DCG.304/370/01/21 13th December, 2021 The Accounting Officer Rural Electrification Agency - REA KAMPALA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF ERT -III PROJECT UNDER THE RURAL ELECTRIFICATION AGENCY FOR THE YEAR ENDED 30m JUNE, 2021 I am enclosing herewith a report which I have already sent to the Rt. Hon. Speaker of Parliament in accordance with Article 163 (4) of the Constitution of Uganda 1995 (as amended). John F.S. Muwanga AUDITOR GENERAL Copy to; The Permanent Secretary/Secretary to the Treasury Ministry of Finance, Planning & Economic Development The Permanent Secretary, Ministry of Energy & Mineral Development The International Development Association - IDA The Project Coordinator, ERT III - REA THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF ENERGY FOR RURAL TRANSFORMATION PROJECT (ERT III) IDA CR. NO.4554-UG AND GEF TRUST FUND GRANT AGREEMENT NO. TF: 094484 IMPLEMENTED BY RURAL ELECTRIFICATION AGENCY FOR THE YEAR ENDED 30TH JUNE 2021 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT III (ERT III) RURAL ELECTRIFICATION AGENCY) FOR THE YEAR ENDED 30 JUNE, 2021........................................1. 1111 ................2..4........................ . O p in io n ............................................ ............................................................ ....................................4 B asis fo r O p in io n ............................................................................................................................ 4 Ke y A u d it M atte r .................................................................................................................[....... 4 O th e r Info rm atio n ...........................................................................................................................6 Management Responsibilities for the Financial Statements .......................................................7 Auditor's Responsibilities for the audit of the Financial Statements........................................7 O ther Reporting Respo nsibilities...................................................................................................8 Report on the Audit of Compliance with Legislation .............................................................. 2.4 Project Component for Gird Intensification and Associated Connections ......................11 2 ACRONYM MEANING EIA Environmental Impact assessment ERT Energy For Rural Transformation FAT Factory Acceptance Test Global Environment Facility GOU Government of Uganda IDA International Development Association INTOSAI International Organisation of Supreme Audit Institutions IPSAS International Public Sector Accounting Standards ISSAI International Standards of Supreme Audit Institutions MOFPED Ministry of Finance Planning and Economic Development NEMA National Environment Management Authority PCU Project Coordination Unit REA Rural Electrification Agency UEDCL Uganda Electricity Distribution Company UGX Uganda Shillings USD United States Dollar 3 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT III (ERT III) RURAL ELECTRIFICATION AGENCY) FOR THE YEAR ENDED 30TH JUNE, 2021 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the financial statements of the Energy for Rural Transformation III project implemented by the Rural Electrification Agency, which comprise the statement of Financial Position as at 30th June 2021, the Statement of Receipts and Payments, the project special account statement and a summary of significant accounting policies and other explanatory notes to the financial statements. In my opinion, the financial statements of the Energy for Rural Transformation III implemented by the Rural Electrification Agency for the year ended 30"'1 June 2021 are prepared, in all material respects, in accordance with the basis of accounting set out in note 9.1 (a) to the financial statements and in conformity with the donor reporting guidelines and terms and conditions. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Project in accordance with the Constitution of the Republic of Uganda 1995 (as amended), the National Audit Act, 2008, the International Organization of Supreme Audit Institutions (INTOSAI) Code of Ethics, the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (IESBA Code), and other independence requirements applicable to performing audits of Financial Statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical requirements applicable to performing audits in Uganda. