office of the auditor-general - world bank€¦ · tobias c. olambo project accountant qualified...

REPUBLIC OF KENYA

OFFICE OF THE AUDITOR-GENERAL

THE WORLD BANKREPORT RECEIVED IN CD'S OFFICE

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THE AUDITOR-GENERAL

ON

THE FINANCIAL STATEMENTS OFKENYA TRANSPORT SECTOR SUPPORTPROJECT IDA CREDIT NO.4926/5410-KE

(MOT COMPONENT)

FOR THE YEAR ENDED30 JUNE 2016

STATE DEPARTMENT OF TRANSPORT

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KENYA TRANSPORT SECTOR SUPPORT PROJECT

STATE DEPARTMENT OF TRANSPORT

PROJECT GRANT/CREDIT NUMBER.4926/5410 KE

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDEDJUNE 30, 2016

Prepared in accordance with the Cash Basis of Accounting Method under the International Public SectorAccounting Standards (IPSAS)


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

TABLE OF CONTENTS PAGE

I. PROJECT INFORMATION AND OVERALL PERFORMANCE ............................ i

2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ....................... iv

3. REPORT OF THE INDEPENDENT AUDITORS ON THE KTSSP PROJECT .................. v

4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2016..........1

5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2016....................2

6. STATEMENT OF CASHFLOW FOR THE PERIOD 30 JUNE, 2016............ ........... 3

7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS ................... 4

8. NOTES TO THE FINANCIAL STATEMENTS ....................................... 5

9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS ................ ..... 10


Reports and Financial StatementsFor thefinancial year ended June 30, 2016

1. PROJECT INFORMATION AND OVERALL PERFORMANCE

1.1 Name and registered office

Name: The project's official is George Ndegwa,

Objective: The key objective of the project is (a) increase the efficiency of road transport along the|Northern Corridor and the Tanzania-Kenya-Sudan road corridor; (b) enhance aviation safety andsecurity to meet international standards; and (c) improve the institutional arrangement and capacity inthe transport sector.

Address: The project headquarters offices are Transcom house (Nairobi), Nairobi County, Kenya.

The address of its registered office is:

P.0 Box 52692 00200 Nairobi

Contacts: The following are the project contacts

Telephone: (254) 2729200E-mail: [email protected]: www.go.ke

1.2 Project Information

-Project Start Date: 2 2nd August 2011

Project End Date: 3 1st December 2018

Project Manager: Mr George Ndegwa

Project Sponsor: International Development Association (WORLD BANK)

1.3 Project Overview

Line Ministry/State The project is under the supervision of the Ministry of Transport andDepartment of the Infrastructure.project

L Project number

Strategic goals of the The strategic goals of the project are as follows:project (i) Training and capacity building of staff in Transport sector

(ii) To support the Transport sector in the country.

Achievement of The project management aims to achieve the goals through the followingstrategic goals means:

(i) Implementation of the various road safety interventions.



(ii) Undertaking consultancy on various urban transport system.

Project duration The project started on 22nd August 2011 and is expected to run until 31IDecember 2018

1.4 Bankers

The following are the bankers for the current year:

Equity Bank Kenya Limited

Centre BranchP.O Box 75104-00200

Nairobi, Kenya

1.5 Auditors

Auditor GeneralKenya National Audit OfficeAnniversary Towers, University WayP.O. Box 30084GPO 00100Nairobi, Kenya

1.6 Roles and Responsibilities

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 ResponsibilitiesGeorge Ndegwa Chief Economist Qualified Team LeaderGeorge Wanjao D. Chief Economist Qualified PITTobias C. Olambo Project Accountant Qualified AccountingEsther Gachanja Economist Qualified PIT

L 1.7 Funding summary

The Project is for duration of 7 years from 2011 to 2018 with an approved budget of US$ 19.1mequivalent to Kshs 1,642,600,000 as highlighted in the table below:

[7 Below is the funding summary:

I,1

KCENYA TRANSPORT SECTOR SUPPORT PROJECT


Source of funds Donor CoImtent- Amountrceivedto narawn bar nee wo

da e - (30/06/2016) date(30/06/2016

Donlor K(sks Dollop Ksks Donlor Ksks

currency Currency currency

QLoanIDA(WORLD BANK) $17.47m 1,498,980,000 122,485,145 1,376,494,855

(ii) Counterpartfunds

Government of Kenya $1.63mn 140,180,000 - 140,180,000

Total $19.1m 1,639.160,000 122,485,145 1,516,674,855

1.8 Summary of Overall Project Performance:

-Budget performance against actual amounts for current year and for cumulative to-date,

- Physical progress based on outputs, outcomes and impacts since project commencement,

- Comment on value-for-money achievements,

- List the implementation challenges and recommended way forward.

