REPUBLIC OF KENYA OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL SAFETY NET PROGRAMME FOR THE YEAR ENDED 30 JUNE 2017  0,V b Project Name: NATIONAL SAFETY NET PROGRAMME Implementing Entity: MINISTRY OF EAST AFRICA COMMUNITY, LABOUR AND SOCIAL PROTECTION (SOCIAL PROTECTION SECRETARIATE) ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2017 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office The project's official Name: National Safety Net Programme Physical Address :(Headquarters) NSSF Building, Nairobi (city), Nairobi County, Kenya. P. 0. Box 46205-00100 GPO, Nairobi. Contacts Telephone: (254) 722 319 186 E-mail: et ovc(@gmail.com OR ct ovc(Xahoo.com Project Coordinator Judy Ndungu 1.2 Project Information Project Start Date: The project start date is March,3 1st 2009 Project End Date: The project end date is 2018 Project Manager: The project manager is Judy Ndungu Project Sponsor: The project sponsor is World Bank Grant ,Government of Kenya, IDA 1.3 Project Overview I ine Ministry/State The project is under the supervision of the - Ministry of East Africa Department of the Community, Labour and Social Protection project ii Nationai Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 Strategic goals of the The strategic goals of the project are as follows: project 2. Strengthening the capacity of families to protect and care for the Orphans and Vulnerable Children (OVC), Older Persons and With severe disability 3. Mobilizing and supporting community response 4. Ensuring access to essential services including education, healthcare, Birth registration and others for OVC, Older Persons and Persons With Severe Disability 5. Improving Government Policy and Regulations. 6. Creating a supportive environment through advocacy and social mobilization 7. Developing and improving the capacity to monitor and evaluate programme effectiveness 8. Strengthening, supporting and coordination of institutional structures. Achievement of The project management aims to achieve the goals through the following strategic goals means: (i) Increase social safety net access to extremely poor households in Kenya (ii) Build the capacity of the Government systems to effectively deliver the safety net project to the vulnerable groups. Current situation that The project was formed to intervene in the following areas: the project was (i) Address cases of vulnerable group and children and be integrated to formed to intervene Families. This was to be achieved by giving households bi-annual cash subsidy to take care of the vulnerable persons Project duration The project started on 31st March 2009 and is expected to run until 31st December, 2018 1.4 Bankers The following are the bankers for the current year: (i) Cooperative Bank of Kenya Limited -011411333228000 (ii) Cooperative Bank of Kenya Limited -02120134198100 (iii) Central Bank of Kenya - 1000311304 (iv) KCB Agency Account iii National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 1.5 Auditors The project is audited by Office of Auditor General. 1.6 Roles and Responsibilities Names Title Key qualification Responsibilities designation Judy Ndungu Senior Assistant Masters in Sociology Head of Social Director Assistance Unit (Project Coordinator) Moses Muga Senior MSC Com. CPA(K) Project Accountant Accountant Cecilia Mbaka Deputy Director Bachelor's Degree in Head of Social Protection Social Sociology Secretariat Development Franklyn Makhalu Senior Children Masters In Sociology and Head of MIS and Officer Economics Payments 1.7 Summary of Overall Project Performance: 1. The Program has been gradually expanded its scope/support from 500 households pre- pilot in 2004 now reaching 730,000 households as at 2017. 2. The Program has increased school enrolment and attendance and reduced rates of mortality and morbidity iv Naional Safety N ec Programme Reports and Financial Statements For the financial year ended June 30, 2017 STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the State Department for Social Protection and the Project Coordinator for National Safety Net Programme are responsible for the preparation and presentation of the Project's financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year (period) ended on June 30, 2017. This responsibility includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Principal Secretary for the State Department for Social Protection and the Project Coordinator for National Safety Net Program;ne accept responsibility