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matter Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined the matters described below to be key audit matters communicated in my report. Implementation of the Approved Budget The Energy for Rural Transformation Program Project (ERT III) key objective is to increase access to electricity in rural areas of Uganda. ERT III REA component was approved on 5th June 2015 with a loan commitment of USD.135M with the World Bank - IDA and USD.8.2M from GEF 4 grant. The three components of the project are; on-grid energy access, off-grid energy access, institutional strengthening and impacts monitoring. The Project became effective on 31st March 2016 with the closing date revised from 31st December 2020 to December 2021. I am aware that the Covid-19 Pandemic continues to significantly affect the implementation of several activities. Consequently, a number of activities were not implemented due to budget cuts and lockdown measures instituted to control the spread of the pandemic. It is against this background that the implementation of the budget was again considered a key audit area during the office-wide planning for the current audit year. Consequently, I developed procedures to address the performance of the budget of the Project. Based on the procedures performed, I noted the following; Observation Recommendation 1.1 Under Absorption of Funds. I advised the Accounting Officer to liaise with the I noted that for the financial year 2020/21, the Ministres responsible for Project had a Budget of UGX.173.lBn, out of which Ene anice to Energy and Finance to UGX 85.6Bn was disbursed in line with the payment expedite the certificates submitted to the Bank for works undertaken, representing a shortfall of 87.5Bn thisi nsurePtimely this will ensure timely ,Which,was'50.5% of the Budget. impl6mentation of plemenationtiof I further noted that as at 1t July 2020, the Project planned activities. had an opening balance of UGX. 53.9Bn, During the year UGX.85.6Bn was released. The available fuhds 'totalled to UGX.139.SBn, out of which, UGX.98.3Bn was utilized on installation of Medium Voltage Networks and Last Mile Consumer Connections, leaving an unutilized balance of UGX.41:2Bn, representing an absorption level of 70/o. This was attributed to delays in compensation of Project Affected Persons and the delays in undertaking Factory Acceptance Tests for imported materials. Management explained that the Accountant General approved transfer of compensation funds to the Escrow Account in Bank of Uganda, to be able to undertake -compensations. REA had to procure a financial institution to handle the e-cash payments. Stanbic Bahk was thus procured to undertake that exercise. The Bank had started setting up the payment system, -unfortunately, the exercise was interrupted by the Covid - 19 lock,down. Later the exercise resumed and compensation is currently on- 5 going. 1.2 Low Funds Disbursement over the Project I advised the Accounting Life to fast track construction I observed that the total amount of credit for the works and compensations project was USD 143.2 Million (USD 135M IDA of Project Affected Credit and USD 8.2M GEF grant). I noted that USD Persons to improve funds 116.1 MIllion relates to REA, and by the end of the absorption, before project finandal year, the Bank had only disbursed USD closure. 73.7 Million, representing 64% of the total credit to REA as shown in the table 1 below. Detailed, Appendix I refers. Table 1: Fund Disbursement Detail Amount/ Amount/U Amount SDR SD Disbursed/ Total Loan 97,900,000 135,000,000 Amount,. REA 84,200,000 116,108,275 73,744,820 Component Exchange Rate: .1 5DR 1.38 USD This was attributed to the delays in compensations of Project Affected Persons, delays in submission of designs and surveys for line routes by the contractors, and recently the COVID-19 country lockdown that affected some activities. Management explained that the requirement by World Bank to have PAPs compensated before the contractors can access site, delayed project implementation which consequently affected funds absorption hence the low disbursement level. Other Information The Accounting Officer is responsible for the other information. The other information comprises the statement of responsibilities of the Accounting Officer and the commentaries by the Head of Accounts and the Accounting Officer, and other supplementary information. The other information does not include the financial statements and my auditors' report thereon. My opinion on the financial statements does not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially consistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to 6 be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. Management Responsibilities for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Energy