I I I I I I. Financial Statements for the year ended 31 December 2016

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Financial Management mprovement and Consolidation Project (PFMCP) Financial Statements This report contains 22 pages Appendix 1 page Ref: S651/utk/eap

2 Public Financial Management mprovement and Consolidation Project (PFMCP) Contents Page General information 1 Background information on the project 2 Management's responsibility statement 3 ndependent auditor's report 4-8 Statement of resources and expenditure 9 * Statement of income and expenditure 10 Statement of financial position 11 Statement of cash flows 12 Statement of changes in accumulated fund 13 Statement of budget versus actual 14 Notes to the financial statements Report of the Auditors on the Special Account Statement US Dollar Account 21 Special account statement - Bank account 22 1 Appendix Schedule of fixed assets 23

3 Public General information Office Project Director Bankers Financial Management mprovement and Consolidation Project (PFMCP) Audit Service Sierra Leone 2nd Floor Lotto Building Tower Hill Freetown Lamin Vandy Sierra Leone Commercial Bank Siaka Stevens Street Freetown Auditor KPMG Chartered Accountants KPMG House 37 Siaka Stevens Street Freetown

4 Public Financial Management mprovement and Consolidation Project (PFMCP) for the year ended 31 December 2076 Background information on the project The Public Financial Management mprovement and Consolidation Project (PFMCP) is designed to respond to the Government of Sierra Leone (GoSL) PFM Strategy ( ) that aims at strengthening the foundation of the overall PFM governance, ranging from planning, budgeting, accounting and reporting, internal audit and controls, public procurement and revenue management, to external audit and legislative and public oversight. These intervention areas under the project together constitute the core of the reforms envisaged in the Government's strategy document and are consistent with the 'Agenda for Prosperity' ( ). The project is jointly 3 funded by the nternational Development Association (DA), the World Bank Group, the Multi- Donor Trust Fund (MDTF) with funds from DFD and the EU and co-financing from the African Development Bank (AfDB). The specific overall Project Development Objective (PDO) of the Public Financial Management mprovement and Consolidation Project (PFMCP) is: "to improve budget planning and credibility, financial control, accountability and oversight in government finances in Sierra Leone". The project is made up of the following components: Component 1: Enhancing Budget Planning and Credibility: The objectives of this component are to: strengthen the macro fiscal forecasting and public investment functions of government to improve overall budget planning, and to strengthen systems and procedures for budget formulation. Component 2: Financial Control, Accountability, and Oversight: The objectives of this component are to: strengthen financial control in government, improve accountability systems and practices, and enhance independent and public oversight in the management and use of central Government public finances. Component 3: Supporting the Strengthening of Revenue Mobilization and Administration Systems: The objectives of this component are to: strengthen revenue policy and oversight of revenue collection, improve the efficiency and integrity of revenue administration to increase domestic revenue, and integrate revenue system within the overall PFM system. Component 4: Strengthening Local Governance, Financial Management and Accountability Systems: The objectives of this component are to: improve the financial management systems in local councils, and strengthen the accountability and oversight institutions to contribute to enhance service delivery efficiency and effectiveness. Component 5: PFM Reform Coordination and Project Management: The objective of this component is to ensure a continued strong institutional framework to coordinate and oversee implementation of the PFM Reform Strategy as a whole as well as manage the implementation of the proposed project. 2

5 Public Financial Management mprovement and Consolidation Project (PFMCP) Management's responsibility statement Management is responsible for the preparation and presentation of the financial statements, comprising the statement of financial position at 31 December 2016, and the statement of income and expenditure, the statement of resources and expenditure, statement of cash flows and the statement of budget versus actual for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes in accordance with the basis of accounting described in note 2 of these financial statements and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Approval of the financial statements The financial statements were approved by management on and signed on its behalf by: Audit r General 1 3

