Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Financial statements for the year ended 31 December 2017 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Financial statements for the year ended 31 December 2017 Contents Page Management's report 1 -5 Management's responsibilities in respect of the preparation of the financial statements 6 Independent auditor's report 7-9 Consolidated statement of sources and utilisation of funds for the African Development Bank and World Bank loans 10 Separate statement of sources and utilisation of funds for the African Development 11 Bank loan Separate statement of sources and utilisation of funds for the World Bank loan 12 Notes to the financial statements 13 - 18 Appendix I - Statement of the special account - African Development Bank loan 19 Appendix II - Statement of the special account - World Bank loan 20 Appendix III - Schedule of Fixed assets 21 -24 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's report for the year ended 31 December 2017 Management has pleasure in presenting their report on the activities of Lusaka Water and Sewerage Company Limited (LWSC) - Lusaka Sanitation Program ("the Program") for the year ended 31 December 2017. Principal activities The Lusaka Sanitation Program's main objective is to increase access to sustainable sanitation services to Lusaka residents especially the urban poor and strengthen Lusaka Water and Sewerage Company's capacity to manage sanitation services. The project aims to address one of Zambia's most binding constraints to economic growth through infrastructure investment in Lusaka, the rapidly urbanizing capital. The project cost is estimated at US$ 127.83 million, of which African Development Bank (AfDB) is financing US$ 50 million or 39%, the World Bank (WB) US$ 65 million or 51%, and the Government of Zambia/ LWSC 10%. It was expected to start in 2015 but only became effective in June 2016. The projects under review are part of a broader Lusaka Sanitation Program (LSP) being implemented by LWSC with financing from World Bank (WB), African Development Bank (AfDB), European Investment Bank (EIB) and the German Development Bank (KfW). The LSP will provide a comprehensive city-wide approach to Lusaka's sanitation challenge and design interventions that can address this challenge in line with the Sanitation Investment Master plan which covers both off-site and on-site systems. The program will implement investments consistent with the Lusaka Sanitation Master Plan and develop LWSC's capacity to manage all aspects of sanitation, from conventional sewerage, to condominium, to oin-site systems and fecal sludge management (FSM). The projects development objective is to increase access to sustainable sanitation services in Lusaka and strengthen LWSC's capacity to effectively manage sanitation services, with particular focus on the poor. Detailed Project Components The program has the following components: Component 1: Sewerage Infrastructure Developmenta and Improvements (US$ 79.5 million). * Climate resilient Sewerage Infrastructure Development (USS 39.5 million) - AfDB This sub-component will finance climate resilient collection system upgrade and collection system expansion. The collection system upgrade and expansion will include approximately 72km of sewers to service an additional 100,000 people through 10,000 new connections. 1 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's report (continued) for the year ended 31 December 2017 Detailed Project Components (continued) Component 1: (continued) Sewerage Infrastructure Developmenta and Improvements (US$ 79.5 million). (continued) * Climate resilient Sewerage Infrastructure Development (USS 39.5 million) - AfDB (continued) Works contacts are packaged in five "sewer sheds" (the sewer network serving a particular part of the service area for Lusaka,) identified in the Masterplan (Manchinchi, Chunga and Matero, Ngwerere, Chelstone and Kaunda Square sewer sheds) to be financed by the World Bank and E1B. Conventional climate resilient sewerage and climate resilient condominial sewerage will be considered as appropriate. This component will also finance rehabilitation/construction of climate resilient sewage pump stations and main collectors. The Bank will finance the works in Matero/Chunga sewer shed, Chelstone sewer shed and the Kaunda square sewer shed * Sewerage improvements (USS 38 million) - WB The objective of this component is to upgrade and expand sewerage systems in the Ngwerere and Manchinchi sewer sheds. Collection system upgrading and expansion will be based on priority I investments as identified in the Lusaka Sanitation Master Plan by LWSC. Year I investments will include sewer network expansion in Emmasdale and Chaisa neighbourhoods and Kafue Road and upgrade of Ngwerere Western Interceptor. Year 2 to 5 investments will be