i audit of fin cial statem s for the d ... - world bank

UIIIIIIII AUDIT OF FIN CIAL STATEM S FOR THE

I PUBLICD CONSOLIDATION PROJECT (P ICP) FOR THE

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P TF Public Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID- P133424Financial Statements for the year ended 3 1stDecember, 2016

Contents Page

General Information 1

Background to the Project 2-4

Statement of Management's Responsibilities 5

Report of the Auditors 6-7

Statement of Financial Position 8

Statement of Comprehensive Income 9

Statement of Resources and Expenditure 10

I Statement of Cash Flows 11

Notes to the Financial Statements 12-15

Report of the Auditors on the Special Account Statement 16

Special Account Statement 17

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IPPublic Financial Management Improvement and Consolidation Project

<Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P 133424Financial Statements for the year ended 3 1stDecember, 2016

IGENERAL INFORMATION

IOfficial Address Public Financial Management Improvement and

II Financial SecretaryMrEdudoom

I Project Director M.Gog ai ad

I ~Bankers Ser en omrilBn

Public Stevnnia Str eentImrv enad

Consolidation Project (PFMICP)Ministry of Finance and Economic Development(MoFED)Ground Floor, Treasury BuildingGeorge StreetFreetown

FinacialSecrtaryMr. Edmund Koroma

Projet DirctorMr. George Lamin Vandi

autrs Sierra Leone Commercial BankSiaka Stevens StreetFreetown

Bank of Sierra LeoneSiaka Stevens StreetFreetown

Auditors Audit Service Sierra Leone2 nd Floor, Lotto BuildingTower HillFreetownSierra Leone

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Public Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P 133424

Financial Statements for the year ended 31stDecember, 2016

THE BACKGROUND TO THE PROJECT

The Government of Sierra Leone (GoSL) launched the third generation Poverty Reduction

Strategy Paper (PRSP III) - The Agenda for prosperity on 12th July 2013. The agenda sets

the direction and development priorities of the country a five year period (2013 - 2018). The

strategy represents the agenda for the first five years of the journey towards achieving the

middle income status by 2035. The agenda for this period is to build a stable economy,

founded on private sector led growth, and diversified across several competitive sectors to

achieve the vision for economic and human development. Furthermore, the Strategy

highlights the fact that achieving accelerated growth and poverty reduction requires an

effective budget system that fully reflects these and other priorities, including enhanced

expenditure efficiency. Therefore, given the importance of sound Public Financial

Management (PFM) to the effective implementation of the Agenda for Change, as well as

its potential for corruption, increasing the quantum and quality of domestic resources, and

attracting external budget support, the effective functioning of PFM institutions and systems

at all levels of Sierra Leone's governance structure is accorded high priority.

Government of Sierra Leone has made considerable efforts in its drive to strengthen the

country's PFM framework and systems since the end of the conflict in 2002. With the help

of financial and technical assistance from the European Commission (EC), the UK

Department for International Development (DFID), the African Development Bank (AfDB)

and the World Bank, the GoSL has made good progress in strengthening its PFM

framework and systems. This has resulted in major PFM achievements over the years,

including the establishment of the legal and regulatory framework for budgeting,

accountability and procurement, implementation of a financial management information

system (FMIS) in the Accountant General's Department in 2005 and its roll-out to several

ministries, departments and agencies (MDAs), and the removal of the backlog of annual

financial statements (over the last 4 years, the public accounts have been produced within

the statutory deadline of 3 months of end of fiscal year). Independent external audit quality

and scope has improved, as has timeliness in the completion of audits. Basic budgeting,

procurement, accounting, and reporting procedures have been established in local councils.

