AUDITOR GENERAL'S REPORT ON THE FINANCIAL STATEMENT AUDIT OF THE LIBERIA URBAN WATER SUPPLY PROJECT (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) FOR THE PERIOD JULY 1, 2020 TO JUNE 30, 2021 December 2021 P. Garswa Jackson Sr. ACCA, CFIP, CFC Auditor General, R.L. Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 Table of Contents Basis for Opinion...................................................................................................................... 4 Management’s Responsibility .................................................................................................... 4 Auditor’s Responsibility ............................................................................................................. 5 Financial Statements ................................................................................................................ 6 STATEMENT OF RESPONSIBILITIES .......................................................................................... 7 STATEMENT OF CASH RECEIPTS AND PAYMENTS .................................................................... 11 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT ........................................... 12 STATEMENT OF CASH POSITION ............................................................................................ 13 NOTES TO THE FINANCIAL STATEMENTS ................................................................................ 14 2 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 ACRONYMS USED Acronyms Meaning ACCA Association of Certified Chartered Accountant AFS Audited Financial Statements AG Auditor General CFIP Certified Forensic Investigation Profession CFC Chartered Financial Consultant FAR Fixed Asset Registry GAC General Auditing Commission GOL Government of Liberia IPSAS International Public Sector Accounting Standards ISSAI International Standards of Supreme Audit Institutions LUWSP Liberia Urban Water Supply Project LWSC Liberia Water and Sewer Corporation NRW Non- revenue Water PFM Public Finance Management PIU Project Implementation Unit 3 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 December 30, 2021 Hon. Duwannah Kamara Managing Director Liberia Urban Water Supply Project (LUWSP) Monrovia, Liberia Dear Hon. Kamara: AUDITOR GENERAL'S REPORT ON THE FINANCIAL STATEMENT AUDIT OF LIBERIA URBAN WATER SUPPLY PROJECT (LUWSP) FOR THE PERIOD JULY 1, 2020 TO JUNE 30, 2021. Unqualified Opinion We have audited the accompanying financial statements of the Liberia Urban Water Supply (LUWSP) Project for the year ended June 30, 2021. These financial statements comprise the statement of Receipts and Payments, statement of budget verses actual, statement of financial position for the fiscal year then ended, and a summary of significant accounting Policies and other explanatory information. In our opinion, the accompanying financial statements of LUWSP (Project: (Credit No. 5774-LR; 6384-LR and Grant No. D4870-LR) present fairly in all material respects, the Statement of Receipts and Payments as at June 30, 2021, Statement of Comparison of Budget and Actual Amounts and a summary of other accounting policies and explanatory notes for the fiscal period then ended in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis of Accounting. Basis for Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Liberia Urban Water Supply (LUWSP) Project in accordance with the Code of Ethics for Supreme Audit Institutions together with the ethical requirements that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management’s Responsibility Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSAS Cash Basis, and for such internal control as management determines is 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, management is responsible for assessing its ability to continue as a going concern, disclosing, as applicable, matters 4 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 related to going concern and using the going concern basis of accounting unless management either intends to cease operations, or has no realistic alternative but to do so. The LUWSP Management is responsible for overseeing the Project’s finan cial reporting process. Auditor’s Responsibility Our 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 our 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Monrovia, Liberia