f TRANSITIONAL 2018 ACCRUAL BASIS IPSAS FINANCIAL STATEMENTS 2019 FOR THE YEAR ENDED 31 DECEMBER, 2020 KADUNA STATE GOVERNMENT JANUARY 2021 2020 KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Table of Contents FOREWORD ................................................................................................................................................................................................................... 2 RESPONSIBILITY FOR FINANCIAL STATEMENTS ............................................................................................................................................................. 3 AUDIT CERTIFICATE ....................................................................................................................................................................................................... 4 CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE ....................................................................................................................................... 5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................................................................................................ 6 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................................................................................. 8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...............................................................................................................................................10 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS (PREPARED ON CASH BASIS) ..........................................................................11 NOTES TO THE FINANCIAL STATEMENTS ....................................................................................................................................................................13 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ..............................................................................................................................................13 SUB CLASSIFICATION OF BALANCES ........................................................................................................................................................................32 OTHER REPORTS ..........................................................................................................................................................................................................62 2018 – 2020 PROGRAM FOR RESULTS (P4R) DETAILED EXPENDITURE FRAMEWORK PER MDA ............................................................................62 SFTAS EXPENDITURE FRAMEWORK .........................................................................................................................................................................65 COVID-19 RELATAED INCOME AND EXPENDITURE .....................................................................................................................................................69 1|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 FOREWORD The better part of year 2020 has been unusual to say the least. This is true for all countries, companies and industries due to impacts of the COVID-19 Pandemic on mostly the health and economic sectors. As a people, we have seen and felt the great opportunities and challenges that such a major blow like the COVID-19 pandemic can have on our daily businesses and on public governance. Since the inception of Mallam Nasir El-Rufai’s administration, KDSG continues to fine-tune the policies and strategies of sound Public Finance Management (PFM) in resource utilization and with the institution of non- linear-thinking in solving the challenges brought about by the largely unanticipated Covid-19 Pandemic. This administration always sees the cup as ‘half full’ irrespective of the prevailing circumstances. The foregoing has given the State Government the ability to be flexible, adapt and learn new ways of achieving more with less. Evidently, the government’s resilience established has already begun to bear fruits as demonstrated by the little or no disruption in activities needed to realize the Kaduna State Master Plan envisioned by His Excellency, the Governor. There is perhaps no better time for a responsive government to show accommodation and empathy than this. The government approved a number of Covid-19 tax incentives for all residents of Kaduna State covering: extension of deadline for filing tax returns, waiver of penalties and interest for late filing of returns, tax rebates, introduction of grace periods for payment of consumption tax by the entertainment and hospitality sectors. In addition, the State piloted innovative revenue drive with the introduction of Public Service on Wheels. This involves revenue officers de-stressing Kaduna State residents by moving revenue generation channels from house to house at their doorsteps across the State. In spite of the Pandemic, the State achieved impressive performance in its IGR with earnings of 66.28% over and above the budgeted amount. Investments in social and infrastructural projects through government capital expenditure was 89% for the year 2020 revised budget. Recurrent expenditure was kept at tolerable levels, within and below budgets. In the area of Transparency and Accountability in Governance, Kaduna State, for the second consecutive year, maintained its lead among all States of the Federation and the Federal Government in the ICAN-Accountability Index (ICAN-AI). Going forward, we will spare no efforts at bringing ‘daylight’ into all government businesses and transactions. Our transparency continues to give confidence to Development Partners in their dealings with KDSG. This is evident in the massive urban renewal and rural development projects with unmatched scale and scope in the year 2020. As we move to contain and recover from the Covid-19 Pandemic, please stay safe. Muhammad Bashir Saidu Hon. Commissioner of Finance 2|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 RESPONSIBILITY FOR FINANCIAL STATEMENTS The Financial Statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS) as issued by the International Public Sector Accounting Standards Board (IPSASB) and the Financial Reporting Council of Nigeria (FRCN). As indicated in the Notes to the Financial Statements, the year 2020 Financial Statements is two year beyond the three years transitional relief period of IPSAS 33 (First Time Adoption of Accrual Basis IPSAS) but due to the inconclusive valuation of legacy assets, certain transitional exemptions still apply. As the Accountant General, and the State’s Accounting Officer for receipts and payments of Government, I am saddled with the responsibility of general supervision of accounts and the preparation of Accrual Basis IPSAS Financial Statements. To fulfil these responsibilities, I am to ensure that proper accounting records are maintained; applicable International Public Sector Accounting Standards are applied; judgments and estimates made are reasonable and prudent; and internal control procedures are instituted to provide reasonable assurances that financial transactions are validly recorded to prevent fraud and irregularities with resources are safeguarded. Efforts were made to ensure that these Financial Statements reflect the true and fair view of the Financial Position of Kaduna State Government as at 31st December 2020 and its Operations for the year ended on that date. I accept responsibility for the integrity of these Financial Statements, the information contained therein, and hereby declare that they comply with IPSAS 33 and the Guidelines issued by the FAAC Technical Sub Committee on IPSAS Implementation. Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified FRC/2019/002/00000020054 Accountant General, Kaduna State 30th January, 2021 3|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 AUDIT CERTIFICATE Page intentionally left blank 4|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD ENDED 31 DECEMBER 2020 STATEMENT No. 1 NOTES 31 DEC. 2020 31 DEC. 2019 Revenue N'000 N'000 Non Exchange Transactions 3 127,653,821 129,580,780 Exchange Transactions 4 30,304,567 33,047,540 Total Revenue 157,958,388 162,628,320 Expenses Consulting and professional services 5 3,395,193 1,439,982 Employee benefits 6 55,879,789 42,864,633 Fuel and lubricants 7 492,630 505,389 Grants and contributions 8 7,752,679 1,793,459 Insurance 9 60,870 79,601 Materials and supplies 10 6,751,113 9,883,948 General expenses 11 6,581,763 6,646,209 Other services 12 3,544,154 895,445 Repairs and maintenance 13 628,589 2,733,344 Security and safety 14 5,507,203 6,131,625 Social benefits 15 1,063,864 870,603 Training and human capital development 16 793,348 3,081,286 Travel and transport 17 637,611 1,994,017 Utilities 18 1,180,314 684,942 Waste Management and Disposal 19 756,034 1,278,474 Depreciation and amortisation 20 9,150,109 10,340,586 104,175,263 91,223,543 Excess of income over expenses before interest 53,783,125 71,404,778 Interest Expense 21 4,469,130 3,126,732 Surplus for the period 49,313,995 68,278,046 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified 30th January, 2021 5|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER, 2020 STATEMENT No. 2 DESCRIPTION NOTES 31 DEC. 2020 31 DEC. 2019 ASSETS N'000 N'000 CURRENT ASSETS Inventory 22 1,692,934 1,580,536 Receivables 23 25,350,516 42,678,092 Reimbursables from the Federal Government 24 17,830,000 17,830,000 Cash and cash equivalents 25 14,298,951 9,953,385 Prepayments 26 21,745,938 466,190 TOTAL CURRENT ASSETS 80,918,339 72,508,205 NON CURRENT ASSETS Property, Plant and Equipment 27 528,386,864 438,414,871 Investment Property 28 1,890,501 1,905,966 Biological Assets 29 13,542,095 16,984,518 Intangible Assets 30 2,337,490 672,238 Available for sale financial assets 31 7,457,692 7,360,400 TOTAL NON CURRENT ASSETS 553,614,642 465,337,994 TOTAL ASSETS 634,532,981 537,846,198 LIABILITIES CURRENT LIABILITIES Liabilities and Accruals 32 14,529,030 18,678,064 Provisions 33 2,932,200 2,820,645 Financial Liabilities 34 783,162 723,306 TOTAL CURRENT LIABILITIES 18,244,392 22,222,015 NON CURRENT LIABILITIES Financial Liabilities 34 253,473,287 200,888,700 Employee Benefits 35 138,296,456 131,546,976 TOTAL NON CURRENT LIABILITIES 391,769,743 332,435,676 TOTAL LIABILITIES 410,014,135 354,657,691 NET ASSETS/EQUITY 224,518,846 183,188,508 6|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 NET ASSETS/EQUITY Accumulated surplus 35 221,708,170 179,356,040 Available for sale reserves 36 2,810,676 3,832,467 NET ASSETS/EQUITY 224,518,846 183,188,508 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified 30th January, 2021 7|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 31 DECEMBER, 2020 STATEMENT No. 3 31 DEC. 2020 31 DEC. 2019 N'000 N'000 Surplus/(Deficit) for the period 49,313,995 68,278,046 Add back: Depreciation and amortisation 9,150,109 10,340,586 Impairment of Biological Assets 3,442,423 - Interest expense 4,469,130 3,126,732 Changes in working capital Inventories (112,398) (261,198) Increase in receivables 17,327,576 (29,521,174) Increase in prepayments (21,279,748) 4,310,325 Increase/(decrease) in liabilities and accruals (4,149,034) (11,879,800) (Decrease)/Increase in provisions 111,555 2,473,058 Increase in employee benefits 6,749,480 43,783,285 Cash generated from operations 65,023,090 90,649,860 Interest paid (4,469,130) (3,126,732) Net Cash Flow from Operating Activities 60,553,960 87,523,128 Cash flow from investing activities Land (30,867) - Building (33,297,848) (37,179,925) Furniture and fittings (1,341,343) (1,101,414) Road infrastructure (49,500,759) (75,436,255) Water infrastructure (8,736,341) (3,602,326) 8|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Vehicle (3,326,303) (5,152,185) Equipment (2,651,806) (9,611,200) Plant (104,724) (3,175,197) Purchase of Biological Assets - (10,849) Purchase of Intangible Assets (1,747,636) (310,978) Investment property (34,262) (1,759,699) Purchase of Financial Assets (1,119,083) (114,950) Net Cash Flow from Investing Activities (101,890,973) (137,454,978) Financing activities Principal loan repayment (3,829,817) (2,847,673) Long term borrowings 35,170,246 60,832,500 DMO Reconciliation 14,342,149 - Net Cash Flow from Financing Activities 45,682,578 57,984,826 Opening balance of cash and cash equiv 9,953,386 1,900,409 Net changes in cash and cash equiv 4,345,565 8,052,976 Closing balance of cash and cash equiv 14,298,951 9,953,386 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified 30th January, 2021 9|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER 2020 STATEMENT No. 4 Accumulated Available for sale AS AT 31 DECEMBER 2020 Surplus reserve Total N'000 N'000 N'000 Opening balance 179,356,040 3,832,467 183,188,508 Surplus for the period 49,313,995 - 49,313,995 Fair value change in Financial Assets 37 - (1,021,791) (1,021,791) Net change in transitional adjustments 38 (6,961,865) - (6,961,865) Closing balance 221,708,170 2,810,676 224,518,846 STATEMENT OF CHANGES IN EQUITY/NET ASSETS AS AT 31 DECEMBER 2019 Accumulated Available for sale Surplus reserve Total N'000 N'000 N'000 Opening balance 111,777,995 3,913,230 115,691,224 Surplus for the period 68,278,046 - 68,278,046 Fair value change in Financial Assets 37 - (80,762) (80,762) Net change in transitional adjustments 38 (700,000) - (700,000) Closing balance 179,356,040 3,832,468 183,188,508 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified 30th January, 2021 10 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS (PREPARED ON CASH BASIS) FOR THE PERIOD ENDED 31 DECEMBER 2020 STATEMENT No. 5 2020 Budget 2020 Actual