REPUBLIC OF KENYA

OFFICE OF THE AUDITOR-GENERAL

REPORT

OF

THE AUDITOR-GENERAL

ON

THE FINANCIAL STATEMENTS OFWATER AND SANITATION SERVICES

IMPROVEMENT PROJECT- COMPONENTNO.3 (IDA GRANT 5103-KE)

FOR THE YEAR ENDED30 JUNE 2016

LAKE VICTORIA NORTH WATERSERVICES BOARD

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*SE 2016

Project Name Water and Sanitation Services Improvement Project

Implementing Entity Lake Victoria North Water Services Board

PROJECT GRANT/CREDIT NUMBER 5103 KE

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDEDJUNE 30, 2016

Prepared in aceordance with the Cash Basis of Accounting Method under the International Publie SectorAccouiiting Standards (IPSAS)

Water and Sanitation Services Iiprovenient Project -A dditional Financing

Reports and Financial StatementsFor the financialyear ended June 30, 2016

CONTENTS IIAGE

. PROJEC T INFORMATION AND OVERALL PERFORMANCE ............................. ......................... .......

2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES............................... vi

3. RIEPO R T OF TI 11 IN DEPENDENT A UDITORS. .................................................... ......................... ...................

4. STATEMENT OF RECEIPTS AND PAYMENTS FOR TI If PERIOD IINDFD 30T1 JUNE 2016.... ........

5. STATIEMENT OF FINANCJAL ASSETS AND LIABILITIES AS AT 30TJ I JUNE ý'016 ....... .......................

6. STAT EMENT' OF CAS] IFLOW FOR TIE PERIOD ENDED 3 0 H JUNE 20 ............... ............. 3

7. STA T EMENT OF COMPARA TIVE BUDG ET AND ACTUAIL A MOUNTS .......... ....... ..................... 4

8. N OTES TO TII IF FIN AN CIA I. STA TEM ENTS ....................................................... ............. . .... ...................

9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDA'TIONS ....... ........................... .

Water and anitation Services Improvement Project -Additional Financing

Reports and Financial Statementsor the financial year ended June 30, 2016

1. PROJECT INFORMATION AND OVERALL PERFORMANCE

1.1 Name and registered office

Name: The project's official is Water and Sanitation Services Improvement Project

Objective:The development objectives of the project are to: (a) increase access to reliable, affordable andsustainable water supply and sanitation services; and (b) to improve the water and wastewaterservices in the areas served by LVNWSB, CWSB and AWSB. This will be achieved by (i)Rehabilitating selected existing water production, transmission, storage and distribution facilities andwastewater collection, treatment and disposal facilities; (ii)expanding piped water supply services toundcr-served areas through the extension of primary and secondary distribution pipes where required(this would include service expansion into urban slums / informal settlements through a balancedprogram including the involvement of communities in decision making); and (iii)refining andstrengthening the institutional structure, emphasizing on increasing accountability and transparencyof the institutional, governance and management framework.

REGISTERED OFFICE

Lake Victoria North Water Services BoardP.O. Box 673-50100,Kefinco House,Off Kakamega-Kisumu RoadKAKAMEGA.

1.2 Project Information

Project Start Datc: The project start date is 14/12/2012

Project End Date: The project end date is 31/12/2017

Project Manager: The project manager is Eng. Peter Ouma

Project Sponsor: The projcct sponsor is World Bank

1.3 Project Overview

Line Ministry/State The project is under the supervision of the Ministry of Environment, WaterDepartment of the and Natural Resources-State Department of Water.prject _ _ _ _ _

Project number 5103 IKE

Strategic goals of the The strategic goals of the project are as follows:

projcct 1(i) increase access to reliable, affordable and sustainable water supply

ii

Water and Sanitation Services Improiement Project-Additional Financing

Reports and Financial StatementsFor the financial year ended June 30, 2016

and sanitation services

(ii) to improve the water and wastewater services in the areas served byLVNWSB, CWSB and AWS13

Achievemcnt of The project management aims to achieve the goals through the f6llowingstrategic goals means:

(i) Rehabilitating selected existing water production, transmssicn,storage and distribution facilities and wastewater collection,treatment and disposal facilities

(ii) Expanding piped water supply services to under-served areasthrough the extension of primary and secqudary distributionpipes where required (this would include service cNpansion intourban slums / informal settlements through a balanced pregramincluding the involvement of comnuniticSin decision making)

(iii) Refining and strengthening the institutionai structure,,emphasizing on increasing accountability and transparency ofthe institutional, governance and management framework.

