Public Disclosure Authorized RF Pl. R LIC OF KENYA KENYA NATIONAL AUDIT OFFICE Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized REPORT OF THE AUDITOR-GENERAL ON KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) IDA CREDIT NO.4926KE FOR THE YEAR ENDED 30 JUNE 2014 KENYA CIVIL AVIATION AUTHORITY
13 NOV 20 RECE V D KENYA CIVIL AVIATION AUTHORITY KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) IDA CREDIT NO: CR 4926 KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE PERIOD ENDING 3 0 TH JUNE 2014
CORPORATE PROJECT INFORMATION, MANAGEMENT & IMPLEMENTATION: The KCAA component is part of the IDA financed Kenya Transport Sector Support( the Project Number is P124109 while the Credit Number is 4926-KE) that the Government of Kenya signed in May 2011 for the purpose of financing development projects Transport Sector. KCAA is one of the implementing agencies of the project. The Financing Agreement (FA) was initialed signed between the Government of Kenya (GoK) and the World Bank on 23d May 2011 and became effective on 2 2 nd August 2011. However in March 2014, due to an additional financing given to the project by the World Bank, a new Financing Agreement was signed between GoK and the World Bank. Under the additional financing, KCAA received a grant support of USD 1,660,000.0. The overall implementation period of the entire project is seven years. The KCAA component, is projected to be implemented over a 5-year period at an approximate cost of US$ 22 million. To date KCAA has received Kshs.659, 430,925 (USD 7,579,666 Approx.) from IDA as the drawn loan amount. The loan attracts an interest of 5% p.a, payable on 152 April and 15t October each year. The repayment of the principal amount of the loan shall commence from 2019 for a period of 23 years. Project Sub-components:- The KCAA Component of the KTSSP project is comprised of four sub-components which are briefly described here below:- a) Provision of technical assistance to strengthen KCAA's Aviation Safety and Security Oversight Capacity. Implementation of this sub-component entails the following key activities: procurement of flight safety consultancy services, purchase of aviation security training equipment, establishment of flight safety technical library, review and development of technical examination questions, rehabilitation of technical examination center and purchase of reference documents for the library. To date the following contracts have been signed and are currently under implementation: four contracts for flight safety consultants and two contracts for procurement of aviation security equipment. The amount allocated for this sub-component is USD 2.89 million. b) Upgrading of Air Navigation Systems Implementation of this sub-component entails supply, installation and commissioning of the following four types of air navigation systems: Communications systems, ATS Message Handling System, Navigation Aids Systems, and Flight Safety Procedure Design. Four contracts have been signed for implementation of the foregoing systems. Implementation of the contract for ATS 2
Message Handling System and Flight Safety Procedure Design have been completed, while the implementation of the two remaining contracts is currently ongoing and are expected to be completed by December 2014.The amount allocated for this sub-component is USD 6.40 million. c) Construction of an office block for KCAA headquarters and supervision of the related construction works. Implementation of this sub-component entails construction of an office block that will serve as the headquarters of KCAA. Towards this end a consultant has been engaged to design and prepare detailed technical drawings for the proposed head office and also to supervise the actual construction. To date the consultant has completed preparing the technical drawings and a works contractor was engaged in December 2013 and the construction of the office block is currently underway. The amount allocated for this sub-component is USD 11.50 million. d) Implementation of Information Communication Technology Systems Implementation of this sub-component entails procurement of the following seven ICT Systems: Human Resource Management System; Electronic Document Management System; E-mail and Collaboration Suite; PABX for EASA; Five Servers and Server Racks; Car track and Fleet Management Solution; and establishment of Remote Disaster Recovery Site. The E-Mail and Collaboration suite, PABX for EASA, Five servers and server racks have been completed, while the human resource management system, electronic document management system, and the car track and fleet management solution are underway. Preparations of technical specifications of the remaining system are currently on going. The amount allocated for this sub-component is USD 1.0 million. e) Training of KCAA Staff This is meant enhance appropriate competencies in aviation safety and security. The amount allocated for this sub-component is USD 1.0 million. Project Staff: As per the Financing Agreement KCAA is to constitute a Project Implementation Team (PIT) comprising of the following:- 1. Project Team Leader, 2. Project Coordinator, 3. Financial Management Specialist, 4. Procurement Specialist, 5. Technical specialist. The PIT is directly responsible to the Director General in the performance of its duties. 3
