FEDERAL GOVERNMENT OF SOMALIA

MINISTRY OF FINANCE

PUBLIC FINANCIAL MANAGEMENT CAPACITY STRENGTHENING 11

PROJECT II (P1 51492)

FINANCIAL STATEMENTS FOR THE YEAR ENDED DEC 31 2016

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1. STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES

The Project Management is responsible to ascertain that the progress report and financial statementsof the Project for the period ended December 31, 2016 are prepared, in all material respects, inaccordance with the basis of preparation and accounting policies set out in Note 8 to the financialstatements. In preparing these financial statements, the Project Management is required to selectsuitable accounting policies and then apply them consistently in conformity with Cash BasisInternational Public Sector Accounting Standard (Cash Basis IPSAS) and the requirements ofFinancial and Accounting procedure of the State, 1961 as amended.

The Project Management is responsible for ensuring that proper accounting records are kept whichenable the financial statements to be prepared in compliance with the basis of preparation andaccounting policies set out in Note 8 to the financial statements as well as in accordance with theterms of the financing agreement for the State and Peace Building Fund Grant Agreement NumberTFA 0388 between the Federal Republic of Somalia and the International Development Association.The Project Management is also responsible for safeguarding the assets of the Project, and for takingreasonable steps for the prevention and detection of fraud and other irregularities.

The Project Management assumes the responsibility to provide, and has provided, the AuditorGeneral with all accounting records, supporting and other documents, minutes, and any otherpertinent information and explanations, either orally or in writing, necessary for the audit.

Signed on behalf of the Project Management:

Ahmed Yusuf M in,Accountant General

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BAKER TILLYME RALI'SCertified Public AccountantsIst Floor New Rehema House,Rhapta Road, Westlands,PO. Box 67486 - 00200,Nairobi, Kenya

T: + 254 20 444 1384M: +254 738 600 209

2. REPORT OF THE AUDITOR GENERAL reception2@rmeraliscpa.comwww.bakertillyrneral isco. ke

To: The Project Management

Opinion

We have audited the accompanying financial statements of the project titled "Public FinancialManagement (PFM) Capacity Strengthening Project Phase I (P151492) - FGS funded by theInternational Development Association (IDA)" which comprise the statement of receipts and paymentsfor the year then ended and notes thereto "the financial Statements" as set bout on pages 8 to 16 Thefinancial statements have been prepared by the project management in accordance with the basis ofaccounting described in the note 8 to the financial statements.

In our opinion, the accompanying financial statements presents fairly the cash receipts and paymentsof the project during the year ended 31 December 2016 in accordance with tie cash basis of theInternational Federation of Accountants and in accordance with tie accounting policies described innote 3 to the financial statements and comply with the related grant agreement.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (]SAs). Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for thieAudit of the Financial Statements section of our report.

We are independent of the International Development Association (IDA) and an independentconstitutional body established by the Federal Government of Somalia (FGS) in accordance with theInternational Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants(IESBA Code) together with the ethical requirements that are relevant to our audit of the financialstatements in Somalia, and we have fulfilled our ethical responsibilities in accordance with theserequirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Emphasis of Matter

Without modifying our opinion, we draw your attention to the financial findings totaling US$ 57,000 andinternal control findings 2.01 as set out in section 2 of our management letter which we identifiedduring the conduct of our financial audit. These findings are not considered material in the context ofour audit. Nevertheless, we report them to you in accordance with our Terms of Reference as theymay be taken into account in determining any balance of funding payable or recoverable.

Basis of Accounting and Restriction on Distribution and Use

Without modifying our opinion, we draw your attention to Note 8 of this Report, which describes thebasis for accounting. The Financial Report is prepared to assist the Federal Government of Somalia(FGS) comply with the specific Financial Reporting requirements of the International DevelopmentAssociation (IDA). As a result, the Financial Report may not be suitable for any other purpose.

Our report is intended solely for the information, distribution and use of the International DevelopmentAssociation (IDA) and the Federal Government of Somalia (FGS).

Bo Tilly 511 Mcclis CPA

SR,and Off ice- Cc nlrery Haus - 4th Ffoor, PC BOX 26)9 Nycu ng D nrt, ·i) go li I City, R,onda. M +20 788 407 373, E: c _ouditorsyahoo Çem

- Jgced Office: Mdir-itc b o u s s Centre, Plot 46, Lugogo BRfças, KM..a. U4nda M+256 758 547 503/ 4254 733603 206. E: asho.coad§mera'.scpa om/ ohr.or chew rocc cpa coi

- So:alila Ofis: KMl4 Aro, Airp-rl Rod, j ir D tict Mog1 sh - Seroaia. E: 1bd.rahman da, d0mroi;3,po M: +252 615 F41 010

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An independent member of Baker Tilly International

A ER TIL YME RALI' S

* Conclude on the appropriateness of the management's use of the going concern basis ofaccounting and based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the project's ability to continueas a going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor's report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained tip to the date of our aUditor's report. However, future events or conditions maycause the project to cease to continue as a going concern.

* Evaluate the overall presentation, structure, and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.These financial statements have been signed by Baker Tilly Merali's, the audit firm that worked underthe Office of the Auditor General Somalia in accordance with paragraph 20 of the Terms of Referencethat states "The financial statements, including the audit opinion and management letters should besubmitted to the Auditor General for review and sign off, implementing agencies and Ministry ofFinance. In the parallel copies of the audited financial statements, management letters andmanagement responses should be submitted directly to the Bank. In event of any unforeseen delaysthe Consultant may be required to sign off the projects final audit opinion".