for the Project's financial statements, which have been prepared on the Cash Basis Method of Financial Reporting, using appropriate accounting policies in accordance with International Public Sector Accounting Standards. The Principal Secretary for the State Department for Social Protection and the Project Coordinator for National Safety Net Programme are of the opinion that the Project's financial statements give a true and fair view of the state of Project's transactions during the financial year/period ended June 30, 2017, and of the Project's financial position as at that date. The Principal Secretary for the State Department for Social Protection and the Project Coordinator for National Safety Net Programme further confirms the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project Financial Statements as well as the adequacy of the systems of internal financial control. The Principal Secretary for the State Department for Social Protection and the Project Coordinator for National Safety Net Programme confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year/period under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by the Principal Secretary, State Deport ent for Social Protection and the Project Coordinator for National Safety Net Programme on So \11 2017 and signed by them. Princi S l retary Proje oordinator V s REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao'go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON NATIONAL SAFETY NET PROGRAMME FOR THE YEAR ENDED 30 JUNE 2017 REPORT ON THE FINANCIAL STATEMENTS Qualified Opinion I have audited the accompanying financial statements of National Safety Net Programme set out on pages 1 to 15, which comprise the statement of financial assets and liabilities as at 30 June 2017, and the statement of receipts and payments, statement of cash flows and statement of comparative budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with the provisions of article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, 2015 and Schedule 2 Section III B of the financing agreement No.5287-KE dated 9 September 2013 between the International Development Association (IDA) and the Government of Kenya. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit. In my opinion, except for the effect of the matters described in the Basis for Qualified Opinion section of my report, the financial statements present fairly, in all material respects, the financial position of National Safety Net Programme as at 30 June 2017, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Financing Agreement dated 9 September, 2013 between International Development Association and the Government of Kenya. Further, as required by Article 229(6) of the Constitution, except for the matters described in the Basis of Qualified Opinion section of my report, I confirm that public money has been applied lawfully and in an effective way. Basis for Qualified Opinion 1. Uncollected Cash Transfer Funds GOK - Equity Bank (component) Cash Transfer funds totalling Kshs.837,575,734 as at 30 June 2017 had not been paid to the beneficiaries and were still held by Equity Bank - the service provider contrary to the Agency Agreement which requires unpaid funds to be paid to an account designated by the Principal and held with the Agent within 14 days after the last disbursement. Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 June 2017 PromotingAccountability in the Public Sector No reasons have been provided for the failure to pay the Kshs.837,575,734 to beneficiaries or for the failure to refund uncollected amounts to the Principal Secretary - State Department for Social Protection as stipulated in the contract agreement. The service provider was therefore, in breach of the Section 4 (e) of the Special Obligations of the Agency Agreement dated 23 October 2014. 2. Uncollected Cash Transfer Funds GOK- Kenya Commercial Bank (component) Cash Transfer funds totalling Kshs.3,155,391,087 had as 30 June 2017 not been paid to beneficiaries and were still held by the agent Kenya Commercial Bank (KCB) the service provider contrary to the Agency Agreement which requires unpaid funds to be paid to an account designated by the Principal Secretary - State Department for Social Protection and held with the Agent within 14 days after the last disbursement. No reasons have been provided for the failure to pay Kshs.3,155,391,087 to beneficiaries or for the failure to refund uncollected amounts to the Principal. The service provider was therefore, in breach of the Section 4 (e) of the Special Obligations of the Agency agreement dated 23 October 2014. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Kenya National Safety Net Programme management in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion. Key Audit Matter Key audit matters are those that, in my professional judgment, were of most significance in the audit of the financial statements of the current year. Except for the matters described in the Basis for Qualified Opinion Section, I have determined that there are no key audit matters to communicate in my report. Other matter 1.0 Budget and Budgetary Performance 1.1 Receipts Shortfall The statements of comparison of budget and actual for the year revealed the following variances: Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 June 2017 2 Receipts Description Final Budget Actual Excess % Variance Receipts Shortfall (-) Kshs. Kshs. Kshs. Kshs. Government of Kenya 17,148,670,747 11,740,702,508 -5,407,968,239 -32% External Financing 6,864,410,454 2,672,529,542 -4,191,880,912 -61% Miscellaneous 0 4,337,910 4,337,910 100% Total 24,013,081,201 14,417,569,960 -9,595,511,241 - 40% No explanation has been provided in the financial statement for the difference between the actual and the budgeted amounts totalling Kshs.9,595,511,241 or 40%. 1.2 Under/Over Expenditure An analysis of the project actual expenditure against the budgeted amount revealed the following variances: Description Final Budget Actual Over % Variance Expenditure Under (+) Kshs. Kshs. Kshs. Kshs. Old Persons Cash Old PrsonsCash2,800,010,114 2,643,569,737 Transfer Programme +157,440,377 6% Urban and Safety 0 Persons with Severe Disability 1,200,000,000 1,647,035,730 -447,035,730 37% Orphans and Vulnerable children +248,728,846 3% Hunger Safety Net 4,288,957,423 4,246,185,684 Programme +42,771,739 1% Social Protection 533,879,636 397,381,916 Secretariat +136,497,720 26% Total 17,667,754,473 17,530,351,521 +137,402,952 1% No explanation has been provided in the financial statements for the over expenditure of Kshs.447,035,730 or 37% under Persons with Severe Disability and under expenditure of Kshs.136,497,720 by the Social Protection Secretariat. 2. Unresolved Previous Years Issues As reported in the previous year, the project management has not resolved the previous year's issues as raised in the Auditor-Generals' report for the financial year 2015/2016 including; inclusion of income not related to cash transfers; unsupported cash disbursements and payments to beneficiaries; and unreconciled social security benefits. No reason has been provided for failure to resolve the issues. Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 June 2017 3 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as management determines 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 is responsible for assessing the Project's ability to continue to sustain services, disclosing, as applicable, matters related to sustainability of services and using the going concern accounting assumption unless the management either intends to liquidate the Project's or to cease operations, or have no realistic alternative but to do so. Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. Those charged with governance are responsible for overseeing the Project' financial reporting process. Auditor-General's Responsibilities for the Audit of the Financial Statements The audit 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 in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution of Kenya. 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 conducted in accordance with ISSAls, I exercise professional judgement 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 control. Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 JAne 2017 4 * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances and for the purpose of giving an assurance on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern accounting assumption 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 I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the Project to cease to continue as a going concern. * 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. * Obtain sufficient appropriate audit evidence regarding the financial information business activities of the Project to express an opinion on the financial statements. * Perform such other procedures as I consider