Variance N'000 N'000 N'000 Revenue from Non Exchange Transactions Statutory Allocation 33,526,617 44,670,588 11,143,970 Value Added Tax Allocation 14,766,592 18,298,065 3,531,473 Aids and Grants 60,728,724 20,270,107 (40,458,617) Direct Taxes 7,641,150 26,277,002 18,635,853 Licenses 1,407,784 804,268 (603,516) Sub Total (A) 118,070,867 110,320,030 (7,750,837) Revenue from Exchange Transactions Sales 1,737,550 353,271 (1,384,279) Fees 19,257,413 19,600,767 343,353 Rent of Government Property 376,728 1,883,894 1,507,166 Sub Total (B) 21,371,692 21,837,932 466,240 Total Revenue (A + B) = C 139,442,558 132,157,962 (7,284,597) Other Budget Financing Development Partners 61,159,160 35,170,246 (25,988,913) Beginning Balance 23,000,000 23,000,000 - Sub Total (D) 84,159,160 58,170,246 (25,988,913) Total Budget Financing (C + D) 223,601,718 190,328,208 (33,273,510) Expenditure budgeted by nature of cost Personnel Cost (excluding Covid19) 36,197,045 33,843,934 (2,353,112) Overhead Charges (excluding Covid19) 24,475,689 13,349,405 (11,126,283) Covid19 Personnel Cost 12,304,621 11,800,000 (504,621) Covid19 Overhead Charges 4,512,126 4,200,000 (312,126) Sub total 77,489,480 63,193,339 (14,296,142) 11 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Capital Expenditure by Sectors Sub-Sector: Economic Agriculture 145,661 130,631 (15,029) Business Innovation and Technology 998,619 895,582 (103,038) Housing and Urban Development 2,067,455 1,854,134 (213,320) Public Works and Infrastructure 6,276,569 3,628,951 (2,647,618) Covid19 Capital Expenditure - Economic Sector 44,733,117 42,117,545 (2,615,572) Total for Sub-sector: Economic 54,221,421 48,626,844 (5,594,577) Sub-Sector: Social Education 8,668,917 5,274,457 (3,394,461) Health 5,764,241 5,169,485 (594,756) Social Development 252,805 226,720 (26,084) Covid19 Capital Expenditure - Social Sector 49,178,576 46,604,321 (2,574,255) Total for Sub-sector: Social 63,864,539 57,274,983 (6,589,556) Sub-Sector: Regional Environment and Natural Resources 864,688 525,469 (339,219) Water 617,586 453,863 (163,723) Covid19 Capital Expenditure - Regional Sector 3,936,422 3,880,262 (56,161) Total for Sub-sector: Regional 5,418,696 4,859,594 (559,102) Sub-Sector: General Administration Executive 5,933,856 4,321,599 (1,612,256) Governance 865,120 775,857 (89,263) Law and Justice 358,743 321,728 (37,015) Legislature 946,353 848,708 (97,645) Covid19 Capital Expenditure - General Admin Sector 14,503,510 14,007,035 (496,475) Total for Sub-sector: General Admin 22,607,582 20,274,927 (2,332,655) Totals 146,112,238 131,036,348 (15,075,890) Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified 30th January, 2021 12 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 NOTES TO THE FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. General information The State financial statements for the year ended 31 DECEMBER 2020 were authorized for issue by the Accountant General on 30th January, 2021. Kaduna State Government's (KDSG’s) principal activities are the provision of social, infrastructure, educational, housing, justice, transport, agricultural and health services, waste management and emergency services. The State’s registered office is located at Independence Way, Kaduna North, Nigeria. 2.1 Statement of compliance with IPSAS and transitional explanations The Federal Executive Council of Nigeria approved the adoption of International Public Sector Accounting Standards (IPSAS) in July 2010. Public Sector Entities were required to adopt, prepare and present 2016 Financial Statements using Accrual Basis IPSAS and Kaduna State was in compliance with Accrual Basis IPSAS from that date. IPSAS therefore became the National Standards in the Public Sector from 2016 and all references to National Standards, if any, refers to the International Public Sector Accounting Standards (IPSAS). The financial statements have been prepared in accordance with accrual basis International Public Sector Accounting Standards (IPSASs). IPSAS 33 (First Time Adoption of Accrual Basis IPSAS) allows KDSG a period of up to three years to recognize and/or measure certain assets and/or liabilities. The Government views the exercise of identifying and measuring legacy assets as very strategic. Hence KDSG has chosen to be diligent in its approach and consequently require more time to fully accomplish the exercise. Based on the progress made so far, it is expected that the exercise would be concluded soon. In its transition to accrual basis IPSASs, KDSG took advantage of this transitional exemption for its yet-to-be-valued and yet-to-be-recognized assets and liabilities. Coordinated efforts are currently being made to establish fair value assessment of all immovable assets controlled by the State. This is to be achieved, in part, through the constitution of a technical committee of relevant and experienced professionals from the Ministry of Works and other Infrastructure related MDAs. As a result of the foregoing, KDSG is unable to make an explicit and unreserved statement of compliance with accrual basis IPSASs in preparing its transitional IPSAS financial statements for this reporting period. The State financial statements are presented in Nigerian Naira, which is the functional and reporting currency and all values are rounded to the nearest thousand except where the thousand sign (N’000) is not indicated. The accounting policies have been consistently applied to all the years presented. The State financial statements are prepared on an accrual basis, except for the Statement of Cash flows and the Statement of Budget comparison with actual amount. 13 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 2.2 Summary of significant accounting policies a) Consolidation Controlled entities The controlled entities are all those entities over which KDSG has the power to govern their financial and operating policies. The entities are Kaduna State Property Development Company, Kaduna Investment and Finance Company Limited, Kaduna State Market Development and Management Company Limited, Kaduna State Transport Authority. These controlled entities are fully consolidated from the date in which control is attained by KDSG. They are de-consolidated from the date that control ceases. Inter-entity transactions, balances and unrealized gains and losses on transactions between members of the State are eliminated in full. The accounting policies of the controlled entities are consistent with the policies adopted by KDSG. b) Interest in joint venture and associates Where the State has an interest in a joint venture which is a Joint Arrangement, whereby the venturers have a binding arrangement that establishes joint control over the economic activities of the entity, the State recognizes its interest in the joint venture using the equity method of consolidation. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognized at cost and the carrying amount is increased or decreased to recognize the investor’s share of the surplus or deficit of the investee after the date of acquisition. The investor’s share of the investee’s surplus or deficit is recognized in the investor’s surplus or deficit. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor’s proportionate interest in the investee arising from changes in the investee’s equity that have not been recognized in the investee’s surplus or deficit. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The investor’s share of those changes is recognized in net assets/equity of the investor. KDSG has neither associates nor joint ventures as at 31st December, 2020. c) Current versus non-current classification KDSG presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: • Expected to be realized or intended to be sold or consumed in the normal operating cycle • Held primarily for the purpose of trading • Expected to be realized within twelve months after the reporting period, or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period 14 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 All other assets are classified as non-current. A liability is current when: • It is expected to be settled in the normal operating cycle • It is held primarily for the purpose of trading • It is due to be settled within twelve months after the reporting period, or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The State classifies all other liabilities as non-current. d) Revenue recognition Revenue from non-exchange transactions Fees, taxes and fines The State recognizes revenues from fees, taxes and fines when the event occurs and the asset recognition criteria are met. To the extent that there is a related condition attached that would give rise to a liability to repay the amount, deferred income is recognized instead of revenue. Other non-exchange revenues are recognized when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the fair value of the asset can be measured reliably. Transfers from other government entities Revenues from non-exchange transactions with other government entities are measured at fair value and recognized on obtaining control of the asset (cash, goods, services and property) if the transfer is free from conditions and it is probable that the economic benefits or service potential related to the asset will flow to the State and can be measured reliably. Revenue from exchange transactions Rendering of services The State recognizes revenue from rendering of services by reference to the stage of completion when the outcome of the transaction can be estimated reliably. The stage of completion is measured by reference to labor hours or cost incurred to date as a percentage of total estimated labor hours or total cost. 15 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are recoverable. Sale of goods Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, usually on delivery of the goods and when the amount of revenue can be measured reliably and it is probable that the economic benefits or service potential associated with the transaction will flow to the State. Interest income Interest income is accrued using the effective yield method. The effective yield discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. The method applies this yield to the principal outstanding to determine interest income each period. Dividends Dividends or similar distributions are recognized when the shareholder’s or the State’s right to receive payments is established. Rental income Rental income arising from operating leases on investment properties (from irrigations and other properties) is accounted for on a straight-line basis over the lease terms and included in revenue. e) Investment property Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the replacement cost of components of an existing investment property at the time the cost is incurred if the recognition criteria are met and excludes the costs of day- to-day maintenance of an investment property. Investment properties primary comprise irrigation assets and other rental yielding buildings. Investment property acquired through a non-exchange transaction is measured at its fair value at the date of acquisition. Subsequent to initial recognition, investment properties are measured using the cost model and are depreciated over a 40-year period. Investment properties are derecognized either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit or service potential is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the surplus or deficit in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. 16 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 f) Property, plant and equipment All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. When significant parts of property, plant and equipment are required to be replaced at intervals, the State recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhaul is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in surplus or deficit as incurred. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration the asset is initially measured at its fair value. Depreciation on assets is charged on a straight-line basis over the useful life of the asset. Depreciation is charged at rates calculated to allocate the cost or valuation of the asset less any estimated residual value over its remaining useful life: Buildings 45 - 55 years Infrastructure assets water 20 - 22 years Infrastructure assets – others 20 – 22 years Plant & Machinery 5 - 12 years Furniture & Fittings 5 - 7 years Vehicles 5 – 7 years Office & Other Equipment 4 – 5 years The assets’ residual values and useful lives are reviewed, and adjusted prospectively, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount, or recoverable service amount, if the asset’s carrying amount is greater than its estimated recoverable amount or recoverable service amount. The State derecognizes items of property, plant and equipment and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognized. g) Leases State as a lessee Finance leases are leases that transfer substantially all of the risks and benefits incidental to ownership of the leased item to the State. Assets held under a finance lease are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value 17 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 of the future minimum lease payments. The State also recognizes the associated lease liability at the inception of the lease. The liability recognized is measured as the present value of the future minimum lease payments at initial recognition. Subsequent to initial recognition, lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in surplus or deficit. An asset held under a finance lease is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the State will obtain ownership of the asset by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased item to the State. Operating lease payments are recognized as an operating expense in surplus or deficit on a straight-line basis over the lease term. State as a lessor Leases in which the State does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term. Rent received from an operating lease is recognized as income on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned. h) Intangible assets Intangible assets acquired separately are initially recognized at cost. The cost of intangible assets acquired in a non-exchange transaction is their fair value at the date of the exchange. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in surplus or deficit in the period in which the expenditure is incurred. The useful life of the intangible assets is assessed as either finite or indefinite. Intangible assets with a finite life are amortized over its useful life: Software 10 - 15 years Intangible assets with a finite useful life are assessed for impairment whenever there is an indication that the asset may be impaired. Intangible assets with indefinite useful life are tested for impairment at least once year regardless of impairment indicators. 18 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 The amortization period and the amortization method, for an intangible asset with a finite useful life, are reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on an intangible asset with a finite life is recognized in surplus or deficit as the expense category that is consistent with the nature of the intangible asset. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the surplus or deficit when the asset is derecognized. Research and development costs The State expenses research costs as incurred. Development costs on an individual project are recognized as intangible assets when the State can demonstrate: • The technical feasibility of completing the asset so that the asset will be available for use or sale • Its intention to complete and its ability to use or sell the asset • How the asset will generate future economic benefits or service potential • The availability of resources to complete the asset • The ability to measure reliably the expenditure during development Following initial recognition of an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. During the period of development, the asset is tested for impairment annually with any impairment losses recognized immediately in surplus or deficit. i) Impairment of non-financial assets Impairment of cash-generating assets At each reporting date, the State assesses whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the State estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset or the cash-generating unit (CGU) exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 19 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations are recognized in the statement of financial performance in those expense categories consistent with the nature of the impaired asset. Impairment of non-cash-generating assets The State assesses at each reporting date whether there is an indication that a non-cash-generating asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the State estimates the asset’s recoverable service amount. An asset’s recoverable service amount is the higher of the non-cash-generating asset’s fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable service amount, the asset is considered impaired and is written down to its recoverable service amount. In assessing value in use, the State has adopted the depreciation replacement cost approach. Under this approach, the present value of the remaining service potential of an asset is determined as the depreciated replacement cost of the asset. The depreciated replacement cost is measured as the reproduction or replacement cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect the already consumed or expired service potential of the asset. In determining fair value less costs to sell, the price of the assets in a binding agreement in an arm's length transaction, adjusted for incremental costs that would be directly attributed to the disposal of the asset is used. If there is no binding agreement, but the asset is traded on an active market, fair value less cost to sell is the asset's market price less cost of disposal. If there is no binding sale agreement or active market for an asset, the State determines fair value less cost to sell based on the best available information. For each asset, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the State estimates the asset's recoverable service amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable service amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable service amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in surplus or deficit. j) Financial instruments Financial assets Initial recognition and measurement 20 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Financial assets within the scope of IPSAS 29 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through surplus or deficit, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. The State determines the classification of its financial assets at initial recognition. The State's financial assets include: cash and short-term deposits; trade and other receivables; loans and other receivables; quoted and unquoted financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets at fair value through surplus or deficit Financial assets at fair value through surplus or deficit include financial assets held for trading and financial assets designated upon initial recognition at fair value through surplus and deficit. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through surplus or deficit are carried in the statement of financial position at fair value with changes in fair value recognized in surplus or deficit. KDSG does not have any ‘financial assets at fair value through surplus or deficit’ as at 31 DECEMBER 2020. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Losses arising from impairment are recognized in the surplus or deficit. KDSG does not have any ‘loans and receivables’ as at 31 DECEMBER 2020. Held-to-maturity Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the State has the positive intention and ability to hold it to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The losses arising from impairment are recognized in surplus or deficit. KDSG does not have any ‘held to maturity’ as at 31 DECEMBER 2020. 21 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Available-for-sale financial assets The State classifies available-for-sale financial assets as non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity or financial assets at fair value through surplus or deficit. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with gains or losses recognized directly in net assets through the statement of changes in net assets until the financial asset is derecognized, at which time the cumulative gain or loss is recognized in surplus or deficit. Derecognition The State derecognizes a financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets when: • The rights to receive cash flows from the asset have expired or is waived • The State has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party; and either: (a) the State has transferred substantially all the risks and rewards of the asset; or (b) the State has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Impairment of financial assets The State assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include the following indicators: • The debtors or a group of debtors are experiencing significant financial difficulty • Default or delinquency in interest or principal payments • The probability that debtors will enter bankruptcy or other financial reorganization • Observable data indicates a measurable decrease in estimated future cash flows (e.g., changes in arrears or economic conditions that correlate with defaults) 22 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Financial assets carried at amortized cost For financial assets carried at amortized cost, the State first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the State determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in surplus or deficit. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or transferred to the State. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in surplus or deficit. Available-for-sale financial assets For available-for-sale financial assets, the State assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of financial assets classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value was below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the surplus or deficit – is removed from the reserve in net assets and recognized in surplus or deficit. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in surplus or deficit. 23 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IPSAS 29 are classified as financial liabilities at fair value through surplus or deficit or loans and borrowings, as appropriate. The State determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, plus directly attributable transaction costs. The State’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts. Subsequent measurement The measurement of financial liabilities depends on their classification. Financial liabilities at fair value through surplus or deficit Financial liabilities at fair value through surplus or deficit include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through surplus or deficit. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the State that are not designated as hedging instruments in hedge relationships as defined by IPSAS 29. Gains or losses on liabilities held for trading are recognized in surplus or deficit. Loans and borrowing After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in surplus or deficit when the liabilities are derecognized as well as through the effective interest method amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Derecognition A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. 24 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in surplus or deficit. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the State statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. k) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. For the purpose of the State’s statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts. l) Inventories Inventory is measured at cost upon initial recognition. To the extent that inventory was received through non-exchange transactions (for no cost or for a nominal cost), the cost of the inventory is its fair value at the date of acquisition. Costs incurred in bringing each product to its present location and condition are accounted for, as follows: • Raw materials: purchase cost • Finished goods and work in progress: cost of direct materials and labor and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs 25 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 After initial recognition, inventory is measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of operations, less the estimated costs of completion and the estimated costs necessary to make the sale, exchange, or distribution. Inventories are recognized as an expense when deployed for utilization or consumption in the ordinary course of operations of the State. m) Provisions Provisions are recognized when the State has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the State expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of financial performance net of any reimbursement. The provisions primarily arise from ongoing litigations and from long-term environmental obligations for which there is present obligations, outflow is probable and reliable estimates could be made. Restoration / Decommissioning liability Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of that particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the restoration/decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the statement of financial performance as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset. Contingent liabilities The State does not recognize a contingent liability, but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. 26 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Contingent assets The State does not recognize a contingent asset, but discloses details of a probable asset whose existence is contingent on the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the State in the notes to the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs. n) Changes in accounting policies and estimates The State recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical. The State recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit. o) Employee benefits Retirement benefit plans The State provides retirement benefits for its employees and political officer holders. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund), and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The contributions to fund obligations for the payment of retirement benefits are charged against income in the year in which they become payable. Defined benefit plans are post-employment benefit plans other than defined-contribution plans. The defined-benefit funds are actuarially valued based on the projected unit credit method basis. Deficits identified are recovered through lump sum payments or increased future contributions on proportional basis. The contributions and lump sum payments reduce the post-employment benefit obligation. Short and long-term employee benefits The cost of all short-term employee benefits, such as leave pay, is recognized during the period in which the employee renders the related service. The State recognizes the expected cost of performance bonuses only when the State has a present legal or constructive obligation to make such payment, and a reliable estimate can be made. 27 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 The State provides long-term incentives to eligible employees, payable on completion of years of employment. The State’s liability is based on an actuarial valuation. The projected unit credit method has been used to value the obligation. Actuarial gains and losses on the long-term incentives are fully accounted for in the statement of financial performance. p) Foreign currency transactions Transactions in foreign currencies are initially accounted for at the ruling rate of exchange on the date of the transaction. Payables and receivables denominated in foreign currency are reported at the statement of financial position reporting date by applying the exchange rate on that date. Exchange differences arising from the settlement of creditors, or from the reporting of creditors at rates different from those at which they were initially recorded during the period, are recognized as income or expenses in the period in which they arise. q) Borrowing costs Borrowing costs are capitalized against qualifying assets as part of property, plant and equipment. Such borrowing costs are capitalized over the period during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization ceases when construction of the asset is complete. Further borrowing costs are charged to the statement of financial performance. r) Related parties The State regards a related party as a person or an entity with the ability to exert control individually or jointly, or to exercise significant influence over the State, or vice versa. Members of key management are regarded as related parties and comprise the State Executive Committee Members and Heads of Ministries, Departments and Agencies. s) Service concession arrangements The State analyses all aspects of service concession arrangements that it enters into in determining the appropriate accounting treatment and disclosure requirements. In particular, where a private party contributes an asset to the arrangement, the State recognizes that asset when, and only when, it controls or regulates the services the operator must provide together with the asset, to whom it must provide them, and at what price. In the case of assets other than ’whole-of-life’ assets, it controls, through ownership, beneficial entitlement or otherwise – any significant residual interest in the asset at the end of the arrangement. Any assets so recognized are measured at their fair value. To the extent that an asset has been recognized, the State also recognizes a corresponding liability, adjusted by a cash consideration paid or received. 28 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 t) Budget information The State intends to prepare accrual basis budget in the nearest future when all planned costs and income are presented in a single statement to determine the needs of the State. As a result of the adoption of the accrual basis for budgeting purposes, there would be no basis, timing or entity differences that would require reconciliation between the actual comparable amounts and the amounts presented as a separate additional financial statement in the statement of comparison of budget and actual amounts. Pending the transition to accrual basis budgeting however, the State would prepare statements of budget comparison on cash basis. u) Significant judgments and sources of estimation uncertainty The preparation of the State's financial statements in conformity with IPSAS requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgments In the process of applying the State’s accounting policies, management has made judgments, which have the most significant effect on the amounts recognized in the State financial statements. Operating lease commitments – State as lessor The State has entered into property leases of certain of its properties. The State has determined, based on an evaluation of the terms and conditions of the arrangements, (such as the lease term not constituting a substantial portion of the economic life of the commercial property) that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Estimates and assumptions In accordance with IPSAS 1 P. 140, the key assumptions concerning the future and other key sources of estimating uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The State based its assumptions and estimates on parameters available when the State financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the State. Such changes are reflected in the assumptions when they occur. Useful lives and residual values The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal: 29 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 • The condition of the asset based on the assessment of experts employed by the State • The nature of the asset, its susceptibility and adaptability to changes in technology and processes • The nature of the processes in which the asset is deployed • Availability of funding to replace the asset • Changes in the market in relation to the asset Impairment of non-financial assets – cash-generating assets The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change, which may then impact management’s estimations and require a material adjustment to the carrying value of tangible assets. The State reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Cash-generating assets are stated at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates of expected future cash flows are prepared for each group of assets. Expected future cash flows used to determine the value in use of tangible assets are inherently uncertain and could materially change over time. Impairment of non-financial assets – cash generating assets The State reviews and tests the carrying value of non-cash-generating assets when events or changes in circumstances suggest that there may be a reduction in the future service potential that can reasonably be expected to be derived from the asset. Where indicators of possible impairment are present, the State undertakes impairment tests, which require the determination of the fair value of the asset and its recoverable service amount. The estimation of these inputs into the calculation relies on the use of estimates and assumptions. Any subsequent changes to the factors supporting these estimates and assumptions may have an impact on the reported carrying amount of the related asset. Fair value estimation – financial instruments Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, judgment is required in establishing fair values. Judgment includes the 30 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Provisions Provisions were raised and management determined an estimate based on the information available. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Provision is made for the estimated cost to be incurred on the long-term environmental obligations, comprising expenditure on pollution control and closure over the estimated life of the landfill. The provision is based on the advice and judgment of qualified engineers. The increase in the restoration provision due to passage of time is recognized as finance cost in the statement of financial performance. The cost of ongoing programs to prevent and control pollution and rehabilitate the environment is recognized as an expense when incurred. Held-to-maturity investments and loans and receivables The State assesses its loans and receivables and its held-to-maturity investments at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the State evaluates the indicators present in the market to determine if those indicators are indicative of impairment in its loans and receivables or held-to-maturity investments. Where specific impairments have not been identified the impairment for receivables, held-to-maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), FCNA, FSCA, ACTI, MNIM, ACCA IPSAS Certified FRC/2019/002/00000020054 Accountant General, Kaduna State 30th January, 2021 31 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 SUB CLASSIFICATION OF BALANCES 3 Revenue from Non - Exchange Transactions 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Gross Allocation from Federation Accounts 42,561,248 54,233,605 Non-Oil Revenue (Share of Solid Minerals) 526,875 69,881 Share of Good and Value Consideration - 562,245 Share of forex equalization 1,779,638 425,700 Excess bank charges 487,418 128,277 Excess crude - 459,931 Value added tax 20,553,733 16,866,419 Exchange Gain Differences 1,380,913 91,791 Share of Stabilization Account 184,645 - FGN Intervention Fund 1,156,618 - Share of additional fund from NNPC - 80,321 Aids and Grants (See Note) 20,270,107 13,495,192 Taxes, Stamp Duty - KADIRS 38,126,120 42,731,409 Land use charge - Ministry of Finance - 121,255 License - Ministry of Health 7,946 5,602 License - Ministry of Human Services and Social Development 1,741 - License - RUWASSA 810 - Fines - Ministry of Environment and Natural Resources 3,515 - Fines - High Court of Justice 8,165 6,059 Fines - Customary Court of Appeal 4,200 5,370 Fines - Sharia Court of Appeal 4,674 9,920 Fines - Kaduna State Environmental Protection Agency 180 55 Fines - Ministry of Agriculture - 2,697 Penalty, Revocation and Re- issuance of C of O - KADGIS 3,180 4,820 Penalties - Kaduna State Traffic Law Enforcement Authority 338,418 168,491 Kaduna State Public Procurement Authority 253,674 109,427 Stamp duty - Alhuda- Huda College, Zaria - 89 Stamp duty - Kaduna Capital School 5 234 Stamp duty - Government Secondary School Fadan Kaje - 21 Stamp duty - Government Secondary School Ikara - 24 32 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Stamp duty - Science Secondary School, Kufena, Zaria - 4 Stamp duty - Sardauna Memorial College - 41 Stamp duty - Ministry of Education, Science and Technology - 1,805 Stamp duty - Rimi College, Kaduna - 42 Stamp duty - GSS Birnin Gwari - 18 Stamp duty - Government College Kagoro - 36 Total Non - Exchange Revenue 127,653,821 129,580,780 Aids and Grants: The World Bank donated the sum of N100,000.00 (One Hundred Million Naira) to KDSG as part of the Covid19 Interventions; whilst the Federal Government donated N1,000,000,000.00 (One Billion Naira) as Covid19 support. 4 Revenue from Exchange Transactions 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Fees, Sales, Rent - Muslim Pilgrims Welfare Board 28,988 86,248 Fees, Sales, Rent - Christian Pilgrims Welfare Board 20 120 Fees - Office of the Auditor General (State) 90 145 Fees, Sales, Rents - Ministry of Agriculture 21,164 30,605 Sales - Kaduna State Forest Management 2,100 - Sales - Agricultural Development Project 947 - Fees, Sales, Rent - Ministry of Finance 15,214,358 12,417,017 Kaduna Industrial and Finance Company - Fees - Kaduna State Independent Electoral Commission 280 420 Fees, Sales - KADIRS 5,364 236,624 Fees, Sales, Rent - Ministry of Business Innovation and Technology 24,307 23,497 Fees - KASUPDA 813,192 423,297 Fees, Rent - Ministry of Works and Transport 10,957 91,207 Fees - Ministry of Water Resources 0 72 Fees - High Court of Justice 16,103 10,901 Fees - Customary Court of Justice 3,618 5,053 Fees - Sharia Court of Appeal 3,635 8,420 Fees, Rent - Ministry of Sports 531 21,286 33 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Fees - Ministry of Education - 130,926 Fees, Rent - Library Board 90 182 Fees, Sales - Nuhu Bamali Polytechnic Zaria 394,011 737,967 Fees, Sales - College of Education Gidan Waya 235,630 252,537 Fees, Rent - Capital School Kaduna 419 23,314 Fees - Barewa College Zaria - 13,875 Fees - Al Hudda College Zaria - 3,924 Fees - Sardauna Memorial College Kaduna - 579 Fees - Government College Kaduna - 2,301 Fees - Queen Amina College - 16,002 Fees - Government Secondary School Kagoro - 729 Fees - Government Secondary School Fada Kaje - 2,889 Fees - Rimi College - 673 Fees - Government Girls College Zonkwa - 2,730 Fees, Sales, Rent - Kaduna State University 292,222 556,401 Fees - Government Science Secondary School Kufena - 7,103 Fees - Government Science Secondary School Soba - 8,430 Fees - Government Secondary School Kwoi - 15,239 Fees - Government Science Secondary School Ikara - 3,767 Fees - Science Secondary School Birnin Gwari - 2,744 Fees - Government College Kagoro - 6,204 Fees, Sales - Ministry of Health 102,802 136,564 Fees, Rent - College of Nursing Kafanchan - 30,843 Fees, Sales - Shehu Idris School of Health Technology Makarfi 295,375 47,481 Fees - State Emergency Management Agency 25,592 52,255 Fees - Ministry of Environment and Natural Resources 19,184 Fees, Sales, Rent - Kaduna State Environmental Protection Agency 53,240 39,746 Fees - Ministry of Rural and Community Development - 3,556 Fees - Kaduna State Road Agency 40 1,620 Fees - Kaduna State Schools Quality Assurance Authority 125,753 112,059 Fees - Ruwassa 10,069 3,610 Fees, Rent - College of Midwifery Kaduna 31,444 26,431 Fees - Local Government Service Commission 530 620 Fees, Rent - KADGIS 5,938,908 9,822,403 Sales - Kaduna State Media Corporation - KSMC 99,554 102,020 34 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Sales - Government Printing Press 23,121 16,526 Sales - Barau Dikko Teaching Hospital Kaduna 336,138 256,134 Sales - Ministry of Youth and Sports - 675 Sales - Kaduna State Management Project (FMP) - 2,604 Sales - Kaduna Water Corporation 4,755,372 7,248,835 Rent - Scholarship Board - 130 Rent - Kaduna State Mining Development Company 1,072,970 Rent - Kaduna