6 KPMG Sierra Leone Telephone: /2 KPMG House Telefax: Siaka Stevens Street P 0. Box 100 nternet: Freetown Sierra Leone ndependent Auditor's report to the Government of Sierra Leone Report on the Audit of the Financial Statements Opinion We have audited the financial statements of the Public Financial Management mprovement and Consolidated Project - Audit Service Sierra Leone Sub-Component 2.4 set out on pages 9 to 20 which comprise the statement of financial position as at December , and the statement of resources and expenditure, the statement of income and expenditure, the statement cash flows, the statement of changes in accumulated fund, and the statement of budget versus actual for the year then ended, and notes to the financial statements including a summary of significant accounting policies. n our opinion, the project financial statements present in all material respect, the program revenue and cost incurred by the project for the year ended 31 December 2016 and it has been prepared in accordance with nternational Public Sector Accounting Standards (PSAS) as stated in note 2 of the financial statements, the World Bank's Guidelines on Financial Reporting and Auditing of projects, the Bank's Disbursement Procedure Manual, terms of the Financing Agreement and the relevant procedures locally in operation. n our opinion, all the funds provided have been used exclusively for eligible expenditure and in accordance with the conditions of the relevant financing agreement with due attention to economy, efficiency and only for the purpose for which the financing was provided. n our opinion, the audited statements of expenditure can be relied upon to support the related withdrawals and supporting documents and records with respect to the statement of expenditure submitted as the basis for withdrawals are available and maintained and the provisions and covenants of the Financing Agreement including all supplementary conditions have been adhered to. n our opinion, Goods and services financed from the Grant Special accounts have been procured in accordance with the relevant Financing Agreement and in accordance with the Bank's procurement policies and procedures. n our opinion, all necessary supporting documents, records and account have been kept in respect of all activities. Clear linkages do exist between the books of account and the financial statements presented to the Bank. 4 KPMG. a partnership established under Sierra Leonean law, is a member of the KPMG network of independent member firms affiliated with KPMG international Cooperative (" KPMG nternational"), a Swiss entity Partners VTO Decker D L Kawaley

7 ndependent Auditor's report to the Government of Sierra Leone (continued) Opinion (continued) n our opinion, a special account has been maintained in accordance with the provisions of the Financial Agreement and in accordance with the Bank's rules and procedures. n our opinion, the financial statements give a true and fair view of the financial position of the Public Financial Management mprovement and Consolidation Project; Audit Service Sub Component 2.4 and of its financial performance and its cash flows for the period then ended in accordance with the accounting policies adopted by the project, as stated in note 2 of the financial statements. Basis for Opinion We conducted our audit in accordance with nternational Standards on Auditing (SAs). 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 nternational Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (ESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Sierra Leone, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other nformation Management is responsible for the other information. The other information comprises the background information on the project, and the management responsibility statement which we obtained prior to the date of this report. 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. n 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. f, based on the work we have performed on the other information obtained prior to the date of this auditor's report, 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. 1 5

8 j ndependent Auditor's report to the Government of Sierra Leone (continued) Responsibilities of management for the Financial Statements Management is responsible for the preparation and presentation of the financial statements in accordance with the basis of accounting described in note 2 of the financial statements 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. n preparing the financial statements, management is 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 management intends to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. 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 SAs 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 SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * dentify 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 Management. 6

9 ndependent Auditor's report to the Government of Sierra Leone (continued) Responsibilities of management for the Financial Statements (continued) * Conclude on the appropriateness of the managements' 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 projects's ability to continue as a going concern. f 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 Project 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; * Obtain sufficient appropriate audit evidence regarding the financial information of the activities of the project to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the project's audit. We remain solely responsible for our audit opinion. We communicate with 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. We also provide those charged with governance 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. Restriction of use These financial statements have been prepared in accordance with the basis of accounting described in note 2 for the purpose of determining the financial position of Public Financial Management mprovement and Consolidation Project (Audit service Sub Component 2.4) for use by the management of the project, the World Bank, African Development Bank (AfDB) and the Government of Sierra Leone and the financial statements and related auditor's report may not be suitable for another purpose. Our report is intended solely for the management of Public Financial Management mprovement and Consolidation Project (Audit Service Sub Component 1