necessary in the circumstances. I communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. I also provide management 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. Report on Contracts with Debarred Firms Based on our audit, I report that nothing came to my attention to indicate that debarred firms, both by Government and external financiers, were awarded contracts under the Project during the financial period under review. Report on Other Legal and Regulatory Requirements Based on our audit, I report that nothing came to my attention to indicate substantial non- compliance with applicable laws and regulations, as well as essential external financing Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 June 2017 5 covenants. However, a few minor cases of non-compliance were identified which have been included in our separate Management Letter to the Principal Secretary for State Department of Social Protection and the Social Protection Secretariat. FCPA Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 29 December 2017 Report of the Auditor-General on the Financial Statements of National Safety Net Programme for the year ended 30 June 2017 6 Nationai Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 1. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2017 __ __ _ 2016/17 2015/16 2015/16 Receipts and Receipts and Rote cpets a payment payment Note payments controlled by controlled by controlled by the entity(Re- the the entity Stated) entity(Certified) Ksh Ksh Ksh RECEIPTS ' Government of Kenya 3 11,740,702,508 14,332,426,567 14,793,398,429 External Financing 1&2 2,672,529,542 5,694,286,412 5,533,663,870 Miscellaneous Receipt 3 4,337,910 3,468,425 13,012,921 TOTAL RECEIPTS 14,417,569,960 20,030,181.404 20,340,075,220 PAYMENTS Old Persons Cash Transfer Programme 2,643,569,737 7,313,814,098 4,302,024,463 Compensation of employees 4 14,972,460 8,839,793 8,839,793 Purchase of goods and services 5 279,990,010 567,489,575 401,891,020 Acquisition of non-financial assets 7 14,094,304 6,228,950 4,660,650 Other grants and transfers and payments 6 2,334,512,963 6,731,255,780 3,886,633,000 Cash Transfer for People with Severe 1,647,035,730 648,887,290 1,675,820,192 Diasability Compensation of employees 4 96,670,525 33,392,706 137,951,560 Purchase of goods and services 5 5,807,845 27,915,046 92,882,321 Acquisition of non-financial assets 7 3,343,500 15,276,138 Other grants and transfers and payments 6 1,541,213,860 572,303,400 1,444,986,311 Cash TraO4sfer for OVC 8,596,178,454 4,857,286,407 5,834,998,805 Compensation of employees 4 3,705,864 3,427,056 3,427,056 Purchase of goods and services 5 555,533,788 362.370,005 437,107,187 Acquisition of non-financial assets 7 118,806,209 23,323,500 23,323,500 Other grants and transfers and payments 6 7,918,132,593 4,468,165,846 5,371,141,062 Hunger Safety Net Programme 4,246,185,684 5,455,188,019 5,454,721,272 Compensation of employees 4 333,102,252 53,371,032 Purchase of goods and services 5 335,455,914 598,373,386 1,519,490,129 Acquisition of non-financial assets 7 4,274,818 1,393,678 2,256,478 Other grants and transfers and paynents 6 3,573,352,700 4,802,049,922 3,932,974,665 Social Protection Secretariate 397,381,916 223,599,531 176,163,030 Compensation of employees 4 69,407,933 31,455,053 31,678,853 Purchase of goods and services 5 209,343,105 188,863,576 141,203,275 Acquisition of non-financial assets 7 118,630,878 3,280,902 3,280,902 Other grants and transfers and payments 6 TOTAL PAYMENTS tN Pg m 17,530,351,521 18,498,775,345 17,443,727,761 AcUisitionRP fnSEFICIT at -3,112,781,561 1,531,406,060 2,896,347,458j Othe grntsandtrasfes an pamens 6 3,53,32,70 4,02,49,22 ,93,97,66 s, National Safety Nlet Programme Reports and Financial Statements For the financial year ended June 30, 2017 2. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2017 Note 2016/17 2015/16(Restated) 2015/16 KShs KShs KShs FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8 3,227,131,055.50 6,339,912,616.62 7,743,822,361 Total Cash and Cash Equivalents 3,227,131,055.50 6,339,912,616.62 7,743,822,361 TOTAL FINANCIAL ASSWETS 3.227,131,055.50 6.339.912.616.62 7.743,822.361 REPRESENTED BY Fund balance b/fwd 8 6,339,912,616.60 4,808,506,557.28 4,847,474,904 Surplus/Deficit for the year (3,112,781,561.10) 1,531,406,059.32 2,896,347,458 NET FINANCIAL POSITION 36227,131,055.50 6,3399 7.743.822.362 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on go 1 2017 and signe by: Principal