AUDITOR GENERAL'S REPORT

Public Disclosure Authorized Public Disclosure Authorized AUDITOR GENERAL'S REPORT Public Disclosure Authorized Integrated Public Financial Management Reform Project (IPFMRP) For the fiscal Period 2015/2016 Public Disclosure Authorized December 2016 Yusador S. Gaye, CPA, CGMA Auditor General, R. L.

Table of Contents Statement of Receipts and Payments... 4 Project Designated Account Statement... 7 Statement of Fund Balance and Cash Status... 10 Statement of Comparison of Budget and Actual Amounts for the Fiscal Year Ended June 30, 2016 (Note 14)... 11 NOTES TO FINANCIAL STATEMENTS... 12 1. Background and Information of the Project... 12 2. Use of Grant Proceeds... 12 3. Significant Accounting Policies... 13 4. Grant... 13 5. Budget Planning Systems, Coverage and Credibility... 14 6. PFM Legal Framework, Budget Execution, Accounting and Reporting... 14 7. Revenue Mobilization and Administration... 14 8. Transparency and Accountability... 14 9. Program Governance and Project Management... 15 10. Cash receipts through grant and other Sources... 15 13 Cumulative Fund Balance FY 2015/2016... 17 14 Statement of Comparison of Budget and Actual amounts for the Fiscal Year ended June 30, 2016... 17 1 Promoting Accountability of Public Resources

December 30, 2016 Mr. Emmanuel Togba Public Financial Management Reforms Coordinator Ministry of Finance and Development Planning Monrovia, Liberia INDEPENDENT AUDITOR S REPORT ON THE STATEMENT OF RECEIPTS AND PAYMENTS We have audited the accompanying Statement of Receipts and Payments of the Integrated Public Financial Management Reform Project (IPFMRP) financed by the IDA 50260, TF 12390, AfDB for the fiscal period ended June 30, 2016. Management Responsibility for the Statement of Receipts and Payments Management is responsible for the preparation and fair presentation of the Statement of Receipts and Payments in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis of Accounting and for such internal control as Management determines is necessary to enable the preparation of Statement of Receipt and Payment that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on Statement of Receipts and Payments based on our audit. We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAI) and the World Bank Guidelines. Those standards and the applicable World Bank guidelines required that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Statement of Receipts and Payments are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement of Receipts and Payments. The procedures selected depends on the auditor s judgment, including the assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the Statement of Receipts and Payments in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the Statement of Receipts and Payments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 2 Promoting Accountability of Public Resources

Opinion sin our opinion, the accompanying Statement of Receipts and Payments presents fairly in all material respects of Grant No.: TF12690, IDA 50260 & AfDB of the Integrated Public Financial Management Reform Project as at June 30, 2016 in accordance with IPSAS Cash Basis of Accounting. Monrovia, Liberia December 2016 3 Promoting Accountability of Public Resources

Statement of Receipts and Payments FOR THE YEAR ENDED JUNE 30, 2016 Notes FY2015/2016 FY2014/2015 Receipt US$ US$ IDA grants 4 5,907,878 6,942,145 Other Income- Sale of bid documents -- 1,800 Total Receipt 5,907,878 6,943,945 Payment Budget Planning Systems, Coverage 5 175,735 279,908 and Credibility PFM Legal Framework, Budget Ex., 6 2,150,393 1,967,989 Acct & Reporting Revenue Mobilization and 7 873,470 2,465,645 Administration Transparency and Accountability 8 1,545,326 820,804 Program Governance and Project 9 1,819,997 1,579,882 Management Total Payment 6,564,921 7,114,228 Excess of payments over receipts (657,043) (170,283) Fund Balance as at July 1, 620,134 790,417 Cumulative fund balance 13 (36,909) 620,134 The notes on pages 7 to 9 are integral part of these project financial reports. 4 Promoting Accountability of Public Resources

December 30, 2016 Mr. Emmanuel Togba Public Financial Management Reforms Coordinator Ministry of Finance and Development Planning Monrovia, Liberia INDEPENDENT AUDITOR S REPORT ON THE DESIGNATED ACCOUNT STATEMENT We have audited the accompanying project Designated Account Statement of the Integrated Public Financial Management Reform Project (IPFMRP) financed by the IDA 50260, TF 12390, AfDB for the fiscal period ended June 30, 2016. Management Responsibility for the Designated Account Statement Management is responsible for the preparation and fair presentation of the Designated Account Statement of the Project Financial Management Unit (PFMU) at the Ministry of Finance, Republic of Liberia. This responsibility includes: designing, implementing, and maintaining internal control relevant to the fair presentation of the Designated Account Statement that is free from 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 Our responsibility is to express an opinion on the Designated Account Statement based on our audit. We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and also in accordance with applicable World Bank Guidelines. These standards and the applicable IDA guidelines required that we plan and perform the audit to obtain reasonable assurance about whether the Designated Account Statement are free from material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall Designated Account Statement presentation. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Designated Account Statement. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the Designated Account Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the Designated Account Statement 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Designated Account Statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis 5 Promoting Accountability of Public Resources