10 ndependent Auditor's report to the Government of Sierra Leone (continued) Restriction of use (continued) 2.4) for use by the management of the project, the nternational Development Association (DA), Multi Donor Trust Fund (MTDF), African Development Bank (AFDB) and the Government of Sierra Leone and should not be distributed to or used by parties other than the management Public Financial Management mprovement and Consolidation Project (Audit Service Sub Component 2.4) by the management of the project, the nternational Development Association (DA), Multi Donor Trust Fund (MDTF), African Development Bank (AfDB) and the Government of Sierra Leone. The Engagement Partner on the audit resulting in this independent auditor's report is Derrick Kawaley. Freetown Chartered Accountants Date c 'L10\1 1

11 Public Financial Management mprovement and Consolidation Project (PFMCP) Statement of resources and expenditure (World Bank, Multi Donor Trust Fund And African Development Bank Funding) for the year ended 31 December, 2016 Fifteen months period ended 31 December Resources Notes Balance brought forward 17,905 - nternational Development Association (DA) 4 137, ,717 Multi Donor Trust Fund (MDTF) 4 37, ,911 Total resources 193, ,628 Expenditure Motor vehicles 7 52,173 74,605 Computer and accessories Training and recruitment 6 3,198 11,126 Bank charges 1, ,973 n house consultant cost 8 54,994 1,019 Audit fees 9 16,843 - Total expenditure 128, ,723 Result for the period 64,423 17,905 Represented by: Cash and cash equivalent 75,082 25,917 Payables (22,091) (8,012) Receivables 11,432 64,423 17,905 These financial statements were approved on Auditor General The notes on pages 15 to 20 are an integral part of the financial statements 9

12 Public Financial Management mprovement and Consolidation Project (PFMCP) Statement of income and expenditure Fifteen months period ended 31 December Notes USD USD ncome DA and MDTF funding 4 175, ,628 Total income 175, ,628 Expenditure Training and recruitment 6 (3,198) (150,973) Bank charges (1,430) (1,019) Depreciation 7 (34,475) (2,781) n house consultant cost 8 (54,994) Professional fees 9 (16,843) Total expenditure (110,940) (154,773) Result for the period 64, ,855 These financial statements were approved on Auditor General The notes on pages 15 to 20 are an integral part of the financial statements 1 10

13 Public Financial Management mprovement and Consolidation Project (PFMCP) Statement of financial position as at 31 December Fifteen months period ended 31 December Assets Notes USD USD Non-current asset Motor vehicles 7 95,084 74,605 Computers and accessories 7 5,564 8,345 Total non-current asset 100,648 82,950 Current asset Bank balance 5 75,082 25,917 Receivables 10 11,432 Total current Assets 86,514 25,917 Total assets 187, ,867 Funding and liabilities Accumulated fund 165, ,855 Payables 11 22,091 8,012 Total funding and liabilities 187, ,867 These financial statements were approved on Auditor General The notes on pages 15 to 20 are an integral part of these financial statements 11

14 Public Financial Management mprovement and Consolidation Project (PFMCP) Statement of cash flows For the year ended 31 December Fifteen months period ended 31 December Notes USD USD Cash flows from operating activities Cash from operating activities 64, ,855 Depreciation 7 34,475 2,781 Operating activities before working capital 98, ,636 ncrease in payables 11 14,079 8,012 ncrease in receivables 10 (11,432) Net cash flow from operating activities 101, ,648 Cash flows from investing activities Purchase of fixed assets 7 (52,173) (85,731) Net cash flows from nvesting activities 49,165 25,917 3 Net increase in cash and cash equivalents 49,165 25,917 Cash at beginning of the period 25,917 and cash equivalents at 31 December 5 75,082 3Cash 25,917 i The notes on pages 15 to 20 are an integral part of these financial statement 12

15 Public Financial Management mprovement and Consolidation Project (PFMCP) Statement of changes in accumulated fund for the year ended 31 December Accumulated fund USD Balance at 1 October 2014 Surplus for the period 100,855 Balance at 31 December ,855 Balance at 1 January 2016 Surplus for the year Balance at 31 December ,855 64, ,071 The notes on pages 15 to 20 are an integral part of these financial statements 13