December 2021 5 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 Financial Statements From July 1, 2020- June 30, 2021 INSTITUTIONAL DETAIL /INFORMATION IMPLEMENTING PARTNERS: Liberia urban Water Supply Project International Development Association and and Liberia Water and Sewer Corporation PROJECT ADDRESS: Barclay Avenue, Fiamah, Monrovia BANKERS: Account Number 160-2003-103, Central Bank of Liberia, Ashmun Street Monrovia, Liberia Randall and Ashmun Monrovia, Liberia AUDITOR: General Auditing Commission of Liberia, Old Executive Mansion, Ashman Street, Monrovia, Liberia 6 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 (a) STATEMENT OF RESPONSIBILITIES The Financial Statements as set out on pages 1 to 4 have been prepared in accordance with the provisions of the Public Financial Management Act of 2009 and in compliance with the Cash Basis International Public Sector Accounting Standards (Cash IPSAS), adopted by the Government of Liberia. In accordance with the provisions of the Public Financial Management (PFM) Act of 2009, I am responsible for the control of and accounting for public funds received, held, and expended for and on behalf of the Liberia Urban Water Supply Project implemented by the Liberia Water and Sewer Corporation. Under the World Bank provisions (Financing Agreement) I am required to submit Annual Financial Statement to external auditors two months after the end of the financial year and Annual Audited Financial Statement to the IDA/ World Bank, six months after the end of the financial year to which it relates. However, the preparation of the annual financial statement has been delegated to the Financial Management Expert of the Liberia Urban Water Supply Project. I am pleased to submit the required Fiscal Year Account of the Liberia Urban Water Supply Project in compliance with the IDA/World Bank provisions and its attendant Regulations. I have provided, and will continue to provide, all the information and explanations as may be required in connection with the financial statements presented therein. In preparing these Financial Statements, the most appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgment and estimates. To the best of my knowledge and belief, these Financial Statements agree with the books of accounts, which have been properly kept. I accept responsibility for the integrity of these financial statements, the financial information they contain and their compliance with the IDA/World Bank provisions. 7 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 (b) MANAGEMENT DISCUSSION AND ANALYSIS Introduction The Government of Liberia has secured a Credit for the financing of Liberia Urban Water Supply Project from the International Development Association (World Bank) as part of reviving the devastated infrastructure of the country. The objective of the Project is to increase access to piped water supply services in the Project Area in Monrovia and improve the operational efficiency of LWSC. The Project Implementation Unit (PIU) of the Liberia Water and Sewer Corporation (LWSC) has been established and is responsible for providing accounting, disbursement and reporting services for the World Bank supported LUWSP. Background of the Project The Republic of Liberia has received a credit and a grant from IDA to finance the Additional Financing of the Liberia Urban Water Supply Project. The project is part of the Monrovia Water Supply and Sanitation Improvements for the Cities of Harper, Gbarnga and Greenville (the Program). The Program is to be implemented by the Liberia Water and Sewer Corporation (LWSC) in three phases and its goal is to restore water supply service to Monrovia and the three secondary cities of Harper, Gbarnga and Greenville. Presently, less than three percent of Liberians benefit from piped water. Even in Monrovia, an estimated 80 percent of the population relies on point sources such as hand-dug wells which may be ‘improved’ in a technical sense but are unsuitable in the dense urban environment. A 2011 water quality study in Monrovia found the majority of ‘improved’ wells to be contaminated and unsafe to drink from (UHL and Associates, 2011). In Monrovia, only 4 million gallons per day (mgd) of water are currently produced, of which 1 million are billed, supplying only about 6,000 active accounts. Increasing access to