for Rural Transformation project (ERT III) Rural Electrification Agency The Accounting Officer is also responsible for the preparation of financial statements in accordance with the Public Finance Management Act, 2015 and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. In preparing the financial statements, the Accounting Officer is responsible for assessing the project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless the unless the Accounting Officer has a realistic alternative to the contrary. The Accounting Officer is responsible for overseeing the project's financial reporting process. Auditor's Responsibilities for the audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement, when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users, taken on the basis of these financial statements. As part of an audit in accordance with ISSAIs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:- * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit 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. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. 7 * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicated with the Accounting Officer regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. I also provide the Accounting Officer with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. From the matters communicated with the Accounting Officer, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters, I describe these matters in my auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Responsibilities In accordance with Section 19 (1) of the National Audit Act, 2008, I report to you, based on my work described on the audit of Financial Statements, that the activities, financial transactions and information reflected in the financial statements that have come to my notice during the audit, are in all material respects, in compliance with the authorities which govern them. Report on the Audit of Compliance with Legislation The material findings in respect of the compliance criteria for the applicable subject matters are as follows; * Project Implementation ERT III REA Component is segmented into 21 line Projects. Lines 1-4 were designated as fast track Projects and lines 5-21 allocated into packages A, 8, C, D and E, The following observations were made; 8 i. Fast Track 1 &2: Kiganda - Mile 16 and Ruhumba - Kashwa with Tee- off Rwebishuri The Project component consists of 111 km Medium Voltage with Associated Low Voltage Networks. The commencement date for Fast-Track 1 Project was 12" February, 2019 with an expected completion date of 12th May 2020 with a no cost extension of up to 1i1 July 2020. Fast Track 2: Ruhumba - Kashwa commencement date was 8t" February, 2019, with a completion date 8th May 2020 with a no cost extension of up to 7th July 2020. A review of the Progress Reports indicated that Kiganda-Mile 16 was completed and commissioned on 5th February, 2021, while Fast track 2 Ruhumba-Kashwa was completed and commissioned on 28th August 2021. The Projects were handed over to respective utilities for operation and maintenance. I however noted that there were outstanding PAPs who had not been compensated, and as a result, the compensation funds were transferred to an escrow account. This was attributed to the absentee PAPs. There is a risk that the affected Project Affected Persons may not be compensated since the Projects have been completed. Management explained that the funds on the Escrow account for PAPs are not subject to sweep back to the Consolidated Fund and therefore PAPs would be compensated as and when they appear. I advised the Accounting Officer to ensure that the payments for the Project Affected Persons are effected in accordance with the law without further delay to avoid future conflicts and interest charges. ii. Fast track 3 and 4: Wandi-Yumbe-Moyo and Onduparaka-Odramachu- Abiria The Project component consists of 304.3 km Medium Voltage with Associated Low Voltage Net-work at Wandi-Yumbe-Moyo and 41.4km at Onduparaka- Odramachu-Abiria. The Line contracts were signed on January 2020, and expected to be completed within 15 months. .1 A review of the Supervision Mission Report (Aide-m6moire) revealed that construction is ongoing and the overall Project progress is only at 20%. Project completion and commissioning dates had been extended to September 20, 2021 for Line 3 and July 25, 2021 for Line 4. However, at the time of concluding the audit (November, 2021), the line had not been commissioned. 