network expansion in Chawama, Kuomboka and Garden, upgrade of Ngwerere Downstream Collector and upgrade and extension of Ngwerere Sewage Ponds. Component II: On-site sanitation and Hygiene Promotion (USS 22 million) * Decentralised Sanitation and Hygiene Education (US$ 9 Million) - AfDB This component aims at increasing population awareness on sanitation and hygiene education, will also finance climate resilient on-site sanitation (infrastructure sanitation facilities) in peri-urban areas where there is no sewerage system in addition to construction of climate resilient Feacal Sludge Management Units as a form of decentralised wastewater treatment in peri urban areas. This component therefore will be divided into the following main sub-component: (i) Sanitation, Hygiene Promotion and Education; (ii) climate resilient On-site Sanitation Infrastructure; (iii) climate resilient Public Sanitation facilities; and (iv) climate resilient Feacal Sludge Management. 2 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's report (continued) for the year ended 31 December 2017 Detailed Project Components (continued) Component II: (continued) On-site sanitation and Hygiene Promotion (US$ 22 million) (continued) * Decentralised Sanitation and Hygiene Education (US$ 9 Million) - AfDB (continued) The component shall also support sanitation marketing and hygiene promotion, which will involve developing of Gender, informed Communication Materials in consultation with Ministry of Health and Millennium Challenge Corporation (MCC) to promote improved sanitation and hygiene in the Matero/Chunga and Chelstone/ Kaunda Square Sewer sheds covered by the Bank intervention and particularly at the household level. * On-site sanitation (US$ 13 million) - WB The objective of this component is to develop a comprehensive response to the on-site sanitation challenge facing Lusaka and support on-site sanitation services and systems in priority areas. This component will focus on priority peri-urban areas that will not be sewered in the medium to long-term due to technical and financial considerations. Investments will include a support fund for on-site sanitation facilities, support to the development of FSM infrastructure and service providers, construction of a number of Decentralised Wastewater Treatment Systems (DEWATS) systems, sanitation and hygiene promotion. The areas to be covered under this component will be selected after the completion of the feasibility study. Component III: Institutional strengthening and Capacity Buiding (USS 13 million) * Institutional Support and Capacity Building (USS 4 million) - AfDB The Project will provide technical assistance focused on capacity development through training, and improving operation and maintenance of sewerage infrastructure by providing adequate specialised equipment, sewer cleaning tools and utility vehicles to replace aged equipment and vehicles. Laboratory equipment, chemicals and reagents will be provided to enhance the quality and timeliness of water quality and wastewater quality tests. Institutional strengthening activities will also target National and Municipal Agencies such as National Water and Sanitation Council (NWASCO), Zambia Environmental Management Agency (ZEMA) and Lusaka City Council. A Memorandum of Understanding (MOU) will be needed between LWSC and LCC outlining roles and responsibilities for implementation of component 2 of the program. This will be the basis of establishing a formal mechanism of all stakeholders in the form of a Component Coordinating Committee with clear strategy and budget to steer sanitation, hygiene and education. 3 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's report (continued) for the year ended 31 December 2017 Detailed Project Components (continued) Component III: (continued) Institutional strengthening and Capacity Building (US$ 13 million) (continued) * Institutional Support and Capacity Building (USS 4 million) - AfDB (continued) In addition, one staff member each from LCC, MLGH, and MCDMCH/MoH will be seconded to LWSC Project Management Unit (PMU). Their role is to act as liaison officers with their respective parent institutions and strengthen the capacity of LWSC in their respective fields of expertise. * Institutional strengthening (USS 9 million) - WB This component will provide technical assistance (TA) to enhance LWSC's capacity to implement the project, operate and maintain the facilities going forward, and to support the reforms needed to deliver sanitation services effectively and efficiently and to respond better to customer demand. This will include: (i) project management support to LWSC to implement the project, (ii) TA to strengthen the capacity of LWSC to provide sanitation services and preparation funds for future investments and equipment for sewer maintenance and labs, and (iii) building