative documented advances to DA excluding the Direct Payments which are included in the Receipts in Sources & Uses of Funds. 2 The adjustment is as a result of opening balances Opening Operating Balance from last period 1, Interest Earned (1, ) (489.00) 3 DA Reconciliation of Closing Balance Bank Statement Balance Less /Add DA Cashbook balance 4a The adjustment is made up of: Operating Account Balance Exe Gain/ loss & Interest earned Total adjustment (3,092) (3,092) 4b DIRECT PAYMENTS 2016 Payments SMEC SMEC 2017 Payments SMEC SMEC 20/05/ /06/ /08/ /01/ , , , , ,

13 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE WORLDBANK (IDA) Q9860 MWPROJECT ID No.: Pl53205 NOTES TO THE FINANCIAL STATEMENTS FOR THE 9 MONTHS PERIOD ENDED 31ST MARCH, Lilongwe Water Project (LWP) The Government of Malawi and IDA signed a Financing Agreement on 4th August 2015 to the tune of USD 3,000,000 (Three Million United States Dollars as a Project Preparation Advance for Lilongwe Water Project following a successful implementation of the Second National Water Development Project. L WP activities shall include the construction of the proposed Diamphwe Multipurpose Dam and Associated Water Supply Structures to Lilongwe City. LWP preparation facility is being implemented by Lilongwe Water Board under the leadership of the MoAIWD. The PPAwas initially planned to be implemented for period of 1 year from August 2015 to 30 1 h Juiy 2016, however, with some critical activities not finalized by then, the implementation period was extended to March, Financial Management and Accounting I The Ministry of Agriculture, Irrigation and Water Development (MIWD) through the Programme Management Unit (PMU), coordinates, controls, accounts and monitors the utilization of programme funds by the component implementing agencies. The PMU manages the fiduciary policies and procedures. The PMU supports the implementation and maintenance of centralized financial management, internal controls, disbursements and financial repotiing procedures. The accounting system operates within the general framework of the Government Financial Management system, which is governed by the Public Finance Management Act No. 7 enacted in The overall direction for the GOM budget process is stipulated in Public Finance Management Act and is operationalised by Treasury Circulars and Instructions. The Acts and th e Treasury Instructions and Circulars stipulate the accounting guidelines for the GoM and GoM managed projects. A computerized accounting system is employed for tracking of funds and activi ties, data integrity, and timely reporting. An accounting package capable of providing these requirements is in place. 2.0 Accounting Policies 2.1 Basis The accounts have been prepared using the historic cost convention and on a cash basis in accordance with the International Public Sector Accounting Standards (IPSAS). All receipts and expenses incurred in the period are reflected in the financial statements. 10

14 I MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE WORLDBANK (IDA) Q9860 MWPROJECT ID No.: P NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE 9 MONTHS PERIOD ENDED 31 5 T MARCH, Foreign Currency Transactions Local currency Receipts and Payments Account transactions are translated back to foreign currency using the exchange rate at the date of draw down, while payments in foreign currency are translated to local currency using actual exchange rate on the transaction date. Expenditures in local currency are translated back to foreign currency using the exchange rate at which the draw down was converted, the average for the year has been K709 / 1. Closing bank balances are translated using the rate at which the funds were converted. 2.3 Receipts Receipts are stated at actual amounts withdrawn from the World Bank Grant account Q9860MW in the form of replenishment to the special account using Statement of Expenditures (SOE), Charges and direct payments to suppliers of goods and services. 2.4 Non-Current Assets Capital expenditure is capitalised in the year it is incurred and no provision fo r depreciation is made on all fixed assets. 3.0 Disbursement Method The project is using Transaction Based method of disbursement. The Statement of Expenditures (SOEs) are used for replenishment of the Designated Account. 4.0 Funds Disbursed The disbursement rate is 100% as the entire 3,000,000 was disbursed and utilized. During the financial year the World Bank disbursed a total of USDl, 260, to the project. USDl, 065, was disbursed through the Designated Account maintained with FDH Bank and USD 195, 826. JO was paid directly to the Consultant. The table below refers. 11

15 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE WORLDBANK (IDA) Q9860 MWPROJECT ID No.: P NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE 9 MONTHS PERIOD ENDED 31sT MARCH, 2017 WB/Trans No Beneficiary Name DISBURSEMENTS as at 30'" June 2016 DISBURSEMENTS for the period ended 31'Mar Lilongwe Water Project 0009 Lilongwe Water Project 0011 Lilongwe Water Project 0013 Lilongwe Water Project TOTAL DISBURSEMENTS to Designated Account DIRECT PAYMENTS 0010 SMEC International PTY Ltd 0012 SMEC International PTY Ltd TOTAL DISBURSEMENTS by Direct Payments TOTAL DISBURSEMENTS to the project Disbursed Amount ill ID 1,739, , , , , ,065, , , , ,000, Jul- l 6 16-Aug ct Jan Aug-l 6 24-Jan Interest earned Interest was earned in a Designated Account and Local currency bank accounts. The total amount of interest earned for the period was K 170, Exchange gain Exchange gain is realized from the difference in exchange rate at the time of conversion to local currency and the rate used at the actual payment of the expenditure as summarized below. Exchange Rate A. Expenditure Incurred in Local Currency B. Exchange rate at Conversion MWK C. Exchange rate on Payment MWK D. Exchange Gain (loss) (Line B minus Line C) E. Exchange Gain (loss) in USD MWK AMOUNT $1,087, MWK 771,345, MWK 770,395, MWK950, , Work in Progress (Construction of Water Supplies) This is in respect of purchase of items that will facilitate the design and construction of new distribution network. DESCRIPTION Supply and Delivery of flow meters USD FY , FY2016 Cumulative (FY?, , ,

16 MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT LILONGWE WATER PROJECT PREPARATION ADVANCE WORLDBANK (IDA) Q9860 MWPROJECT ID No.: Pl53205 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE 9 MONTHS PERIOD ENDED 31 st MARCH, Office Equipment One (1) Windows 2012 Server complete with UPS One (1) Laptop Computer Three (3) Desktop computers complete with UPS US$ 38, , ,436_.50 50, The project purchased a financial management account package (Tompro) amounting to $57,