State Market Development and Management Company 346,451 Total Exchange Revenue 30,304,567 33,047,540 Total Revenue 157,958,388 162,628,320 31 Dec. 2020 31 Dec. 2019 4A REVENUE SPLIT BETWEEN ALLOCATION AND IGR N'000 N'000 Cash Internally Generated Revenue 50,768,523 43,961,831 Accrued Internally Generated Revenue (See Note 4B) 18,288,669 32,253,127 Subtotal of Internally Generated Revenue 69,057,192 76,214,958 Cash FAAC Allocation 62,968,653 66,160,106 Accrued FAAC Allocation 5,662,436 6,758,064 Subtotal of Allocation 68,631,089 72,918,170 Grants 20,270,107 13,495,192 Total Revenue 157,958,388 162,628,320 35 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 31 Dec. 2020 31 Dec. 2019 4B MDA / CLASS OF REVENUE N'000 N'000 KADGIS 2,811,438 7,797,121 KASUPDA Fees 63,500 148,283 Kaduna State Water Corporation 4,755,372 7,248,835 Nuhu Bamali Polytechnic, Zaria - 203,967 Kaduna State Development and Property Company Limited 1,052,970 Shehu Idris College Health Science & Tech, Makarfi 189,720 - Kaduna State Media Corporation 31,593 7,266 Kaduna State Market Development Co. Limited 20,662 - Kaduna State Quality Assurance Authority 9,647 - Ministry of Business Innovation and Technology 5,553 7,948 State Emergency Management Agency (SEMA) 19,271 42,606 KADIRS Accrued Revenue and Reimbursement of PAYE, VAT & WHT from FG 9,328,943 16,797,101 18,288,669 32,253,127 36 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 SCHEDULE OF JANUARY – DECEMBER 2020 FAAC ALLOCATION SHARE OF SHARE OF FGN GROSS EXC BANK SOLID STABILIZATION Intervention 4C MONTH AMOUNTS CHARGES EXCH.GAIN MINERALS ACCONT FOREX EQUA. Funds VAT TOTAL N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 January 4,264,874 6,085 8,513 - - - - 1,442,563 5,722,035 February 3,766,411 - 6,143 - - 122,078 - 1,311,481 5,206,113 March 3,816,490 - 521,911 - - - - 1,575,522 5,913,923 April 2,976,310 10,360 221,308 102,178 - 1,161,984 - 1,189,882 5,662,023 May 3,357,472 9,360 231,242 - - - - 1,341,776 4,939,850 June 3,112,273 461,613 360,599 - - - - 1,735,343 5,669,828 July 4,463,459 - - - - - - 1,716,277 6,179,736 August 4,415,427 - - - - - - 2,066,733 6,482,160 September 2,823,837 - - 415,452 - 317,605 578,309 1,957,582 6,092,785 October 2,912,599 - - 9,245 184,645 59,380 578,309 1,625,233 5,369,411 November 3,331,924 - - - - 63,193 - 2,335,673 5,730,789 December 3,320,172 - 31,197 - - 55,399 - 2,255,668 5,662,436 TOTAL 42,561,248 487,418 1,380,913 526,875 184,645 1,779,638 1,156,618 20,553,733 68,631,089 5 Consulting and professional services 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Revenue collection expenses 577,881 275,555 Budgeting expenses 188,058 220,464 Other services 2,629,254 943,963 Total 3,395,193 1,439,982 This is the expenditure made by Government in procuring professional services from specialists in the advancement of government programmes. Revenue collection expenses represents performance-based incentives awarded revenue collection agencies for meeting and surpassing targets. Budget expenses are extra expenditure and incentives for budget preparation. Other services were 37 | P a g e expenses incurred in procuring expert services across various disciplines. KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 6 Employee benefits 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Covid19 related benefits 559,985 - Basic salary 36,015,453 28,562,399 Entertainment Allowance 752 70,532 Furniture Allowance 1,519 137,631 Hazard Allowance 229,433 100,872 Housing Allowance 80,325 992,151 Leave Allowance 1,001,304 666,044 Legislative Allowance 30,660 76,019 Meal Allowance - 173,220 Medical Allowance - 309,077 Responsibility Allowance 695 7,852 Robe Allowance 46,397 110,904 Shift Allowance 169,631 90,239 Teaching Allowance 407,764 348,530 Transport Allowance 277,847 790,575 TSS Allowance 1,620,168 679,850 Utility Allowance 2,851 224,357 Vehicle Maintenance Allowance 7,344 50,240 Wages 3,441 34,630 Post-Employment Benefits 12,653,818 8,621,470 CRFC Salaries/Allowances 444,896 223,629 Other Allowances 2,325,506 594,413 55,879,789 42,864,633 38 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Employee benefits are establishment cost for direct and indirect employees, including political office holders. In Kaduna State, all employee benefits are consolidated. Basic salary is a base salary from which other allowances are determined. Entertainment allowance is aimed at catering for work related entertainment of internal and external customers. Furniture allowance is meant to augment the cost of furnishing official residences of government appointees, customarily paid once in four years subject to approval. Hazard allowance is a special allowance paid to employees who work in hazardous environment, for example, hospitals, laboratories, fire services etc. Housing allowance is given to employees to augment rental charges for employees that do not enjoy government quarters. Leave allowance is paid to employees to defray cost of travelling to leave destinations. Legislative allowance is a special allowance paid to staff working with legislators. Meal allowance is meal subsidy paid to all employees. Medical allowance is aimed at subsidizing cost of medication and hospital services. Responsibility allowance is to confidential secretaries of Management staff and in certain instances, the Management staff. Robe allowance is paid to Judges and Solicitors that appear in courts and in official capacities. Shift allowance is paid to staff that run shifts involving evening and night duties. Teaching allowance is a special allowance for classroom teachers. Transport allowance is aimed at augmenting transportation cost of staff that do not qualify for official vehicles. TSS allowance is an awarded salary for all professional teachers. Utility allowance is aimed at defraying cost of utilities (water, electricity etc.). Vehicle maintenance allowance is paid to appointees to maintain official vehicles. Wages are paid to non-scheduled temporary staff. Post-employment benefits include pension and gratuities. CRFC Salaries/Allowance applies to certain employees of scheduled Commissions and Boards as first line charges. Other allowances cover such benefits as domestic staff allowance, exams supervision allowance etc. 7 Fuel and lubricants 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Motor Vehicle Fuel Cost 263,518 253,593 Other Transport Equipment Fuel Cost 24,314 25,191 Plant/Generator Fuel Cost 204,798 226,605 492,630 505,389 Fuel and lubricants relate to the expenses incurred in running official vehicles, plant and equipment as distinct from cost of maintenance. In prior years, Sea Boat Fuel Cost and Cooking Gas Cost were separately classified but have been aggregated with Other Transport Equipment Fuel Cost and Plant/Generator Fuel Cost respectively. 39 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 8 Grants and contributions 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Cultural and Religious Expenses 259,576 338,458 Grants and Donations 2,834,457 1,136,831 Parastatals Overheads 3,450,795 283,704 Counterpart Contribution 1,207,851 34,466 7,752,679 1,793,459 Grants and contribution relate to the Government intervention for the operations and proper functioning of quasi-government organizations and other entities that are self-accounting. Cultural and religious expenses are government expenditure to promote activities of traditional councils including seminars and workshop for the council. Grants and donations are funding support for research or special services. Parastatals overheads expenditure relate to quasi government organization for specific purposes. Recurrent counterpart contributions are condition precedent to receiving Development related grants from external donors. 9 Insurance 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Group Personal Accident - 37,443 Kaduna Health Insurance Scheme - - Motor Vehicle comprehensive insurance 60,870 42,158 60,870 79,601 Insurance expenditure provides covers against identified insurable risk. Group personal accident insurance is aimed at providing group compensation to employees of government in case of death. Kaduna Health Insurance Scheme (KHIS) is a contribution towards providing medical bills cover for public servants. Motor vehicle insurance is a comprehensive cover for government vehicles. 40 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 10 Materials and supplies 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Covid19 Interventions 2,258,056 - Books 308,835 56,299 Consumables 734,723 1,992,051 Drugs and medical supplies 1,285,255 1,542,785 Scholarship 400,280 2,431,746 Education Expenses and Examination fees 232,913 657,365 Newspapers and periodicals 33,352 57,629 Printing and stationery 259,882 477,067 School feeding 874,303 2,027,854 Water infrastructure chemicals 363,514 641,154 6,751,113 9,883,948 Materials and supplies are consumables procured and used by government organizations in the course of service delivery. Books are educational supplies covering text books and exercise books; they are expensed upon distribution. Consumables are materials used in the course of providing services by government covering uniforms, office stationery, and computer consumables. Drugs and medical supplies are health products, public health emergencies etc. Health related programmes separately classified in prior periods has been aggregated with Drugs and Medical supplies. Scholarship are special education support scheme for students. Education Expenses and Examination fees are education related expenses and other expenditure paid to external examination bodies. Newspapers and periodicals are magazines procured for departments and management staff for information currency. Printing and stationery are cost of producing documents and materials for documentation and communication. School feeding is a special programme of government to provide food and nutrition for pupils. Water treatment chemicals are inputs for public water purification. Certain expenses were reclassified from General office expense category (Note 11) to Materials and supplies category in order to more accurately reflect their substance. These include Education and examination expenses, Health related programmes and Scholarship. 41 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 11 General expenses 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Catering expenses 47,014 100,752 Cleaning and fumigation 609,225 836,052 Court settlement, Legal Services and Provision (Note 33) 158,167 2,042,308 Entertainment 1,005,871 1,448,954 Honorarium and sitting allowance 2,070,820 60,514 Mass awareness 2,189,220 1,598,246 Promotion and recruitment expenses 3,883 114,786 Rent 4,044 11,078 Sporting and recreation expenses 65,420 180,695 Subscription 428,099 252,825 6,581,763 6,646,209 General office expenses are other office expenditure of a general nature separately from stationery materials and supplies. Catering expenses are expenditure on food items for in-house facilities for Ministries, Departments and Agencies. Cleaning and fumigation are expenditure incurred on work/office environment. Court settlement are payment and/or provisions for judgement debt. Entertainment are hospitality related expenditure in the course of service delivery. Honorarium and sitting allowance are expenses of conducting meetings and per-diem paid to non-scheduled staff. Hotel accommodation are expenses for government visitors. Mass awareness are campaigns for sensitization and awareness about government policies and programmes. Promotion and recruitment expenses are direct cost of job interviews. Rent expenses are rentals for office accommodation. Sporting and recreation expenses are youth and hospitality oriented programmes to engender youth empowerment and leisure. Subscription expenses are software renewal charges, internet access, subscription to professional bodies etc. Certain expenses were reclassified to Materials and supplies category (Note 10) in order to more accurately reflect their substance. These include Education and examination expenses, Health related programmes and Scholarship. 42 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 12 Other services 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Seedling expenses 101,731 657,129 Agricultural immunization - 54,135 Weeding and fire tracing - 31,959 Restoration of River Kaduna Biodiversity Programme - 25,900 Pre planting and post planting activities - 26,993 Land clearance for Agricultural activities - 30,030 Brushing, coppice reduction - 69,300 Impairment charge on Biological Assets 3,442,423 - 3,544,154 895,445 Seedling expenses is the cost of raising seedlings to the point of transplanting. Agricultural immunization is the protection of livestock against diseases and pests. Weeding and fire tracing are cost of maintaining tree plantations against fire outbreaks; it involves weeding of grass and brush around the perimeter of the forest. Restoration of River Kaduna Biodiversity programme involves de-silting of the river channels and streams running into the river to keep it clean and reduce sludge. Pre planting are activities undertaken before transplanting of seedlings. Post planting are the immediate activities including weeding, manuring etc. to ensure survival of the transplanted seedlings. Land clearance for agricultural activities include ploughing, harrowing and ridging preparatory to planting crops. Brushing, coppice reduction are maintenance activities to ensure that new shots from stumps are reduced to manageable numbers. Impairment charges are diminution in the fair value less cost to sell of Biological Assets. 