16 Public Financial Management mprovement and Consolidation Project (PFM1CP) Statement of budget versus actual Annual operational objectives Programme Programme budget Note budget utilisation Variance USD USD USD Funds received nternational Development Association 16a 160, ,599 (22,545) MDFT-Multi-donor Trust Fund 16a 173,455 37,557 (135,898) African Development Bank (AfDB) 16c 46,701 - (46,701) Grand total 380, ,156 (205,140) Expenses Recruitment of n-house Consultant for Performance Audit Division 16d 105,300 54,994 50,306 Capacity Building Support - training of staff in professional courses 16e 3,000 3,198 (198) Replacement of old and depreciated data processing equipment 16f 125, ,000 Development of Audit Management nformation Systems (AMS) 16g 100, ,000 Vehicle for the regional office 16h 45,000 52,173 (7,173) General administration of project (bank charges Cost of audit for the 15 months period ended 31 December & i 16,843 (16,843) 3i80, , ,662 Reconciliation of cash balance b/f Add: Total receipts Receivables Less: Total payment Expenses yet to be settles 2015 expenses paid for in 2016 Closing balance 25, ,156 (11,432) (128,638) 22,091 (8,012) 75,082 The notes on pages 15 to 20 are an integral part of these financial statement 14

17 3 Public Financial Management mprovement and Consolidation Project (PFMCP) e tfor Notes to the financial statements 1. Reporting Project the year ended 31 December 2016 According to the project financing agreement, the Government of Sierra Leone (GoSL) is to receive funding in the amount of US$ 28.5m from the World Bank, EU, DFD, and AfDB towards the cost of public financial management mprovement and Consolidation Project (PFMCP).The oversight of the project's day to day operations is managed by the project management unit (PMU) of the Ministry of Finance and Economic Development. The specific overall project development objective of the Public Financial Management mprovement and Consolidation Project (PFMCP) is: "To improve budget planning and credibility, financial control, accountability and oversight in government finances in Sierra Leone. 2. Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. The policies have been consistently applied unless otherwise stated. 2.1 Basis of accounting The statement of resources and expenditure is prepared in accordance with nternational Public Sector Accounting Standards (PSAS). 2.2 Foreign currency transactions (i) Functional and presentation currency The functional currency is the local currency in Sierra Leone which is the Leone. The Project has however adopted the United States Dollars (US$) as its presentation currency as most of its transactions are denominated in US Dollars. Transactions in all other currencies are therefore considered to be foreign currency transactions. (ii) Transactions and balances All payment are made in foreign currency through the bank and as a result of such, there is neither foreign exchange gain nor loss. 15

18 Public Financial Management mprovement and Consolidation Project (PFMCP) Notes to the financial statements (continued) 2. Significant accounting policies 2.3 Non-current assets Recognition and measurement tems of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. 2.4 Depreciation Depreciation is recognized in the statement of income and expenditure on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leasehold assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The applicable depreciation rates under the Project are as follows: tems Years Percentage Motor vehicles 4 25% Computer and accessories 4 25% 3. ncome Funding from the World Bank and Multi Donor Trust Fund is recognized in the project's statement of income and expenditure when received. The amounts received for the period under review are as follows: 4. Contributions received USD USD nternational Development Association (DA) 137, ,717 Multi Donor Trust Fund 37, , , , Cash and cash equivalents USD USD Special account balance 75,082 25,917 75,082 25,917 16

19 Public Financial Management mprovement and Consolidation Project (PFMCP) Notes to the financial statements (continued) * 6. Training and recruitment USD USD Tuition fees - 115,723 Development of training modules and production of training materials - 17,500 Examination and certification 3,198 3,500 Course management - 14,250 3, ,973 Cost 7. Property and equipment Motor Computer and vehicle accessories Total USD USD USD Ati1 October Acquisitions 74,605 11,126 85,731 Disposals Balance as at 31 December ,605 11,126 85,731 At 1 January ,605 11,126 85,731 Acquisitions 52,173-52,173 Balance as at 31 December ,778 11, ,904 xmnto Depreciation n etfcto,9,0 Balance as at 1 October Depreciation for the period -2,781 2,781 Balance as at 31 December ,781 2,781 Balance as at 1 January ,781 2,781 Depreciation for the year 31,694 2,781 34,475 Balance as at 31 December ,694 5,562 37,256 Carrying amounts At 31 December ,605 8,345 82,950 At 31 December ,084 5, ,648 3gs17