9 This was attributed to the slow delivery of major equipment and materials to site, and compensation of Project affected Persons. There is a risk that the Project may not be completed within the new Project timelines, thus delaying the benefits of the project. Management explained that Compensation of PAPs as of November 2021 was at 98%. Project progress for Fast Track 3 and Fast Track was at 72% and 78% respectively. Fast Track 3 was expected to be completed by 31st March 2022 and Fast Track 4 by 31st January 2022. They also stated that the outbreak of covid - 19 affected the overall implementation of projects especially as regards supply of imported materials. I advised the Accounting Officer to ensure that the delivery of materials and equipment are fast tracked to enable timely project implementation and service delivery. In addition, the bottlenecks underlying the payment of PAPs should be identified and immediate actions taken. iii. Project Status under Line 11-21 of Lots B, C, and D The Project component of Grid extension and associated connections consist of several lines from 11-21 clustered under Lots B, C and D. A review of monthly progress report and ERT III Aide Memoire supervision reports dated March, 22- 31 2021 revealed that the Project component under the different lines have significant delayed as shown in table 2 below. Table 2: Project Status under line 11-21 Project Contract Completion Project Status Date Lines 11-13 (Lot Line i -July 6, 2021 Construction wirks were on going, and overall B) (USD 12.5 Line 12- August 2, 2021 progress is estimated at-50% (line 11) and 30% million) (line 12). Construction of line 13 commenced Line 13 - August 29, recently,and verification of technical designs is 2021 on going. Lines 14-15 (Lot Line 14 - July 20, 2021 Under line 14, the technical designs have been C) (USD 7.2 Line 15 - September 12, approved and FATs have been completed. All million). 2021 imported materials are in the country, while for line 15, FATs are fully completed for local equipment and at 20% completion for imported equipment. Lines 16-19 (Lot. Line 16 & 17 August,31, Construction works are progressing for all the D) (USD8.2 2021 lines .except for line 18 where works have been million). temporarily spspended-due to flooding and a ine 18- October 20, new scope and route has been approved 2021 101 Line 19 -Julyi78, 2021 Lines 20-21 (Lot Line 20- September 6, Overall progress is behind schedule at 17% (line E) (USD 6.6 2021 20) and 2% (line 21). Verification of technical million) designs and FATs are ongoing, and construction Line 21 -November 37 has not started. 2021 Furthermore, I noted that much as Compensation of PAPs along lines 11-12 has advanced substantially, compensation of PAPs along line 13 was still low at 16.6%. This was as a result of delays in compensation of PAPs due to lengthy verification of data for additional PAPs as well as delays in conducting Factory Acceptance Tests for imported equipment. There is a risk of delay in construction works and Project Implementation. Management explained that the implementation of projects was affected by the delayed compensation of PAPs and covid - 19 interruptions. Compensation of PAPs had now commenced. Line 11 is expected to be completed by 31st December 2021. Lines 12 to 21 are scheduled to be completed by end of March and April 2022. I advised the Accounting Officer to fast track compensation of Project Affected Persons as well as implementation of Project activities to ensure the achievement of Project Objectives and delivery of service to the beneficiary community. iv. Project Comrponent for Gird Intensification and Associated Connections The Project component consists of Schemes under UMEME and of Batch 1&2 and Schemes with Service providers for Batch 1& 2 respectively as shown in table 3 below; Table 3: Project Status under Batch 1&2 Project per Commissioning Project Status schemes Date UMEME (Batch 1) August'30, 2021. Construction work on going, Pole erection at (USD 3.5.million) 98% and pole dressing and conductor stringing on-going. Overall project progress currently at 55%. Factory Acceptance Tests (FATs) undertaken and approval for all project equipment & materials with exception to transforMers which did not conform to the approved specification. UMEME (Batch 2) September 30, Preparation of detailed engineering designs (USD 5.0 million) 2021 ongoing with overall project progress at 20%. 