capacity for monitoring program implementation and impacts in LWSC, LCC, MCDMCH and MoH. Specific activities to be included under the Technical Assistance include: (a) HR strategy to consider realigning sewerage and sanitation departments; (b) revenue enhancement strategies to ensure cost recovery of sewerage and sanitation services, (c) asset management strategy to improve management of sanitation assets; (d) improved customer care, in particular around sewerage blockages and new sanitation activities; (e) continuation of the shadow credit rating undertaken during preparation (funded by PPIAF); (f) continuation of the performance contract between LWSC management and branches; and (g) various training activities and strategic studies (such as an update of the Sanitation Master Plan). 4 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's report (continued) for the year ended 31 December 2017 Detailed Project Components (continued) Component IV: Programme Management (USS 3 million) - AfDB This component includes Engineering Services and accompanying measures: A consulting firm will be recruited to carry out design reviews, detailed designs were required, prepare tender documents, assist with procurenment and supervise works construction. Incremental operating costs related to Management and implementation of the project are also included, as well as the cost of annual project audits. This component also includes land acquisition and compensation, if sewers shall pass through private land, the owners will be compensated for any damage to property, trees and crops, etc, by Government and according to Government's established procedures. The Project Implementation Department shall be responsible for the program implementation and successful delivery of its outputs. Eng Jonathan Kampata SOTu-a 2018 Managing Director 5 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Management's responsibilities in respect of the preparation of the financial statements Management are responsible for the preparation and fair presentation of the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program's ("the Program") financial statements comprising the Consolidated statement of sources and utilisation of funds for the African Development Bank and World Bank loans, separate statements of sources and utilisation of funds for the African Development Bank and the World Bank loans for the year ended 31 December 2017, and the notes to the financial statement, which include a summary of significant accounting policies and other explanatory notes, in accordance with accounting policies described in note 2 and the requirements of the loan agreements between the Government of the Republic of Zambia and African Development Bank and World Bank. Management are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error and for maintaining adequate accounting records and an effective system of risk management, as well as preparation of the supplementary schedule included in the financial statements. Management has made an assessment of the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program's ability to continue as a going concern and have no reason to believe that the project will not be a going concern in the year ahead. The auditor is responsible for reporting on whether the financial statements are fairly presented in accordance with the applicable financial reporting framework as described above. Approval of the financial statements The financial statements of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program, as identified in the first paragraph, were approved by Management on 30 June 2018 and were signed on its behalf by: Eng Jonathan Kampata Matilda Mwansa Managing Director Director of Finance 6 KPMG Chartered Accountants Telephone +260 211 372 900 First Floor, Elunda Two Website www.kpmg.com Addis Ababa Roundabout Rhodes Park, Lusaka PO Box 31282 Lusaka, Zambia Independent auditor's report To the members of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program Report on the financial statements Opinion We have audited the financial statements of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program ("the Program") set out on pages 10 to 18, which comprise the Consolidated statement of sources and utilisation of funds for the African Development Bank and World Bank loans, separate statement of sources and utilisation of funds for the African Development Bank and World Bank loans for the year ended 3 1 December 2017, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements present fairly, in all material respects, the financial position of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program as at 31 December 2017, and its financial performance and cash flows for the year then ended in accordance with accounting policies described in note 2 and the requirements of the loan agreements between the Government of the Republic of Zambia and African Development Bank and World Bank. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Program in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Basis of accounting and restriction on use and distribution The financial statements has been prepared in accordance with the basis of accounting described in note 2 to assist management of the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program to comply with the financial reporting provisions of the loan agreements. As a result, the financial statements and related auditor's report may not be suitable for another purpose. Our report is intended solely for the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program, the Government of the Republic of Zambia, the African Development Bank and the World Bank and should not be distributed to or used by parties other than the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program, the Government of the Republic of Zambia, the African Development Bank and the World Bank. Other matters The financial statements of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program for the year ended 31 December 2016 were audited by another auditor who expressed an unmodified opinion in their report dated 30 June 2017. KPMG Chartered Accountants, a Zambian partnership, is a member firm of the KPMG network of independent member firms affiliated Partners: A list of the partners is available at the above mentioned with KPMG International Cooperative ("KPlG linternational"), a address. Swiss entity. All rights reserved. 7 Other Information Management are responsible for the other information. The other information comprises the Management's report, Management's responsibilities in respect of the preparation of the financial statements and appendix I to III set out on pages 19 to 24. Other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of ManageMent for the financial statements Management are responsible for the preparation and fair presentation of the financial statements in accordance with accounting policies described in note 2 and the requirements of the loan agreements between the Government of the Republic of Zambia and African Development Bank and World Bank, and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management are responsible for assessing the Program's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to liquidate the Program or to cease operations, or have no realistic alternative but to do so. Auditors'Responsibilities/fbr the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Program's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 8 * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Program's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Program to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statement, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. KPMG Chartered Accountants 2018 Maaya Chipwayambokoma AUD/F000861 Partner 9 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 ZM Consolidated statement of sources and utilisation of funds for the African Development Bank and World Bank loans for the year ended 31 December 2017 In United States Dollar Cumulative to 31 Note 2017 2016 December 2017 Funds available at 1 January 582,315 2,170,080 - Funds received 4 9,480,411 699,277 13,179,673 Direct payments 5 1,632,686 6,700 1,639,386 Interest received 6 59,968 38 60,006 Other income 7 9,767 - 9,767 Total funds avaliable 11,765,147 2,876,095 14,888,832 Expenditui-e Works 8 (2,716,946) - (2,716,946) Goods 9 (1,476,038) (292,114) (1,853,607) Consultancy services 10 (1,737,241) (1,360,406) (3,727,985) Training 11 (325,458) (108,982) (486,357) Program management 12 (737,713) (523,403) (1,323,311) Other expenses 13 (114,174) (8,875) (123,049) Total direct expenditure (7,107,570) (2,293,780) (10,231,255) Surplus of funds over expenditure 4,657,577 582,315 4,657,577 Exchange movement 14 9,564 - 9,564 Funds available at 31 December 4,667,141 582,315 4,667,141 Represented by: Assets Cash and cash equivalents 15 4,667,141 582,315 4,667,141 The financial statements were approved by management on 30 June 2018 and were signed on its behalf by: Eng Jonathan Kampata Matilda Mwansa Managing Director Director of Finance The notes on pages 13 to 18 are an integral part of these financial statement 10 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646-ZM Statement of sources and utilisation of funds for the African Development Bank loan for the year ended 31 December 2017 In United States Dollar Cumulative to 3 1 December Note 2017 2016 2017 Funds available at 1 January 537,936 538 538 Funds received 4 - 699,277 699,277 Direct payments 5 1,632,686 6,700 1,639,386 Interest received 6 36 38 74 Other income 7 9,767 - 9,767 Total funds avalaible 2,180,425 706,553 2,349,042 Expenditure Works 