GOVERNMENT OF LESOTHO AUDIT REPORT ON THE ANNUAL FINANCIAL STATEMENTS OF LESOTHO BASIC EDUCATION IMPROVEMENT PROJECT FOR THE YEAR ENDED 31 MARCH 2018 f AUDITOR - GENERAL P.O. BOX 502 MASERU 100 LESOTHO REPORT OF THE AUDTITOR-GENERAL ON THE FINANCIAL STATEMENTS OF LESOTHO BASIC EDUCATION IMPLEMENTATION PROJECT FOR THE YEAR ENDED 31 MARCH 2018 004 KINGDOM OF LESOTHO MINISTRY OF EDUCATION AND TRAINING ANNUAL FINANCIAL STATEMENTS FOR YEAR ENDED 31 MARCH 2018 LESOTHO BASIC EDUCATION IMPROVEMENT PROJECT (LBEIP) PROJECT ID : P160090 GRANT No. : A5372LS TABLE OF CONTENTS Auditor's Report 2 Key Dates 6 Background information on the Project 6 Project Costs and financing 7 Implementation Arrangements 7 Physical Performance 8 Summary Financial Performance 9 Accountant Report 10 Statement of Sources and Uses of Funds by Components and Category (Dollar) 11 Statement of Sources and Uses of Funds by Components and Category (Maloti) 12 Budget Performance (Dollar) 13 Budget Performance (Maloti) 14 Notes to the Financial Statements 15 The attached Financial Statements set out on Pages 10 to 17 were approved by the Project Management on the 13th December 2018 and signed on its behalf by: PRINCIPAL SECRETARY DIRECTOR EDUCATION PLANNING OFFICE OF THE AUDITOR - GENERAL P.O. BOX 502, MASERU 100 LESOTHO REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF LESOTHO BASIC EDUCATION IMPROVEMENT PROJECT FOR THE YEAR ENDED 31 MARCH 2018 Opinion I have audited the financial statements of Lesotho Basic Education Improvement Project (the Project) set on pages 6 to 17, which comprise the Consolidated Statements of Sources and Uses of Funds by Component and Category- GPE Dollar, Statement of Sources and Uses of Funds by Component and Category - GPE Maloti, Budget Performance - GPE Dollar, Budget Performance - GPE Maloti for the year ended 31 March 2018 and the Notes to the Financial Statements. In my opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Project as at 31 March 2018, and its financial performance and its cash flows for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS). Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those 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 Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Lesotho, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 2 4th floor * Finance House * High Court Road * Maseru * Lesotho Telephone (+266) 22323904/22314247 * Fax (+266) 22310366 Key Audit Matters Key Audit Matters (KAM) are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. There were no Key Audit Matters in this audit. 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 IPSAS Cash Basis Accounting, 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 as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. 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 audit 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 ISSAIs, I exercise professional judgment and maintain professional skepticism throughout the audit. I also: 3 * 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. * 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 control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * 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 Project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my audit 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. 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 control 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 4 other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my audit report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my audit report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. OFFICE OF THE AUDITOR-CENER:kt =. AUDITOR GE LUCY LIPHAFA DD AUDITOR-GENERAL P. o0% 502 MASERUJ00, LL50Th0 5 Key Dates Grant Agreement Project Completion Disbursement Effectiveness Date Deadline 20th July 2017 20th July 2017 31th August 2020 31st December 2020 Background Information on the project 1.0 INTRODUCTION The Kingdom of Lesotho, through the Ministry of Education and Training, received Grant financing from Global Partnership for Education (GPE), to support implementation of the Lesotho Basic Education Improvement Project (LBEIP) for a three year period of July 2017 to August 2020. The Grant financing in the amount of US$ 2.1 million is meant to support the Government of Lesotho in its efforts to improve the equity of basic education and enhance skills for Basotho students in targeted schools. The project addresses the same key issues in the education system as the ongoing WB financed Lesotho Education Quality for Equality Project. With the same objective and similar scope targeting additional primary schools, pre primary and secondary schools in the same catchment areas. The project is expected to benefit approximately 5,100 beneficiaries by 2020. This includes 4,100 students from 20 targeted primary schools, 900 students from 6 junior secondary schools in the same catchment areas as primary, 173 pre-primary, primary and junior secondary teachers and 26 school boards. The project will be implemented as a pilot Programme comprising 3 components. 