1 11 SPs (Batch 1) (USD May 24, 2021 for- Detailed engineering designs 'for the three tots 3.0 million) Lot 1 and have been approved, Pole erection currently on September 30, going. Lot I to be commFssioned by May 24, 2021 for Lot 2-3 2021 and Lot 2-3 expected to be commissioned -by September 30, 2021, SPs batch 2 (USD September 4, Detailed engineering design review for the three 15.0 million), 2021. j lots is on-going. The project delays were attributed to delays in compensation of PAPs as well as non-conformance of the transformer to the approved specification at the time of Factory Acceptance Tests under Umeme Scheme, Batch 1. There is a risk of delay in construction works and Project Implementation, Management explained that compensation of PAPs was on-going and the issue of transformers was being addressed. They further stated that the works under Umeme Batch I and 2, SPs Batch I & 2 were expected to be completed by end of February 2022 March 2022. SPs Batch 2 Lot 3 were to be completed by end of April 2022. I advised the Accounting Officer to ensure that construction works are expedited to enable completion of the Project within set timelines. In addition, engage the contractor to rectify the defects caused by non-conformance to approved specifications. Status of Compensation of Project Affected Persons (PAPs) Under the ERT III Project, the World Bank requires that compensation of PAPs is undertaken before signing of contracts and Project commencement. Out of 34,535 PAPs approved for compensation, only 22,180 PAPs have been paid to date, leaving 12,355 PAPs not paid at the time of audit as shown in the table 4 below; Table 4: Status of PAP Compensation Project Name No. of PAPs No of PAPs No of PAPs not %/age Identified PAID I PAID (Outstanding) Uneme Batch 1 2,145 1,774 371 17 Umeme Batch 2 3,127 2,937 190 6 [ Umeme Batch 1 Supplementary 224 - 224 100 Line 3 & 4 3,914 3,829 85 2 Three Service Territory & 2,512 2,386 126 5 Supplementary Line 11-21 19,464 11,144 8,320 43 12 6 Service Territories 3,149 110 30399 TOTAL 34,535 22,180 12,355 Furthermore, an analysis of PAPs payments revealed that out of the Approved compensation amount of UGX.22,553,729,297, a sum of UGX.11,941,460,620 has so far been paid leaving UGX.8,300,053,686 as unpaid compensation amount. Details in the table 5 below; Table 5: Status of PAP Payments No. of PAPs Identified Total Compensation Total Amount paid Outstanding Amount To- Amount (Approved by To-Date Date CGV) Umeme Batch 1 1,012,533,200 979,282,700 33,250,500 Umeme Batch 2 1,394,654,993 1,332,932,291 61,722,702 Umeme Batch 1 115,391,200 115,391,200 Supplementary Line 3 & 4 2,190,754,000 2,174,96G,000 15,788,000 Three Service Territory 1,840,014,028 1,758,804,028 81,210,000 Line 11-21 14,630,226,816 7,954,607,326 6,675,619,490 6 Service Territories 1,370,155,060 53,083,266 1,317,071,794 TOTAL 22,553,729,297 11,941,460,620 8,300,053,686 This was attributed to delays in the compensation process and disputed compensation amount by PAPs. The failure to make timely compensation of PAPs may result in to delays in Project implementation and additional costs to the Project as a result of possible litigation. Management explained that the Accountant General approved transfer of compensation funds to the Escrow Account in Bank of Uganda. REA procured Stanbic Bank to undertake the compensations exercise through E-cash payments. The Bank set up the system, unfortunately, the exercise was interrupted by the Covid-19 lock down. I advised the Accounting Officer to liaise with the relevant stakeholders in ordei to expedite the compensation of PAPs to enable timely implementation and completion of the Projec John F.S. Muwanga AUDITOR GENERAL 13t December 2021 13 REPUBLIC OF UGANDA ENERGY FOR RURAL TRANSFORMATION III (FUNDED BY WORLD BANK) MINISTRY OF ENERGY & MINERAL DEVELOPMENT FINAL ACCOUNTS FOR THE FINANCIAL YEAR 2020/2021 ENERGY FOR RURAL TRANSFORMATION PROJECT III (ERTIII) (WORLD BANK) RURAL ELECTRIFICATION AGENCY 1.0 PROJECT INFORMATION FOR THE PERIOD ENDED 30rn JUNE 2021. Principal Office Plot 10, Windsor Loop, Kololo, 2Tid & 3rd Floor, House of Hope, P.O. Box 7317, Kampala. Tel: (256) 312 264 095 / 6 (256) 312 264 103/ 4 / 5 Fax: (256) 414 346 013 Website: - \ i . Members of the Rural Electrification Board. There was no Board during the Financial Year 2020/21. The Principal Officers of the Project During the Year Eng. Joan K. Mutiibwa - Accounting Officer Mr. Patrick Kyakulaga - Manager, Finance Mr. Benon Bena - Manager, Off Grid and Renewable Energy Ms. Patricia Anabo - Manager, Legal and Board Services Mr. Charles Lutwama - Manager, Investment Planning and Promotion Mr. Wegulo S. Byakatonda - Ag. Manager, Project Development and Management Ms. Deborah Nantume - Ag. Manager, Service Territory Devt & Operations Ms. Sylvia Birungi - Manager. Connections Mr. Arthur Mutaremwa - Senior Administration & Human Resource Officer Mr. Geoffrey Nuwamanya - Manager, Audit Risk and Compliance Bankers Bank of Uganda P.O. Box 7120, Kampala 2 ENERGY FOR RURAL TRANSFORMATION PROJECT Ill (ERT III). RURAL ELECTRIFICATION AGENCY 2.0 MANAGEMENT REPORT FOR THE YEAR ENDED JUNE 30T"' 2021 The Management of the Energy for Rural T ransformation Project (ERT II) submits its Annual Report and Accounts for the financial year ended June 30th, 2021. 