piped, treated water is an urgent public health requirement. The Government of Liberia’s post-Ebola Economic Stabilization and Recovery Plan (ESRP) has emphasized the “urgent need to address the structural deficiencies in the service delivery systems in the water and sanitation sector that the [Ebola] epidemic highlighted”. The pro ject will reduce exposure to unsafe drinking water and hygiene for close to fifty-thousand Liberians. This is expected to reduce poverty and boost shared prosperity by reducing health-related costs (direct on treatments and indirect through missed work), as well as reduce negative impacts associated with lower school attendance due to water and hygiene-related burdens. Financial Performance The budget of US$6,690,770.00 was approved by the World Bank to execute activities for the fiscal year 2020/2021. The amount of US$5,355,525 was appropriated to Component 1 for infrastructure improvements while US$1,335,245 was appropriated to Component 2 for capacity building to the 8 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 Liberia Water and Sewer Corporation. Below is the budget versus actuals result by the project component with sub-activities for the reporting period: Budget vs Actual by project component (FY 20/21) (%) Budgeted Actuals ($) Diff. Diff. (COMPONENT 1-Infrastructure improvements) 1.1 (Rehabilitation and extension of Monrovia piped water distribution system) 3,919,254 83.3% 4,705,275 786,021 1.2 (Feasibility studies, detailed engineering designs, supervision and associated 620,724 95.5% 650,250.00 29,476 rehabilitation works for 36' main waterline) 1.3 (Construction of a ground reservoir and connecting it to the existing water - - - - distribution network) Total (COMPONENT 1-Infrastructure improvements) 5,355,525.00 4,540,028 84.8% 815,497 2.0 (COMPONENT 2- Capacity Building to the LWSC) 2.1 (Capacity Building to LWSC) 566,410 4,98270 88% 68,140 2.2 (WORLD BANK COVID-19 INTERVENTION-LWSC) 160,315 157,043 3,272 2% 2.3 (Project Implementation Unit) 608,520 414,432 194,088 31.9% Total (COMPONENT 2- Capacity Building- 695,630 LWSC) 1,335,245 639,615 52.1% TOTAL 6,690,770 1,455,112 5,235,658 78.3% 9 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 Component 1 has an unspent balance of 84.8% because the procurement process for the recruitment of contractor(s) and consultants could not be completed as at that quarter. The current status of the procurement of these activities are outlined below: i. Activity 1.1.7– Procurement of Civil Works (Express Line + Ground Reservoir)—We have received Bank No Objection and Contract signed. We are now at implementation stage ii. Activity 1.2.2 – Feasibility + Design + Preparation of bidding Documents for the Replacement of the 36-Inch Main Water Transmission Line from with Plains to Monrovia. We have received No Objection from the Bank and Contract signed. We are also now at implementation stage. iii. Activity 1.1.6 – Supervision Services for Civil Works Construction of Express Line + Ground Reservoir. We have received No Objection from the PPCC and Contract signed. We are also now at implementation stage. Component 2 has an unspent balance of 52.1%. This was also because we could not conclude the procurement process for sub-components 2.1.2 (Improved Customer Service), sub-components 2.1.3 (public Consultation) To comply with the reporting framework, the budget and actual expenditures were reclassified into economic classification of the Government of Liberia. Actuals paid for Compensation of Project Staff amounted to US$220,500, US$255,927 for the Use of Goods and Services, and US$978,685 on Non- Financial Assets. The Project paid US$962,151 from its bank account on budgetary activities while the World Bank also made direct payments toward budget activities in the amount of US$492,961. Constraints There are few constraints to mention which is associated with the overall efficiency to the Project. One of the key is the delay from the Internal Audit review at LWSC head office; the Project may need an assigned Internal Auditor at the Project Office. Secondly is the maintenance of our current ICT Infrastructure; IT troubleshooting sometimes in the absence of IT support is difficult and causes delay in works feeding from resources on the server. 