2.0 PROJECT SUMMARY The Project Development Objective (PDO) is to improve basic education service delivery and student retention in targeted schools. 3.0 PROJECT COMPONENTS The Three Project Components are as follows: Component 1: Improving the teaching and learning environment in targeted primary and associated pre - primary and junior secondary schools, whose objective is to raise the quality of classroom service delivery at pre primary, primary and junior secondary school levels to help create a youth population with strong foundations in literacy, numeracy, and cognitive skills. Component 2: Strengthening school accountability for student learning and retention in targeted schools, aimed to empower key actors at the school level including School Boards to collectively design and perform actions that contribute to retaining students and enabling 6 them to learn using a school based management tool. The component will support the targeted primary and junior secondary schools to develop and implement a School Improvement Plan (SIP) through a participatory approach. Component 3: Strengthening Institutional Capacity and Project Management, whose focus is on strengthening and developing the capacity of MoET on its agenda as stated in the education sector plan, support project implementation activities, and cover project management costs. PROJECT COSTS AND FINANCING PER COMPONENT Component Total % I (US$m) Financing 1. Improving the Teaching and Learning Environment in Targeted Primary 1.15 55% and Associated Pre-primary and Junior Secondary Schools 2. Strengthening School Accountability for Student Learning and Retention 0.37 18% in Targeted Schools 3. Strengthening Institutional Capacity and Project Management 0.58 27% TOTAL PROJECT COSTS 2.10 100% IMPLEMENTATION ARRANGEMENTS The implementation arrangements for this project are same as for LEQEP and are as follows: The three components are coordinated and supported by a MoET Project Facilitation Unit (PFU) in close collaboration with the respective Central and regional structures of the Ministry. The PFU is a project coordination unit integrated into MoET with a Project Coordinator, Procurement Specialist, Finance Manager, M&E Specialist, Project Officer and Records Officers. The PFU reports directly to the Director of Education Planning (DEP) who will ensure a close collaboration with the other departments of the Ministry at central and district level. Under supervision of the DEP, PFU will be responsible for day-to-day coordination of project activities and reporting on the project performance. Each component (or subcomponent) will be implemented by MoET departments as follows: (a) Component 1: NCDC, ECoL, Teaching Services, SSU, Inspectorate, Special Education; (b) Component 2: Inspectorate, Teaching Services, Planning; (c) Component 3: Planning, EMIS, Curriculum and Assessment, Teaching Services and Inspectorate. These departments will lead the activities with close support from the PFU. Project activities will be reviewed semi-annually by a Coordination Committee chaired by the Principal Secretary (PS) and includes the Chief Education Officers (CEOs) of the ministry with participation from the Ministry of Finance (MoF), and Ministry of Development Planning (MDP). The DEP will present the progress of the project prepared by the PFU highlighting performance and issues to be tackled, and corrective actions will be decided as 7 appropriate. The Project Implementation Manual claries the roles and responsibilities of the overall Coordination Committee,CEOs, DEP, and PFU and the form of reporting to the committee. PHYSICAL PERFORMANCE 1. Component 1: Improving Teaching and Learning Environment in targeted primary and Associated Pre - Primary and junior secondary schools. 1.1. Component 1(a): Strengthening Primary School Teaching and Providing Learning Materials: This subcomponent is mainly focused on training for improving teacher competencies on content knowledge, pedagogy and maths and science teaching skills for Grades 1 to 7 teachers, DRTs and Inspectors and the training will commence in June 2018. Printing of Assessment Packages is at procurement stage while training of teachers after review of assessment packages implemented from December 2017 and January 2018. The final group to be trained in June 2018. The sub component also provides for Procurement of goods which includes literacy and numeracy wall charts, classroom teaching aids, literacy kits, numeracy kits, readers and book lockers for primary schools. Also Puzzle kits, construction kits and life skills kits for Pre - Primary schools. All goods are at specifications development stage of procurement. 1.2. Component 1(c): Demonstrating the PSI-PMI Approach at Junior Secondary. Modalities to incorporate the LBEIP schools in an already ongoing PSI PMI pilot which commenced in January 2017 are being finalised. 