43 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 13 Repairs and maintenance 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Repairs and Maintenance - Building 271,636 2,216,871 Repairs and Maintenance - Furniture and fittings 15,414 43,093 Repairs and Maintenance - Vehicle 199,562 214,430 Repairs and Maintenance - Equipment 59,286 93,722 Repairs and Maintenance - Plant 72,369 101,446 Repairs and Maintenance - Roads 1,092 802 Repairs and Maintenance - Others 9,230 62,980 628,589 2,733,344 Repairs and maintenance expenses were incurred to maintain the proper functioning of the property, plant and equipment. Included in "repairs and maintenance - others is the maintenance cost of dumpsites. 14 Security and safety 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Anti-Corruption 8,000 - Fire Fighting Materials 7,615 19,956 Printing of Security Documents 36,774 27,178 Protocol Support Services 213,094 344,498 Security Personnel Allowances 94,828 87,209 Security Services 2,202,338 2,020,077 Security Vote (Including Operations) 654,604 1,026,045 Security Vote (Preventive & Supportive Measure) 2,289,950 2,606,662 5,507,203 6,131,625 Security and safety expenses relate to the protection of lives and property and in the maintenance of laws and order. Fire-fighting materials expenses included materials, reagents and chemicals used in fire prevention and control. Printing of security documents expense were spent producing sensitive and controlled documents which includes stamps, receipts, vouchers etc. Security personnel allowances are paid to the security details of designated government officials. Security services are expenses in the course 44 | P a g e of providing security that may include security related supplies. Security votes are expenses related to the maintenance of the security architecture across the state. KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 15 Social benefits 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Welfare Packages 519,901 303,244 Social investments 543,963 567,358 1,063,864 870,603 Social benefits are all humanity related expenditure geared towards improving their lives and living conditions. Welfare packages are authorized expenditure to cater for welfare needs especially during festivities and to engender family and social relationships. Social investments and Empowerment of persons with disability are targeted investments aimed at improving the lives of youth and vulnerable persons in the society. 16 Training and human capital development 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Conferences and events 137,411 2,318,075 Formal training and capacity building - local 624,345 702,864 Formal training and capacity building - international 31,593 60,346 793,348 3,081,286 Training and human development is investment in human capacity that is job and career related. 17 Travel and transport 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Local travel and transport 366,957 1,204,330 International travel and transport 270,654 789,688 637,611 1,994,017 45 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Travel and transport are out of station job related travels. 18 Utilities 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Electricity 996,878 562,781 Postages and Telephone 6,307 19,981 Water Rates 177,129 102,180 1,180,314 684,942 Utility expenses are payment to providers of electricity, telephone and water rates. 19 Waste Management and Disposal 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Refuse evacuation programme 756,034 1,278,474 756,034 1,278,474 Waste management and disposal are expenditure on waste collection, transportation and disposal of both domestic and industrial waste. 20 Depreciation and amortization 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Irrigation 49,727 48,871 Building 1,199,545 1,352,743 Furniture & Fittings 669,278 802,948 Road Infrastructure 3,455,178 3,781,891 Water Infrastructure 450,422 454,957 Motor Vehicle 864,408 930,790 Office & Other Equipment 1,352,514 1,582,368 Plant & Machinery 1,026,652 1,361,888 Intangible assets amortization 82,384 24,130 9,150,109 10,340,586 46 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Depreciation expense is the systematic allocation of the depreciable amount of an item of property, plant and equipment over its useful life. Depreciable amount is determined after deducting the residual value. For the purpose of computing depreciation, residual value is deemed to be zero. Depreciation begins when the property, plant and equipment is available for use. The useful life of each asset is reassessed at the end of every reporting period and where expectation differs from previous projections, the change is accounted for as a change in accounting estimates and treated prospectively. Depreciation is charged in the year of construction or acquisition and none is charged in the year of disposal or asset retirement. 21 Finance and other bank charges 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Interest on local loans 2,143,568 2,571,903 Interest on foreign loans 2,312,593 553,043 Other bank charges 12,969 1,786 4,469,130 3,126,732 Finance charges are credit and bank related expenses. Interest on local loans is determined using the effective interest method. Effective interest method is a method of calculating the amortized cost of financial liabilities and of allocating the interest expense over the loan tenor. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the net carrying amount of the financial liability. Determination of effective interest rate on foreign loans is daunting due to the complications in obtaining verifiable repayment schedules on foreign borrowings, many of which predate the establishment of debt management office (DMO). Other bank charges are bank administrative charges not related to credits. 47 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 22 Inventories 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Water treatment chemicals 584,822 98,937 Books 102,862 353,563 Agric supplies - 128,036 Walkie Talkie 5,250 - Buildings for sales 1,000,000 1,000,000 1,692,934 1,580,536 Inventories are assets in the form of materials or supplies to be consumed in the production process; In the form of materials or supplies to be consumed or distributed in the rendering of services; Held for sale or distribution in the ordinary course of operations; or in the process of production for sale or distribution. Water treatment chemicals are alum for water purification; this balance represents the inventory of unused chemicals at year end. Books are multi-year usage reference books, other than student text and exercise books that are written off as incurred. Agric supplies are inventories of farm inputs such as fertilizer and seedlings. Buildings represent investments in a Public Private Partnership between Kaduna State Mortgage and Foreclosure Agency and other private sector partners to construct residential houses for sale. The buildings were under construction as at 31 December, 2020 48 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 23 Receivables 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Kaduna Geographic Information Service (KADGIS) 2,811,438 7,797,121 KASUPDA 63,500 148,283 Kaduna State Water Corporation 4,755,372 7,248,835 State Emergency Management Agency (SEMA) 19,271 42,606 Federal Account Allocation 5,662,436 6,758,064 KADIRS Accrued Revenue and Direct taxes and other related taxes refund from FG 10,132,739 20,095,996 Nuhu Bamali Polytechnic, Zaria - 203,967 Kaduna State Development and Property Company 1,052,970 - Shehu Idris College Health Science & Tech, Makarfi 189,720 - Kaduna State Media Corporation 31,593 7,266 Kaduna State Market Development Co. Limited 20,662 - Kaduna State Quality Assurance Authority 9,647 - Ministry of Business Innovation and Technology 5,553 7,948 Loans and advances 595,615 368,007 25,350,516 42,678,092 These are earned revenues, demand notices and staff related advances not yet collected at year end. 31 Dec. 2020 31 Dec. 2019 23A Receivables N'000 N'000 Exchange 9,545,694 15,824,033 Non Exchange 15,804,822 26,854,060 25,350,516 42,678,092 49 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 31 Dec. 2020 31 Dec. 2019 24 Reimbursables from the Federal Government N'000 N'000 Refund on account of Operation Sharan Daji at Kamuku/Kuyambana Forest 600,000 600,000 Zaria Water Supply Expansion Project 17,230,000 17,230,000 17,830,000 17,830,000 Refund for the renovation of Kaduna Airport, refund on account of Operation Sharan Daji at Kamuku/Kuyambana Forest. Zaria Water Supply project was a collaboration between the Federal Government, Kaduna State Government and the five benefiting Local Government Councils. The Federal Government share of N17.23b was borne by the State Government. 31 Dec. 2020 31 Dec. 2019 25 Cash and cash equivalents N'000 N'000 Treasury Single Accounts (TSA) 3,648,247 2,178,883 Operations Accounts 10,650,703 7,774,502 14,298,951 9,953,385 Cash represents demand deposits. Cash equivalents are highly liquid investments that are convertible to known amount of cash and with insignificant risk of change in value and that has short maturity period usually 90days from date of origination. There were no cash equivalents at year end. 31 Dec. 2020 31 Dec. 2019 26 Prepayments N'000 N'000 Contractors prepayment 21,745,938 466,190 21,745,938 466,190 Prepayments are advance payment and mobilization to contractors and supplies of services. Contractors prepayment are duly backed by Advance Payment Guarantees (APGs) issued by reputable financial institutions. 50 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 FURNITURE & ROAD WATER LAND BUILDING FITTINGS INFRASTRUCTURE INFRASTRUCTURE VECHICLE EQUIPMENT PLANT TOTAL 27 COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 2020 Opening balance 3,007,614 182,620,323 12,044,222 226,913,473 27,297,425 13,961,850 18,988,415 20,428,316 505,261,637 Addition 30,867 33,297,848 1,341,343 49,500,759 8,736,341 3,326,303 2,651,806 104,724 98,989,991 Reclassification Retirement - 2020 Closing balance 3,038,481 215,918,171 13,385,565 276,414,232 36,033,766 17,288,152 21,640,221 20,533,040 604,251,628 ACCUMULATED DEPRECIATION 2019 Closing balance - (11,589,892) (8,258,379) (24,691,000) (2,979,935) (4,931,780) (5,999,235) (8,396,544) (66,846,766) Charge for the year - (1,199,545) (669,278) (3,455,178) (450,422) (864,408) (1,352,514) (1,026,652) (9,017,997) Reclassification Retirement 2020 Closing balance - (12,789,438) (8,927,658) (28,146,178) (3,430,357) (5,796,187) (7,351,749) (9,423,196) (75,864,763) 2020 Carrying Amount 3,038,481 203,128,733 4,457,907 248,268,054 32,603,408 11,491,965 14,288,472 11,109,843 528,386,865 51 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 FURNITURE & ROAD WATER LAND BUILDING FITTINGS INFRASTRUCTURE INFRASTRUCTURE VECHICLE EQUIPMENT PLANT TOTAL 27 COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 2019 Opening balance 3,007,614 145,440,398 10,942,808 151,477,218 23,695,099 8,809,665 9,377,215 17,253,118 370,003,135 Addition - 37,179,925 1,101,414 75,436,255 3,602,326 5,152,185 9,611,200 3,175,197 135,258,502 Reclassification - Retirement - 2019 Closing balance 3,007,614 182,620,323 12,044,222 226,913,473 27,297,425 13,961,850 18,988,415 20,428,316 505,261,637 ACCUMULATED DEPRECIATION 2019 Opening balance - (10,237,149) (7,455,431) (20,909,109) (2,524,978) (4,000,990) (4,416,867) (7,034,656) (56,579,181) Charge for the year - (1,352,743) (802,948) (3,781,891) (454,957) (930,790) (1,582,368) (1,361,888) (10,267,585) Reclassification Retirement 2019 Closing balance - (11,589,892) (8,258,379) (24,691,000) (2,979,935) (4,931,780) (5,999,235) (8,396,544) (66,846,766) 2019 Carrying Amount 3,007,614 171,030,430 3,785,843 202,222,473 24,317,489 9,030,070 12,989,180 12,031,772 438,414,871 52 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Property, plant and equipment and tangible assets held for use in the production or delivery of goods and services, for rental to other and for administrative purposes and that are expected to be used for more than one financial period. Included in land are parcels of land purchased for right of way road construction and building of schools. Building are structures used for administrative purposes, teaching facilities, housing facilities and market and commercial purposes. Furniture and fittings include furnishings, desks, chairs, tables etc. Road infrastructure are roads constructed and rehabilitated including street lights, roads signs and other related infrastructure to facilitate mobility of human, goods and services. Water infrastructure are water related constructions including dams, canals, boreholes, storage tanks etc. Vehicles include motor and tricycles, trucks, vans, ambulances used for conveyance of persons and goods in the course of government operations. Equipment consists office equipment, electrical and mechanical appliances used in government operations. Plant includes immovable power plant and other heavy-duty installations. Land are not depreciated except in quarry and land fill. Building are depreciated over its useful life usually within 50years. Furniture and fittings are depreciated over its useful life and within the range of 5years. Road infrastructure is depreciation over its useful life usually within 20years. Water infrastructure is depreciated over its useful life and within 20years. Vehicles are depreciated over its useful life, usually 5years. Equipment has a useful life of 4years whilst Plant is depreciated over 5years. These depreciation periods are in line with the policy contained in section 2.2(f) of the accounting policy. The residual value and the useful life of an asset are reviewed at least at each annual reporting date and, if expectations differ from previous estimates, the change(s) are accounted for as a change in an accounting estimate in accordance with IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors. The State is yet to measure and recognize legacy assets. Logistics are in place to bring them into the books as soon as practicable. 