REPÚBLICA DE MOÇAMBIQUE MINISTÉRIO DA ADMINISTRAÇÃO ESTATAL E FUNÇÃO PÚBLICA DIRECÇÃO NACIONAL DE DESENVOLVIMENTO AUTÁRQUICO Projecto de Cidades e Mudanças Climáticas - PCMC Unidade de Gestão do Projecto (Crédito - 5066 MZ) AO Elvis Langa - Especialista em gestão Financeira. Banco Mundial Av: Kenneth Kaunda, NO1224 Maputo N/Refa.319/UGP/PCMC/2017 Maputo, 23 de Agosto de 2017 ASSUNTO: ENVIO DO RELATORIO DE AUDITORIA DO MAEFP - DNDA Exmo. Sr. Elvis Langa, De acordo com o assunto em referência, enviamos em anexo por forma a tomar conhecimento Banco Mundial, o Relatório Final de Auditoria e a respectiva Carta de Recomendações do Ministério de Administração Estatal e Função Pública - MAEFP - DNDA referente ao exercício económico do ano de 2016. Sem mais subscrevemo-nos com elevada consideração. Ma. Francisca Macie - (A Coordenadora do PCMC) PCMC - Projecto Cidades & Mudanças Climáticas, Av. Guerra Popular, Edificio do CPD, 7° Andar porta N'. 711, TeL.: +258 21305720,+258 21305724,+258 823080364, +258 823080366 Maputo Moçambique Financial Statements AUS Ministry of State Administratlon and Public Function NationalDirectorate of Municial DeVelopMent Cities and CIlimate Cnang e Project Credit number 5066B- MZ Foi- te yeai onded 310Ueee 201B Financial Statements for the year ended 31 December 2016 Index Page Independent auditors' report 2-3 Cumulative statement of receipts and payments 4 Statement of receipts and payments 5 Statement of designated account 6 Notes to the financial statements 7 - 12 Disbursement summary 13 Statement of Management Responsibilities The management of the Cities and Climate Change Project is responsible for the preparation and presentation of the financial statements for the year ended 31 December 2016, which comprise of statement of receipts and payments, statement of designated account and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with the cash receipts and disbursements basis of accounting described in note 2. Management is also responsible for determining that the basis of accounting is an acceptable basis for preparing and presenting the financial statements in the circumstances; for such internal control as the management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and for maintaining adequate accounting records and an effective system of risk management. Management is also responsible for the other project internal controls and for compliance with the relevant project agreement terms and local laws and regulations applicable to the Cities and Climate Change Project. The responsibility for the prevention and detection of non-compliance rests with management. Approval of the financial statements The financial statements of the project for the year ended 31 December 2016 and the accompanying notes, as indicated above, were approved by the management on 15 August 2017 and are signed on its behalf by: Project Coordinator Project Finance Manager 1 Other Information The Management is responsible for the other information. The other information comprises the Management' responsibility statement. The other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Management for the Financial Statements The Management is responsible for the preparation and fair presentation of the financial statements in accordance with the basis of accounting described in note 2 and for such internal control as the Management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements 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 ISAs 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. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We 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 our 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. * 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. 3 We communicate with the Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. KPMG, Registered Audit Firm Ae se ed by: Abel Jone G iaguaia, OCAM no 04/CA/OCM/2012 15 August 2 7 4 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Cumulative statement of receipts and payments Cumulative from May 2012 to 31 December 2016 Note Cumulative up to 31/12/2016 USD Description Receipts Disbursements from IDA 28 665 546 Total receipts 28 665 546 Payments Goods, works, consultant services, non-consultant services, 13 276 240 training and operating costs (1) Municipal Performance Grant (3) 7 835 201 Total payments 14 581 701 Closing balance as at 31 December 2016 6 7554105 5 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Statement of receipts and payments for the year ended 31 December 2016 Note 2016 USD Description Receipts Opening balance 5 589 211 Disbursements from IDA 3 8 494634 Total