1.9 Summary of Project Compliance:-Include significant cases of non-compliance with applicable laws and regulations, and

essential external financing agreements/covenants,- Include consequences suffered on account of non-compliance or likely to be suffered

- Indicate mitigation measures taken or planned to be taken to alleviate the adverse effects of

actual or potential consequences of non-comipliance

111i

-KENYA TRANSPORT SECTOR SUPPORT PROJECT


2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES

The Principal Secretary for the State Department of Transport and the Project Coordinator for KTSSPare responsible for the preparation and presentation of the Project's financial statements, which give atrue and fair view of the state of affairs of the Project for and as at the end of the financial year (period)ended on June 30, 2015. This responsibility includes: (i) maintaining adequate financial managementarrangement and ensuring that these continue to be effective throughout the reporting period; (ii)maintaining proper accounting records, which disclose with reasonable accuracy at any time thefinancial position of the Project; (iii) designing, implementing and maintaining internal controlsrelevant to the preparation and fair presentation of the financial statement, and ensuring that they arefree from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the

Project; (v) selecting and applying appropriate accounting policies; and (vi) making accountingestimates that are reasonable in the circumstances.

The Principal Secretary for the State Department of Transport and the Project Coordinator for KTSSPaccept responsibility for the Project's financial statements, which have been prepared on the Cash BasisMethod of Financial Reporting, using appropriate accounting policies in accordance with InternationalPublic Sector Accounting Standards.

The Principal Secretary for the State Department of Transport and the Project Coordinator for KTSSPare of the opinion that the Project's financial statements give a true and fair view of the state ofProject's transactions during the financial year/period ended June 30, 2016, and of the Project'sfinancial position as at that date. The Principal Secretary for the State Department of Transport and theProject Coordinator for KTSSP further confirm the completeness of the accounting recordsmaintained for the Project, which have been relied upon in the preparation of the Project financialstatements as well as the adequacy of the systems of internal financial control.

The Principal Secretary for the State Department of Transport and the Project Coordinator for KTSSPconfirm that the Project has complied fully with applicable Government Regulations and the terms ofexternal financing covenants, and that Project funds received during the financial year/period underaudit were used for the eligible purposes for which they were intended and were properly accountedfor.

Approval of the Project financial statements

The Project financial statements were approved by the Princial Secretary for the State Department ofTransport and the Project Coordinator for KTSSP on _2 2016 and signedby them.

Principal Secretary Project Coordinator

iv

REPUBLIC OF KENYA

Telephone: +254-20-342330 P.O. Box 30084-00100Fax: +254-20-311482 NAMOBIE-mail: [email protected]: www.kenao.go.ke

OFFICE OF THE AUDITOR-GENERAL

REPORT OF THE AUDITOR-GENERAL ON KENYA TRANSPORT SECTOR SUPPORTPROJECT IDA CREDIT NO.4926/5410-KE (MOT COMPONENT) FOR THE YEARENDED 30 JUNE 2016 - STATE DEPARTMENT OF TRANSPORT

REPORT ON THE FINANCIAL STATEMENTS

I have audited the accompanying financial statements of Kenya Transport Sector SupportProject set out on pages 1 to 10 which comprise the statement of financial assets andliabilities as at 30 June 2016, the statement of receipts and payments, the statement ofcash flows, the statement of comparative budget and actual amounts for the year thenended, and a summary of significant accounting policies and other explanatory informationin accordance with the provisions of Article 229 of the Constitution of Kenya and Section35 of the Public Audit Act, 2015 and the Financing Agreements dated 23 May 2011 and 31March 2014 between the International Development Association (IDA) and theGovernment of Kenya (GOK). 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

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with International Public Sector Accounting Standards and forsuch internal control as management determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud orerror.

The management is also responsible for the submission of the financial statements to theAuditor-General in accordance with the provisions of Section 47 of the Public Audit Act,2015.

Auditor-General's Responsibilities

My responsibility is to express an opinion on these financial statements based on the auditand report in accordance with the provisions of Section 48 of the Public Audit Act, 2015and submit the audit report in compliance with Article 229(7) of the Constitution. The auditwas conducted in accordance with International Standards of Supreme Audit Institutions(ISSAls). 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 of the Auditor-General On the Financial Statements of Kenya Transport Sector Support Project IDA CREDITNO.4926/5410-KE (Mot Component) for the year ended 30 June 2016 - State Department of Transport

1

Promoting Accountability in the Public Sector

judgment, 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 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 statements present fairly, in all material respects, the financial

position of the project as at 30 June 2016, and of its financial performance and its cash

flows for the year then ended, in accordance with International Public Sector AccountingStandards (Cash Basis) and comply with the Financing Agreement for IDA Credit

No.4926/5410 dated 25 May 2011 and 31 March 2014.