8 (190,998) - (190,998) Goods 9 (1,020,517) - (1,020,517) Consultancy services 10 (633,826) (82,750) (716,576) Training 11 (29,030) - (29,030) Program management 12 (185,939) (76,992) (262,931) Other expenses 13 (114,174) (8,875) (123,049) Total direct expenditure (2,174,484) (168,617) (2,343,101) Surplus of funds over expenditure 5,941 537,936 5,941 Exchange movement 14 475 - 475 Funds available at 31 December 6,416 537,936 6,416 Represented by: Assets Cash and cash equivalents 15 6,416 537,936 6,416 The financial statements were approved by management on 30 June 2018 and were signed on its behalf by: Eng Jonathan Kampata MtiRat Mwansa Director Managing Director of Finance The notes on pages 13 to 18 are an integral part of these financial statement I I Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Statement of sources and utilisation of funds for the World Bank loan for the year ended 31 December 2017 In United States Dollar Cumnu1lative to 3 1 December Note 2017 2016 2017 Funds available at 1 January 44,379 2,169,542 46 Funds received 4 9,480,411 - 12,480,396 Interest received 6 59,932 - 59,932 Total funds available 9,584,722 2,169,542 12,540,374 Expenditure Works 8 (2,525,948) - (2,525,948) Goods 9 (455,521) (292,114) (833,090) Consultancy services 10 (1,103,415) (1,277,656) (3,011,993) Training 11 (296,428) (108,982) (457,326) Program management 12 (551,774) (446,411) (1,060,381) Total direct expenditure (4,933,086) (2,125,163) (7,888,738) Surplus of funds over expenditure 4,651,636 44,379 4,651636 Exchange movement 14 9,089 - 9,089 Funds available at 31 December 4,660,725 44,379 4,660,725 Represented by: Assets Cash and cash eqivalents 15 4,660,725 44,379 4,660,725 The financial statements were approved by management on 30 June 2018 and were signed on its behalf by: Eng Jonathan Kampata Matilda Mwansa Managing Director Director of Finance The notes on pages 13 to 18 are an integral part of these financial statement 12 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements for the year ended 31 December 2017 1 Reporting entity The Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program ("Program) is domiciled in Zambia. The address of its registered office is LWSC DG Office, Plot I Chila Road, Kabulonga, Lusaka, Zambia The Program aims at supporting the Government of the Republic of Zambia's ongoing commitment to water and sanitation sector reforms by increasing access to sustainable sanitation services in Lusaka and strengthen LWSC's capacity to effectively manage sanitation services, with particular focus on the urban poor. The main Components of the program include: a. Sewerage Infrastructure Improvements. b. On-Site Sanitation c. Institutional Strengthening d. Programme Management 2 Basis of preparation These financial statement have been prepared on a cash basis of accounting and in accordance with the requirements of the loan agreements between Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program and the Government of the Republic of Zambia, the African Development Bank and the World Bank. Details of the Program's accounting policies are included in note 17 to the financial statements. Change in accounting framework During the year under review, Management changed the accounting framework from International Public Sector Accounting Standards (IPSAS) cash basis of accounting to Generally Accepted Accounting Principles cash basis of accounting to align with LWSC accounting policies. There is no impact on the comparative consolidated and separate statements of sources and utilisation of funds. 3 Functional and presentational currency The financial statement are presented in United States American Dollars (USD), which is the Program's functional currency. Except as otherwise indicated, the financial information presented has been rounded off to the nearest Dollar. 13 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements (continued) for the year ended 31 December 2017 In United States Dollar 4 Funds received 2017 2016 Africa Development Bank - 699,277 World Bank 9,480,411 - 9,480,411 699,277 These relate to amount received into the special accounts of the respective donors during the year. 5 Direct payments 2017 2016 Africa Development Bank 1,632,686 6,700 Direct payments relate to expenditure paid for directly by the donors. 6 Interest received Africa Development Bank 36 38 World Bank 59,932 - 59,968 38 7 Other income Africa Development Bank 9,767 - Other income relates to unutilised funds transferred back to the special account from the Kwacha account. 