ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TFOA 1823 SPECIAL PURPOSE FINANCIAl, REPORT 31 DECEMBER 2018 International Development Association International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America RE: SPECIAL PURPOSE FINANCIAL REPORT ZIMBABWE NATIONAL WATER PROJECT We have concluded our audit of the Zimbabwe National Water Project for the year ended 31 December 2018. The overall objective of this engagement was to allow us to express an opinion on the financial position and the income and expenditure for the year ended 31 December 2018 and to report on the adequacy of the internal controls and to express an opinion on the compliance with the covenants of the grant agreement and applicable laws and regulations (with regard to the financial aspects). This report includes the following: * the auditor's report which includes the above mentioned opinions; * the financial statements; * notes to the financial statements which include the basis of preparation, a summary of funds received and a summary of reports used as a basis for withdrawal applications; * a statement of sources and uses of funds which reconciles to the designated account and cash on hand and; * the management letter which details the internal control weaknesses identified during the audit. Please note that this report has been provided for use by the project management, the project donors and the Government of Zimbabwe and may not be suitable for other purposes. We would be pleased to provide you with further assistance and request that you do not hesitate to contact our office with regard to any queries. Yours faithfqlly, /----- HARARE HLB ZIMBABWE Chartered Accountants Engagement partner: Clement M.Ruzengwe 25 June 2019 PAAB Practising Certificate Number:(099) i ZIMBAWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TF0A1823 IMPLEMENTING ENTITY: ZIMBABWE NATIONAL WATER AUTHORITY PROJECT STEERING COMMITTEE: inMayeshe Mutazu (Chairman) - Ministry of Environment Water and Climate Taurayi Maurukira - Zimbabwe National Water Authority Shepherd Kadaira - Ministry of Agriculture, Mechanization and Irrigation Development Mike Mazal - Ministry of RLural Development. Promotion and Preservation of Na:ional Culture and I leritawe No representative - Ministry of Women's Affairs, Gender and Cornmunity Development. Priscilla Mudzinge - Ministry of Locaf Government, Public Works and National Housing Jorum Willie Pfunye - Ministry of Finance and Economic Development Fadzai Mukonoweshuro - World Bank Norman Tinarwo - Department of International Development PROJECT IMPLEMENTATION UNIT MANAGER Eng. Takudza MakwangUdze PROJECT OFFICE: Suite 2B., 2 lona Close. Borrowdale BANKERS: Stanbic Bank. Samora Machel Branch, larare. AUDITORS: HLB /imbabwe Chartered Accountants 14 Downie Avenue, Alexandra Park. Harare TABLE OF CONTENTS Eage FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Background ......................round - . 2 -3 B ackgro und ............................. ......... . ... 6........................... 4 - 6 Statem ent of Financial Positionsition..... ............... ................................ 7 Statement of Income and Expendpnireu......... .. .......-- ........................ - 8 Notes to the financial State nts. ............................ 9- 11 Statement of Sources and uses of fnds ..... ...................... ...... Appendix A ZIMBAWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TF0A1823 BACKGROUND The Government of Zimbabwe has applied for a grant from the Zimbabwe Reconstruction Fund (ZIMREF) managed by the World Bank for rehabilitation and expansion of water supply and sanitation infrastructure (investments) in seven rural and urban growth centres managed by the Zimbabw\e National Water Authority (ZINWA). and provision of technical assistance as well as the capacity building of /INWA, L,oca authorities and the Government of Zimbabwe. The capital works consist of urgent rehabilitation of infrastructure, universal metering of production and customer consumption, expansion of distribution networks to non- serviced areas, and augmentation of treatment and storage capacity where needed. Capacity building for ZN\WA wil focus on technical capacity in project planning and implementation, management and monitoring, T his will boost ZINWA's technical and operational capacities. Capacity building will also promote institutional reform, improved commercial and customer focus, and