10 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 LIBERIA URBAN WATER SUPPLY PROJECT (LUWSP) STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021 FY 20/21 FY 19/20 Receipts/(Pay Direct Receipts/(Pay Direct No Note ments) Payments ments) Payments te Controlled by by World Controlled by by World LUWSP Bank LUWSP Bank US$ US$ US$ US$ RECEIPTS External Assistance 3 491,892 492,961 1,584,061 932,404 Other Sources - - - - Total Receipts 491,892 492,961 1,584,061 932,404 PAYMENTS Compensation of 4 220,500 - 260,700 - Employees Use of Goods and 5 255,927 - 576,258 - Services Non-Financial Asset 6 485,723 492,961 526,891 932,404 Other Payments 7 - - 50,000 - Total Payments 962,151 492,961 1,413,849 932,404 Increase/(Decrease) -470,259 170,212 in Cash - - Cash Balances - July 872,358 702,146 01, 2020 - - Increase/(Decrease) -470,259 170,212 in Cash - - Cash Balances - June 2 402,099 872,358 30, 2021 - - The accompanying notes are an integral part of the financial statements. The financial statements on page 9 to 14 were approved and signed by Project Management. 11 omoting Accountability of Public Resources Auditor General's Report on The Financial Statement Audit of The Liberia Urban Water Supply Project (LUWSP) (CREDIT NO. 5774-LR; 6384-LR AND GRANT NO. D4870-LR) For The Period July 1, 2020 to June 30, 2021 LIBERIA URBAN WATER SUPPLY PROJECT (LUWSP) STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Budget Approved on the Cash Basis (By GOL Economic Classification) Note 8 ACCOUNT Actual Final Original Difference: Percentage TITLE/DESCRIPTION Amount Budget Budget Final Variance Budget and Actual US $ US $ US $ US $ % CASH INFLOWS External Assistance 984,853 6,690,770 -6,198,878 -85% Other Sources - - - - - Total Receipts 984,853 6,690,770 -5,705,917 -85% CASH OUTFLOWS Compensation of Employees 220,500 242,700 -22,200 -9% Use of Goods and Services 255,927 365,820 -109,893 -30% Non-Financial Asset 978,685 6,082,250 -5,103,565 -84% Other Payments - - Total Payments 1,455,122 6,690,770 -5235,658 -78% NET CASH FLOWS -470,259 - - -470,259 * Actual amounts encompass both cash and World Bank settlements. The accompanying notes from page 10 to 15 are integral parts of these reports 12 omoting Accountability of Public Resources Auditor General’s Report on the Liberia Urban Water Supply project (LUWSP) Financial Statements For the Fiscal Period Ended June 30, 2021 LIBERIA URBAN WATER SUPPLY PROJECT (LUWSP) STATEMENT OF CASH POSITION AS AT JUNE 30, 2021 Currency Notes As at June As at June Change in Held In 30, 2021 30, 2020 Cash Balances Cash/ Bank Account Details 2 Bank Accounts LBDI – LUWSP Operations Account USD 225,286 480,763 -255,477 CBL Designated Account USD 48,259 4,214 44,045 LBDI Designated Account USD 128,555 386,942 -258,387 Petty Cash USD - 439 -439 Total Cash in Banks 402,099 872,358 -470,259 13 Ensuring Accountability of Public Resources Auditor General’s Report on the Liberia Urban Water Supply project (LUWSP) Financial Statements For the Fiscal Period Ended June 30, 2021 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies These are the specific principles, bases, conventions, rules and practices adopted by the Government of the Republic of Liberia and in compliance with the IDA/World Bank provisions and its attendant Regulations in preparing and presenting the financial statements. The accounting policies have been applied consistently throughout the period. a. Basis of Reporting The financial statements have been prepared in accordance with Cash Basis International Public Sector Accounting Standards (Cash Basis IPSAS) adopted by the Government of Liberia. b. Reporting Entity The Government of Liberia has secured a Credit for the financing of Liberia Urban Water Supply Project from the International Development Association (World Bank) as part of reviving the devastated infrastructure of the country. The objective of the Project is to increase access to piped water supply services in the Project Area in Monrovia and improve the operational efficiency of LWSC. The project was signed in April 27, 2016 and became effective on April 12, 2017. The main beneficiaries of this project will be the residents of neighbourhoods in Monrovia selected by the project who will be benefiting in the form of new connections, more hours of water supply, and fewer interruptions in water service delivery, closer proximity of the water supply or a combination of these. The principal address of the reporting entity is Liberia Water and Sewer Corporation Project Implementation Unit, Barclay Avenue, Fiama, Monrovia. c. Reporting Currency The presentation currency is the United States Dollars (US Dollars). 