2. 1 Project Background The objective of the Project is to increase access to electricity in rural areas of Uganda. The Project constitutes the third phase of a series of projects, and consists of the following parts: Part 1. On-Grid Energy Access, where Rural Electrification Agency is participating. Part 2. Off-grid Energy Access, and; Part 3. Institutional Strengthening and Impact Monitoring ERT III (REA Component) supplements the Rural Electrification Fund (REF) that is administered by the Rural Electrification Board (REB). The Rural Electrification Agency (REA) is the secretariat for the REB. Both REB and the REA are set up by a statutory instrument No. 75, of 2001 under the Electricity Act, 1999. 2.2 Principal Activities The principal activity of the project is as follows: (a) Carrying out of rural electrification investment activities consisting of, inter alia, grid expansion, intensification and associated connections, in particular: (i) construction of approximately 21 priority power distribution lines in accordance with the Indicative Rural Electrification Master Plan; (ii) short grid extensions to medium voltage and low voltage networks; and (iii) last mile/no pole household connections (collectively "REA Subprojects"). (b) Strengthening the capacity of REA through provision of technical advisory, services; non-consulting services, training and acquisition of goods for the purpose. 2.3 Projects Implementation Progress During the year, RLA embarked on the activities for the following project areas whose status is given below: 3 * Burhani Engineers Ltd: Kiganda-Mile 16 Tee-off Katabalanga and Kyabamirizi - Construction works ongoing; certified work paid for is 86%. * Megger Technical Services Ltd: Ruhumba, Kashwa, Tee-off Rwebishuri - Construction works ongoing; certified work paid for is 100% * China Jiangxi Corporation for International Economic and Technical Cooperation: Wandi-Yumbe-Moyo - Construction works commenced. Certified work paid for is 37%. * C & G Andijes Group Ltd: Onduparaka-Odramachaku-Abiria - Construction works commenced. Advance of 10% paid. * Megger Technical Services Ltd: Lot 1: Central Service Territory - Construction works commenced. Certified work paid for is 64%. * M & T Construction Co. Ltd: Grid Intensification in Umeme Service Territory - Construction works commenced. Advance of 10% paid * Burhani Engineers Ltd: Grid Intensification of 29 Schemes under Umeme Service Territory - Construction works commenced. Certified work paid for is 56%. * Chapa General Enterprises Ltd: Grid Intensification of 53 Schemes for 3 Lots; Lot 2: Rwenzori Service Territory - Construction works commenced. Certified work paid for is 38%. * Chapa General Enterprises Ltd: Grid Intensification of 53 Schemes for 3 Lots; Lot 3: Western Service Territory - Construction works commenced. Certified work paid for is 37%. * Megger Technical Services Ltd - Line II - Kyabadaza-Masankwa-Nyanama, Mpenja- Nsambwe-Kanoni-Mamba-Mawuki (130km). Certified work paid for is 72%. * MBH Power Ltd - Line 12 - Nakifuma-Nagojje, Walusubi-Katogo Mbaliga-Namcle& Nakasajja-Kyampisi (75.3km). Certified work paid for is 45%. * DATPO Investments (U) Ltd - Line 13 - Mitemula-Nakiyaga-Nkuke-Ketenges, Bukeeri- Namirembe & Baale Landing Sites, Kyanamukaka-Butano (104km). Certified work paid for is 22%. * TETRA Technical Services - Line 14 - Mubende-Kyabayanga-Ngangi with tee off Kahirimbara, Kibaale-Kikwaya and Karuguza SS, Kibonge, burnzi, Katete Pri Sch(130.7km). Certified work paid for is 49%. * Megger Technical Services Ltd - Line 15 - Kiyagara-Bwizi-Biguri-Ntonwa-Kyakaitaba- Bwensamba (95.8km). Certified work paid for is 44%, * DATPO Investments (U) Ltd - Line 16 - Rukoni(Mailo 16)-Rwoho-Ngugo-Bugamba (29km), Bugangari-Rwenshama. Certified work paid for is 29%. * STEG International Services - Line 18 - Rwebisengo-Ntoroko (58.402km), Kagongo- Rweshuri with tee off Kigalama & Nyansimbo-Rwenkoobwa (62.29 km). Advance of 20% paid * C & G Andijes Group Ltd - Line 20 - Ngeta-Ayala-Alito-Ogur-Aloi-Adwari-Patongo (102.4km). Advance of 20% paid * SAGEM COM Energy & Telecom SAS - Line 21 - Dokolo-Agwata 1HCI, Aceng- Dokolo-Atru, Dokolo-Apapai-Til ii &Otuboi-Orungo-Acuna (95.5km) * Megger Technical Services Ltd: Lot 1: 10 Service Territories. Advance of 20% paid. Total expenditure amounted to UGX 97,883,400,185 (Ninety-seven billion, eight hundred eighty-three million, four hundred thousand, one hundred eighty-five only) as at 30hJunc 2021. 