8 Works African Development Bank Construction of public toilet facilities 190,998 - 190,998 - World Bank Sewer Network expansion and upgrade Kafue road 657,723 - Sewer Network expansion and upgrade Emmasdale 1,851,734 - Livelihood restoration for year I PAP's 16,491 - 2,525,948 - Total Works 2,716,946 - 14 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements (continued) for the year ended 31 December 2017 I United States Dollar 9 Goods African Development Bank 2017 2016 Support to NWASCO 10,097 - LWSC 1,010,420 - 1,020,517 - World Bank Supply and delivery of equipment for sewer maintenance 22,948 - Supply and delivery laboratory equipment 332,803 - Supply and delivery of motor bikes* 97,128 135,482 Supply and delivery of office equipment - 68,813 Supply and delivery of office furniture - 33,079 Supply and installation of software 2,642 54,740 455,521 292,114 Total Goods 1,476,038 292,114 *This relates to 37 motor bikes for LCC, LWSC and MoH. 10 Consultancy services African Development Bank Support to NWASCO 22,524 15,000 Support to LCC 33,055 - LWSC 578,247 67,750 633,826 82,750 World Bank Supervision of year I works 507,100 - Detailed design and supervision of year 2-5 sub projects 181,249 - Shadow credit rating 31,000 Sanitation marketing services 143,750 - Technical assistance to set up monitory and evaluation system 147,144 - Feasibility studies sewerage and on site sanitation - 963,141 Baseline and socio economic study - 186,754 Institution assessment and technical assistance to LWSC - 80,196 Support to LWSC social safe guard teams 2,786 - Development of national monitory & evaluation framework 90,386 21,596 Property valuation and economic - 17,814 Preparation of the project implementation manual - 8,155 1,103,415 1,277,656 Total consultancy services 1,737,241 1,360,406 15 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements (continued) for the year ended 31 December 2017 In United States Dollar 11 Training 2017 2016 African Development Bank 29,030 - World Bank 296,428 (108,982) Total training 325,458 (108,982) 12 Program management African Development Bank Support to NWASCO - 15,000 LWSC 185,939 61,992 185,939 76,992 World Bank Staff cost 468,784 446,411 Advertising, evaluation and other cost 82,990 - 551,774 446,411 Total program management 737,713 523,403 13 Other expenses African Development Bank 114,174 8,875 14 Exchange movement African Development Bank 475 - World Bank 9,089 - 9,564 - 15 Cash and cash equivalents African Development Bank 6,416 537,936 World Bank 4,660,725 44,379 Total 4,667,141 582,315 16 Subsequent events There were no subsequent events requiring disclosure or adjustment to these financial statements. 16 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements (continued) for the year ended 31 December 2017 17 Significant accounting policies The Project has consistently applied the following accounting policies to all periods presented in these financial statements. Set out below is an index of the significant accounting policies, the details of which are available on the pages that follow. a) Income recognition b) Foreign currencies c) Cash and cash equivalents d) Taxes e) Employee benefits f) Expenditure g) Capital expenditure a) Income recognition Grant income Grant income is recognised when funds are received from African Development and World Bank. Direct payment Direct payment to third parties by the financier are recognized as income when the financier make payments directly for goods, services or contractor for works. Interest income Interest income recognised when earned and received. b) Foreign currencies The financial statements are prepared in USD. Funds received are converted from USD to local currency at the exchange rates ruling at the date of the transactions. The cash balances at the yearend are translated at the closing rate obtained from the bank were the accounts are held and any exchange gains or loss are recognized in the income and expenditure. c) Cash and cash equivalents Cash and cash equivalents comprise cash balances on hand and at bank. Cash and cash equivalents are carried at face value. d) Taxes Value Added Tax (VAT) Expenses and assets are recognised net of the amount qf VAT, except: When the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable. 17 Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Notes to the financial statements (continued) for the year ended 31 December 2017 17 Significant accounting policies (continued) e) Employee benefits i) Short tern employee benefits Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the project has a present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably. For fixed contract employees an additional payment is payable after six months and at the end of the contract period and is accrued as a provision and settled at the end of the contract period. Contract period is for one year. ii) Defined contribution plans Obligations for contributions to defined contribution plans are expensed as the related service is provided. The project contributes to National Pension Scheme Authority (NAPSA) for its eligible employees as provided by law. The project's contribution is charged to profit and loss in the year in which it arises. f) Expenditure Expenditure represents the total amount incurred on project activities under the loan agreements. g) Capital expenditure Items of a capital nature are expensed at the time of acquisition. 