better tariff designs, in order that ZINWA can be more accountable and more financially sustainable. The institutional reform will include improved customer., stakeholder and citizen engagement. Local Authorities need assistance in developing consultative planning approaches, formal delegation of' water supply responsibilities to service providers as per the new Water Policy provisions, and creation of effective mechanisms allowing stakeholder to monitor and enforce agreed service standards. Project Development Objeetivc4 The proposed project development objective is to strengthen the capacity of water sector institutions to improve the access to and the quality of water and sanitation services of communities in selected growth centers and to improve water resources planning. ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TFOA1823 BACKGROUND Beneficiaries The beneficiaries of the projects would be the inhabitants of seven small towns who will receive improved water supply. A total of 52,000 people stand to benefit, as well as ZINWA and the National Government through technical assistance. The project will be implemented over a four-year period, from June 2016 to June 2019 and consists of three components as follows; Component 1 - Rehabilitation and expansion of seven growth centers Water and Sanitation infrastructure. This component will finance the Rehabilitation and expansion of Seven Growth Centers Water and Sanitation infrastructure. namely; / Guruve Growth Centre / (utu Growth Centre V Mad/iwa TeachersColgeg V Mataga Growth Centre / Nembudziya Growth Centre V Lupane Growth Centre / Zimunya Growth Centre Component 2 - Technical Assistance: This component will finance Technical assistance for carrying out of critical studies and activities aimned at capacitating the participatina institutions ais follows: Sub-component 2 1: National Water Resources Master Plan Sub- component 2.2: Technical Assistance jr a Water Services Regulator Sub- component 2.3: Technical Assistance to Local authorities Sub-component 2. 4: Institutional strengthening ?f/ 1VWA Sub-component 2.1 Training Component 3 - Project Management This component will finance the Project management costs, which include costs in supervision and management of the project. 3 REPORT OF THE INDEPENDENT AUDITORS TO THE WORLD BANK ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P15486 GRANT NUMBER: TFOA1823 Opinion We have audited the financial statements of the Zimbabwe National Water Project set out on pages 7 to 12 which comprise the statement of income and expenditure and statement of financial position for the year ended 31 December 2018, and the notes to the financial statements, which include a summary of the significant accounting policies. In our opinion, the financial reports of the Zimbabwe National Water Project as at 31 December 2018 and for the year then ended have been prepared in conformity with note 1.1 and giVe a true and fair presentation of the results and position of the Zimbabwe National Water Project. Report on legal and regulatory compliance In our opinion, the financial statements have in all material respects also been properly prepared in conformity with the provisions of the Zimbabwe Reconstruction lund Grant Agreement, Grant Number TFOA 1823. 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 Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the organisation in accordance with the ethical requirements that are relevant to our audit of the finlancial statements in the Plrofessional Code ol Conduct, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 4 Harre Office: 14 Downie Avenue, Alexandra Park, Harare I www hrbzimbabwn nn -w Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 1.1 to the financial statements. which describe the basis of' accounting. The financial statements have been prepared in accordance with note 1 .1 to assist the Projects management with meeting the reporting reqLirements of the Project donors and the Government of Zimbabwe. Our report is prepared in terms of ISA 800 and is for the Project management's reporting purposes to the project donors and the Government ofZimbabwe. As a result. the financial statements and the auditor's report may not be suitable for any other purpose. Our opinion is not modified in respect of this matter. Responsibilities of the Project Management for the Financial Statements The Project ranagement is responsible lr the