Other important Te project has three major components: (1) support to the Athi Waterbackground Services Board (including limited complementary support to the Waterinforma'3on of the Services Regulatory Board and the Water Appeals Board through technicalproject assistance, goods and works); (2) support to the Coast Water Services

Board; and (3) support to the Lake Victoria North 'Water Services Board.These arc summarized below. Within each component, there arc two mainsubcomponents for water and sewerage infrastruct'urc rchabilitation andexpansion that arc focused on increasing the accbss of safe water andsanitation services to the beneficiaries.A further subcomponent of institutional strengthening o f WSB13 and WSPsis included under each component and is focused on the quaity, rceability,affordability and sustainability of service provision to beneficiarics and thelong term viability and sustainability of service provision institutions.Included under the institutional strengthening subcomponent is limitedsupport to operational costs of new WSPs to cover cost of electricity,chemicals etc. The support to Lake Victoria North Water Services Board isunder component 3 of the project and details of this componznt aredescribed below:-

Current situation that The project was formed to intervene in the following areas:the pro:cct was (i) increase access to reliable, affordable and sus ainablc water supplyformed 'o intervene and sanitation services

(ii) to improve the water and wastewater services in the areas served byLVNWSB, CWSB and AWS13

Projcct duration The project started on 14 December 2012 and closcd.31 December 2017

iii

wailer ana anItaion ervices nimprovement Project-Atuntional inanci g

Reports and Financial Statementsor the financial year ended June 30, 2016

1.4 Bankers

The following are the bankers for the current year:(i) Special Account:

CFC STAN131C 13AN K KE.NY AC13K/GO.K PART3 LAKE VIC'1.0RIA NORTIH SERVICES 13OA.RI)Account No 0100000488277

(ii) Project Account:Standard Chartered BankKakarnega BranchKAKAMEGA.

1.5 AuditorsThe project is audited by the;Auditor GeneralKenya National Audit OfficeP.O. Box 30084-00100NAIROBI.

1.6 Roles and Responsiilities

List the different people who will be working on the project. This list would include the projectmanager and all the key stakeholders who will be involved with the project. Also, record their role.their positions, and their contact information.

Names Title designation Key qualification ResponsibilitiesEng. Alfred Chief E'xecutive BSc(Civil Accounting OfficerAmornbo Officer Engineering)__Eng. Peter Ouma Chief Manager BSe(Civil Project Coordinator

Technical Services Engineering)CPA Anthony Chief Executive MBA,CPA(K) Project AccountantKisaka OfFicer

IV

vn

VII i

, CI,C-=recrcwrnrrTriTa 2r T

1.9 Summary of Project Comnipliance:-

Therec have be-n, no instances of non complian'cc!

v

REPUBLIC OF KENYA

+254-20-342330 P.O. Box 30084-010054-2 NAIROBI

E-mail: oag@oagkenya.go.keWebsite: wwwkenao.go.ke

OFFICE OF THE AUDITOR-GENERAL

REPORT OF THE AUDITOR-GENERAL ON WATER AND SANITATION SERVICESIMPROVEMENT PROJECT- COMPONENT NO.3 (IDA GRANT 5103-KE) FOR THEYEAR ENDED 30 JUNE 2016-LAKE VICTORIA NORTH WATER SERVICES BOARD

REPORT ON THE FINANCIAL STATEMENTS

I have audited the accompanying financial statements of Water and Sanitation ServicesImprovement Project- Component No. 3 (IDA Grant 5103- KE) set out on pages 1 to 16,which comprise staterent of financial assets and liabilities as at 30 June 2016 thestatement of receipts ali payments for the year ended 30 June 2016, and the statementof cash flows, Statements of comparison of budget and actual amounts and statement ofspecial account activity for the year ended, and a summary of significant accountingpolicies and other explanatory information in accordance with the provisions of Article229 of the Constitution of Kenya and Section 35 of the Public Audit Act 2015 andschedule 2 Section II Sub-Section B (3) of the Financial Agreement No.5103 dated 4June 2008 between the International Development Association and the Government ofKenya. I have obtained all the information and explanations which, to the best of myknowledge and belief, were necessary for the purpose of the audit.