2. Cash and Cash Equivalents Cash and Cash Equivalents comprise cash in banks and petty cash amounts held in office. Cash included in the Statement of Receipts and payments comprise the following amounts: FY20/21 FY19/20 Cash in Bank 402,099 871,919 Petty Cash in Office - 439 Total Cash and Bank Balances 402,099 875,358 14 Ensuring Accountability of Public Resources Auditor General’s Report on the Liberia Urban Water Supply project (LUWSP) Financial Statements For the Fiscal Period Ended June 30, 2021 3. External Assistance The Government of Liberia has received external assistance by securing a credit from the World Bank to increase access to piped water supply services in the in Monrovia and improve the operational efficiency of LWSC. The total receipts from the loan is US$984,853. Total received in the bank accounts of the LUWSP and Direct Payment Contribution from World Bank was U$491,892 and US$492,961 respectively. 4. Compensation of Employees The project made payments from its bank accounts to core and support staff. Analysis of the payments by activity code and GOL classification is presented below. WORLD BANK COMPONENT CODING AFFECTED Project Activity GOL Economic Component 1 Component 2 Code Classification TOTAL 2.3.1.1 211101 52,750.00 52,750.00 2.3.1.2 211101 33,000.00 33,000.00 2.3.1.3 211101 33,000.00 33,000.00 2.3.1.4 211101 35,750.00 35,750.00 2.3.1.5 211101 24,900.00 24,900.00 2.3.2.1 211102 13,200.00 13,200.00 2.3.2.2 211102 16,500.00 16,500.00 2.3.2.3 211102 4,400.00 4,400.00 2.3.2.4 211102 5,500.00 5,500.00 2.3.2.7 211102 1,500.00 1,500.00 211102 220,500.00 220,500.00 5. Use of Good & Services The project incurred cost on recurring activities such as fuel, office supplies, Insurance and other related repairs and maintenance. Below is an analysis by of payments by activity code and GOL classification. 15 Ensuring Accountability of Public Resources Auditor General’s Report on the Liberia Urban Water Supply project (LUWSP) Financial Statements For the Fiscal Period Ended June 30, 2021 CODING WORLD BANK COMPONENT AFFECTED Project Activity GOL Economic TOTAL Component 1 Component 2 Code Classification 2.3.4.03 221203 4,279 4,279 2.3.5.03 221203 11,285 11,285 2.3.5.06 221203 3,510 3,510 2.3.5.07 221203 9,370 9,370 2.3.5.04 221401 9,498 9,498 2.3.5.15 221402 7,350 7,350 2.1.5 221501 67,200 67,200 2.3.5.18 221501 1,005 1,005 2.3.5.05 221502 23,020 23,020 2.3.5.16 221503 1,175 1,175 2.3.5.17 221504 558 558 2.3.5.13 221602 35,932 35,932 2.3.5.14 221606 8,096 8,096 2.3.4.02 221703 19,560 19,560 2.3.4.05 221909 5,483 5,483 2.3.5.11 222116 7,230 7,230 2.3.5.02 222125 34,353 34,353 2.3.4.01 223106 2,818 2,818 2.3.5.09 222108 4,200 4,200 255,927 6. Property, Plant, & Equipment Civil works including all cost incurred on construction of plants, water drainages, and related consultancies are summarized under PPE. 16 Ensuring Accountability of Public Resources Auditor General’s Report on the Liberia Urban Water Supply project (LUWSP) Financial Statements For the Fiscal Period Ended June 30, 2021 WORLD BANK COMPONENT CODING AFFECTED Project Activity GOL Economic Code Classification Component 1 Component 2 TOTAL 1.1.1 230003 657,291 657,291 1.1.2 230003 11,115 11,115 1.1.4 230003 77,097 77,097 1.1.5 230003 1,300 1,300 1.1.7 230003 25,200 25,200 1.2.1 230003 28,477 28,476 1.2.2 230003 1,000 1,000 2.2.1 230003 4,775 4,807 2.2.3 230003 105,508 105,508 2.2.9.2 230003 46,728 46,728 2.3.4.04 232201 4,595 4,595 2.3.4.09 232201 1,430 1,430 1.1.3 232201 14,018 14,018 2.3.4.06 232221 120 120 978,685 7. Other Payments There were no other payments incurred outside the budgetary activities of the project. 8. Comparison of Budget Amounts versus Actuals Since the project is activities based, please refer to Management Discussion and Analysis budget versus actuals by project components on page 8. The budget created by economic classification is a reorganization of activities to compare budget versus actuals as required by IPSAS. 9. Authorization Date The financial statements were authorized for issue on September 30, 2021 by Pawon Boayue, Project Director. 17 Ensuring Accountability of Public Resources