4 ENERGY FOR RURAL TRANSFORMATION PROJECT III (ERT III) RURAL ELECTRIFICATION AGENCY 3.0 STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE PERIOD ENDED JUNE 30"' 2021 The Guidelines for Annual Financial Reporting and Auditing for World Bank-Financed Activities require that annual financial statements are prepared for the project in accordance with the terms acceptable to the bank. It also requires management to ensure that the project keeps proper accounting records, which disclose with reasonable accuracy at any time the financial position and operating results of the project. Rural Electrification Agency (REA) management accepts responsibility for the financial statements for ERT Ill, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgment and estimates, in conformity with generally accepted accounting practice and in a manner required by the said regulations. REA management is of the opinion that the financial statements give a true and fair view of its operating results. REA management further accepts responsibility for the maintenance of accounting records, which may be relied upon in the preparation of these accounts, as well as adequate systems of internal control. Management is also responsible for safeguarding the assets of the project. Nothing has come to the attention of management to indicate that the operations of the project will not continue into the foreseeable future. Signed on behalf of Rural Electrification Agency: Nriyga EmOianuel F. Patrick yakulagl Accounting Oficer Managed Finance 5 ENERGY FOR RURAL TRANSFORMATION PROJECT III (ERT III) RURAL ELECTRIFICATION AGENCY 4.0 INDEPENDENT REPORT OF THE ALUDITORGENERAL TO THE GOVERNMENT OF UGANDA AND THE WORLD BANK ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30'm JUNE 2021 6 MINISTRY OF ENERGY AND MINERAL DEVELOPMENT ENERGY FOR RURAL TRANSFORMATION III PROJECT WORLD HANK - IDA CREDIT No.56530 UG 5.0 STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30.06.2021 IDA (UGX) IDA (UGX) RECEIPTS Note 30.06.2021 30.06.2020 Opening Balance 01.07.2020 7.2 53.916013,859 19,992,251,190 IDA Disbursements 7.3 85,625,221,937 145,045,564.911 GOD Counterpart Funding - 139,541,235,796 165,037,816,101 PROJECT PAYMENTS 221014 - Bank Charges 7,553,007 2,331,093 Program Costs 225001 - Consultancy Services & Capacity Building 17,194.184,764 2 ,576,452,088 221003 - Training - - Capital Budget 312202 - Projects and Schemes 7.4 69,344,310,273 24,835,929,679 Connections 11,337,352,141 71,290,453,560 Motor Vehicles 419,596,520 98,302,996,705 117,705,166,420 Foreign Exchange gain/loss 7.5 - - Balance/ Excess of Receipts over expend tures 7.6 41,238,239,091 47,332,649,681 Accouf! g Offier . ManagVr Finance 7 (Accounting Officer) MINISTRY OF ENERGY AND MINERAL DEVELOPMENT ENERGY FOR RURAL TRANSFORMATION III PROJECT WORLD BANK - IDA CREDIT No.56530 UG 6.0 STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30.06.2021 IDA (USD) IDA (USD) RECEIPTS Note 30.06.2021 30.06.2020 Opening Balance 01 .07.2020 7.2 14,650,041.68 5,446,536.03 IDA Disbursements 7.3 23,325,516.14 39,469,117.42 GOU Counterpart Funding - 37,975,557.82 44,915,653.45 PROJECT PAYMENTS 221014 - Bank Charges 2,063.68 659.94 Program Costs 225001 - Consultancy Services & Capacity Building 4,700,730.82 6,121,870.59 221003 - Training Capital Budget 312202 - Projects and Schemes 7.4 19,104,467.44 6,671,353.50 Connections 3,087.530.65 19,082,659.02 Motor Vehicles 115,199.40 27,009,991.98 31,876,543.05 Foreign Exchange gain/loss 7.5 Balance/ Excess of Receipts over expenditures 7.6 10,9 5,565.83 13,039,110.40 Accou tg Officer Managet Finance 8 MINISTRY OF ENERGY AND MINERAL DEVELOPMENT ENERGY FOR RURAL TRANSFORMATION III PROJECT WORLD BANK IDA CREDIT NO. 56530 UG 7.0 PROJECT SPECIAL ACCOUNT STATEMENT FOR THE YEAR ENDED 30.06.2021 ACCOUNT NUMBER: 003270088400006 (REA/ERTIII) DEPOSITING BANK: BANK OF UGANDA CURRENCY: UNITED STATES DOLLARS PART A ACCOUNT IDA (USD) 30.06.2021 opening Balance 01.07.2020 14-303,372.38 Add: Remittance by Bank 20,734,065.00 Miscellaneous income GOU Counterpart Funding Sub-total 35,037,437.38 Less: Total amount withdrawn for expenditure (25,336,686.51) Exchange rate g ain Special Account Balance 9,700,750.97 gounti office Manag Finance 9 7.0 NOTES TO ACCOUNTS FOR THE YEAR ENDED 30" JUNE 2021. 