Management's Responslbility for the Financial Statements

Management is responsible for preparation and fair presentation of these financialstatements in accordance with the International Public Sector Accounting Standards(Cash Basis) and for such internal controls as management determines is necessary toenable the preparation of financial statements that are free from material misstatements,whether due to fraud or error.

The management is also responsible for the submission of the financial statements tothe Auditor -General in accordance with the provisions of section 47 of the Public AuditAct, 2015.

Auditors General's Responsibility

My responsibility is to express an opinion on these financial statements based on theaudit and report in accordance with the provisions of Section 48 of the Public Audit Act,2015 and submit the audit report in compliance with Article 229 (7) of the Constitution.The audit was conducted in accordance with the International Standards Supreme AuditInstitution. Those standards require compliance with ethical requirements and that theaudit be planned and performed to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor's

Report qf the Auditor-General on Water And .Sanitation Services Improvement Project- Component No,3 (IDAGRANT 5103-Ke) for the 1year ended 30 June 2016

Prmog Accna iltv4 in the Public Sector

judgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal controls relevant to theentity's preparation and fair presentation of the financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Project's internal controls. An auditalso includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the management, as well asevaluating the overall presentation of the financial statements.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basisfor my audit opinion.

Opinion

In my opinion, the financial statements present fairly, in all material respects, thefinancial position of Water and Sanitation Services Improvement Project as at 30 June2016, and of its financial performance and its cash flows for the year then ended, inaccordance with International Public Sector Accounting Standards (Cash Basis) andcomply with the Financing Agreement IDA Grant No.5103-KE.

In addition, the special account statement presents fairly the special accounttransactions and the closing balance has been reconciled with the books of account.

Emphasis of Matter

Budget Compliance and Project Implementation

During the year, the budget counterpart funding of Kshs.49,206,671 was not disbursedwhile Kshs.31,044,021 was not received in time due to delay of funds release byNational Treasury.

The budget expenditure was Kshs.577,296,783. However, the project managed to spendonly Kshs.431,581.769 resulting to an under expenditure of Kshs.145,715,015.Consequently, the project failed to meet its budget target that may delay its completionas planned.

My opinion is not qualified in respect of this matter.

FCPA Edward R.O. Ouko, CBSAUDITOR-GENERAL

Nairobi

21 December 2016

Report of the 1uditor-General on Water And Sanitation Services Improvement Project- Component No.3 (fDAGRANT 5/03-Ke)lor the year ended 30 June 2016

2

Water and anitattion Services Improvement Project -Additional Financing

Reports and Financial Statements*or the financial year ended June 30, 2016

4. STATEMENT OF RECEI1PTS ANI) AYMENTS FOR TIHE PIERIOi EN)EID 30'1i JUNE 2016Note

CumulativC2016 2015 to-dateKshs Kshs Kshl

RECEIPTSTransfer from Government entities 8.2

- 125,000,000 125,000.000Loan from external development partners 8.3

131,816,014 506,559,508 1,300,444.981Miscellaneous receipts 8.4

16,470,538 26,547,668 58.607-336

Total receipts148,286,552 658,107,176 1,484,052,318

PAYMENTSGoods, Works, Training and Services 8.5(a)(b)(d) 275,069,301 204,926,339 682,520.090Goods, Works and Services (c) 8.6

100,219,682 280,360,857 446,464,663Operating costs 8.7

56,292,786 29,462,624 105,055,590TOTAL PAYMENTS

431,581,769 514,749,820 1,234,040,343WaSSIP RefundSURPLUS/1)EF1ICIT F( OR TIHE YEAR

(283,295,216) 143,357,356 250,011,975

The accounting policies and explanatory notes to these financial statements are an integral part ofithcfinancial statements. The entity financial statements were approved on 20"' August, 2016 and signedby:

Aceountin O Project Coordinator

1

Water and Sanitation Services Inprovement Project-A dditional Finaneing

Reports and Financial StatementsFor thefinancialyear ended June 30, 2016

5. STA TEMENT IOF FINANCIAL ASSETS AND LIABILITIES AS AT 30T11l JUNE 2016Note 2016 2015

Kshs KshsFINANCIAL ASSETS

Cash and Cash Equivalents

Bank Balances 8.12A 250,011,975 533,307,191Imprests and Advances 8.12B -TOTAL FINANCIALASSETS 250,011,975 533,307,191

REPRESENTED BY:

Cash and cash equivalentsb/fwd 8.13 533,307,191 389,949,835

Surplus/Deficit for the year (283,295,216) 143,357,356Prior ycar adjustients 8.14NET FINANCIALPOSITION 250,011,975 533,307,191

The accounting policies and explanatoiy notes to these financial !statements for i an integral part ofthe financial statements. The financial statements wcre ajproved on 2 0t1 Auglit, 2016 and signed by:

Accourfing Offi r 1Proj ct Coordinatý

2

Water and Sanitation Services Improvement Project-Additional Financing

Leports and Financial StatementsWor the financial year ended June 30, 2016

* 6. STATEMENT OF CASIIFLOW FOR THE PERIOD ENDED 30' JUNE 20162016 2015Kshs Kshs

Receipts for operating incomeTransfer from Government entities

125,000,000Proceeds from domestic and foreign grants

100,219,682 280,360,857Miscellaneous receipts

16,470,538 26,547,668

Payments for operating expensesPurchase of goods and services

56,292,786 29,462,624

Net cash flow from operating activities 60,397,434 402,445,901

CASHFLOW FROM INVESTING ACTIVITIES

Acquisition of Assets 375,288,983 485,287,196

Net cash flows from Investing Activities 375,288,983 485,287,196

CASIIFLOW FROM BORROWING ACTIVITIES

Proceeds from Foreign Borrowings 31,596,332 226,198,651

Net cash flow from financing activities 31,596,332 226,198,651

NET INCREASE IN CASH AND CASHEQ1JIVALENT (283,295,216) 143,357,356

Cash and cash equivalent at BEGINNING of'the year 533,307,191 p '389,949,835

Cash and cash equivalent at END of the year 250,011,975 533,307,191

The accounting policies and explanatory notes to these financial statements form an integral part ofthe financial statements. The entity financial statements were approved on 2 0 th August, 2016 andsigned by:

Ace untin) e( Project Coordinator

3

!J wer and Sanitation Services Improvement Projeci -Additional Financing

Reports and Financial StatementsFor the financial year ended June 30, 2016

7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS

Actual onComparable % of

Receipts/Payments Item Original Budget Adjustments Final Budget Basis Variance Variance

a b c=a+b d e=d-c f=e/c %Receipts

Transfer from Government entities 49,206,671 49,206,671 - (49,206,671) -100%

Proceeds from borrowings 442,860,035 442,860,035 131,816,014 (311,044,021) -70%Proceeds from domestic and foreign grants

862,859,118 862,859,118 - (862,859,118) -100%

Miscellaneous receipts - 16,470,538 16,470,538 16,470,538 -

Total Receipts 1,354,925,823 16,470,538 1,371,396,361 148,286,552 (1,223,109,809) -89%

PaymentsGoods, Works, Training and Services(a)(b)(d) 442,860,035 (121,733,413) 321,126,622 275,069,301 46,057,321 14%Goods, Works and Services (c)

862,859,118 (672,366,165) 190,492,953 100,219,682 90,273,271 47%Operating costs

49,206,671 16,470,538 65,677,209 56,292,786 9,384,423 14%

Total Payments 1,354,925,823 (777,629,040) 577,296,783 431,581,769 145,715,015 25%

Note: The significant budget utilisation/performance differences in the last column are explained in Annex 1 to these financial statements.

Accoun Fic Project Coordinator

4

Water and Sanitation Services improvement Project -Additional Financing

,eports and Financial StatementsWor the financial year ended June 30, 2016

-8. 0OTES TO THE FINANCIAL STATETMENTS

The principal accounting policies adopted in the preparation of these financial statements are set outbelow:

8.1 Statement of complianec and basis of preparation

The financial statements have been prepared in accordance with and comply with InternationalPublic Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis FinancialReporting under the Cash Basis of Accounting. The financial statements comply with andconform to the form of presentation prescribed by the Accounting Standards Board of Kenya.

The financial statements.are presented in Kenya Shillings, which is the functional and reportingcurrency of the Project and all values are rounded to the nearest one Shilling. The accountingpolicies adopted have been consistently applied to all of the years presented.