18 Appendix I Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Statement of the special account African Development Bank for the year ended 31 December 2017 African Development 1. Advances for the period USD account Special Account Replenishment - Interest received 36 Transfer from Kwacha/Dollar 9,767 Refunds (redeposited from Zanaco Account) _ Total advance received 9,803 2. Balance in the special account 537,936 3. Eligible expenditure paid during the year from Special Account (541,798) 4. Total advances accounted for (3) (541,798) 5. Difference (1 - 4) 5,941 6. Add: exchange movement on cash balance in Kwacha Account 475 Analysed in cash and bank balance Cash and cash equivalent 6,416 *Note: The Eligible expenditure exclude Direct Payments 19 Appendix II Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Statement of the special account World Bank for the year ended 31 December 2017 World Bank 1 Advances for the period USD account Disbursement to the Designated Account 9,480,411 Interest received 59,932 Transfer from Dollar Account - Total Funds received 9,540,343 2 Balance in the Designated Account 44,379 3 Eligible expenditure paid during the period (Total expenditure less payables) (4,933,086) 4 Total advances accounted for (3) (4,933,086) 5 Difference (1 - 4) 4,651,636 6 Add: exchange movement cash balance in Kwacha Account 9,089 Analysed in cash and bank balance Cash and cash equivalent 4,660,725 20 Appendix III Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Schedule of fixed assets for the year ended 31 December 2017 Asset ID/Code Item Description Year Amount (ZMW) MTV-000458 Mazda BT50 double cab BAC 1176- PIU 12/9/2015 367,419.43 MTV-000459 Mazda BT50 double cab BAC 1178- PIU 12/9/2015 367,419.43 MTV-000460 Mazda BT50 double cab BAC 1175- PIU 12/9/2015 367,419.43 MTV-000483 Toyotal Hilux BAB 7097 1/9/2016 275,000.00 MTV-000484 Toyotal Hilux BAB 7098 1/9/2016 275,000.00 OFE-002743 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002744 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002745 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002746 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002747 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002748 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002749 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002750 Standard high back chair- LSP 3/1/2016 1,024.14 OFE-002754 4 seater cluster table- LSP 3/1/2016 17,855.16 OFE-002755 4 seater cluster table- LSP 3/1/2016 17,855.16 OFE-002756 Conference chair- LSP 3/1/2016 848.28 OFE-002757 Conference chair- LSP 3/1/2016 848.28 OFE-002758 Conference chair- LSP 3/1/2016 848.28 OFE-002759 Conference chair- LSP 3/1/2016 848.28 OFE-002760 Conference chair- LSP 3/1/2016 848.28 OFE-002761 Conference chair- LSP 3/1/2016 848.28 OFE-002762 Conference chair- LSP 3/1/2016 848.28 OFE-002763 Conference chair- LSP 3/1/2016 848.28 OFE-002764 Conference chair- LSP 3/1/2016 848.28 OFE-002765 Conference chair- LSP 3/1/2016 848.28 OFE-002766 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002767 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002768 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002769 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002770 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002771 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002772 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002773 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002774 Slegh base visitor's chair- LS350 3/1/2016 848.28 21 Appendix III (continued) Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Schedule of fixed assets for the year ended 31 December 2017 Asset ID/Code Item Description Year Amount (ZMW) OFE-002775 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002776 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002777 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002778 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002779 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002780 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002781 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002782 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002783 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002784 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002785 Sleigh base visitor's chair- LS350 3/1/2016 848.28 OFE-002722 ockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002724 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002725 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002726 