STATEMENT OF ACCOUNTING OFFICER AND PROJECT COORDINATORS' RESPONSIBILITY The Financing Agreement dated May 23, 2011 between International Development Association (IDA) and Kenya Civil Aviation Authority (KCAA) Article IV requires the Accounting officer and the project coordinator to prepare financial statements for each financial year, which adequately reflect the operations, resources, and expenditures related to the KCAA Component of Kenya Transport Support Project as at the end of the financial year under review. It also requires the project accounting officer and the coordinator to ensure that proper accounting records are kept, which disclose with reasonable accuracy at any time, the financial position of the project.; It also requires the project to design, implement and maintain internal controls relevant to the preparation and fair presentation of the financial statements and ensuring that they are free from material misstatements, whether due to fraud or error; safeguarding the assets of the project, selecting and applying appropriate accounting policies and reasonable in the circumstances. making accounting estimates that are The Accounting Officer and the Project Coordinator accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Public Sector and the requirements of the Credit Agreement. Accounting Standards The Accounting Officer and the Project Coordinator are of the opinion that the financial statements give a true and fair view of the state of the project financial position as at 3 0 th June 2014. The Accounting officer and the project coordinator further confirm the completeness of the accounting records maintained for the project which have been relied upon in the preparation of the financial statements as well as on the adequacy of the internal control systems. The Accounting Officer and the Project Coordinator confirm that the project has complied fully with the terms and conditions of the Financing Covenants in accordance with the legal agreement and the applicable Government regulations and that the project funds received during the period under audit were used for the eligible purposes for which they were intended and were properly accounted. CHARLES KOMBO JOSEPH K CHEBUNGEI PROJT RDINA T OR Ag. DIRECTOR GENERAL Date Dae...... 4I
REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: 254-20-31 1482 NAIIB E-Mail: oag@oagkenya go.ke NAIROBI Website: www.kenao.go.ke KENYA NATIONAL AUDIT OFFICE REPORT OF THE AUDITOR-GENERAL ON KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) IDA CREDIT NO.4926KE FOR THE YEAR ENDED 30 JUNE 2014 - KENYA CIVIL AVIATION AUTHORITY REPORT ON THE FINANCIAL STATEMENTS I have audited the accompanying financial statements of Kenya Transport Sector Support Project (KTSSP) IDA Credit No. 4926KE, set out on pages 5 to 12 which comprise the statement of financial position as at 30 June 2014, the statement of comprehensive income, the cash flow statement, the fund accountability statement for the year then ended and a summary of significant accounting policies and other explanatory information in accordance with provisions of Article 229 of the Constitution of Kenya and Section 14 of the Public Audit Act, 2003 and the Development Credit Agreement No. 4926 KE dated 23rd May 2011 between the Republic of Kenya and International Development Association. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit. Management's Responsibility for the Financial Statements The management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards 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 to fraud or error. The management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 13 of the Public Audit Act, 2003. Auditor-General's Responsibility My responsibility is to express an opinion on the financial statements based on the audit and report in accordance with the provisions of section 15 of the Public Audit Act, 2003. The audit was conducted in accordance with the International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 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 internal control relevant to the entity's Promoting Accountability in the Public Sector