The financial statements have been prepared on the cash basis following the Goverrunent'sstandard chart of accounts. The cash basis of accounting recognises transactions and events onlywhen cash is received or paid out by the Project.

i. Recognition of revenue and expenses

The Project recognises all revenues from the various sources when the event occurs and therelated cash has actually been received by the Project. In addition, the Project recognises allexpenses when the event occurs and the related cash has actually been paid out by the Project.

ii. In-kind donations

In-kind donations are contributions made to the Project in the form of actual goods and/orservices rather than in money or cash terms. These donations may include vehicles, equipmentor personnel services. Where the financial value of in-kind donations can be reliablydetermined, the Project includes such value in the statement of receipts and payments both asrevenue and as an expense in equal and opposite amounts; otherwise, the donation is notrecorded.

iii. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on calland highly liquid investments with an original maturity of three months or less, which arereadily convertible to known amounts of cash and are subject to insignificant risk of changes invalue. Bank account balances include amounts held at the Central Bank of Kenya and at variouscommercial banks at the end of the financial year/period. For the purposes of these financialstatements, cash and cash equivalents also include short term cash imprests and advances toauthorised public officers and/or institutions which had not been surrendered or accounted forat the end of the financial year/ criod.

5

WI r vd Sanitation Services Iniproveient Project-A dditional Financing

Reports and Financial StatementsFor thefinancial year ended June 30, 2016

SIGNIFICANT ACCOUNTING POLICIES (Continued)

iv. Pending bills

Pending bills consist of unpaid liabilitics at the end of the financial year/period arising fromcontracted goods or services during the ycar/period or in past ycars/pcripds. As pending bills donot involve the payment of cash in the reporting period, they are simply, disclosed as an Annexto the financial statements. When the pending bills are finally settled, such pyments areincluded in the statement of receipts and payments in the year in which the payments are made.

v. Budget

The budget is devcloped on the same accounting basis (cash basis), the same accountsclassification basis, and for the same period as the financial statements. The Projiect's budgetwas approved as required by Law and National Treasury Regulati6ns, as well as by theparticipating development partners, as detailed in the Government o Kenya Budget PrintedEstimates for the year. A high-level assessment of the Project's actual pcrformanc6 againsI thecomparable budget for the financial year/period under review has been included in an annex tothese financial statements.

vi. Exchange rate differences

The accounting records are maintained in the functional currency of the prinmary economicenvironment in whch the Project operates, Kenya Shillings. Transactiobs in foreign currenciesduring the year/period are converted into the functional currency using the exchange ratesprevailing at the dates ofthe transactions. Any foreign exchange gains and losses resulting fromthe settlement of such transactions and from the translation at year-end exchange rates ofmonetary assets and liabilities denominated in foreign currencies are rcogniscd in thestatements of receipts and payments.

vii. Comparative figures

Where necessary comparative figures for the previous financial year/period have been amendedor reconfigured to conform to the required changes in financial statemen preseptation.

viii. Subsequent events

There have been no events subsequent to the financial ycar/period'cnd With a sianifdcan: impacton the financial statements for the year ended June 30, 2016.

6

Water anti ianitation Services Improvement Project-Additional Financing

Reports and Financial Statementsthe financial year ended June 30, 2016

*)2 RECEIPTS FROM GOVERNMENT OF KENYAThese represent counterpart funding and other receipts from government as follows:

2015/16 2014/15 CumulativeKshs Kshs to-date

Counterpartfunding through MEWNRCounterpart funds Quarter 4 - 125,000,000 125,000,000

125,000,000 125,000,000

8.3 LOAN FROM EXTERNAL I)EVELOPM ENT PARTNERS

During the 12 months to 30 June 2016 we received funding from development partners in form of loans negotiated by the NationalTreasury donors as detailed in the table below:

of Date Amount in Loans Total amount in Kshs Remarksreceived loan received in

currency cash

FY 2015/16 FY 2014/15 FY 2013/14 FY 2012/13

USD Kshs Kshs Kshs

s

ivedId

J<(IDA) 12/03/2013 5,180,447 433,240,783 Project Account

(lDA) 18/06/2013 4,479,006 385,294,080 Project AccountId-(IDA) 13/03/2014 1,656,588 143,140,584 Project Account

_<(1DA) 13/03/2014 5,436,881 Refunded to lDA

(IDA) 13/03/2014 1,296,126 131,816,014 Project AccountId-fIDA) 12/02/2015 2,272,716 206,953,520 Project Account

-A<(1DA) 15/09/2016 7,308,659 Designated Account/MVVI

27,630,423 131,816,014 206,953,520 528,434,664 433,240,783

8.4 MISCELLANEOUS RECEIPTSFY 2015/16 FY 2014/15 CumulativeKshs Kshs Kshs

Interest income 16,470,538 26,547,668 58,607,336

16,470,538 26,547,668 58,607,336

7

Water and Sanitation Services Improvement Project-Additional Financing

Reports and Financial StatementsFor the financial year ended June 30, 2016

NOTES TO THE FINANCIAL STATEMENTS (Continued)

8.5 Loan2016 201.5

WORKS Kshs KshsWAaSSIP I FInancing Ga?(ConstructionMu.mias 14,591,850 74,374,337works).