receipts 14 083 845 Payments Goods, works, consultant services, non-consultant 4 4 892 525 services, training and operating costs (1) Municipal Performance Grant (3) 5 1637217 Total payments 6529740 Closing balance as at 31 December 2016 6 7554105 6 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Statement of designated account for the year ended 31 December 2016 Description Actual USD Receipts Opening balance 5589211 Disbursements from IDA 3 8494634 Total receipts 14 083 845 Payments Goods, works, consultant services, non-consultant services, training 4 4 892 525 and operating costs (1) Municipal Performance Grant (3) 5 1637217 Total payments 6 529 740 Closing balance as at 31 December 2016 6 7554105 7 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Notes to the financial statements for the year ended 31 December 2016- 1. Project background On 04 May 2012 a credit agreement was signed between Republic of Mozambique and International Development Association (IDA) to finance the Cities and Climate Changes Project in an amount not exceeding USD 35 000 000. The overall objective of the Project is to strengthen municipal capacity for sustainable urban infrastructure provision and environmental management which enhance resiliency to climate related risks. The project consists of the following parts: Part A: Strengthening of the Municipal sector Increase municipal capacity to sustainably plan, manage and finance climate resilient urban development, including through the strengthening of the Recipient's institutions underpinning its municipal system in order to improve sustainable decentralized financing and management of the urban environment and infrastructure. Part B: Enhancing resilience of strategic municipalities in coastal cities Enhancement of selected municipalities, including those in Beira, Nacala and Maputo metropolitan area, for sustainable resilience to whether - related environmental threats. 2. Basis of accounting The following paragraphs describe the main accounting policies applied consistently by the project. 2.1 Accounting convention The financial statements are prepared on a cash basis of accounting under the historical cost convention. 2.2 Currencies The books of account of the Project are maintained in United States Dollars (USD). The financial statements are also expressed in United States Dollars (USD) unless otherwise stated. The transactions in other currencies are translated to USD at the official exchange rate ruling at the date of the transactions. Closing balances in other currencies are translated at the exchange rate ruling at period end date. 2.3 Fixed assets Fixed assets acquired by the Project are expensed in the year of purchase. 8 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Notes to the financial statements for the year ended 31 December 2016 5. Municipal Performance Grant (category 3) This Municipal Performance Grant is detailed as follows: Closing balance Opening Disbursed by Expenditure at 31 December Municipal Council balance PCMC 2016 USD USD USD USD Matola City 712078 398105 59437 1050746 Chibuto Village 33412 116838 112772 37478 Chimoio City 524140 503374 210915 816599 Chockwe City 3283 72147 7457 67973 Inhambane City 115990 152360 168615 99735 Maxixe City 29513 201233 168486 62260 Massinga Village 68834 50337 44778 74393 Catandica Village 342 39 802 - 40 144 Macia Village 42 39 802 - 39 844 Manhiga Village 196046 131 351 117338 210059 Gondola Village (35) 62 644 21 141 41 467 Gorongosa Village (1 722) 39 802 39 802 (1 722) Manjacaze Village 59 50 337 50 337 59 Namaacha Village 47 50 337 50 337 47 Vilanculos Village 120399 68744 70082 119061 Manica Village 52 009 66 800 34 092 84 715 Moatize Village 65 71 977 - 72 042 Ul6ngu6 Village 57917 50337 43736 64518 Tete Village 154733 211933 190336 176329 Xai Xai Village 169207 215231 247552 136886 Other 2392 - - 2392 Total 2238749 2593491 1637215 3 195 025 12 Ministry of State Administration and Public Function National Directorate of Municipal Development Cities and Climate Change Project Credit number 5066 - MZ Disbursement summary as at 31 December 2016 Expenditure Total Disbursement Disbursement Total Credit credit in prior years during the disbursement available as agreement year as at at 31/12/2016 31/12/2016 SDR SDR SDR SDR SDR Category 1 13 879 000 5 163 534 3477082 8 635 622 5 243 379 Category 2 - (463 868) - (463 868) 463 868 Category 3 8490000 4104481 530271 4634752 3855249 Designated account - 5 708 391 1 375 514 7083 905 (7 083 905) Total 22369000 14512538 5377872 19890410 2478591 Category 1 - Goods, Works, Consultant services, non-consultant services Category 3 - Municipal Performance Grant 14