preparation of the financial statements in accordanrce with the financial provisions of'the World Bank and for such internal con tro1 as the Project management determines is necessary to enable the preparation of financial statements that are free from material misstatement. vhether due to fr-aUd or error. Auditor's Responsibilities for the Audit of the Financial Statements The overall objective of the audit of tlis engagement (audit of the pro'ect financial statements), is to allow the auditor to express a profess onal opinion on the financial position of the project at the end ofthe period audited (3 1 December every year), and of the income and expenditure for the accounting period ending on that date, and also to report on the adequacy of th e internal controls, and to express5 an op Inion on the compliance with the covenants of the grant agreement and applicable laws and regU LIationIS. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraUd or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance. but is not a guarantee that an id it CondUCted in accordance with ISAs will always detect a material misstatement v hen 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 ofusers taken on the basis of these financial statements. 5 As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We 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. We also 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 organisation's internal control. We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the project management. We also conclude on the appropriateness of the project management' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's 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 auditor's report. However, future events or conditions may cause the project to cease to continue. We communicate with those charged with governance, 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. /x HLB ZIMBAWE Chartered Accountants HARARE Clement M.Ruzengwe 5 July 2019 PAAB Practising Certificate Number:(099) 6 ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TFOA1823 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 2018 2017 NOTES USD USD NET ASSETS Current assets Inveitorics 3 3576 Security deposit 4 2, 3250 Bank and cash balances 5 49,476 47,972 52,868 52,798 Current liabilities Payables 6 4,90 95,725 4,190 95,725 NETASSETS 48,678 (42,927) FINANCED BY: Reserves Accumulatcd fund 48,678 (42,927) TOTAL RESERVES 48,678 (42,927) Chief Executive Officer Project Manager Zimbabwe National Water Authority Project Accountant 3 July 2019 ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TFOA1823 STATEMENT OJ INCOME AND EXPEND lTURE FOR THE YEAR ENDED 31 DECEMIBER 2018 Cumulative Current Cumulttive Prior Periods Period Current Period UNCO) USD USD iNCOMFi (ilant reccived 11om the Wold llnk 3134,61 7.453,410 4.319,255 3,134,161 7,453,416 EX PE NDITR 4,39 5 31316 7 341 Phase 1 L i Lupane 1,2 Zimuva .435.422 723.612 2. 159,034 1.3 GLIuua 798,045 733,499 1,53 1,544 Total for Component i 53.459 573. 186 106.636 2,766,917 2,030,297 4,797,214 2 Component 2: Techniel Assistance 2.1 Water esources master plan i 12.378 2 3.1 (ICnsultanjs for support lo Z 1m nd Local 8 45,036 2 3.2 Consultancy for Saniratum Ne«eds .Assessmewnts in tIw Seven proect areas 2 L I ( fns(ulyfor/ Saniaion ed+ ssessmen t ite' .Seten prjec3tt ar/eas 8161;645125 2.2 1stinstu¡onil Lrengthi S l 6486 24 2L2 1 (onsultancyfj baseline survr 4 2.2.2 Gouds and equipment 342,762 -4342.702 2.3 Training 28L223 (18,514) Total fur COMponent 2 232723,236 Totl fr ompnen 21,340,2 13 878,730 2 , 2 1 8 , 9 4 2 3 Component 3: Project MYanagement 3.1 P1 U consultants 3 1. 1 Procuremnent specialist 3 1.2 95.295 1525 96.829 unitu 1 flUttugew.tr (Of»Uhlun~ ~26.000)9 994.9 3. 1 3 Exernal audit '220 20290 246.290 3.2 3.2.1 rojcct management costs 12.320 14320 26.640 3.2.2 Bank charges 120J07 96.213 216,320 Total for component 3 M5 1J i ,5i 202 133,529 3851 TOta expenditure - 4,362,182 3,042,556 7,404,737 (Deficit)/surplus for the year --,- (42,927) 91,04 4,7 ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER: TF0A1823 NOTES TO THE FINANCIAL STATEMENTS FOR TIHE YEAR ENDED 31 DECEMBER 2018 1. BASIS OF PREPARATION 1.1 Basis of preparation [he financial statements have been prepared using the modified cash basis of accounting. Under the modified cash basis of accounting, income is recognised when received and expenditures are recognised when incurred. 