WaSSI P 1 F:nancing Gap(Lumakanda/Kipkaren 31 0,590Works).

WaSSIP I Financing Gap(RehabilitationKaimosi,1Ilarnisi,Serem).

WaSSIP 1 Financing Gap(Mangat-Supervision 3,000,750Munmias).

Construction of Elligirini Pipeline and and expansionof Kapsoya Treatnent works.

Construction of Kipkarren Darn Treatment worksand Distribution.

Construction of Power Generation Works at WasteWater Treat Plant Eldoret

Construction of Water and Sanitation facilities for 13,994,436Informal Settlements in Mumias 41,296,086

Construction of Upstream Water Treatment Worksand Distribution Lines, (Additional investment in 40,157,58,Kapchcrop)

Total 96,045,51§ §1,680,113

CONSULTANCIESSupervision Informal Settlements in Mumias

27,8'90,194FS, Design and supervision of Energy Generationfrom WWTP in Eldoret

FS study review, design and Supervision of Kapsoya 5,420,803 2,4.85,259Treatment Works and Supervision of ElligiriniPipeline

8

Water antw Sanitati Services Improivement Prrject-Additional Financing

Reports anid Financial Statements*'or the financial year ended June 30, 2016

*S and Final Design for Kipkarren Dam T Works and 10,196,734 4,903,941Associated Distribution lines

Design review and supervision for Kipkarren DamT -Works and Associated Distribution lines

Consultancy services for communication 2,100,000 2,100,000

Intergration of customer management systems to GIS -and updating of GIS maps and network model for -WSPS

Carry out Staffing Needs Assessment for the Board 1,458,000(Human Resources Department)

Carry out Water and Sanitation Service Levels Survey 4,482,769 8,646,750in the Board Area

TA for Environmental and Quality Management 4,477,200Systems implementation 1,109,482

Consultancy for Energy Audit for Eldowas

5,262,601Consultancy for Ildorct water master plan -

TA for Customer Identification Survey forELDOWASTA for Ressetlement Action Plan(RAP) for Kipkarren 3,309,063 2,520,000dam Water Supply,Ellegirini/KapsoyaProject,Additional Works for Kapcherop Projects

TA for EIA for Kipkarren dam Water 3,211,468 1,108,836Supply,E1legirini/ Kapsoya Project,Additional Worksfor .Kapcherop Projects

Conditional Survey for EIllegirini & Kipkarren Dams 11,152,200(Dam Safety Inspection)

Condition Survey for Chebara-Kapsoya transmission 8,316,000main

9

W'ter and Sanitation Services Iprovement Project-Additional Financing

Reports and Financial StatementsFor the financial year ended .une 30, 2016

Customer/Employee Satisfaction Survey 2,880,0002,880,000)

FeasibIlity Study,l)etailed design and supervision 3,047,620

for a gravity Scheme for Indigencous 3,430,3510

PeopIe(Kapcherop)

TA for Assessment of FMIS for WSPs and WS3 1,080,330

Total 69,293,469 54,176,106

Goods

Water Metering Programme for WSPs (in Lots) Lot 1: 76,618,488 35,M9,053

Ordinary Meters; Lot 2: Zonal/Bulk meters

Supply and Installation for LVNWS3 and WSPs (a) 25,441,265 P6,887

Office equipment; (b) integrated information system/

electronic information System.; c) Specialized software

Procuwent of communication materials and 991,000C 10,947,621

services as per communication strategy

Procuirer.ent of Intranet system for the Board, Voice 549,435 8,5016,749

over internet protocol VolIP software, MIS for theB3oard.