7.1 Accounting Policies The significant accounting policies adopted in the presentation of the Receipts and Expenditure Statement are set out as below: a) Basis of accounting The financial statements are prepared in accordance with the general Guidelines for Accounting and Auditing issued by the World Bank The financial statements are prepared on the cash receipts and disbursement basis of accounting. On this basis, revenue is recognized when received rather than when earned and expenses are recognized when paid rather than when incurred. This basis of accounting is not intended to comply with International Financial Reporting Standards (IFRS). b) Fixed Assets Fixed Assets is expensed in full in the year of purchasc. Depreciation is not provided for on those fixed assets since expenditure is written off as incurred. A fixed asset register is maintained to record particulars of fixed assets. c) Foreign Currency Translation The accounting records are maintained in Uganda shillings. Receipts and expenditure in currencies other than Uganda shillings are converted using the exchange rate ruling at the time of receipt of income. 7.2 OpeninE Balances UGX US$ UG USS 01.07.2020 01.07.2020 01.07.2019 01.07.202019 IDA - Special Dollar 46,124,899,182 12,715.778.73 19,991,634,577 5,446,368.05 Account IDA - Project Shillings 1,207,750,499 323,331.67 616,613 167.98 Account Uncleared items for June 6,583,364,178 1.610,931.28 2020 Bank Reconciliation TOTAL 53,916,013,859 14,650,041.68 19,992,251,190 5,446,536.03 Uncleared items for June 2020 In the final accounts for 2019/2020 FY the closing balances reported were reconciled figures. These included UGX 93,212,697 for the UGX account and USD 1,587,593.65 forthe USD account in the form of unpresented cheques. Given that accounts are prepared on cash basis, these uncleared amounts were restated to reflect the actual money in the accounts from which various cash expenses were made. 10 7.3 IDA Disbursements UGX uS$ UGX USS 30.06.2021 30.06.202 1 30.06.2020 30.06.2020 World Bank - 76,094,018,550 20,734,065.00 71,404,759,264 19,465,570.00 Designated Account World Bank - Direct 9,631,203,387 2,591,451.14 73,640,805,647 20,003,547.42 Payments TOTAL 85,625,221,937 23,325,516.14 145,045,564,911 39,469,117.42 7.4 Proicets and Schemes Project UCX US$ UCX US$ 30.06.2021 30.06.2021 30.06.2020 30.06.2020 Line 1: Kiganda - Mile 16 4,684,979,833 1,274,474.28 6,838,402,213 1,699,657.54 with tee-off Katabalanga & Kibyamirizi: Grid Intensification of29 5,211,702,457 1,426,962.05 1,544,327,886 416,163.24 Schemes under Umeme Service Territory Ruhumba - Kashwa with 4,378,457,718 1,219,182.75 9,280,118,108 2,632,265.22 tee-off Rwebishuri: Lot 1: Central Service 1,667,152,382 464,098.26 338,884,982 87,042.45 Territory Kiyagara-Bwizi-Biguri- 4,160,572,267 1,155,286.26 - - Ntonwa-Kyakaitaba- Bwensamba Kyabadaza-Masankwa, 10,737,403.489 2,966,275.87 Nyanama, Mpenja- Maseruka, Kiriri-Kasasa, Mpenja-Nsambwe-Kanoni- Mamba-Mawuki (130 KM) 10 Service Territories (10 2,832,456,641 778,603.04 STS) Lot I Wandi-Yumbe-Moyo 3,405,111,735 952,232.16 3,706,390,813 998,021.18 11 Mitemula - Nakiyaga - 2,950,006,438 817,020.22 Nkuke - Kyanamukaka with Tee-offs Nkuke - Ketengesa, Bukeeri - Namirembe & Baale Landing Sites, Kyanamukaka - Butano Rukoni (mailo 36) - 2,691,794,806 746,547.71 Rwoho - Ngugo - Bugamba (29.8km)- & Line 17 - Bugangari - Rwenshama With Tee-Off to Mirama Sub County Grid Intensification in - - 1,671,630,297 455,516.68 Umeme Service Territory Lot 2: Grid Intensification 777,085,671 212,276.80 330,190,570 89,150.08 in under Rwenzori Service Territory Lot 3: Grid Intensification 742,562,346 205,307.92 367,084,526 99,113.30 in under Western Service Territory Lot 2: Batch 3, three (3 2,630,553,732 726,221.88 - STS) (North Eastern, Eastern and Central North) Lot 2: Onduparaka- - 758,900,284 194,423.81 Odramacaku-Abiria Ngeta - Ayala - Alito- 2,131,424,353 578,394.99 - Ogur -Aloi - Adwari- Patongo (102.4km) Mubende-Kyabayanga- 6,894,803,998 1,906,751.33 Ngagi with Tee-Off Kahirimbara, Kibaale- Kikwaya and Karuguza SS 10 STS under Lot 3; Batch 2,965,318,043 811,467.15 4, 04 STS (Southern, South-Western, North Western and Mid Western) Rwebisengo - Ntoroko 3,003,071,452 812,222.66 (58.402km) - & line 19 - Kagongo - Rweshuri With Tee-Off Kigalama & 12 Nyansimbo - Rwenkoobwa Nakifuma-Nagojje, 5,176,697,313 ,425,300.01 Walusubi-Katogo Mbaliga- Namele & Nakasajja- Kyampisi (75.3km) Dokolo-Agwala HCIII, 2,303,055,598 625,842.10 Aceng-Dokolo-Atru, Dokolo-Apapapai-Tilili and Otubol-Orungo-Acuna Total 69,344,310,272 19,104,467.44 24,835,929,679 6,671,353.50 7.5 Exchange Rate Loss/ Gain UGX uAs$ Exchange Rate Gain TOTAL 7.6 Fund Balance Statement (SHS) UGX SS Ls$ 30.06.2021 30.06.2021 30.06.2020 30.06.2020 IDA - Special Dollar 36,794,830,287 9,700,750.87 46,124,899,182 2.715,778 Account IDA -Project Shillings 4,443,408,804 1,264,814.97 1.207,750A499 33316 Account 323.331.67 TOTAL 41,238,239,091 10,965,565.84 47,332,649,681 13,039,110.40 13