MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT PROJECT PREPARATION GRANT NO. TF072503 FINANCIAL STATEMENTS For The Year Ended 31st December, 2017 OFFICE OF THE AUDITOR GENERAL RP0 BOX 50071 LUSAKA MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT Project Preparation Grant No. TF072503 Sources And Utilization Of Funds fr the year ended 31" December 2017 Contents Page Statement of Program me M anagement's Re sponiiiilties ......................................................... I Independent A uditor's Report .............................. ................................ .........2 to 4 Statem ent of Sources and U tilization of funds .............................................................................. 5 N otes to the Financial Statem ent .......................................................................6 to 9 MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT - PROJECT PREPARATION GRANT NO. TF072503 Statement of Sources And Utilization Of Funds ,fr the year ended 31" December 2017 STATEMENT OF PROGRAMME MANAGEMENT'S RESPONSIBILITIES The Controlling Officer for Ministry of National Development Planning is responsible for the preparation of the Statement of Sources and Utilization of Funds for Zambia Integrated Forest Landscape Project which gives a true and fair view of the state of affairs of Zambia Integrated Forest Landscape Project - Project Preparation Grant (ZIFLP-PPG). In preparing the Statement of Sources and Utilization of Funds, the Project Management: * selects suitable accounting policies and then applies them consistently * makes judgments that are reasonab e and prudent; and * follows Generally Accepted Accounting Principles The Statement of Sources and Utilization of Funds is prepared on a cash basis of accounting in accordance with accounting principles generally accepted by Government of the Republic of Zambia (GRZ) and Cooperating Partners. This is a departure from the requirements of International Accounting Standards (IAS). The Project Management is responsible for ensuring that the ZIFLP PPG project keeps accounting records, registers and other relevant documents which disclose with reasonable accuracy at any time the financial position and activities of the project as required by the Financing Agreement. Management is responsible for taking reasonable steps for the prevention and detection of errors, fraud and other irregularities. The Project Management is also responsible for the systems of internal controls designed to provide reasonable, but not absolute assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability for assets, and to prevent and detect material misstatements. The systems are implemented and monitored by suitably trained personnel with appropriate segregations of authority and duties. Nothing has come to the attention of the Project Management to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. In the opinion of the Project Management, the Statement of Sources and Utilization of Funds is drawn up so as to present fairly the financial activities for the year ended 3 December 2017. Signed on behalf of the programme management by: Chola J. Chabala Chitembo K. Chunga Permanent Secretary - DPA National Coordinator - PPCR Ministry of National Devclopment Planning Ministrny of NaunuMti[ Inpmennt P 1mg D ate:.. .................. ........ D ate: . .. P ge I1 OFFICE OF THE AUDITOR GENERAL INDEPENDENT AUDITOR'S REPORT STAND No.7951 HAILE SELASSIE AVENUE, LONGACRES P.0 BOX 50071 LUSA KA. ZAMBIA E-mail: a id i -a iu0A Website: www.ago.gov.zm Telephone: +260252611/252771 To the Permanent Secretary, Ministry of National Development Planning Report on the Audit of the Financial Statements Opinion I have audited the financial statements of the Zambia Integrated Forest Landscape Project - Project Preparation Grant (ZIFLP-PPG), which comprise the Statement of Sources and Utilization of Funds for the financial year ended 31s" December, 2017, and notes to the financial statements, inc uding a summary of significant accounting policies as set out on pages 5 to 9. In my opinion, the accompanying financial statements of the Zambia Integrated Forest Landscape Project - Project Preparation Grant (ZIFLP-PPG) are prepared, in all material respects, in accordance with International Public Sector Accounting Standards (IPSASs) Cash Basis of Accounting and the Financing Agreement between International Bank of Reconstruction and Development ("World Bank") and the Republic of Zambia. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under these standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Zambia Integrated Forest Landscape Project in accordance with the International Organization of Supreme Audit Institutions (INTOSAI) Code of Ethics together with the ethical requirements that are relevant to my audit of the Financial Statements in Zambia, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the INTOSAI Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSASs) Cash Basis of Accounting and the financing agreement between International Bank of Reconstruction and Development ("World Bank") and the Republic of Zambia and for such internal controls as Page 2 OFFICE OF THE AUDITOR GENERAL management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the project's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements My 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 my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, I exercise professional judgment and maintain professional skepticism throughout the audit. I 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 my 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 controls. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the project's internal controls. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I 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 controls that I identify during my audit. I also provide those charged with governance with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable related safeguards. Page 3 OFFICE OF THE AUDITOR GENERAL Report on Other Legal and Regulatory Requirements In my opinion, the financial statements of the Zambia Integrated Forest Landscape Project - Project Preparation Grant (ZIFLP-PPG) as at 3 December, 2017, have been properly prepared in accordance with the provisions of the International Bank of Reconstruction and Development ("World Bank") Financing Agreement. Ron M. Mwambwa, If iic-A ca(v use ciF, ACTING AUDITOR GENERAL 2018 OFFICE OF THE AUDITOR GENERAL DATE:..... .....2018 Page 1 4 MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT - PROJECT PREPARATION GRANT NO. TF072503 Statement of Sources And Utilization Of Funds for the year ended 3P' December 2017 Statement of Sources and Utilization of Funds for the Year Ended 311" December 2017 ZMW US S Sources of Funds Opening Cash Balances Receipts from World Bank (IBRD) 4 2,333,724.99 250,000.00 Total Cash Available 2,333,724.99 250,000.00 LESS: Utilisation of Funds by Category Goods, Non-Consulting Services, Consultants Services, 5.1 ,473,110.33 157,806.76 Workshops and Operating Costs Total Expenditure 1,473,110.33 157,806.76 Surplus/ (Deficit) for the period 860,614.66 92,193.24 Foreign Exchange Gain/ (Loss) 6 103,341.09 4,271.79 Net Cash Available 963,955.75 96,465.03 Represented by cash and cash equivalent 7 963,955.75 96,465.03 Bank Balances Chola J. Chabala Chitembo K. Chunga Permanent Secretary - DPA National Coordinator - PPCR Ministry of National Development Planning Ministry of National Development Planning .. . . . .. . . .. . . . .Date . .. . . . .. . . . Page 5 MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT - PROJECT PREPARATION GRANT NO. TF072503 Statement of Sources And Utilization Of Funds for the year ended 3P1 December 2017 NOTES TO THE STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE FINANCIAL YEAR ENDED 31T DECEMBER 2017 . Background On 23rd November 2016, the Government of the Republic of Zambia and International Bank for Reconstruction and Development (World Bank) signed a Project Preparation Grant Agreement - TF072503 for the Zambia Integrated Forest Landscape Project under the Ministry of National Development Planning. The objectives of the Project are to improve rural livelihoods and to contribute to low-carbon development in targeted landscapes of Eastern Province. The Project consists of the following parts: i. Carrying out of technical studies and identifying cross-sectoral investment activities for financing. ii. Preparing manuals and safeguards instruments for identified investments. iii. Carrying out of public consultations on the activities including on the safeguards documents. iv. Building capacity of the Interim Climate Change Secretariat (ICCS) and the Province to implement the program. v. Financing of Operating Costs associated with Project implementation. The Project Preparations started in December 2016. First disbursement of funds to the Project was made in 2017 when project activities began. The Project Designated Account denominated in US Dollars is maintained at Bank of Zambia, Lusaka, while a Kwacha operations account is held at Zambia National Commercial Bank, Acacia Branch. Funds from the Word Bank are remitted into the Designated Account and transferred into the Kwacha Account for operations using the Bank of Zambia ruling exchange rate at the time of the transfer. The Project Preparation Grant has one category for Goods, Non-Consulting Services, Consultants Services, Workshops and Operating Costs. The Statement of Sources and Utilization of Funds has been prepared for the year ended 31 December 2017. Page | 6 MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT - PROJECT PREPARATION GRANT NO. TF072503 Statement of Sources And Utilization Of Funds for the year ended 31s December 2017 2. Statement of Compliance The Statement of Sources and Utilisation of Funds have been prepared in accordance with International Public Sector Accounting Standards (IPSAS). The Statement of Sources and Utilization of Funds has been prepared on cash basis of accounting in accordance with accounting principles generally accepted by the Government of the Republic of Zambia and Cooperating Partners. This is a departure from the requirements of IAS because under the circumstances, the cash basis accounting is considered appropriate. 3. Significant Accounting Policies Significant accounting policies adopted in the preparation of the Statement of Sources and Utilisation of Funds and applied in all material respects, are set out below: 3.1 Basis of Financial Statement Preparation The Statement of Sources and Utilization of Funds were prepared under historical cost convention. 3.2 Sources of Funds The source of funds for the project represent amounts received from the International Bank of Reconstruction and Development Association (IBRD) - World Bank during the accounting period. The total agreed project preparation grant amount is US$250,000 for the project preparation period from 23rd November 2016 to 30h September 2018. During the twelve (12) month period to 31st December 2017, US$250,000 (ZMW2, 333,724.99) disbursement was received under the grant. 3.3 Exchange Rates The annual average exchange rate used for translating US$ amounts into ZMW was 9.3349 and the closing bank balances were translated using the closing rate as at 3 1 1 December 2017 which stood at US$1 to ZMW9.9928 4. Opening Balances and Cash Receipts from IBRD There were no opening balances as the first disbursement under the project was received during the accounting period. Total cash received have been valued at the annual average exchange rate. Page | 7 MINISTRY OF NATIONAL DEVELOPMENT PLANNING ZAMBIA INTEGRATED FOREST LANDSCAPE PROJECT - PROJECT PREPARATION GRANT NO. TF072503 Statement of Sources And Utilization Of Funds for the year ended 3P' December 2017 Date of Receipt Amount Received ZMW US$ 8-May-17 933,490.00 100,000.00 1-Sep- 17 128,914.50 13,809.95 8-Nov-17 563,194.49 60,332.14 26-Dec-17 708,126.00 75,857.91 Total Amount Received 2,333,724.99 250,000.00 5. Utilisation of Funds Utilisation of funds represents amounts paid during the accounting period and no provisions are made for accrued expenses. Expenses, apart from advances, are recognized at the time they are paid; advances are expensed when they are retired. 5.1 Goods, Non-Consulting Services, Consultants Services, Workshops and Operating Costs The following is the breakdown for Category 1 items - Goods, Non-Consulting Services, Consultants Services, Workshops and Operating Costs undertaken during the 12 Month period to 31 " December 2017: ZMW US $ Goods - - Non-Consulting Services 520,686.99 55,778.53 Consultants Services 360,315.79 38,598.78 Workshops and Operating 592,107.55 63,429.45 Costs Total Expenditure 1,473,110.33 157,806.76 6. Foreign Currency Exchange Difference ZMW USS Total Cash Balances and Receipts 2,333,724.99 250,000.00 Total Expenditure 1,473,110.33 157,806.76 Total Cash Balances and Receipts Less Expenditure 860,614.66 92,193.24 Actual Closing Cash Bal ances (See Note 10) 963,955.75 96,465.03 Foreign Currency Exchange Difference 103,341.09 4,271.79 Page | 8