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002727 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002728 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002729 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002730 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 OFE-002731 Lockable glass door cabinet- LSP 3/24/2016 3,200.00 CPE-001586 HP450 G2 Laptop- PIU- CND601OTBV- 4/4/2016 14,000.00 S.E.IMPL sanitation project CPE-001587 HP450 G2 Laptop- PIU- CND601OJCL- 4/4/2016 14,000.00 S.E.PROJ sanitation project CPE-001589 HP250 G3 Laptop- PIU- CND5464LJX- 4/4/2016 10,200.00 Director IPD CPE-001591 HP250 G3 Laptop- PIU- CND5464LSS- 4/4/2016 10,200.00 Accountant Projects CPE-001592 HP250 G3 Laptop- PIU- CND5464LBW- 4/4/2016 10,200.00 Procurement Specialist CPE-001593 HP250 G3 Laptop- PIU- CND5464LIY- 4/4/2016 10,200.00 Safeguards Specialist CPE-001597 HP250 G3 Laptop- PIU- CND5464M90- 4/4/2016 10,200.00 Senior Engineer IPD CPE-001598 HP Lazerjet Enterprise 500 Colour 4/4/2016 24,000.00 Printer-PIU-Sanitation Pro OFE-002732 L-Shaped office desk- LSP 4/5/2016 3,000.00 22 Appendix III (continued) Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Schedule of fixed assets for the year ended 31 December 2017 Asset ID/Code Item Description Year Amount (ZMW) OFE-002733 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002734 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002735 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002736 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002737 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002738 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002739 L-Shaped office desk- LSP 4/5/2016 3,000.00 OFE-002740 Conference table- LSP 4/5/2016 9,000.00 OFE-002741 Executive high back swivel chair- LSP 5/10/2016 2,760.00 manager MTV-000476 Mazda BT50 double cab BAC 9117- PIU 7/1/2016 335,667.91 MTV-000477 Mazda BT50 double cab BAC 9057- PIU 7/1/2016 335,667.91 MTV-000478 Mazda BT50 double cab BAC 9085- PIU 7/1/2016 335,667.91 CPE-001574 CISCO 1941 Router- PIU Sanitation 7/1/2016 30,050.00 Project CPE-001596 HP250 G3 Laptop- PIU- CND5464L91 7/1/2016 10,200.00 OFE-002666 Microwave- PIU LSP 7/1/2016 1,206.03 CPE-001588 HP450 G2 Laptop- PlU- CND601OJBK- 8/17/2016 14,000.00 M&E Spe- sanitation project MTV-000482 Toyotal Hilux BAB 7096 9/1/2016 275,000.00 OFE-002670 SamsuIng refridgerator- 9/5/2016 4,199.00 S/N#54944DADB00162A- PIU Sanitation p OFE-002667 Rexel RDM 1170 paper shredder- PIU 9/6/2016 20,065.43 Sanitation project OFE-002668 Canon digital camera EOS 80D 18-55- 9/6/2016 18,978.62 PIU Sanitation project OFE-002669 Canon LV multi-media projector- PIU 9/6/2016 10,812.80 Sanitation project CPE-00 1602 Canon IR advance multi purpose printer- 9/29/2016 28,105.03 LSP OFE-002700 Office high back swivel chair- LSP- M&E 10/1/2016 1,288.79 Specialist OFE-002704 Office desk with pedastal- LSP- M&E 10/1/2016 3,480.00 Specialist OFE-002707 2 door cabinet- LSP- M&E Specialist 10/1/2016 3,500.00 OFE-002708 Kitchen cupboard- LSP kitchen 10/1/2016 2,700.00 23 Appendix III (continued) Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 - ZM Schedule of fixed assets for the year ended 31 December 2017 Asset ID/Code Item Description Year Amount (ZMW) OFE-002709 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002710 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002711 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002712 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002713 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002714 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002715 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002716 Leather high back chair- LSP- 10/1/2016 2,800.00 OFE-002717 Leather high back chair- LSP- 10/1/2016 2,800.00 CPE-001600 Lenovo laptop- #PFOFX IDU- 11/22/2016 12,010.00 Procurement officer-LSP MTV-000485 BAE 6077- MITSUBISHI L200 S/CAB- 2/16/2017 242,537.75 LSP SEWER MAINTENANCE MTV-000486 BAE 6078- MITSUBISHI L200 S/CAB- 2/16/2017 242,537.75 LSP WWTP-CHUNGA MTV-000487 BAE 6469- MITSUBISHI L200 S/CAB- 2/16/2017 242,537.75 LSP SAFEGUARDS MTV-000488 BAE 6470- MITSUBISHI L200 D/CAB- 2/16/2017 321,733.75 LSP EFFLUENT & POLLUTION CO MTV-000489 BAE 6471- MITSUBISHI L200 D/CAB- 2/16/2017 321,733.75 LSP MONITORING & EVALUATION MTV-000490 BAE 6472- MITSUBISI-11 L200 S/CAB- 2/16/2017 242,537.75 LSP SEWER MAINTENANCE MTV-000492 BAE 7503- VW AMAROK- LSP 3/15/2017 344,350.00 PROJECT MANAGER CPE-001615 HP 450 LAPTOP- LSP ACCOUNTANT 6/19/2017 9,048.00 CPE-001628 HP Pro-desk 490- LSP 10/1/2017 13,968.00 CPE-001629 HP Pro-desk 490- LSP 10/1/2017 13,968.00 CPE-001630 HP Pro-desk 490- LSP 10/1/2017 13,968.00 CPE-001631 Canon Multi-Purpose Industrial Printer- 10/1/2017 93,450.00 LSP CPE-001632 Beyonder Binder- LSP 10/1/2017 5,150.00 CPE-00 1627 Kyocera multi-functional copier- LSP 10/5/2017 21,692.00 24