53 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 28 Investment property 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Land irrigation - Opening balance 1,954,837 195,139 Addition in the year 34,262 1,759,699 Gross carrying amount 1,989,100 1,954,837 Accumulated Depreciation Opening balance (48,871) - Charge for the year (49,727) (48,871) Closing balance (98,598) (48,871) Carrying amount 1,890,501 1,905,966 Investment property is land or a building (or part of a building – or both) held to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes; or sale in the ordinary course of operations. Land irrigation are plots of land rented out to farmers for dry season farming. It is currently being written off over 40years. 29 Biological Assets 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Plantation assets 13,518,648 16,962,726 Ranch assets 8,111 9,013 Wildlife assets 15,336 12,780 13,542,095 16,984,518 Biological assets are living plants and animals. Plantation assets are living trees to be used as pulp woods, fuel woods, timber; they are also used for construction, scaffolding and building. Ranch assets are living animals bred for resale. Wildlife assets are living animals kept in the zoo for exhibition. These assets are state at their Fair value less cost to sell. 54 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 30 Intangible Assets 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Opening balance 723,896 412,918 Addition - Licenses 22,930 26,888 Addition - Software 1,724,706 284,090 Gross carrying amount 2,471,532 723,896 Amortization Opening balance (51,658) (27,528) Charge for the year (82,384) (24,130) Accumulated amortization (134,042) (51,658) Carrying amount 2,337,490 672,238 Intangible assets are identifiable non-monetary assets without physical substance. Intangible assets are amortized over the period of agreement or if shorter, over its useful life. The amortization expense is recognized in the Statement of Financial Performance under the heading 'Depreciation and amortization' 55 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 31 Financial Assets 31 Dec. 2020 31 Dec. 2019 a Available for sale N'000 N'000 N.N.D.C. Limited 200,939 200,939 Flour Mills of Nigeria Limited 7,406 6,131 Cement Company of Northern Nigeria Ltd 65,276 252,000 Kaduna Industrial and Finance Company 7,000 7,000 Niger Delta Holding 27,812 27,812 Nigeria Sovereign Investment Authority 5,857,775 6,696,066 DAAR Communication 300 36 First City Monument Bank 2,038 1,312 Unity Bank Plc. 44,098 44,098 First Bank Plc. 11,015 10,056 Take off grants - KADPMC 114,950 114,950 Guaranty Trust Bank Plc 8,721 - Zenith Bank Plc 7,250 - Dangote Cement Plc 10,946 - Take off grants - Kaduna State Contributory Health Management Authority 9,387 - Recapitalization of Kaduna State Development Company 1,000,000 - Sub total 7,374,913 7,360,400 b Held to Maturity 82,779 - Total 7,457,692 7,360,400 Financial assets are investments and instruments that entitle the government to receive cash or the equity instruments of other entities. IPSAS 29 requires financial assets to be designated subsequent to initial recognition at Held to maturity, Available for sale, Loans and receivables and Fair value through surplus or deficit. The investments listed above are designated at "Available for sale" and are recognized at fair value and with fair value changes recognized in net assets/equity in accordance with IPSAS 29 p. 64b. Held to Maturity is the amortized cost balance of Treasury Bill Investment made by Kaduna Industrial and Finance Company. The Investment will mature in July 2021. 56 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 32 Liabilities and accruals 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Liabilities on capital projects 10,496,921 16,409,100 Local Government share of IGR 3,527,024 2,268,963 Accrued Electricity and Water Rates 505,085 - 14,529,030 18,678,064 Liabilities are accruals consist of unpaid bills to third parties. Liabilities on capital projects represent indebtedness to contractors on projects on which certificate of values (CVs) have been raised. The CVs are raised on projects covering road infrastructure, water infrastructure, buildings etc. Utility accruals are unpaid bills on water, electricity and other utilities. Local government’s share of IGR represents local government share of internal generated revenue collected by a central state agency to be remitted to the respective local governments. 33 Provisions 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Opening balance: Ongoing legal cases with 'probable' outflow 2,389,895 347,587 Additional provision/(reversal) on legal cases (see note 11) 111,556 2,042,308 2.5% Provision on Zaria Water Supply and Expansion Project 430,750 430,750 2,932,200 2,820,645 The State has various legal cases in court; many of which are possible obligation as a result of past event, the outcome of which could result in outflow of resources or service potential. The Zaria Water provision is in respect of facilitation fee due on the receivable from the project. 57 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 34 FINANCIAL LIABILITIES 31 Dec. 2020 31 Dec. 2019 Non-Current N'000 N'000 Zenith Bank - - FG/Zenith Bank 11,963,005 12,423,878 Access Bank 8,365,738 8,688,027 Federal Government (BSF) 17,500,293 17,530,179 Development Partners 215,644,251 162,246,615 253,473,287 200,888,700 Current Zenith Bank - FG/Zenith Bank 460,873 425,649 Access Bank 322,289 297,657 783,162 723,306 254,256,449 201,612,006 34A FINANCIAL LIABILITIES - MOVEMENT 31 Dec. 2020 31 Dec. 2019 N'000 N'000 34B Zenith Bank Opening balance - 122,839 Interest accretion based on effective interest rate - 4,179 Repayment - (127,018) Closing balance - 0.00 34C FG/Zenith Bank Opening balance 12,849,528 13,242,646 Interest accretion based on effective interest rate 1,009,682 1,042,213 Repayment (1,435,331) (1,435,331) Closing balance 12,423,878 12,849,528 58 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 34D Access Bank Opening balance 8,985,684 9,260,591 Interest accretion based on effective interest rate 719,040 728,821 Repayment (1,016,697) (1,003,728) Closing balance 8,688,027 8,985,684 34E Federal Government Budget Support Opening balance 17,530,179 16,869,000 Adjustment to beginning balance (Note 38) - 700,000 Interest accretion 427,815 796,690 Repayment (457,702) (835,510) Closing balance 17,500,293 17,530,179 34F Foreign loans Opening balance 162,246,615 103,432,104 Adjustment to beginning balance (Note 38) 6,961,865 - Additional receipt 35,170,246 60,832,500 DMO Reconciliation 14,342,149 - Interest 2,312,593 553,043 Repayment (5,389,217) (2,571,031) Closing balance 215,644,251 162,246,615 254,256,449 201,612,006 Financial liabilities above are measured at initial recognition at fair value, which is the net amount received after deducting any directly related transaction cost. They are measured and carried subsequently at amortized cost with the exception of foreign loans. Determination of contractual repayment cash flows are daunting for foreign loans, hence are carried at provisional amounts after due reconciliation and consultation with the Debt Management Office (DMO). 59 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 35 Employee benefits 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Gratuity -A 66,216,486 63,063,320 Pension (defined benefits) - B 55,284,887 52,652,273 Pension (defined contributions) 18,090,510 17,229,058 Pension liability held in trust for workers without RSA Number 2,030,820 1,176,722 Severance benefits of political office holders 937,500 2,500,000 Payment of gratuity and death benefits - C (3,858,058) (1,924,566) Investments domiciled in the Central Bank of Nigeria D (405,688) (3,149,830) 138,296,456 131,546,976 35A Employee benefits 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Gratuity A + C 62,358,427 61,138,754 Pension (defined benefits) B + D 54,879,198 49,502,443 Pension (defined contributions) 18,090,510 17,229,058 Pension liability held in trust for workers without RSA Number 2,030,820 1,176,722 Severance benefits of political office holders 937,500 2,500,000 138,296,456 131,546,976 Gratuity and Defined Benefits Obligations are a form of Post-Employment arrangements under which KDSG provides post- employment benefits for her employees. Under these arrangements, the obligation of Government is not limited to contributions, if any, made on behalf of the employees. In 2016, the Government discontinued the Defined Benefits Scheme and transited to Defined Contribution Plans. (Contributory Pension Scheme). Defined contribution plans are post-employment benefit plans under which KDSG pays fixed contributions to the Pension Fund Administrators of employees’ choice and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The State paid an aggregate of N6.86billion for pension and accrued rights for the State and Local Governments in the 2020 financial year. 60 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 36 Accumulated Surplus 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Beginning balance 179,356,040 111,777,995 Surplus for the period 49,313,995 68,278,046 Net transitional adjustments (see Note 38) (6,961,865) (700,000) Closing balance 221,708,170 179,356,040 37 Available for Sale Reserve 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Beginning balance 3,832,467 3,913,230 Fair value movement (1,021,791) (80,763) Closing balance 2,810,676 3,832,467 IPSAS 29 p. 64b requires that financial assets designated at Available for sale be measured at fair value and with fair value changes recognized in net assets/equity. 38 Transitional adjustments 31 Dec. 2020 31 Dec. 2019 N'000 N'000 Federal Government Budget Support (Note 34E) - (700,000) Foreign Loans (Note 34F) (6,961,865) - (6,961,865) (700,000) Year 2020 reconciliation with the Debt Management Office (DMO) resulted in additional recognition of N6.9billion of foreign loans from Development Partners and with the transitional adjustments recognized in accumulated surplus. 61 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 OTHER REPORTS 2018 – 2020 PROGRAM FOR RESULTS (P4R) DETAILED EXPENDITURE FRAMEWORK PER MDA 2018 PERSONNEL OVERHEADS CAPITAL Cross Cutting P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD Government House 279,975 563,376 2,676,496 8,308,838 Office of the Secretary to the State Government 1,606,550 2,289,168 5,361,196 10,372,689 Bureau Public Service Reform - - 33,387 30,443 207,791 14,528,277 Office of the Head of Service 579,116 346,684 2,325,292 758,285 Civil Service Commission 162,227 134,250 57,570 83,127 Ministry of Finance 996,706 481,202 3,428,847 293,262 2,625,582 9,298,097 Ministry of Budget and Planning 699,811 194,887 650,699 679,522 6,027,495 16,852,801 Ofice of the Accountant General 4,260,221 553,610 71,249,685 49,053,291 Kaduna State Bureau of Statistics 337,223 321,777 64,097 29,374 2,316,679 8,716,966 Ministry of Agriculture and Forestry 1,997,150 1,110,487 95,078 81,028 Results Area 1: Improving the business enabling environment - - - KADGIS 366,720 412,266 126,610 60,129 12,867,065 9,733,945 KADIPA 292,924 - 219,909 417,686 390,164 16,562,236 Ministry of Commerce, Industry and Tourism (Effective 2019: Business Innovation) 586,679 457,975 318,847 326,513 Ministry of Environment and Natural Resources 209,558 239,890 122,945 68,157 Ministry of Rural and Community Development 212,704 167,777 440,678 64,425 Ministry of Women and Social Dev (Effective 2019: Human Services and Social Development) 245,661 100,496 71,825 41,318 1,442,754 10,169,794 Kaduna State Environmental Protection Authority (KEPA) 262,274 186,678 43,192 92,671 1,007,435 7,577,125 Results Area 2: Strengthening fiscal management and accountability - - - Kaduna State Pubilc Procurement Authority 92,642 125,357 29,493 135,113 783,209 8,716,966 Office of the State Auditor General 347,154 238,730 102,581 100,462 Office of the Auditor General - LG 327,232 281,480 97,083 92,330 KADIRS 2,056,018 1,083,347 940,029 965,395 183,607 11,622,621 Ministry of Local Government 281,239 183,473 1,460,887 1,325,653 Ministry of Works, Housing and Transport (Effective 2010: Public Works and Infrastructure) 894,885 329,791 529,439 103,426 Ministry of Water Resources 177,528 187,367 47,750 40,820 Ministry of Education, Science and Technology 2,710,740 21,064,053 375,246 1,113,197 Ministry of Health and Human Services 1,728,097 16,502,159 140,643 119,171 Total 21,711,034 47,556,280 91,009,504 74,756,327 27,851,781 113,778,828 62 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 2019 PERSONNEL OVERHEADS CAPITAL Cross Cutting P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD Government House 220,027 466,855 6,408,670 11,713,731 Office of the Secretary to the State Government 1,767,205 2,066,068 7,449,132 9,432,073 Bureau Public Service Reform - - 36,289 17,716 169,131 22,173,525 Office of the Head of Service 4,246,852 444,044 2,358,103 732,164 Civil Service Commission 146,956 186,698 32,883 161,270 Ministry of Finance 1,096,376 982,048 5,103,459 702,769 12,028,938 14,191,056 Ministry of Budget and Planning 1,031,864 336,890 508,282 616,534 6,520,446 25,721,289 Ofice of the Accountant General 1,981,326 540,089 33,466,329 48,532,058 Kaduna State Bureau of Statistics 370,945 376,999 67,131 20,352 2,182,141 13,304,115 Ministry of Agriculture and Forestry 1,776,062 1,640,362 322,631 78,539 Results