Se retary Project dinator Project Accountant 30/11/ -017 30/11/2017 30/11/2017 ICPAK M/Number: 14266 IPSAS 3(54) an entity shall correct material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by: (a) Restating the comparative amounts for prior period(s) presented in which the error occurred; or (b) If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. During the FY 2015/2016, an amount of Kshs 1,403,909,745.38 relating to net financial position and transfers which was due to understatement of expenditures and overstatement of receipts of Ksh 1,055,047,582 and Ksh 348,862,162.82 respectively on the opening balance of 2015/16 accounts. The figure has been restated correctly. This is the basis of re-stating the statement which affect the statement of financial position, statement of Cash flow and the statement of changes in net assets. 2  National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 3. STATEMENT OF CASHFLOW FOR THE PERIOD 30TH JUNE 2017 2015/16( Re 2016/17 Stated) 2015/16 Receipts for operating activities Ksh Ksh Ksh Transfer from The National Treasury 3 11,740,702,508 14,332,426,567 14,793,398,429 Proceeds from domestic and foreign 1&2 grants 2,581,449,542 5,486,691,752 5,533,663,870 Miscellaneous Receipts 3 4,337,909 3,468,425 13,012,921 14,326,489,959 19,822,586,744 20,340,075,220 Payments for operating activities Compensation of employees 4 517,859,034 130,485,640 181,897,262 Purchase of goods and services 5 1,386,130,662 1,745,011,589 2,454,651,559 Other grants and transfers 6 15,367,212,116 16,573,774,948 14,776,938,313 17,271,201,812 18,449,272,176 17,413,487,134 Adjustments during the year Receivables Net cash flow from operating activities (2,944,711,852) 1,373,314,568 2,926,588,086 CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Assets 7 259,149,709 49,503,168 30,240,628 Net cash flows from Investing Activities (259,149,709) (49,503,168) (30,240,628) CASHFLOW FROM BORROWING ACTIVITIES Proceeds from domestic and foreign 2 borrowing 91,080,000 207,594,659 0 Net cash flow from financing 0 activities 91,080,000 207,594,659 NET INCREASE IN CASH AND CASH EQUIVALENT (3,112,781,561) 1,531,406,059 2,896,347,458 Cash and cash equivalent at BEGINNING of the year 6,339,912,617 4,808,506,557 4,847,474,904 Cash and cash equivalent at END of the year 3,227,131,056 6,339,912,617 7,743,822,362 The accounting policies and explanatory notes to these financial statements form an in gral part of the financial statements entity financial statements were approved on Zo 2017 and signed by: Principal Secre Project ordinator Project Accountant 30/11/2017 V 30/11/2017 30/11/2017 ICPAK M/No. 14266 3 Nationai Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 4. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Ad jus tm Actual on Budget % of Receipts/Payments ent Comparable Utilization Utilizat Item Original Budget s Final Budget Basis Difference ion f-d/c a b c=a+b d e=c-d Receipts Government of 17,148,670,747 17,148,670,747 11,740,702,508 5,407,968,239 68% Kenya External Financing 6,864,410,454 6,864,410,454 2,672,529,542 4,191,880,912 39% Miscellaneous 4,337,910 (4,337,910) Total Receipts 24,013,081,201 24,013,081,201 14,417,569,960 9,595,511,241 Payments Old Persons Cash 2,800,010,114 2,800,010,114 2,643,569,737 165,440,377 94% Transfer Programme Urban and Safety Parsons with Severe 1,200,000,000 1,200,000,000 1,647,035,730 (477,035,730) 137% Disability Orphans and 8,844,907,300 8,844,907,300 8,596,178,454 248,728,846 97% -Vulnerable children Hunger Safety Net 4,288,957,423 4,288,957,423 4,246,185,684 43,981,871 99% Programme 1 Social Protection 533,879,636 533,879,636 397,381,916 136,497,720 74% Secretariat Total Payments 17,676,754,473 17,676,754,473 17,530,351,521 147,589,765 Princi 1IS retary Projectghordinator Project Accountant 30/11/2 30/11/2017 30/11/2017 ICPAK M/No.14266 4 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 5. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1. Basis of Preparation 8.1.1. Statement of compliance and basis of preparation The financial statements have been prepared in accordance with Cash-basis IPSAS financial reporting under the cash basis of Accounting, as prescribed by the PSASB and set out in the accounting policy note below. This cash basis of accounting has been supplemented with accounting for; a) receivables that include imprests and salary advances and b) payables that include deposits and retentions. The financial statements comply with and conform to the form of presentation prescribed by the PSASB. The accounting policies adopted have been consistently applied to all the years presented. 