for our audit opinion. Opinion In our opinion, the Designated Account Statement presents fairly, in all material respects, in accordance with the provisions of the Grant No.: TF12390, IDA 50260 & AfDB of the Integrated Public Financial Management Reform Project. Monrovia, Liberia December 2016 The notes on pages 7 to 11 are integral part of these project financial reports. 6 Promoting Accountability of Public Resources

Project Designated Account Statement Account Number: 02/205/300001/68 Account Type: Depository Bank: Address: Related Grant Agreement: Current Account Central Bank of Liberia Warren Street Monrovia, Liberia IPFRMP Grant No.: TF 12690, IDA 50260 & AfDB 5900155003751 FY 2015/2016 US$ 2014/2015 US$ Total Grant received 5,907,878 6,942,145 Other Income-Sale of Bid Documents -- 1,800 Total grant income reported 5,907,878 6,943,945 Amount spent (6,564,921) (7,114,228) Balance as at July 1 620,134 790,417 Balance as at June 30 (36,909) 620,134 7 Promoting Accountability of Public Resources

December 31, 2016 Mr. Emmanuel Togba Public Financial Management Reforms Coordinator Ministry of Finance and Development Planning Monrovia, Liberia INDEPENDENT AUDITOR S REPORT ON THE STATEMENT OF EXPENDITURE We have audited the accompanying Statement of Expenditure of Grant No.: TF12690, IDA 50260 & AfDB of the Integrated Public Financial Management Reform Project for the fiscal period ended June 30, 2016. Management Responsibility for the Statements of Expenditures Management is responsible for the preparation and fair presentation of the Statement of Expenditure in accordance with the World Bank guidelines and for such internal control as Management determines is necessary to enable the preparation of the Statement of Expenditure that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our Responsibility is to express an opinion on the Statement of Expenditure based on our audit. We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and in accordance with World Bank Guidelines. Those standards and the applicable World Bank guidelines required that we plan and perform the audit to obtain reasonable assurance about whether the Statement of Expenditure is free from all 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 judgment, including the assessment of the risks of material misstatement of the Statement of Expenditure, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the Statement of Expenditure 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Statement of Expenditure. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 8 Promoting Accountability of Public Resources

Opinion In our opinion, the accompanying Statement of Expenditure presents fairly, in all material respects, Grant No.: TF12690, IDA 50260 & AfDB of the Integrated Public Financial Management Reform Project as at June 30, 2016 in accordance with IPSAS Cash basis and the World Bank guidelines. Monrovia, Liberia December 2016 9 Promoting Accountability of Public Resources

Statement of Fund Balance and Cash Status FOR THE YEAR ENDED JUNE 30, 2016 Notes FY2015/2016 FY2014/2015 A: FUND BALANCE US$ US$ Balance of Project Fund 620,134 790,417 Add: Total Receipts during the 5,907,878 6,943,945 period Total fund available for operations 6,528,012 7,734,362 Less: Total payments during the 6,564,921 7,114,228 period Balance of project funds at the end (36,909) 620,134 of the year B. CASH STATUS: Cash at bank (36,909) 620,134 Total cash on hand and in bank (36,909) 620,134 Difference between A and B - - 10 Promoting Accountability of Public Resources

Statement of Comparison of Budget and Actual Amounts for the Fiscal Year Ended June 30, 2016 (Note 14) Project Annual Actual 2016 Percentage Variance Allocation Budget FY Variance Uses of funds, by Activity within Component $ $ $ $ % Component 1: Enhancing Budget Planning Systems, Coverage and Credibility Component 2: Strengthening PFM Legal Framework, Budget Execution, Accounting and Reporting 1,838,000.00 403,000.00 175,735.00 227,265.00 56.39 10,258,000.00 2,629,400.00 2,150,392.96 482,557.04 18.35 Component 3 : Revenue Mobilization and Administration 5,378,000.00 3,514,700.00 873,469.72 2,641,230.28 75.15 Component 4 : Enhancing Transparency and Accountability 6,233,000.00 2,248,534.00 1,545,325.96 703,208.04 31.27 Component 5 : Program Governance and Project Managemen 4,844,000.00 1,823,300.00 1,819,997.55 5,337.05 0.29 Grand Total 28,551,000.00 10,618,934.00 6,564,921.19 4,059,597.41 38.23 11 Promoting Accountability of Public Resources