Area 1: Improving the business enabling environment - - - - KADGIS 421,054 569,322 133,229 68,180 2,100,656 14,856,262 KADIPA 322,216 1,128 669,340 189,203 393,443 25,277,818 Ministry of Commerce, Industry and Tourism (Effective 2019: Business Innovation) 645,347 569,297 228,591 264,913 Ministry of Environment and Natural Resources 230,514 228,446 202,441 36,211 Ministry of Rural and Community Development 233,974 173,233 152,667 19,078 Ministry of Women and Social Development (Effective 2019: Human Services and Social Development) 270,227 199,413 82,626 76,817 1,475,410 15,521,467 Kaduna State Environmental Protection Authority (KEPA) 288,501 239,154 62,387 138,771 1,023,336 6,681,408 Results Area 2: Strengthening fiscal management and accountability - - - - Kaduna State Pubilc Procurement Authority 97,678 170,505 44,450 341,726 1,038,457 13,304,115 Office of the State Auditor General 361,727 285,853 108,419 80,559 Office of the Auditor General - LG 343,593 330,630 108,038 65,428 KADIRS 2,261,620 1,462,769 1,769,762 1,231,141 839,344 17,738,820 Ministry of Local Government 309,363 185,621 1,528,133 1,146,907 Ministry of Works, Housing and Transport (Effective 2010: Public Works and Infrastructure) 1,524,480 411,219 884,305 336,543 Ministry of Water Resources 195,280 723,079 66,203 13,764 Ministry of Education, Science and Technology 3,208,052 29,249,039 477,094 1,273,658 Ministry of Health and Human Services 1,900,907 18,137,702 172,101 266,577 Total 25,252,146 59,976,465 62,442,695 77,556,681 27,771,302 168,769,876 63 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 2020 PERSONNEL OVERHEADS CAPITAL Cross Cutting P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD Government House 242,029 668,602 6,408,670 3,497,182 - Office of the Secretary to the State Government 1,943,925 2,038,741 7,881,918 3,345,540 - Bureau Public Service Reform - 39,655 1,977 104,918 - Office of the Head of Service 4,671,537 370,167 2,417,488 127,500 - Civil Service Commission 178,856 221,823 32,883 9,696 - Ministry of Finance 1,206,014 1,528,874 5,464,115 19,974,791 12,028,938 33,223,581 Ministry of Budget and Planning 1,083,457 535,072 513,958 1,172,904 6,102,127 5,107,184 Ofice of the Accountant General 2,179,458 - 33,502,395 - - Kaduna State Bureau of Statistics 408,040 382,316 67,131 1,303 2,151,305 20,798 Ministry of Agriculture and Forestry 1,776,062 1,254,286 330,909 2,420 - Results Area 1: Improving the business enabling environment - - - KADGIS 463,159 564,017 124,705 21,907 2,100,656 15,618,294 KADIPA 354,438 16,266 669,340 15,172 491,803 - Ministry of Commerce, Industry and Tourism (Effective 2019: Business Innovation) 709,881 589,341 232,919 34,871 - Ministry of Environment and Natural Resources 253,565 181,717 202,441 5,224 - Ministry of Rural and Community Development 257,372 - 152,667 - - Ministry of Women and Social Dev (Effective 2019: Human Services and Social Development) 297,250 7,641,890 90,889 2,816,485 836,066 973,135 Kaduna State Environmental Protection Authority (KEPA) 317,351 245,266 63,846 14,418 526,230 156,546 Results Area 2: Strengthening fiscal management and accountability - - - Kaduna State Pubilc Procurement Authority 156,342 192,156 48,896 38,948 971,100 85,898 Office of the State Auditor General 397,900 329,377 108,419 58,360 - Office of the Auditor General - LG 360,773 384,493 108,038 14,919 - KADIRS 2,487,782 1,151,392 1,783,024 1,295,651 839,344 882,706 Ministry of Local Government 340,300 252,711 1,528,493 286,562 - Ministry of Works, Housing and Transport (Effective 2010: Public Works and Infrastructure) 1,528,288 352,073 839,418 143,280 - Ministry of Water Resources 214,809 17,336 67,733 3,613 - Ministry of Education, Science and Technology 3,528,857 27,188,951 479,962 407,195 - Ministry of Health and Human Services 2,090,998 24,458,734 186,439 4,537,432 - Total 27,448,443 70,565,600 63,346,351 37,827,349 26,152,487 56,068,142 SUMMARY USD NAIRA @ N305 P 4 R Target $ 489,835,169 ₦ 149,399,726,545 Actual Achieved To Date $ 706,855,549 ₦ 215,590,942,382 Excess $ 217,020,380 ₦ 66,191,215,837 64 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 SFTAS EXPENDITURE FRAMEWORK Kaduna State is participating in the World Bank assisted States Fiscal Transparency, Accountability and Sustainability Program for Results (SFTAS Program). For participation in the Program, the State must fully meet the Eligibility Criteria and amount earned is determined by performance against a set of Disbursement Linked Results which terms are defined in the Loan and Subsidiary Grant Agreement. The achievement of performance by the State is verified by an Independent Verification Agent. The Program Expenditure Framework for SFTAS Program comprises expenditures incurred in the following MDAs and Budget types: 2020 Personnel 2020 2020 (Inclusive of Year End Revised 2020 Year End Revised Organization Description Pensions) Adjustments Personnel Overhead Adjustments Overhead N'000 N'000 N'000 N'000 N'000 N'000 Alhudahuda College, Zaria 77,946 - 77,946 670 - 670 Barau Dikko Teaching Hospital, Kaduna 1,773,213 1,863,125 3,636,339 49,980 705,796 755,776 Barewa College Zaria 82,772 - 82,772 888 - 888 Bureau for Substance Abuse, Prevention & Treatment 5,046 - 5,046 781 - 781 Bureau of Interfaith 23,816 - 23,816 411 - 411 Bureau of Public Service Reform 3,003 - 3,003 603 - 603 Christian Pilgrims Welfare Board 11,691 - 11,691 204 - 204 Civil Service Commission 67,656 - 67,656 2,957 - 2,957 College of Education, Gidan Waya 1,207,955 - 1,207,955 17,409 - 17,409 Customary Court of Appeal 691,456 - 691,456 12,966 - 12,966 Government College , Kagoro 83,468 - 83,468 548 - 548 Government College, Kaduna 87,542 - 87,542 506 - 506 Government Girls' College, Zonkwa 26,317 - 26,317 646 - 646 Government Girls' Science Secondary School, Soba 47,658 - 47,658 547 - 547 Government Girls Secondary School, Kwoi 46,657 - 46,657 724 - 724 Government House 203,924 - 203,924 1,066,640 - 1,066,640 Government Printing Department 31,897 - 31,897 471 - 471 Government Science Secondary School, Birnin Gwari 39,115 - 39,115 293 - 293 Government Secondary School, Fadan Kaje 35,639 - 35,639 303 - 303 Government Secondary School, Kagoro 56,656 - 56,656 200 - 200 High Court of Justice 780,889 - 780,889 42,523 - 42,523 Industrialization and Micro Credit Management Board 6,729 - 6,729 325 - 325 65 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Judicial Service Commission 16,892 - 16,892 6,052 - 6,052 Kaduna Capital School 113,994 - 113,994 6,428 - 6,428 Kaduna Geographic Information Service (KADGIS) 172,025 - 172,025 6,682 - 6,682 Kaduna Investment Promotion Agency 4,961 - 4,961 4,627 - 4,627 Kaduna Power Supply Company Limited (KAPSCO) 8,610 - 8,610 1,421 - 1,421 Kaduna Roads Agency (KADRA) 56,792 - 56,792 4,049 - 4,049 Kaduna State Agricultural Development Project (KADA) 267,038 - 267,038 171 - 171 Kaduna State AIDS Control Agency (KADSACA) 60,616 - 60,616 401 - 401 Kaduna State Assembly Service Commission 65,196 - 65,196 5,356 - 5,356 Kaduna State Bureau of Statistics 116,606 - 116,606 398 - 398 Kaduna State College of Nursing and Midwifery 223,627 - 223,627 4,066 - 4,066 Kaduna State Contributory Health Management Authority (KACHMA) 34,260 - 34,260 1,871 - 1,871 Kaduna State Environmental Protection Authority (KEPA) 74,806 - 74,806 4,398 - 4,398 Kaduna State Facilities Management Agency (KADFAMA) 31,283 - 31,283 84,832 - 84,832 Kaduna State Fiscal Responsibility Commission 20,264 - 20,264 1,258 - 1,258 Kaduna State Forest Management Project 43,507 - 43,507 - - - Kaduna State Health Supplies Management Agency (KADHSMA) 45,836 3,726,251 3,772,087 5,678 1,411,592 1,417,271 Kaduna State Internal Revenue Service (KADIRS) 351,175 - 351,175 395,174 - 395,174 Kaduna State Legislature 683,328 - 683,328 805,567 - 805,567 Kaduna State Liaison Office Abuja - - - 6,390 - 6,390 Kaduna State Library Board 39,933 - 39,933 307 - 307 Kaduna State Livestock Regulatory Authority 2,114 - 2,114 647 - 647 Kaduna State Media Corporation 178,876 235,996 414,872 14,618 89,401 104,018 Kaduna State Mining Development Company 2,810 - 2,810 285 - 285 Kaduna State Mortgage Foreclosure Authority - - - 245 - 245 Kaduna State Muslim Pilgrims Welfare Board 23,524 - 23,524 159 - 159 Kaduna State Peace Commission 6,973 - 6,973 2,924 - 2,924 Kaduna State Pension Bureau 8,803 - 8,803 1,084 - 1,084 Kaduna State Public Procurement Authority (PPA) 58,607 - 58,607 11,879 - 11,879 Kaduna State Rehabilitation Board. 65,957 - 65,957 18,744 - 18,744 Kaduna State Residents Registration Agency 1,623 - 1,623 44,233 - 44,233 Kaduna State Scholarship Board 24,503 - 24,503 7,543 - 7,543 Kaduna State Schools Quality Assurance Authority 49,410 - 49,410 108,956 - 108,956 Kaduna State Traffic Law Enforcement Agency (KASTLEA) 1,129,541 - 1,129,541 18,008 - 18,008 Kaduna State Transport Regulatory Authority 13,553 - 13,553 3,769 - 3,769 66 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 Kaduna State University (KASU) 4,196,548 - 4,196,548 82,287 - 82,287 Kaduna State Urban Planning and Dev Auth. (KASUPDA) 162,298 - 162,298 9,600 - 9,600 Kaduna State Water Service Regulatory Commission 5,288 - 5,288 1,102 - 1,102 Kaduna States Vigilance Service 2,155 - 2,155 1,129 - 1,129 Kufena College, Zaria 59,041 - 59,041 1,033 - 1,033 Local Government Service Board 25,755 - 25,755 118 - 118 Ministry for Local Government Affairs 77,077 - 77,077 87,401 - 87,401 Ministry of Agriculture 382,557 - 382,557 738 - 738 Ministry of Business, Innovation and Technology 179,749 - 179,749 10,636 - 10,636 Ministry of Education 7,855,928 436,702 8,292,630 124,194 - 124,194 Ministry of Environment and Natural Resources 55,424 - 55,424 1,593 - 1,593 Ministry of Finance 466,306 - 466,306 6,092,311 - 6,092,311 Ministry of Health 4,975,746 2,484,167 7,459,914 442,855 941,061 1,383,917 Ministry of Housing and Urban Development 11,222 - 11,222 3,023 - 3,023 Ministry of Human Services and Social Development 95,026 2,235,751 2,330,776 12,073 846,955 859,028 Ministry of Internal Security and Home Affairs 4,594 196,761 201,355 1,245,599 239,971 1,485,570 Ministry of Justice 232,727 - 232,727 70,306 - 70,306 Ministry of Public Works and Infrastructure 107,382 - 107,382 43,700 - 43,700 Ministry of Sports Development 89,001 - 89,001 51,398 - 51,398 Nuhu Bamalli Polytechnic, Zaria 1,321,827 - 1,321,827 72,393 - 72,393 Office of the Auditor-General (Local Government) 117,270 - 117,270 4,550 - 4,550 Office of the Head of Service 112,901 - 112,901 38,888 - 38,888 Office of the State Auditor-General 100,460 - 100,460 17,800 - 17,800 Planning and Budget Commission 163,197 - 163,197 357,736 - 357,736 Queen Amina College, Kaduna 76,404 - 76,404 1,335 - 1,335 Rimi College, Kaduna 94,909 - 94,909 507 - 507 Riot Damage, Rehabilitation and Resettlement - - - 397 - 397 Rural Water Supply and Sanitation Agency (RUWASSA) 14,183 - 14,183 3,493 - 3,493 Sardauna Memorial College 80,074 - 80,074 854 - 854 Science Secondary School, Ikara 44,340 - 44,340 500 - 500 Secretary to the State Government 621,816 - 621,816 1,020,390 - 1,020,390 Sharia Court of Appeal 721,218 - 721,218 8,492 - 8,492 Shehu Idris College of Health Science and Tech, Makarfi 510,403 1,242,084 1,752,486 31,988 470,531 502,518 State Emergency Management Agency 84,227 - 84,227 26,573 - 26,573 State Independent Electoral Commission (SIECOM) 107,468 - 107,468 1,268 - 1,268 67 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 State Primary Health Care Development Agency 523,730 - 523,730 152,171 - 152,171 State Universal Basic Education Board (SUBEB) 123,346 - 123,346 30,752 - 30,752 Teacher Service Board 33,413 - 33,413 14,101 - 14,101 33,223,097 12,420,837 45,643,934 12,844,098 4,705,307 17,549,405 The State was found eligible to participate in the Program for 2019 for verification and disbursements occurred during the year 2020. Verification and disbursement for 2020 is to occur in 2021. The disbursements below were received as grants from the Federal Government in the State’s [Consolidated Revenue Fund] and are reflected in the activity and balances under Note 3 (Aids and Grants Revenue) and Note 25 (Cash and Cash Equivalents). SFTAS RECEIPTS IN YEAR 2020 USD Receipts ₦’000 SFTAS (USD 11m) 3,960,000 SFTAS (USD5m) 1,900,000 SFTAS (USD 8.1m) 3,078,000 8,938,000 68 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2020 COVID-19 RELATAED INCOME AND EXPENDITURE 2020 Final Budget 2020 Actual % Performance N'000 N'000 N'000 Income Donations - COVID-19 Response 1,430,356 2,530,356 176.90% Total 1,430,356 2,530,356 Recurrent Expenditure Covid19 Personnel Cost 12,304,621 11,800,000 95.90% Covid19 Overhead Charges 4,512,126 4,200,000 93.08% Total 16,816,747 16,000,000 Capital Expenditure Covid19 Capital Expenditure - Economic Sector 44,733,117 42,117,545 94.15% Covid19 Capital Expenditure - Social Sector 49,178,576 46,604,321 94.77% Covid19 Capital Expenditure - Regional Sector 3,936,422 3,880,262 98.57% Covid19 Capital Expenditure - General Admin Sector 14,503,510 14,007,035 96.58% Total 112,351,626 106,609,163 Covid19 Income and Expenditures were initially not appropriated in the Original Budget but was included in the Revised Budget in response to the sweeping health impacts of the Corona Virus and its attendant economic implications on Kaduna State economy. A total income of N1.430 billion was budgeted as the aggregate contributions for Covid19 Response. Actual receipts was in excess of the budgeted amounts by N1.10 billion on account of N100M contributions from the World Bank and N1.0 billion from the Federal Government of Nigeria. Covid19 budget expenditure execution ranged from 93.08% to 98.57% due to the scope and reach of KDSG’s various initiatives cutting across health, education and social interventions. 69 | P a g e