In addition the special account present fairly the special account transactions and the

closing 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. I have obtained all the information and explanations which, to the best of myknowledge and belief, were necessary for the purpose of the audit; and,

ii. In my opinion, proper books of account have been kept by the project, so far as

appears from my examination of those books; and,

iii. The project's statement of financial position is in agreement with the books of

account.

FCPA Edward R.O. Ouko, CBSAUDITOR-GENERAL

Nairobi.

23 December 2016

Report of the Auditor-General On the Financial Statements of Kenya Transport Sector Support Project IDA CREDIT

NO.4926/5410-KE (Mot Component) for the year ended 30 June 2016- State Department of Transport

2



4. STATEMENT OFRECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE

2016

Note Cumulative2016 2015 to-dateKshs Kshs Kshs

RECEIPTS

Loan from external development partners 8.2 127,195,860 104,504,695 249,681,005

Miscellaneous receipts

Total receipts 127,195,860 104,504,695 249,681,005

PAYMENTS

Purchase of goods and services 8.4 17,736,289 20,627,546 53,604,944

Acquisition of non-financial assets 8.3 113,490,979 47,744,710 164,135,689

TOTAL PAYMENTS 131,227,268 68,372,256 217,740,633

SURPLUS/DEFICIT FOR THE YEAR (4,031,408) 36,132,438 32,795,396

The accounting policies and explanatory notes to these financial statements are an integral part of the

financial statements.

Pr Secretary Project Coordinator

Date Date



5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2016

Note 2016 2015Kshs Kshs

FINANCIAL ASSETS

Cash and Cash EquivalentsBank Balances 8.5A 31,800,263 25,521,490

Imprest and Advances 8.5 B 323,700 10,633,883

TOTAL FINANCIAL ASSETS 32,123,963 36,155,373

REPRESENTED BY:

Cash and cash equivalents b/fwd 8.5 36,155,372 22,934

Surplus/Deficit for the year (4,031,409) 36,132,438

NET FINANCIAL POSITION 32,123,963 36,155,372

The accounting policies and explanatory notes to these financial statements form an integral part of

the financial statements. The financial statements were approved on 3 2016 and

signed by:




6. STATEMENT OF CASHFLOW FOR THE PERIOD 3 0TH JUNE 2016

Receipts for operating incomeMiscellaneous receipts

Payments for operating expensesPurchase of goods and services (18,059,989) (20,627,546)

Net cash flow from operating activities (18,059,989) (20,657,546)

CASHFLOW FROM INVESTING ACTIVITIES

Acquisition of Assets (113,490,979) (47,744,711)

Net cash flows from Investing Activities (113,490,979) (47,744,711)

CASHFLOW FROM BORROWINGACTIVITIESProceeds from Foreign Borrowings 127,195,860 104,504,695

Net cash flow from financing activities 127,195,860 104,504,695-

NET INCREASE IN CASH AND CASH (4,355,109) (36,132,438)EQUIVALENTCash and cash equivalent at BEGINNING of the 36,155,372 22,934yearCash and cash equivalent at END of the year 31,800,263 36,155,372

The accounting policies and explanatory notes to these financial statements form an integral part of

the financial statements. The entity financial statements were approved on Z 2016 and

signed by:




STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS

Adjustm Actual on % of

Original ent Comparable VarianReceipts/Payments Item Budget s Final Budget Basis Variance ce

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

Receipts

Contracted Professional services 14,310,987 14,310,987

Contracted Professional services 140,000,000 140,000,000 127,195,860 12,804,140 9.15%

Proceeds from borrowings

Miscellaneous receipts

Total Receipts 154,310,987 154,310,987 127,195,860 12,804,140

Payments

Compensation of emplovees

Purchase of goods and services 14,310,987 17,736,289 3,425,302 23.9%

Social security benefits

Acquisition of non-financial assets 140,000,000 113,490,979 26,509,021 18.9%

Transfers to other government entities

Other grants and transfers

Other payments

Total Payments _______ __154,310,987 13,2,6 994323 ___

Vaia


Date Date

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128414..5

;V,84,4

3,2,32 239

KENYA TRANSPORTSECTOR SUPPORT PROJECT


7. NOTES TO THE FINANCIAL STATEMENTS

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

below:

8.1 Statement of compliance and basis of preparation

The financial statements have been prepared in accordance with and comply with International

Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial

Reporting under the Cash Basis of Accounting. The financial statements comply with and

conform 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 accounting

policies adopted have been consistently applied to all of the years presented.