NOTES TO FINANCIAL STATEMENTS 1. Background and Information of the Project With support from the International Development Association, MTDF, and AfDB; the IPFMR-project is to strengthen 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. The IPFMR project was approved by the World Bank on December 11, 2011 and other Partners with a grant amount of USD 28.551 Million. The aim of the project is i. Improvement in the efficiency and reliability of the Government s accounting system; ii. Harmonize the project chart of accounts with the GoL chart of accounts; iii. Finalize the business processes for projects in IPFMR project; iv. Configure the IPFMR project; and v. Conduct testing 2. Use of Grant Proceeds The table below sets out the categories of items to be financed out of the grant proceeds, the allocation of the amounts of the grant to each category and the percentage of expenditures for items to be financed in each category: Category Budget Planning Systems, Coverage and Amount of grant allocated Expressed in US$ % of Expenditure to be financed 1,838,000 100 Credibility PFM Legal Framework, Budget Ex., Acct 10,258,000 100 & Reporting Revenue Mobilization and Administration 5,378,000 100 Transparency and Accountability 6,233,000 100 Program Governance and Project 4,844,000 Management Total 28,551,000 12 Promoting Accountability of Public Resources

All categories of expenditure shown in these financial statements are fully financed based on the percentage below: % of Expenditure IDA grant 18 MDTF 66 AfDB 16 Total 100 NOTES TO FINANCIAL STATEMENTS (continued) 3. Significant Accounting Policies Basis of accounting The financial statements have been prepared in accordance with the Cash Basis International Public Sector Accounting Standards (IPSAS) and in the manner required by the Project Grant Agreement as required by the World Bank s Operating Policies and Procedures and PFMU s Financial Management manual. This implies that all expenditures are expensed whether they are revenue or capital in nature and income is recognized when funds are received from the World Bank. Reporting currency Financial reports have been presented in United States Dollars. Transactions denominated in other currencies are translated into United States Dollars and recorded at the rate of exchange ruling at the date of transactions. Balances denominated in other currencies are translated into United States Dollars at the rate of exchange prevailing on the reporting date. 4. Grant Grant from IPFMRP is held in a deferred income account when received and are only recognized in the Project s income statement when utilized. Grant Receipt FY2015/2016 US$ FY2014/2015 US$ IPFMRP/MOF/012- TF 12690 3,935,259 IPFMRP/MOF/016- TF 12690 704,482 IPFMRP/MOF/005 - AfDB 1,268,137 IPFMRP/MOF/009- TF 12690 4,603,951 IPFMRP/MOF/003 - AfDB 2,338,194 Total 5,907,878 6,642,145 13 Promoting Accountability of Public Resources

NOTES TO FINANCIAL STATEMENT (continued) 5. Budget Planning Systems, Coverage and Credibility Enhanced Macro-Fiscal Framework - 31,318 Fiscal Reporting and Fiscal Policy Review 89,582 98,545 Fiscal Budget Framework 86,153 150,045 Total 175,735 279,908 6. PFM Legal Framework, Budget Execution, Accounting and Reporting SIFMIS Rollout to M&As 1,655,546 1,670,618 Strengthening Financial Standards, Accounting - 30,090 and Reporting Treasury, Cash, Debt and Aid Management 154,238 122,287 Establishment of County Treasuries 264,357 87,530 Donor Project Financial Management/Use of 76,252 57,464 Country Systems Total 2,150,393 1,967,989 7. Revenue Mobilization and Administration Tax Automation (SIGTAS) 227,484 133,397 Establishment of Revenue Authority 645,986 2,326,248 Total 873,470 2,459,645 8. Transparency and Accountability Strengthening Public Procurement Oversight 196,506 - Strengthening Internal Audit and Controls 343,972 239,849 Strengthening External Audit 528,984 391,709 Enhancing Legislative Oversight 265,564 84,016 Civil Society and Social Accountability 210,300 105,230 Total 1,545,326 820,804 14 Promoting Accountability of Public Resources