Baker Tilly Mer Ii'sCertified Public Accountants CPA Madhav Bhandari1st Floor, New Rehema House Practicing Certificate No. 1213Rhapta Road, Westlands Nairobi, Kenya

.2017

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3. FUNDING SUMMARY

The Project implementation for this year is 12 months from 01 January 2016 to 31 December 2016, withan approved budget of US$ 10,000,000 from 2015 to 2016 and commitment/Grant of the donors is ashighlighted in the table below:

Source of funds Donor Amount Amount UndrawnCommitmentlGra received as received up to balance as of

nt Dec 31,2015 Dec 31, 2016 Dec 31, 2016

US$ US$ US$ US$

(A) (B) (C) (A)-[B+C]

Somalia Multi-Partner 10,000,000-001 573,508.70 3,629,916.93 5,796,574.37Fund (MPF) -WorldBank (FGS)

Total 10,000,000.00 573,508.70 3,629,916.93 5,796,574.37

'The loan total was 20,000,000 where 5,000,000 and 4,000,000 were allocated for Puntland and Somalilandrespectively. 1,000,000 was also allocated for other activities by the Bank and 10 million is for FGS.

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5. STATEMENT OF FINANCIAL POSITION

Notes As of From Jan Oct 1, Cumulative Cumulativ31/1212015 1-Sept 2016 Dec Jan 1- Dec e as

301912016 31, 2016 31, 2016 3111212016

US$ US$ US$ US$

ASSETS

Cash and cash 12 384,295.82 (56,811.59) 19,781.52 (199,728.00) 184,567.82equivalents

TOTAL ASSETS 384,295.82 (56,811.59) 19,781.52 (199,728.00) 184,567.82

LIABILITIES

Liabilities 13 0.00 0.00 0.00 0.00 0.00

TOTAL 0.00 0.00 0.00 0.00 0.00LIABILITIES

NET BALANCE 384,295.82 (56,811.59) 19,781.52 (199,728.00) 184,567.82

FUND BALANCE 14 384,295.82 (56,811.59) 19,781.52 (199,728.00) 184,567.82

The notes set out on pages 12 to 16 form an integral part of these financial statements

Ahmed Yusuf M in,Accotintani: Generl

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臘 ：&

(g) Capital items/Non-current assets

As of December 31, 2016, there are Capital items purchased at project money. Under the government'scash basis of accounting, capital items have been fully expensed in the year Of purchase. However, theseassets are recorded in the Fixed Asset Registers at historical cost as a memorandum record with effectfrom effective date of the project.

(h) Foreign Currency transactions

Foreign currency transactions denominated in foreign currencies would be converted into United StatesDollars (US$) at the exchange rate ruling on the date of the transaction; realized gains and lossesresulting from these transactions would be recognized in the Statement of Receipts and Payments.Monetary assets and liabilities denominated in foreign currency at the year-end Would be translated at theclosing rate of exchange with the resulting exchange gains/(losses) dealt with through the Statement ofReceipts and Payments. However, for purposes of this accounting policy, there were no foreign currencytransactions other than US$ translated at the reporting date.

(i) Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise of deporits held atcall with Central Bank of Somalia tinder TSA umbrella.

0) Employee benefits

Employee benefits include salaries, allowances and other related-employment costs and these have beenrecognized in the financial statements only when actual payments are made. However, PFIVI project paysno salaries for government employees. People who have been paid from this project are those who haverendered contractual services agreed upon or made deliverance of goods in accordance with the termsand conditions set for in contracts signed by the parties.

(k) Authorization date

The financial statements are authorized for on May 1. 2017 publication by the Accountant General.

8.4 Exchange rates

All monetary amounts in the financial statements are expressed in United States Dollars (US$). Theestimated US$ closing rates for major currencies were:

From 01 Jan 20162016 to 31 Doc US$

2016

US$

Somali Shilling 22,500 22,500

Great Britain Pound 0.641584 0.641584

Euro 0.825748 0,825748

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11. Capital expenditure - Intangibles

Capital expenditure 105,705.70 119,304.00 134,990.00 254,294.00 359,999.70

Total Another Capital & Intangible 105,705.70 119,304.00 134,990.00 254,294.00 359,999.70assets Dec 31, 2016

Total Use of goods and services; 189,212.88 2,154,600.96 1,675,529.14 3,830,130.10 4,019,342.98Other assets Dec 31, 2016

12. Cash and cash equivalents

Cash comprise of demand deposits. Demand deposits consists of interim period-end project bankbalance held at Central Bank of Somalia (CBS) and the project bank accounts are part of Treasury SingleAccount (TSA) as detailed in the below:

Dec 31, 2016

US$

Project Designated Account No. 1080 DA (A) 184,567.82

Total Cash Available as of December 31, 2016 184,567.82

13. Liabilities

As of Dec 31, 2016, Project doesn't have liabilities.

14. Fund Available as of Dec 31, 2016 $184,567.82

Less Total Liabilities 0.00

Fund Balance/Surplus 184,567.82

15. Designated Accounts (DAs) Statement Reconciliation

Opening balances as at 01 Jan 2016 384,295.82

Add:

World Bank advances into the DA (A) DP during the period 3,629,916.93

Interest earned (if credited into DA)

Subtotal 4,014,212,75

Less:

Amount of eligible expenditures paid during the period 3,830,130.10

Refund to World Bank from the DA during the period

Service charges (if debited into DA)

Subtotal 3,830,130.10

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