The financial statements have been prepared on the cash basis following the Government's

standard chart of accounts. The cash basis of accounting recognises transactions and events

only when 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 the

related cash has actually been received by the Project. In addition, the Project recognises all

expenses 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/or

services rather than in money or cash terms. These donations may include vehicles, equipment

or 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 as

revenue and as an expense in equal and opposite amounts; otherwise, the donation is not

recorded.

iii. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on call

and highly liquid investments with an original maturity of three months or less, which are

readily convertible to known amounts of cash and are subject to insignificant risk of changes in

value. Bank account balances include amounts held at the Central Bank of Kenya and at various

commercial banks at the end of the financial year/period. For the purposes of these financial

statements, cash and cash equivalents also include short term cash imprests and advances to

authorised public officers and/or institutions which had not been surrendered or accounted for

at the end of the financial year/period.



SIGNIFICANT ACCOUNTING POLICIES (Continued)

iv. Pending bills

Pending bills consist of unpaid liabilities at the end of the financial year/period arising from

contracted goods or services during the year/period or in past years/periods. As pending bills do

not involve the payment of cash in the reporting period, they are simply disclosed as an Annex

to the financial statements. When the pending bills are finally settled, such payments are

included in the statement of receipts and payments in the year in which the payments are made.

v. Budget

The budget is developed on the same accounting basis (cash basis), the same accounts

classification basis, and for the same period as the financial statements. The Project's budget

was approved as required by Law and National Treasury Regulations, as well as by the

participating development partners, as detailed in the Government of Kenya Budget Printed

Estimates for the year. A high-level assessment of the Project's actual performance against the

comparable budget for the financial year/period under review has been included in an annex to

these financial statements.

vi. Exchange rate differences

The accounting records are maintained in the functional currency of the primary economic

environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies

during the year/period are converted into the functional currency using the exchange rates

prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from

the settlement of such transactions and from the translation at year-end 'exchange rates of

monetary assets and liabilities denominated in foreign currencies are tecognised in the

statements of receipts and payments.

vii. Comparative figures

Where necessary comparative figures for the previous financial year/period have been amended

or reconfigured to conform to the required changes in financial statement presentation.

viii. Subsequent events

There have been no events subsequent to the financial year/period end with a significant impact

on the financial statements for the year ended June 30, 2016.



8.2 LOAN FROM EXTERNAL DEVELOPMENT PARTNERS

During the 12 months to 30 June 2016 we received funding from development partners in form of loans negotiated by the National

Treasury donors as detailed in the table below:

Name,of Donor Date Am-ou, Totnl amoun. --- --- h-

received aat in fDreceived', receivloan: in1cash ed as

cu'rren direct'

c y payme

FY 2015/16 FY 2014/15

Kshi Kshs Kshs Kshs

Loans Received from Multilateral Donors(nternational Organisations)

IDA (WORLD BANK) 16/06/2016 ____ 69,954,310

{ Total_________ 12,9,6 10,465



NOTES TO THE FINANCIAL STATEMENTS (Continued).

8.3 PURCHASE OF GOODS AND SERVICES

2015/16 2014/15 Cummulative

Kshs Kshs

Dbmestic travel and subsistence 66,110 598,634 1,602,439

Foeign travel and subsistence 4,173,929 6,371,751 18,742,607

Training expenses 13,473,315 9,460,848 29,226,606

Office and general supplies and services - 4,160,763 4,160,763

Other operating expenses 22,935 35,550 85,220

17,736,289 20,627,546 53,817,635

E8



NOTES TO THE FINANCIAL STATEMENTS (Continued)

8.4 ACQUISITION OF NON-FINANCIAL ASSETS2015/16 2014/15 Cumulative

Kshs Kshs to-date

Purchase of specialised Plants, Machinery and Equipment - 30,922,595 30,922,595Purchase of vehicles and other Transport

Equipment 61,034,312 - 61,034,312Construction of buildings 25,427,247 16,822,116 45,149,362

Research, studies and Project preparation 24,919,264 - 24,919,264Purchase of ICT Equipment 2,110,156 - 2,110,156

113,490,979 47,744,710 164,135,406

8.5 CASH AND CASH EQUIVALENTS C/FWD Kshs Kshs

2015/16 2014/15

Bank accounts (Note 8.5A) 31,800,263 25,521,490

31,800,263 25,521,490

8.5 A Bank Accounts

Local Currency AccountsEquity Bank [A/c No 0810299741984] 31,800,263 25,521,490

Total bank account balances 31,800,263 25,521,490

8.5 B Imprest and Advances 323,700 10,633,883

Imprest was issued to Teresah Njambi on 6/05/2016 and was due for surrender in 2016/2017.

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