9. Program Governance and Project Management In United States Dollars Program Coordination & Financial Management 331,447 406,919 Institutional and capacity building 1,167,804 923,362 Monitoring & Evaluation/Change management 83,276 89,369 Project fiduciary 237,470 160,232 Total 1,819,997 1,579,882 10. Cash receipts through grant and other Sources MDTF 4,639,741 4,603,951 AfDB 1,268,137 2,338,194 Sale of bid documents - 1,800 Total 5,907,878 6,943,945 11. Cash paid Budget Planning Systems, Coverage and 175,735 279,908 Credibility PFM Legal Framework, Budget Ex., Acct & 2,150,393 1,967,989 Reporting Revenue Mobilization and Administration 873,470 2,465,645 Transparency and Accountability 1,545,326 820,804 Program Governance and Project Management 1,819,997 1,579,882 Total Payment 6,564,921 7,114,228 15 Promoting Accountability of Public Resources

FINANCIAL STATEMENT (continued) 12. Analysis of Varisance Project Allocation Annual Budget Variance Uses of funds, by Activity within Component $ $ $ $ Component 1: Enhancing Budget Planning Systems, Coverage and Credibility Enhanced Macro-Fiscal Framework 355,000.00 0.00 0.00 0.00 Fiscal Reporting and Fiscal Policy Review 292,000.00 0.00 89,582.00 (89,582.00) Enhanced Budget Framework 1,191,000.00 403,000.00 86,153.00 316,847.00 Sub-Total 1,838,000.00 403,000.00 175,735.00 227,265.00 Component 2: Strengthening PFM Legal Framework, Budget Execution, Accounting and Reporting Review of PFM legal framework 50,000.00 10,000.00 0.00 10,000.00 SIFMIS Rollout to M&As 5,845,000.00 1,555,200.00 1,655,546.44 (100,346.44) Strengthening Financial Standards, Accounting and Reporting 40,000.00 0.00 0.00 0.00 Treasury, Cash, Debt and Aid Management 614,000.00 493,200.00 154,237.52 338,962.48 Establishment of County Treasuries 494,000.00 251,000.00 264,357.00 (13,357.00) Donor Project Financial Management/Use of Country Systems 840,000.00 320,000.00 76,252.00 243,748.00 Sub-Total 10,258,000.00 2,629,400.00 2,150,392.96 479,007.04 Component 3 : Revenue Mobilization and Administration Capacity Development of Customs 200,000.00 50,000.00 0.00 50,000.00 Tax Automation (SIGTAS) 4,218,000.00 2,562,510.00 227,484.00 2,335,026.00 Establishment of Revenue Authority 3,335,000.00 902,190.00 645,985.72 256,204.28 Sub-Total 5,378,000.00 3,514,700.00 873,469.72 2,641,230.28 Component 4 : Enhancing Transparency and Accountability Strengthening Public Procurement Oversight 313,000.00 288,220.00 196,505.60 91,714.40 Strengthening Internal Audit and Controls 1,555,000.00 625,000.00 343,971.80 281,028.20 Strengthening External Audit 3,235,000.00 881,814.00 528,984.20 352,829.80 Enhancing Legislative Oversight 630,000.00 114,500.00 265,564.36 (151,064.36) Civil Society and Social Accountability 500,000.00 339,000.00 210,300.00 128,700.00 Sub-Total 6,233,000.00 2,248,534.00 1,545,325.96 703,208.04 Component 5 : Program Governance and Project Management Program Coordination & Financial Management 645,000.00 40,000.00 331,447.39 (291,447.39) Institutional and capacity building 3,165,000.00 1,640,300.00 1,167,803.80 472,496.20 Monitoring & Evaluation/Change management 462,000.00 143,000.00 83,276.00 59,724.00 Project fiduciary 572,000.00 0.00 237,470.36 (237,470.36) Sub-Total 4,844,000.00 1,823,300.00 1,819,997.55 3,302.45 Grand Total 28,551,000.00 10,618,934.00 6,564,921.19 4,054,012.81 16 Promoting Accountability of Public Resources

FINANCIAL STATEMENT (continued) 13 Cumulative Fund Balance FY 2015/2016 The credit balance came about when the World Bank gave the assurance that a credit of US$1.9Million was to be transferred into the Project s account. Given the commitment of the World Bank to the Central Bank and the Government of Liberia, couple with the professional relationship that exist between both institutions, the World Bank requested the GoL to make funding available in advance so as to enable project activities to continue given that the World Bank's funding was already approved and was pending transfer into the designated account. Accordingly, the CBL was informed and given the good financial records with the CBL, they allowed / encashed checks relating to critical project activities as the need arose; hence the credit balance. 14 Statement of Comparison of Budget and Actual amounts for the Fiscal Year ended June 30, 2016 The variance on the various components of the Project was as a result of the delay in accessing the balance of US$1.9 million from the donor due to some technical challenges experienced by the bank in making the fund available. 17 Promoting Accountability of Public Resources