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IPublic Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424

Financial Statements for the year ended 3 1stDecember, 2016

As a result, despite the very low starting point at the end of the war, the initial evaluation

(In 2007) shows that Sierra Leone has caught up with its peers in the region in terms Public

Expenditure and Financial Accountability (PEFA). Despite this progress however, various

analyses including that of the IMF report 'Sierra Leone Implementing Public Financial

Management Reforms', indicate that areas of weakness still remain. These weaknesses

include lack of budget credibility and predictability, fiscal management challenges,

weaknesses in expenditure control (including payroll), and low levels of transparency. It is

therefore clear that much remains to be done to more the system to a level that is capable of

directing resources to priority areas and support high quality expenditure outcomes.

Project Development objective includes to improve budget planning and credibility,financial control, accountability and oversight in government finances in Sierra Leone and

are segregated through 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 systems 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 enhanced service delivery efficiency and effectiveness.

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IIPPublic Financial Management Improvement and Consolidation Project

Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424Financial Statements for the year ended 3 1stDecember, 2016

I 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

the implementation of the PFM Reform Strategy as a whole as well as manage the

implementation of the proposed project.

In view of the above therefore, the Government of Sierra Leone, in consultation with, and

support from its key development partners, conceptualized and formulated a Public

Financial Management Improvement Project (PFMICP) aimed at deeper, coherent and

sequential PFM reforms.

Contributors to the PFMICP:

US$

International Development Association (IDA) 12.00

African Development Bank (AfDB) 3.50

MDTF - European Union (EU) 1.81

MDTF - UK Dept. for international Dev. (DFID) 11.19I Total funding 28.50

Audit Service Sierra Leone operates component 2.4 External Audit of the project and has

assigned, its own designated accounts for activities amounting to $ 1.27M.

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Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424Financial Statements for the year ended 31 stDecember, 2016

I STATEMENT OF MANAGEMENT'S RESPONSIBILITIES

It is the responsibility of management to prepare Financial Statements for each financial

year which should show a true and fair view of the state of affairs of the Project and of its

surplus or deficit for that year. In preparing these Financial Statements the Management is

required to:

* select suitable accounting policies and apply them consistently;

* make judgements and estimates that are reasonable and prudent;

* state whether applicable accounting policies have been followed, subject to any material

departures disclosed and explained in the Financial Statement;

* prepare the Financial Statements on a going concern basis unless it is inappropriate to

presume that the Project will continue its activities

Management is responsible for keeping proper accounting records which disclose with

reasonable accuracy at any time the financial position of the Project. They have a general

responsibility for such steps as are reasonably available to them to safeguard the assets of

the Project and to prevent and detect fraud and other irregularities.

On behalf of Management

Project r PFMICP

I &

Finaicial Secretary

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IIPublic Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424


REPORT OF THE AUDITORS - AUDIT SERVICE SIERRA LEONE TO THEGOVERNMENT OF SIERRA LEONE

I have audited the accompanying Financial Statements of the Public Financial Management

Improvement and Consolidation Project which comprise a separate statement of the

financial position as at 31st December 2016, a separate statement of comprehensive income

for the year to 31s" December 2016, a statement of resources for the year to 31st December

2016 and a statement of cash flow for the year to 3 1 t December 2016 and a summary of

significant accounting policies and other explanatory notes as set out on pages 12 to 15.

Responsibility of Management

The responsibility for the prevention of fraud and error and other irregularities rests with the

management of the Project.

Other responsibilities include:

* designing, implementing and maintaining internal controls relevant to the

preparation and fair presentation of financial statements that are free from material

misstatement, whether due to fraud or error;

* selecting and applying appropriate accounting policies; and

0 making accounting estimates that are reasonable in the circumstances.

Responsibility of the Auditor General

The Financial Statements of the Project are subject to audit by the Auditor General in

accordance with section 119(2) of the Constitution of the Republic of Sierra Leone, 1991.

My responsibility is to express an opinion on these financial statements based on my audit.

The audit was conducted in accordance with the International Standards of Supreme Audit

Institutions. Those standards require that I comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance whether the financial statements are free

from material misstatement.

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IAn 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 controls relevant to the entity's preparation and fair presentation of the

financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity's internal controls.