20 Public Financial Management mprovement and Consolidation Project (PFMCP) Notes to the financial statements (continued) 8. n house consultant's cost USD USD Professional fees 48,400 - Travel 2,777-3 Rent 3,817-54, Audit fees USD USD Audit fees for ,421 Audit fees accrual for ,422 16, Receivables USD USD Rent refund from Hedjazi residentials 1,720 - Refund on security deposit for motor vehicle clearing Prepaid Rent for consultant 9,525-11, Payables USD USD Withholding tax 3,990 8,012 Accrual for 2016 audit fee 8,421 - Accrual for Consultant's December 2016 fees 9,680-22,091 8,012 18

21 Public Financial Management mprovement and Consolidation Project (PFMCP) j Notes to the financial statements (continued) 12. Capital commitments Capital commitments at the reporting date were nil (2015: Nil) 13. Contingent assets and liabilities Contingent assets and liabilities at the reporting date were nil (2015: Nil) 14. Related Party transactions There were no related party transaction (s) for the year (31 December 2015: Nil). 15. Events after the reporting date There were no events that occurred after the financial year end that materially affected the financial position as at 31 December 2016 (31 December 2015: Nil). 16. Budget versus actual analysis a) The adverse variance is due to unused advance in 2015 which was carried forward to b) The adverse variance is due to the withdrawal of support/funds by the donor c) No funds were requested from Africa Development Bank (AfDB) for the year under review. d) Recruitment of n-house Consultant to Support Performance Audit Division: The favourable variance is due to the fact that the consultancy for the performance of the audit commenced on the 1st August However the budget was made for the whole year e) The excess over the budget is due to the increase in exchange rate at the time of the transaction. f) The procurement process started in t was expected that it will be completed in However, this did not go through as anticipated and as a result, no cost was incurred in 2016 for this expenditure line item g) The procurement process commenced in t was expected that it will be completed in However, this did not go through as anticipated and as a result, no cost was incurred in

22 Public Financial Management mprovement and Consolidation Project (PFMCP) j Notes to the financial statements (continued) 16. Budget versus actual (continued) h) The reason for the adverse variance is due to the cost of clearing two (2) Land Rovers in 2016 which were bought in the year 2015 but were not cleared in Also contributing to the adverse variance is the high cost of clearing one Toyota Land Cruiser Prado purchased in i) The variance arose on the back of the fact that Audit Service Sierra Leone did not budget for the audit fees. This was done under the assumption that the audit fees were to be paid by the Ministry of Finance and Economic Planning, the procuring agency. 1 20

23 KPMG Sierra Leone Telephone: /2 KPMG House Telefax: Siaka Stevens Street P 0. Box 100 nternet: Freetown Sierra Leone Report of the Auditors on the Special Account Statement US Dollar Account We have audited the accompanying Special Account statements established under the provisions of the Programme. The Project's Management is responsible for the preparation and presentation of the Special Accounts. Our responsibility is to express an opinion on the Accounts based on our audit. We conducted our audit in accordance with nternational Standards on Auditing and the World Bank Guidelines for Project Audit. Those standards require that we plan and perform the audit to obtain reasonable assurance that the Special Account statements are free of material misstatement. We believe that our audit provides a reasonable basis for our opinion. n our opinion, the Special Account statements give a true and fair view of the financial position of the project as at 31 December Freetown Chartered Accountants Date: O 21 KPMG, a partnership established under Sierra Leonean law, is a member of the KPMG network of independent member firms affiliated with KPMG Partners VT 0 Decker DL Kawaley nternational Cooperative "KPMG nternational"), a Swiss entity

24 Public Financial Management mprovement and Consolidation Project (PFMCP) () Special account statement Depository Bank Address Sierra Leone Commercial Bank Limited Freetown, Sierra Leone 3 Related Grant Number P Currency United States Dollar Part A - Account Activity Opening balance - 1 January ,917 Add: Replenishments 175,156 Less: Withdrawals and charges (125,991) Closing balance 31 December ,

25 Public Financial Management mprovement and Consolidation Project (PFMCP) ()

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