Procu.Tc/Upgrade billing/accounting software for 786,000WSPs33'W013

Leak G"etection and GIS Equipmen-ts for WSIPI_

Total 103,600,188 55,776,360

Train5ngLV6WS9 529,200 41.,500

wSps7 5,600,45 3,12,260

TOTAL 6,130,125 3,2,93,760

TOTAL LOAN 275,469,3 1 204,96,39(WOIZKS+CONSULTANCY+GOOI)S+TRAINING)

10

Water and Sanitation Seriices Improv)ement Project-Additional Financing

orts and Financial StatementsWor the financial year ended June 30, 2016

.6 Grants

2016 2015WORKS I(shs KshsDrilling and capping of Drought 13oreholes LVNWS13 27,168,792

Drilling and capping of Drought 13oreholes RVWS13 27,165,6694,098,029

Drilling and capping of Drought Boreholes LVSWS3 6,963,6052,530,153

Equiping of Drought Boreholes and Civil WorksLVNWS13 2,645,3401.quiping of Drought Boreholes and Civil WorksRVWS13

9 Equiping of Drought IBoreholes and Civil WorksL.VSWSB

Rehabilitation/Expansion of Water Supplies forLVNWSB - Kwanza Water Supply -

Rehabilitation/Expansion of Water Supplies forRVWSB3-Suswa Water Supply

Rehabilitation/Expansion of Water Supplies forRVWS13-Kapenguria Water Supply 3,688,187 -

Rehabilitation/Expansion of Water Supplies forRVWSB-Kapindararn 57,500 -

Construction of plinths/ gutters for plastic water 6,003,0727 tanks 10,0001ts for LVN, INS AND RV WSBs 14,495,024

Total 27,514,233 67,301,138CONSULTANCIESCarry out strategic drought mitigation studies/plan

Preparation of [IA & RAP for drought boreholes-LVNWS3 500,000

2,583,000Design for civil works and supervision of drought 3,271,800boreholes-LVNWS13Preparation of EIA & RAP for drought boreholes-RV WS13 1,000,00() -

11

Water and Sanitation Seriices Improvement Project-Additional Financing

Reports and Financial Statements

For the financial year ended June 30, 2016

)esign for civil works and supervision of drought 4,329,719

boreholes-RVW\SB 8,821,305

Preparation of EIA & RAP for drought boreholes-

L,VSWSB 500,000

Dcsign for civil works and supervision of drought 3,198,000

boreholes-LcVSWS3 2,798,250

Design and Supervision for Kwanza Water Supply 5,040,0bo

Project 1,440,000

Desi,gn Review and construction supervision for 8,359,2(0

Suswa,Kapindaram and Kapenguria Water Supply 8,753,341.

Projects in RVWSB

TA for EISIA and RAP for Kwanza water supply94,008

TA for EISIA and RAP for Suswa, Kapenguria and 1,360,800

Kapinidarum 3,898,757,

Total 31,077,460 24,870,719

GOODS

Procurement of 18m3 Water Bowsers/10 tonnes 181,989,000

L orry,Purchase of Operational Vehicles

Purchase of Plastic Tanks (400 No) 6,200,000

Procurement of collapsable Tanks: 10,000 to

15,00C litres 13,28V,800

Procurement of Stand-by generating sets: various

ratings

Procurement of Stand-by submersible pumps4,916,436 -

Provision of Mobile treatment units23,423,7531-

Total 41,627,989' 188,189,000

TOTAL GRANTS 100,219,682 280,160,857

(WORKS+CONSULTANCY+GOODS+TRAINING)

12

rrater ana amntanon Nervices improvement Project-Additional Financing

Reports and Financial Statements*or thie financial year eled June 30, 2016

OTES TO THE FINANCIAL STATEMENTS (Continued)

8.7 Operating Costs

2016 2015Kshs Kshs

Fuel ,advertisements, staff travel,M&E and others 56,292,786 29,462,624

8.12 CASH AND CASH EQUIVALENTS C/FWD

2015/16 2014/15Kshs Kshs

Bank accounts (Note 12A) 250,011,975 533,307,191Cash in handCash equivalents (short-tern deposits)Outstanding irnprests and advances (Note 1213)

250,011,975 533,307,191

2015/16 2014/15Kshs Kshs

8.12A Bank Accounts

Local Currency AccountsStandard Chartered Bank [A/cNo 0102002530002] 250,011,975 533,307,191