An audit also includes evaluating the:

I appropriateness of accounting policies used;* reasonableness of accounting estimates made by management;

I overall presentation of the financial statements; and* adequacy of design and the effective implementation of internal controls.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a

basis for my audit opinion.

Unqualified Opinion

In my opinion the financial statements of the Project give a true and fair view, in all material

respects, of the financial position as at 3 1st December 2016 and its financial performance for

the year then ended.

Pt AUDITOR GENERAL

Date -29 ;LQk

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I PIT Public Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P 133424

Financial Statements for the year ended 31 stDecember, 2016

ISTATEMENT OF FINANCIAL POSITION

Fifteen Mths2016 to 2015US$ US$

Asset

Cash & Cash Equivalent 3 4,437,728.64 2,387,698.574,437,728.64 2,387,698.57

Funding and Liabilities

Deferred Income 4 4,437,728.64 2,387,698.574,437,728.64 2,387,698.57

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These Financial Stat ents were approved on.... ......... ......... 2017

....... .... .. .........Financial Secretary

............ ............ Project Director PFMICP

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impr Public Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (NMTF/IDVJAfDB) - Project ID - P 133424Financial Statements for the year ended 3 IstDecember 2016

STATEMENT OF COMPREHENSIVE INCOME

Fifteen Mths2016 to 2015

Income US$ US$

Funding from Donor 4 3,998,379.84 4,277,060.44

3,998,379.84 4,277,060.44

Expenditure

Goods, Consultants' Services

Training and operating Cost -Result for the period 5 4,277,060.44

I po

IIII These Financial Statement ere approved on .. J2017I * *............. . 2017

****..... ..........-... Financial Secretary

....... * .................. Project Director PFMICP

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IPublic Financial Management Improvement and Consolidation ProjectMulti Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424


ISTATEMENT OF RESOURCES & EXPENDITURE


Opening Balance as at 1st January 2016 2,387,698.57

I Resources Received

I MDTF/ IDA Special Accounts 2 6,045,578.25 6,661,393.16

Interest Received 2,831.66 3,365.85Total 6,048,409.91 6,664,759.01

IResources Expended 5 3,998,379.84 4,277,060.44

IClosing Balance as at 31st December 2016 4,437,728.64 2,387,698.57

Supported By:

IBalance in Special Accounts 4,437,728.64 2,387,698.57

I These Financial Statem ts were approved on.................. 2017

I..... Financial Secretary

I( J.............................. Project Director PFMICP

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I ,4,7.5661331

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IOPublic Financial Management Improvement and Consolidation Project


I STATEMENT OF CASH FLOWS


Operating Activities

Cash Paid to suppliers, Activities and employees 5 (3,998,379.84) (4,277,060.44)Cash Outflow from operating activities (3,998,379.84) (4,277,060.44)

Financing Activities

Funding received from MDTF/IDA 6,045,578.25 6,661,393.16Interest Received 2,831.66 3,365.85Cash inflow from financing activities 6,048,409.91 6,664,759.01

INet (Decrease)/ Increase in cash and cash equivalent 2,050,030.07 2,387,698.57Cash & Cash equivalent at the beginning of the period 2,387,698.57Cash & cash equivalent at the end of year 3 4,437,728.64 2,387,698.57

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These Financial State ents were approved on...... . ................ 2017

I........ .Financial Secretary

I... .. Project Director PFMICP

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Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P 133424Financial Statements for the year ended 3 1stDecember, 2016

INOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing withitems which are considered material in relation to the Project's financial statement.

a. Basis of accountingStatement of resources and expenditure are prepared on the basis of cashaccounting whereby income is recognised on the receipt of cash and cashequivalents is recognised on the disbursement of cash and cash equivalents.