8.1.2. Reporting entity The financial statements are for the Hunger Safety Net Programme under National Government of Kenya. The financial statements encompass the reporting entity as specified in the relevant legislation PFM Act 2012. 8.1.3. Reporting currency The financial statements are presented in Kenya Shillings (Kshs), which is the functional and reporting currency of the Project and all values are rounded to the nearest Kenya Shilling. 8.2. Significant Accounting Policies a)Recognition of receipts The Project recognises all receipts from the various sources when the event occurs and the related cash has actually been received by the Government. * Transfers from the Exchequer Transfer from Exchequer is be recognized in the books of accounts when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity. * External Assistance External assistance is received through grants and loans floin iultilateial aid bilateral development partners. 5 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 SIGNIFICANT ACCOUNTING POLICIES (Continued) Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowing Borrowing includes Treasury bill, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Project or any other debt the Project may take on will be treated on cash basis and recognized as a receipt during the year they were received. Undrawn external assistance These are loans and grants at reporting date as specified in a binding agreement and relate to funding for the Project currently under development where conditions have been satisfied or their ongoing satisfaction is highly likely and the project is anticipated to continue to completion. An analysis of the Project's undrawn external assistance is shown in the funding summary * Other receipts These include Appropriation-in-Aid and relates to receipts such as proceeds from disposal of assets and sale of tender documents. These are recognized in the financial statements the time associated cash is received. b) Recognition of payments The Project recognises all payments when the event occurs and the related cash has actually been paid out by the Project. * Compensation of employees Salaries and Wages, Allowances, Statutory Contribution for employees are recognized in the period when the compensation is paid. * Use of goods and services Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they shall be disclosed as pending bills. * Interest on borrowing Borrowing costs that include interest are recognized as payment in the period in which they incurred and paid for. 6 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 SIGNIFICANT ACCOUNTING POLICIES (Continued) * Repayment of borrowing (principal amount) The repayment of principal amount of borrowing is recognized as payment in the period in which the repayment is made. The stock of debt is disclosed as an annexure to the consolidated financial statements. * Acquisition of fixed assets The payment on acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of. these items are treated as payments and receipts items respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as receipt and as a payment. A fixed asset register is maintained by each public entity and a summary provided for purposes of consolidation. This summary is disclosed as an annexure to the consolidated financial statements. c) In-kind donations In-kind contributions are donations that are made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment or personnel services. Where the financial value received for in- kind contributions can be reliably determined, the Project includes such value in the statement of receipts and payments both as receipts and as payments in equal and opposite amounts; otherwise, the contribution is not recorded. d) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term 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. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks at the end of the financial year. For the purposes of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorized public officers and/or institutions which were not surrendered or accounted for at the end of the financial year. Restriction on cash Restricted cash represents amounts that are limited/restricted from being used to settle a liability for at least twelve months after the reporting period. This cash is limited for direct use as required by stipulation. Amounts maintained in deposit bank accounts are restricted for use in refunding third part deposits 7 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 SIGNIFICANT ACCOUNTING POLICIES (Continued) e) Accounts receivable For the purposes of these financial statements, imprests and advances to authorized public officers and/or institutions which were not surrendered or accounted for at the end of the financial year is treated as receivables. This is in recognition of the government practice where the imprest payments are recognized as payments when fully accounted for by the imprest or AlE holders. This is an enhancement to the cash accounting policy. Other accounts receivables are disclosed in the financial statements. f) Pending bills Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. As pending bills do not involve the payment of cash in the reporting period, they recorded as 'memorandum' or 'off-balance' items to provide a sense of the overall net cash position of the Project at the end of the year. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. g) Budget The budget is developed on a comparable accounting basis (cash basis), the same accounts classification basis (except for accounts receivable - outstanding imprest and clearance accounts and accounts payable - deposits, which are accounted for on an accrual basis), and for the same period as the financial statements. The Project's budget was approved as required by Law and National Treasury Regulations, as well as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. The Development Projects are budgeted for under the MDAs but receive budgeted funds , as transfers and account for them separately. These transfers are recognised as inter-entity transfers and are eliminated upon consolidation. A high-level assessment of the Project's actual performance against the comparable budget for the financial year/period under review has been included in an annex to these financial statements. 8 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 SIGNIFICANT ACCOUNTING POLICIES (Continued) h) Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year/period are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments. i) Comparative figures Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to conform to the required changes in financial statement presentation. j) Subsequent events There have been no events subsequent to the financial year/period end with a significant impact on the financial statements for the year ended June 30, 2017. k) Errors Material prior period errors shall be corrected retrospectively in the first set of financial statements authorized for issue after their discovery by: i. Restating the comparative amounts for prior period(s) presented in which the error occurred; or ii. If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. 9 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 NOTES TO THE FINANCIAL STATEMENTS 1. PROCEEDS FROM DOMESTIC AND FOREIGN GRANTS During the 12 months to 30 June 2017 we received grants from donors as detailed in the table below: Name of Donor Grants received Total amount in KShs in cash Ksh FY 2016/17 FY 2015/16 Ksh(Re FY 201[5/16 Ksh Stated Grants Received from World Bank frant-World Bank Grant-World Bank 838,758,520.00 838,758,520.00 207,594,660 0 Total 838,758,520.00 838,758,520.00 207,594,660 2. PROCEEDS FROM DOMESTIC AND FOREIGN LOAN During the 12 months to 30 June 2017 we received Loan from IDA Credit as detailed in the table below: Loan Received from IDA Credit IDA Credit 91,080,000.00 91,080,000.00 5,486,691,752 5,533,663,869 Other External Financing 4,9102 00 174,691 0?? 00 Total 1,833,771,022.00 1,833,771,022.00 5,486,691,752 5,533,663,869 10 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 3. RECEIPTS FROM GOVERNMENT OF KENYA During the 12 months to 30 June 2017 we received cash from Government of Kenya as detailed in the table below: Name of Donor received in cash Total amount in KShs FY 2016/17 FY 2015/16(Restated) FY 2015/16 Ksh Ksh Ksh Ksh Loan Received from GOK GOK 11,740,702,508 11,740,702,508.00 14,332,426,567 14,793,398,429 Misc. Receipt 4,337,909.90 4,337,909.90 3,468,425 13,012,921 Total 11,745,040,417.90 11,745,040,417.90 14,335,894,992 14,806,411,350 4 COMPENSATION OF EMPLOYEES-BASIC WAGES TO TEMPORARY EMPLOYEES Total Payments(2016/ FY 2016/17 17) FY/2015/16(Re Stated) FY/2015/16 KShs KShs KShs KSH