Total local currency balances 250,011,975 533,307,191

Total bank account balances 250,011,975 533,307,191

8.121 Outstanding Inprests and Advances

2015/16 2014/15Kshs Kslis

Irnprest

8.13 Cash and cash equivalents b/fwd 2015/16 2014/15

Cash and bank balances b/fwd from previous period 533,307,191 389,949,835

8.14 Surplus/Deficit for the year

Difference between receipts and payments (283,295,216) 143,357,356

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WTVater and Sanitation Services improvement Project-Additional Financing

Reports and Financial StatementsFor the financial year ended June 30, 2016

13 PENUING BILLS

20,5/16 2014/15Kshs Kshs

Pending bills at reporting date 22,053,602 13,254,84222,053,602 13,254,842

14 STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT ACTIVITlY

USD

USD KSII CVMN4Ui,X AIVE

OPENING EALANCE AT IST JULY 2015 1,296,126 127,849,104 20,321,764

Add;

Total amount deposited by World Bank 7,308,659 742,478,920 7,308, 59

Total interest earned if deposited in account

Amount refunded for ineligible expenditure - -,436,881

TOTAL 8,604,785 870,328,024 2, 93,542

Deduct;

Total amour.t withdrawn:

Transferred to Project Account 1,296,126 131,816,014 14,884,883

In Tranlsit MOWI 4,000,000 404,000,000 4,000,00

Foreign exchange differences

Total service charge

CLOSING BALANCE AT 30 JUNE 2016 3,308,659 334,512,717 3,308, 59

14

n ant. ~ et.un..,m.~~oe..~at..:r...... yig,

Reports and Financial StatementsFor thefinancial year ended June 30, 2016

9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONSThe following is the summary of issues raised by the external auditor, and management comments that were provided to the auditor. We have nominated focalpersons to resolve the various issues as shown below with the associated time frame within which we expect the issues to be resolved.

Reference T - Focal Point Status: ITireframe:INo. on the person to (Resolvedl (Put a date ihenexternal Issue / Observations from Auditor Management comments resolve the issue Not you expect the

audit (Name and Resolved) issue to beReport _j - _ _ desi.nation,) resolved)

Eng. Peter Ourna. .Chief-Manager i

1. Tanks not distributed The tanks have since been installed ResolvedTechnicalServices [

Eng. Peter Ouma

2. 1 Additional information provided by Chief Manag cr Follow up next2. Construction of plinths and installation of gutters infoatin p echiNot Resolved F u pnx

Imanagement I Technical 'auditServices

Peter Bett3. Incorrect Deliveries of Water bowsers A name n Manager Resolved

j management_ I Procurement

Guidance Notes:

(i) Use the same reference numbers as contained in the external audit report;

(ii) Obtain the "Issuc/Observation" and "management comments", required above, from final external audit report that is signed by Management;

(iii) Before approving the report, discuss the timeframe with the appointed Focal Point persons within your entity responsible for implementation of each issue;

(iv) Indicate the status of "Resolved" or "Not Resolved" by the date of submitting this report to National Treasury.

Accounting Project Coordinator

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ANNEX 1 - VARIANCE EXPLANATIONS - COMPARATIVE BUDGET AND ACTUAL AMOUNTS

Actual onOriginal Comparable % of

Receipts/Payments Item Budget Adjustments Final Budget Basis Variance Variance Comments on Variance

a b c=a+b d e=d-c f=e/c %

Receipts

Transfer from Government Counterpart funds not

entities 49,206,671 49,206,671 - (49,206,671) -100% disbursed

Delay funds release from

Proceeds from borrowings 442,860,035 442,860,035 131,816,014 (311,044,021) -70% treasury

Proceeds from domestic and

foreign grants 862,859,118 862,859,118 - (862,859,118) -100% Budget revised

Miscellaneous receipts - 16,470,538 16,470,538 16,470,538 -

Total Receipts 1,354,925,823 16,470,538 1,371,396,361 148,286,552 (1,223,109,809) -89%

Payments

Goods,- Works, Training and

Services (a)(b)(d) 442,860,035 (121,733,413) 321,126,622 275,069,301 46,057,321 14% Retention held

Goods, Works and Services - Delay in procurement of

(c) 862,859,118 (672,366,165) 190,492,953 100,219,682 90,273,271 47% works, lengthy processes

Counterpart funds not

Operating costs 49,206,671 16,470,538 65,677,209 56,292,786 9,384,423 14% disbursed

Total Payments 1,354,925,823 (777,629,040) 577,296,783 431,581,769 145,715,015 25%

16