1.2 Basis of measurement The financial statements iave been prepared on a historical cost basis. Historical cost is generally based on the fair value o 'the consideration given in exchange for the assets. 1.3 Functional and presentation currency The financial statement have been presented in United States dollars (USD), which is the Project's functional currency. 2. Significant Accounting Policies The principal accounting po icies adopted in the preparation of financial statements, set out below, have been consistently followed in all material respects. 2.1 Income recognition Income is recognised when received 2.2 Expenditure recognition Expenditure is recognised when incurred. Capital expenditure is fully expensed when purchased, however an asset is maintained for ail project assets. 9 ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER:P154861 GRANT NUMBER:TF0Al823 NOTES TO TE FINANCIAL STATEMLNTS FOR THE YEAR ENDED 31 DECEMBER 2018 2 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements, set out below, have been consistently followed in all material respects. 2.1 Income recognition Income is recognised when received. 2.2 Expenditure recognition Lxpenditure is recognised wlhen incurred. Capitwl expenditure is fully expensed when purchased. however, an asset register is maintained lbr all project assets. 2018 2017 USD USD 3 INVENTORIES Fuel coupons 2,142 3 576 4 Security deposit Security deposit 1,250 1,250 A security deposit was made to the landlord lbr the office being rented by the pro ject situated at 2 lona Close, Borrowdaie, I larare. 5 Bank and cash balances 49,476 47,972 Designated account Cash on hand 49,476 47,972 6 Payables *ZINWA-Salary creditors 4,190 4,190 Trade Payables - 91,535 4,190 95,725 *(reditors include an amount owed to ZINWA Ior the procurement consultant fec paid using ZINWA funds. ZIMBABWE NATIONAL WATER PROJECT PROJECT NUMBER: P154861 GRANT NUMBER; TFOA1823 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 7. SUMMARY OF FUNDS RECEIVED Disbursements amounting to LSD 3 134 146 (Three million one hundred and thirty-four thousand one hundred and forty-six united states dollars) were received from the World Bank for the period ending 31 December 2018 made up of the following amounts; 2018 2017 USD USD Disbursements from the Bank 142 587 265 422 Direct payment 2 991 580 3 953 833 Totals 3 134 146 4219255 8. SUMMARY OF REPORTS USED AS BASIS FOR WITHDRAWAL APPLICATIONS There were two withdrawal applications amounting to (ISD 142 586 and reports accompanying the application for the withdrawals are kept for audit trail. The 3 withdrawals are summarised as follows: 2018 2017 USD USD First withdrawals 81 734 99933 Second withdrawals 60853 8 489 Third withdrawals - 84000 Total 142587 265 422 9. EVENTS AFTER THE REPORTING DATE There were no material subsequint CvCntS ater the reporting date. 10. GOING CONCERN The project's management assessed the ability of the project to continue operating as a going concern and believe that the preparation of these financial statements on a going concern is still appropriate. II ZIMBABWE NATIONAL WATER PROJICTv PROJECT NLM BEIR:P154861 GRANT NUMBERrIVVOA [823 NOTES TO THE FINANCIAL STATEMENTS FOR THE; VEAR UNDE» 31 I)CEMBER 2018 STATEMENT OF SOURCES AND I SES OPl VND FOR TiHE VEAR ENDE1 31 DE iltBER 2l18 Cumulative Cunulative Prior Piods Curren Period Cu r reni Perilds [.SD DM) Opening bilance Designated 3ank Acount Project Baik Aceount Total Add: Sources uf nLid received within the period - 7 465 Disbursement from the Bank Direct paymecnts 365,40J 142,587 507,9gR 395832 91 2,991558 6,945,391 Total Cash Available - ._ 4,319,234 3,134,1480 Less Expendilire Colponen i l. i ILupalle 1.2 Zimunya .43 5422 7 2 3.5 727,1999 12 /iurv 795 ~ 7339 *sI 53 4si Tiotal Componlent 1 718 10663 3 grve- 73.1W, Li .06.6,33 2,766,916 2,01,202 4,79717- Compunent 2 2.1 Water Resources Maser Plan 2.2 TA for Water Service Reguor 8 2 3 TA for Local autlhorities 2.3 i Consultancyfor Su/pp)ort / /m//c 0 ldc l.Od ic iI/c,/1L 2 3,2 'onsidtanc for swaon neCs n the Sen01 p I 13 64.58pro5 2 4 Institutional Strengthenirng of/INWA 6 6 69 2.4 i Consultancyfor Des/gn and sejting up of a coninercial service Dept) 2.4.2 Consullancy for Baseline SI-vey 2 4 3 BQ softwhare 342,702 - 342.762 2.5 T raminu 281 223 (8.5 14) 262.709 Total Component 2 23.237 231 237 Component 3 340,213 87,73 2843 3 / iPrcurm spct c 315.2(295 1.523 96,820 3.1/2i3//curmcd