The project financial statements have been prepared using the modified cashbasis. The basis of the income recognition is described in note (d) below.

b. Foreign currency transaction

Functional and presentation currencyThe functional currency is the local currency in Sierra Leone which is the Leone.The Project has however adopted the United States Dollars (US$) as itspresentation currency as most of its transactions are dominated in US Dollars.Transactions in all other currencies are therefore considered foreign currency

Itransactions.Transactions and balances

Foreign currency transactions are translated into functional currency using theexchange rates prevailing on the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions denominatedin foreign currencies are recognised in the Project Income and ExpenditureAccount.

I c. Non-current assets

Plant and equipment are expensed on acquisition by the Project. The financialstatements therefore have no non-current assets shown.

d. Income

Funding from the Trust Fund is held in a deferred income account when receivedand only recognised in the Project's Income and Expenditure Account whenutilised.

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I,Public Financial Management Improvement and Consolidation Project

Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424Financial Statements for the year ended 31 stDecember, 2016

INOTES TO THE FINANCIAL STATEMENTS (Continued)

2a Disbursements

Fifteen Mths toI062015US$ US$

Total Grants Receivable (MDTF/IDA/ AfDB) 20,568,606.84 27,230,000.00Amount disbursed during the year (6,045,578.25) -6,661,393.16

Amount yet to be disbursed 14,523,028.59 20,568,606.84

2b Disbursement During the year

PFMICP/ MOFED/ IDA 001 2,160,466.00

PFMICP/ MOFED/ TF 001 2,340,035.00PFMICP/ MOFED/ AFDB/00 1 489,588.00PFMICP/ MOFED/ IDA 005 802,238.75PFMICP/ MOFED/ TF 005 869,065.41PFMICP/ MOFED/ IDA 006 3,481,001.23PFMICP/ MOFED/ TF 006 1,400,000.00PFMICP/ MOFED/ AfDB/002 1,164,577.02

6,045,578.25 6,661,393.163 Cash & Cash Equivalents

Sierra Leone Commercial Bank - Designated 4,429,437.57 2,342,137.84AccountBank of Sierra Leone - Designated Account 8,291.07 45,560.73

4,437,728.64 2,387,698.57

4 Deferred Income

Opening Balance as at 1 st January 2,387,698.57IInterest Received 2,831.66 3,365.85Funds Received during the period 2b 6,045,578.25 6,661,393.16Total funds Available 8,436,108.48 6,664,759.01

Releases to Income Statement 5 -3,998,379.84 -4,277,060.44

Closing Balance as at 31st December 2016 4,437,728.64 2,387,698.57

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8,9.7455074,3,2.4237685

1I T Public Financial Management Improvement and Consolidation Project


NOTES TO THE FINANCIAL STATEMENTS (Continued)

5 Total ExpenditureFifteen Mths

2016 to 2015US$ US$

Total Payment 4,018,615.48 4,289,431.19Less returns (20,235.64) (12,370.75)

3,998,379.84 4,277,060.44

5b Use of Funds by Component

I Comp. I (Enhancing Budget Planning andCredibility) 367,513.12 213,082.68Comp. 2 (Strengthening Financial Control,Accountability & Oversight) 2,301,548.47 2,718,366.20Comp. 3 (Strengthening Revenue Mobilization andAdministration) 136,697.25 109,398.81Comp. 4 (Strengthening Local GovernmentFinancial Management & Accountability) 197,230.57 106,746.53Comp. 5 (PFM Reform Coordination & ProjectManagement) 1,015,626.07 1,141,836.97

4,018,615.48 4,289,431.19

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13 IT Public Financial Management Improvement and Consolidation Project

Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID- P133424ai Ll Financial Statements for the year ended 3 1stDecember, 2016