Old Persons 14,972,460 14,972,460 8,839,793 8,839,793 Urban Food Subsidy Person with Severe Disability 96,670,525 96,670,525 33,392,706 137,951,560 Orphans and Vulnerable 3,705,864 3,705,864 3,427,056 3,427,056 children Hunger Safety Net Programme 333,102,252 333,102,252 53,371,032 Social Protection Secretariat 69,407,933 69,407,933 31,455,053 31,678,853 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 Total 330 5 PURCHASE OF GOODS AND SERVICES PER PROGRAMME 2015/16 2016/17 2016/17 Re Stated 2015/16 Old Persons 279,990,010 279,990,010 567,489,575 401,891,02 Urban Food Subsidy Person with Severe Disability 5,807,845 5,807,845 27,915,046 92,882,32 Orphans and Vulnerable children 555,533,788 555,533,788 362,370,005 437,107,18 Hunger Safety Net Programme 335,455,914 335,455,914 598,373,386 1,519,490,12 Social Protection Secretariat 209,343,105 209,343,105 188,863,576 3,280,9( Total 1,386,130,662 1,386.130,662 1.745,011,589 2,454,651.5_ 6. CASH TRANSFERS PER PROGRAMME 2016/17 KShs 2015/16(Re Stated) 2015/16 Old Persons 2,334,512,963 6,731,255,780 3,886,633,000 Urban Food Subsidy Person with Severe Disability 1,541,213,860 572,303,400 1,444,986,311 Orphans and -Vulnerable children 7,918,132,593 4,468,165,846 5,371,141,062 Hunger Safety Net Programme 3,573,352,700 4,802,049,922 3,932,974,665 Social Protection Secretariat 141,203,275 Total 15,367212,11 15.367,212.116 14,776,313 12 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 7. ACQUISITION OF NON-FINANCIAL ASSETS 2016/17 KShs 2015/16(Re Stated) 2015/16 Old Persons 14,094,304 6,228,950 4,660,650 Urban Food Subsidy Person with Severe Disability 3,343,500 15,276,138 Orphans and Vulnerable children 118,806,209 23,323,500 23,323,500 Hunger Safety Net Programme 4,274,818 1,393,678 2,256,478 Social Protection Secretariat 118,630,878 3,280,902 1 Total 2_59.149,709 495031 301240_628 8. CASH AND CASH EQUIVALENTS CARRIED FORWARD 2016/17 2015/16(Re Stated) 2015/16 KShs KShs Ksh Cash equivalents 3,227,131,056 6,339,912,617 7,743,822,361 Total 3,227,131,056 6,339,912,617 7,743,822,361 The project has four project accounts spread within the project implementation area and foreign currency designated accounts managed by the National Treasury as listed below: 13 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 8A. BANK ACCOUNTS Project Bank Accounts 2016/17 2015/16 usd KShs Foreian Currency Accounts Co-operative Bank of Kenya [021201341981001 466.23 100,466.23 Total Foreign Currency balances 46 10,466.2 Local Currency Accounts KES KES Central Bank of Kenya [1000311304] 27,781,500 547,422,751 KCB Agency for Cash Transfer(1168237459) 3,155,391,087 5,559,345,237 Cooperative Bank of Kenya (0114113332280) 0 186,029,409 Kenya Hunger Safety Net 43,958,468 47,115,220 Total Local Currency balances 3,227131,055.50 6.339,912.617 Note: the following Agency accounts holds the programme funds as at 30th June 2017 1. Equity Bank Limited KES 837,349,234 2. Hunger Safety Net Programme KES 226,500 14 National Safety Net Programme Reports and Financial Statements For the financial year ended June 30, 2017 9. CONSOLIDATED STATEMENT OF RECEIPTS AND PAYMENTS FOR YEAR ENDED JUNE 2017 Older persons cash Urbar Cash transfer for Cash transfer for Hunger Safety Net Social protection transfer program subsi( persons with orphans and programme Project secretariat Total transl severe Disabilities Vulnerable children Ksh Ksh Ksh Ksh Ksh Ksh Ksh b c d e g=a+b+c+d+e CASH BALANCE B/F 1,741,182,030 811,321,694 3,740,293,673 47,115,305 - 6,339,912,701 RECEIPTS _ Government of Ker 1,887,959,707.00 - 1,200,000,000.00 5,759,360,885.00 2,496,000,000 397,381,916.00 11,740,702,508 External financing 1,742,691,022 1,742,691,022 (a) World Bank loan 91,080,000.00 91,080,000 (b) Foreign Grant 838,758,520.00 838,758,520 © Miscellaneous 4,337,910 4,337,910 Total 3,629,141,737 2,011,321,694 10,429,493,078 4,290,144,236 397,381,916 20,757,482,661 Payments compensation of 14,972,460.00 96,670,525 3,705,864 333,102,252.00 69,407,933 517,859,034 Social security bei 2,334,512,963 1,541,213,860 7,918,132,593 3,573,352,700.00 15,367,212,116 Use of goods and 279,990,010 5,807,845 555,533,788 335,455,914.00 209,343,105 1,386,130,662 Acquisition of nor 14,094,304 3,343,500 118,806,209 4,274,818.00 118,630,878 259,149,709 Total Payments 2,643,569,737.00 - 1,647,035,730.00 8,596,178,454.00 4,246,185,684.00 397,381,916.00 17,530,351,521 CASH BALANCE C/1 985,572,000 364,285,964 1,833,314,624 43,958,552 - 3,227,131,140 15 s