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 effectiveness 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 management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statement present fairly, in all material respects, the financial position of the Project as at 30 June, 2014 and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards and conforms with the Financing Agreement. In addition, the special account statements presents fairly the special account transactions and the ending balance has been reconciled with the books of account. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS As required by the International Development Association, I report based on my audit that:- i. All International Development Association funds have been used in accordance with the conditions of the Loan Agreement, with due attention to economy and efficiency and only for the purpose for which the fund was provided; ii. Counterpart funds have been provided and used in accordance with the conditions of the Agreement, with due attention to economy and efficiency and only for the purpose for which they were provided; iii. iv. Goods and Services financed have been procured in accordance with the Agreement and in compliance with the World bank rules and procedures; Necessary supporting documents, records and accounts have been kept in respect of all project activities; v. Adequate internal control to monitor expenditure and other financial transactions exist; and vi. A fixed assets register for the Project's assets was maintained during the year. Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 23 December 2014 2
KENYA TRANSPORT SECTOR SUPPORT PROJECT CR: 4926 KE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30TH JUNE 2014 Note 2014 Income 2013 Kshs Kshs Interest Receipts 6 2,585,879 Project 4,361,363 counterpart 7 889274 25250 Total Income 1,479r5S4 6,917,613 Expenditure Training of staff and trainers 7 5,225,350 7,618,170 Aviation Safety Consultancy 7 27,309,645 21,503,233 Project operating costs 7 20,143,229 2,096,423 Bank Charges 8 22,671 12,891 Total Expenditure 52,700,895 31,230,717 Surplus/ (Deficit) for the year 41,221,742 24313,104 Surplus /(deficit) B/F (24,313,104) Surplus/(Deficit) C/Forward (65,534,846) (24,313,104 5
KENYA TRANSPORT SECTOR SUPPORT PROJECT - CR: 4926KE STEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 3 0 TH JUNE 2014. 2014 2013 ASSET Note Ksh Ksh Fixed Assets Property Plant & Equipment 2 26,922,542 Motor Vehicles 2 11,401,843 Computer Hardware & Software 2 25,739,638 Property Plant & Equipment Work In Progress 2 431,282,356 127,600,654 Building Work in Progress 2 169,117,512 Total - Non Current Assets 664,463,891 127,600,654 Current Assets Interest Receivable - 2,412,159 Cash in Bank 3 11,218,155 70,017,347 Total Current Assets 11,218,155 72,429,506 TOTAL ASSETS 675,682,046 200,030,160 Equity and Liabilities IDA Loan 4 659,430,945 221,216,899 KCAA Counterpart 4 55,442,880 Accounts Payable 5 26,343,067 3,126,364 Surplus / (Deficit) Account (65,534,845) (24,313,103) TOTAL LIABILITIES & LOAN 675,682,046 200,030,160 CHARLES KOMBO JOSEPH K CHEBUNGEI PROJECT OORDINATOR Ag. DIRECTOR GENERAL Date Date 6
KENYA TRANSPORT SECTOR SUPPORT PROJECT - CR: 4926KE CASHFLOW STATEMENT AS AT 30TH JUNE 2014 2014 2013 Note Ksh Ksh Cash from Operating Activities Net Surplus from Operations Adjustments (41,221,742) (24,313,103) Operating profit before working Capital changes (increase) / Decrease in Interest (41,221,742) (24,313,103) Receivable 2,412,159 (2,412,159) Increase / (Decrease) in Creditors 13 23,216,702 3,126,364 Net Cash from Operating Activities (15,592,880) (23,598,898) 90% Surplus Paid I Corporation Tax Paid 14 Cash used in Investing Activities (15,592,880) (23,598,898) Purchase of Fixed Assets (536,863,237) (127,600,654) Disposal of Assets -. Total Cash used in Investing (535,863,237) (127,600,654) Activities (535,863,237) (127,600,654) Cash flow from Financing Activities Loans received IDA 438,214,046 221,216,899 GOK/KCAA Counterpart 55,442,880 - Net Cash flow from Financing Activities 493,656,926 221,216,899 Increase / (Decrease) in Cash & Cash Equivalents (58,799,192) 70,017,347 Cash & Cash Equivalents at the Start of the Year 70,017,347 Cash & Cash Equivalents at the End of the Year 11,218,155 70,017,347 7
FUND ACCOUNTABILITY STATEMENT FOR THE YEAR ENDED 30TH JUNE 2014 2014 2013 Receipts Ksh Ksh Receipts from Min. Of Transport ( WB) 66,878,286 127,720,743 Interest income 2012/2013 2,412,159 - Interest Income 2,585,879 1,949,204 71,876,324 129,669,947 Payments Training of staff and trainers Consultancy services for Aviation 3,688,350 7,530,780 safety 27,451,001 18,322,922 Consultancy services for KCAA HQ 11,077,150 19,072,910 Aviation Equipment Purchase 88,434,342 14,715,098 Bank charges 24,672 10,891 130,675,515 59,652,601 Excess Receipts over Payments (58,799,191) 70,017,346 Opening balance as 70,017,346 - Closing Balance IDA Account 11,218,155 70,017,346 STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30TH JUNE 2014 Revised Actual 2013- Variance Budget 2013-2014 14 Ksh Ksh Ksh Aviation Safety & Security 75,000,000.00 27,309,645.00 47,690,355.00 Aviation Equipment 325,000,000.00 221,279,586.50 103,720,413.50 Training of Staff & 34,418,105.00 Trainers 5,225,350.00 29,192,755.00 Purchase of ICT 65,138,895.00 Equipments 20,650,159.00 44,488,736.00 Head Office Construction 290,000,000.00 & Consultancy 218,209,868.03 71,790,131.97 Grand Total 789,557,000.00 492,674,608.53 296,882,391.47 8
NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) and IDA/Donor guidelines. The principal accounting policies adopted remain unchanged from the previous reporting period and are set out below. a) Basis of preparation The financial statements have been prepared under historical cost convention as modified to include valuation of donations received in kind, long term investments, and equipments as described here below. b) Revenue - Grants Unrestricted grants are accounted for in the period when confirmation of the commitment to pay is received from Donors or GOK. Grants received for specific purposes are treated as deferred. income and only credited to the income and expenditure statement when the activities for which they are provided for have been undertaken. Grants received for specific asset purchases are treated as deferred income for asset acquisition and only credited to the income and expenditure statement when activities for which they were provided for have been undertaken. c) Project Income Project income represents income from project carried out by KCAA and is accounted for on accrual basis. d) Donation in Kind Donations in kind are recognized on a receipt basis and recorded at their fair value. e) Interest Income Interest income is recognized on accrual basis. f) Fixed Assets Fixed Assets acquired under this project are shown in the books at cost price. 9
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. Asset Purchases The Project made payments for the following Works & Equipment during the year ended 30th June 2014 During the year 2013-2014 the assets purchased were as below: MOTOR VEHICLES TOYOTA KENYA Ksh LTD TOYOTA LANDCRUIZER HZJ79R-TJMRS CMC MOTORS 6,158,843 LTD FORD RANGER XLT NO MTD-914-045-11 PLANT & EQUIPMENT 5,243,000 INTERTECH 11,401843 BATINORM EXPLOSIVE DETECTION TRACE EQUIPMENT ACHELIS KENYA 16,552,868 LTD X-RAY BAGGAGE INSPECTION UNIT 10,369,674 COMPUTER & COMPUTER SOFTWARE SYMPHONY 26,922,542 SERVERS & SERVER RACKS SYSTEM INFORMATION 8,124,459 & TECHNOLOGY EMAIL SOLUTION & COL SUIT MFI CONSULTING 7,769,632 LTD PABX AT EASA 9,845,548 25,739,638 Total Fixed Assets 64,064,023 2012-2013 WORK IN PROGRESS DESCRIPTION Mutiso Menezes International Design Consultancy for KCAA HQ CGX AERO 19,389,400 IN SYS FLIGHT PROCEDURE DESIGN TOOL INTERTECH 23,153,686 BATINORM 10% ADVANCE PAYMENT SCREENING TEST EQPT 1,636,438 SUPPLY OF VHF, VOICE RECORDERS SELEX ELSAG & VOICE S.P.A COMMUNICATION SYSTEMS THALES ELECTRONIC 13,350,058 SUPPLY & DELIVERY OF NAVAIDS SYSTEMS SYSTEMS - GmbH ILS/DME & DVOR/DME 49,895,146 THALES AIR SYSTEMS S.A Supply, Installation & Commissioning of ATS Message Handling System 20,175,927 127,600,654 2013-2014 WORK IN PROGRESS LANDMARK HOLDINGS LTD CONSTRUCTION OF KCAA HQ MMI 218,209,868 CONSTRUCTION SUPERVISION OF SELEX KCAA HQ ELSAG S.P.A 12,659,600 57,332,400 THALES ELECTRONIC SYSTEMS GmbH THALES 104,121,284 AIR SYSTEMS S.A. CoreTEC System & 59,825,902 Solutions HUMAN RESOURCE MGT SOLUTION XRX TECHNOLOGIES 8,415,200 DOCUMENT MGT SYSTEM(CGALS & SCANNERS) FROTCOM LTD 9,100,871 CAR TRACK FLEET MOT SOLN 3,134,088 472,799,213 Total Work In Progress 600,399,867 10
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. CashAtBank The IDA funds held by KCAA in the project account held at National Bank of Kenya- JKIA Branch as at 30 th June 2014 was Kshs 11,218,154.65 4. IDA Loan received to date is Kshs 659,430,945. This is made up as follows: 2014 2013 Kshs Kshs Balance B/F 221,216,899.00 Direct payments 371,335,760.30 93,496,156.50 Receipts Thro' MOT 66,878,285.70 127,720,742.50 Total 659,430,945. 221,216,899. The counterpart contribution by the Authority was Ksh 55,442,880. 5. Creditors represent amount owed as at 30th June 2014 but for which the services had been rendered to the project as follows:- Creditors Thales Electronic Systems S.A ILS/DME & VOR/DME NAVAIDS 906,678 Frotcom K Ltd CAR TRACK FLEET MGT SOLN 3,134,088 PRODUCTIVITY IMPROVEMENT & MGT COURSE Kenya School of Government 10/04/14-14/04/14 1,537,000 XRX Technologies CALS & SCANNERS 650,404 CoreTec Systems & Solutions HUMAN RESOURCE MGT SOLUTION 5,049,120 MFI Consulting Ltd EASA PABX System 984,555 & Information Technology E - MAIL SOLUTION 776,963 Achelis Kenya Ltd X-Ray Baggage Screener Kit 10,369,674 African Touch Safaris Airticket 8,584 Capt Joe Mutungi Flight Safety Consultancy 2,064,000 Capt James Ouma Flight Safety Consultancy 787,000 26,343,067 6. Interest Income The interest income is on the current account balances as held at the National Bank during the year. The total for the year was Ksh 2,585,879. 11
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 7. Expenditure during the financial year in each category were as follows: a) Training: various officers were trained under this category. The total expenditure incurred during the year amounted to Kshs 5,225,350 b) Consultancy: Aviation safety & KCAA HQ design. Individual flight safety consultants and KCAA HQ design consultancy services during the year. This amounted to the following total.ksh 27,309,645 c) Project operating costs- this is the Authority's contribution to the project recurrent activities as per the contract. Ksh 20,143,229 was incurred during the year. 8. Bank charges for the year 2013/2014 were Ksh 22,671. 12