I NOTES TO THE FINANCIAL STATEMENTS

I 5c. Use of Funds by Sub-Component

1.1 Budgetary & Macro-fiscal planning & Forecasting(EPRU) 92,602.69 85,526.991.2 Public Investment Management (PIM) 169,984.25 36,029.001.3 Fiscal Risk Management & Report 20,301.21 8,736.751.4 Budget Framework & Formulation 84,624.97 82,789.942.1 Strengthening Financial Systems, Control,Accounting & Reporting 1,457,293.58 2,177,279.622.2 Cash Debt & Aid Management 175,954.94 81,406.162.3 Strengthening Public Procurement Contract Mgt(NPPA & Contract Mgt) 257,571.10 151,622.172.5 Legislative & Public Oversight(PEAC,PFC,TAC & NSA,) 410,728.85 308,058.253.1 Tax Legislation, Regulatory Framework &Policies (Rev Tax Policy) 53,517.25 20,900.003.2 Tax System, Business Processing, Collecting &reconciliation (NRA) 83,180.00 88,498.814.1 Budgeting Planning & Systems (LGFD) 26,214.35 86,103.404.2 Budget Execution, Accounting & ReportingSystems 102,283.93 20,643.134.3 Local Governance-Public Procurement Systems 25,926.314.4 Oversight and Transparency Systems & Practices(PETS) 42,805.985.1 Project Management & Coordination 891,952.08 1,022,254.575.2 PFM Reform & Directorate 123,673.99 119,582.40

4,018,615.48 4,289,431.19

5d Use of Funds by Category

Category 1: Goods, Consultancy, Non-Consultancy,Training and Operating Cost 3,924,006.83 4,194,822.54Category 2: Sub-grants to NSA 94,608.65 94,608.65

4,018,615.48 4,289,431.19

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I1,2.53808253572U0900

IfPublic Financial Management Improvement and Consolidation Project

"Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P133424Financial Statements for the year ended 3 1stDecember, 2016

I REPORT OF THE AUDITORS ON THE SPECIAL ACCOUNT STATEMENT, US

DOLLLAR ACCOUNT NUMBER 003-001-014156030-144

I have audited the accompanying Special Account numbered 003-001-014156030-144

established under the provision of the IDA Programme for the year ended 31st December

2016 as set out on page 17.

I conducted the audit in accordance with the Standards of the International Organization of

Supreme Audit Institutions (INTOSAI) and International Federation of Accountants (IFAC).

Those Standards require that I plan and perform the audit to obtain reasonable assurance that

the Special Account statements are free from material misstatement.

The accompanying Special Account Statement was prepared on the basis of cash deposited

and withdrawals for the purpose of complying with the project agreement.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a

basis for my opinion.

I Opinion

In my opinion the receipts are properly accounted for and the withdrawals were made for the

purpose of the project in accordance with the Loan/Grant agreement and IDA disbursement

procedures. The accompanying special account statement give a true and fair view of the

ending balance for the year ended 31st December 2016.

In accordance with the provisions of the terms of reference of the audit, I confirm as

follows:

* Withdrawals from the Special Account during the period under review were made foreligible expenditure.

* The Special Account of the project has been maintained in accordance with theprovisions of the financing agreement.

AUDITOR GENERAL

1oC Date a eu D o0-

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IIT Public Financial Management Improvement and Consolidation Project

Multi Donor Trust Fund (MDTF/IDA/AfDB) - Project ID - P1 33424Financial Statements for the year ended 3 1stDecember, 2016

REPORT OF THE AUDITORS ON THE SPECIAL ACCOUNT STATEMENT, USDOLLAR ACCOUNT NUMBER 003-001-014156030-144

SPECIAL ACCOUNT STATEMENT

Account No: 003-001-014156030-144

Depository Bank Sierra Leone Commercial bank

Address Siaka Steven Street, Freetown

Agreement Reference P133424

Currency United States Dollars

Account ActivityI Fifteen Mths2016 to 2015

$ $

Opening Balance 2,387,698.57Funds Received during the period 6,045,578.25 6,6661,393.16Interest Received 2,831.66 3,365.85

8,436,108.48 6,664,759.01

Amount withdrawn for implementation (3,998,379.84) (4,277,060.44)Closing Balance as at 31st December 2016 4,437,728.64 2,387,698.57

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i audit of fin cial statem s for the d ... - world bank

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