2. Component 2: Strengthening School Accountability for student Learning and Retention in Targeted Schools 2.1. Component 2(a) School Improvement Planning 2.1.1 Engagement and training of SIP Facilitators: 12 SIP Facilitators for the 20 primary and 6 junior secondary schools were trained in January 2018 and engaged from March 2018. Training included 10 SIP Facilitators to be a buffer for replacement. 2.1.2 School Improvement Plans (SIPS): All Facilitators were engaged in March 2018 and are yet to submit plans for the supported schools. 2.2Component 2(b) School Grants 2.2.1 SIP School Grants: No schools grants were issued in 2017/18 as engagement of SIP Facilitators and allocation to schools was completed in March 2018. 9 3. Component 3: Strengthening Institutional Capacity and Project Management. Progress for activities under component 3 is as follows: 3.1. Technical Assistance: The consultancies are at procurement stage ranging from development of TOR's for other studies to evaluation for the development of induction and mentoring programme for teachers. Stakeholder consultations for the review of curriculum and assessment policy are ongoing. 4. SUMMARY FINANCIAL PERFORMANCE Component Total Project % Expenditure Costs Financing to 31 March Exp. as % (US$) 2018 Allocation (US$) 1. Improving the Teaching and Learning Environment in Targeted Primary and Associated Preprimary and Junior Secondary Schools 1,156,000 55% 2,818 0.24% 2. Strengthening School Accountability for Student Learning and Retention in Targeted Schools 366,300 18% 24,794 6.77% 3. Strengthening Institutional Capacity and Project Management 577,700 27% 2,975 0.52% TOTAL 2,100,000 100% 30,587 1.46% 9 LESOTHO BASIC EDUCATION IMPROVEMENT PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Accountant Report We have prepared the annual financial statements of the Lesotho Basic Education Improvement Project (LBEIP) of the Ministry of Education and Training as at 31st March 2018. They entail the Statements of Sources and Application of funds as at 31 March 2018, budget performance and summary of accounting policies and other explanatory notes as set out on pages 10 to 17. The financial statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS) Cash Basis Accounting. To the best of our knowledge and belief, the financial statements of the Lesotho Basic Education Improvement Project (LBEIP) financed by Global Partnership for Education (GPE) and supervised by World Bank give a true and fair view of the state of affairs of the project and comply with the requirements of the Lesotho Government Financial Regulations. The Ministry fulfilled its primary responsibility by establishing and maintaining accounting systems and practices adequately supported by the internal accounting controls. Such controls provide assurance that the Project's assets are safeguarded, the transactions are executed in accordance with management's authorization, the financial records are reliable and that the financial statements are free from material statements. FINANCE MANAGER LBEIP - MINISTRY OF EDUCATION AND TRAINING 10 Statement of Sources and Uses of Funds by COMPONENT AND CATEGORY - GPE DOLLAR FOR THE PERIOD CUMULATIVE TO ENDED 31 MARCH PERIOD ENDED 31 2018 MARCH 2018 US US US US NOTE DOLLAR DOLLAR DOLLAR DOLLAR Opening Balance Designated Account Note 6 Current Account Note 6 Totals Add: Source of Funds Funds received from GPE Note s 355 639 355 639 Foreign Exchange Adjustment Note 4 (302) (302) Total 355 337 355 337 Total Cash Available 355 337 355 337 Less: Uses of Funds Component 1: Improving the Teaching and Learning Environment in Targeted Primary and Junior Secondary Schools Goods Non Consulting Services Consultants' Services Training 2818 2818 Operating Costs Sub-Total 1 2818 2818 Component 2: Strengthening School Accountability for Student Learning and Retention in Targeted Schools Goods Non Consulting Services Consultants' Services 4405 4405 Training 20389 20389 Operating Costs Grants Sub-Total 2 24794 24794 Component 3: Strengthening Institutional Capacity and Project Management Goods Non Consulting Services Consultants' Services Training Operating Costs 2975 2975 Sub-Total 3 2975 2975 Total Expenditure 30587 30587 Cash Available less Expenditure 324751 324751 Closing Balance Designated Account Note 6 324751 324751 Current Account Note 6 TOTALS 324 751 324751 11 Statement of Sources and Uses of Funds by COMPONENT AND CATEGORY - GPE MALOTI CUMULATIVE TO FOR THE PERIOD ENDED PERIODTENE 3O 31 MRCH 018 PERIOD ENDED 31 31 MARCH 2018 MRH21 MARCH 2018 NOTE MALOTI MALOTI MALOTI MALOTI Opening Balance Designated Account Note 6 Current Account Note 6 Totals Add: Source of Funds Funds received from GPE Note s 4867 738 4 867 738 Foreign Exchange Adjustment Note 4 (666 980) (666 980) Total 4200758 4200758 Total Cash Available 4200758 4200758 Less: Uses of Funds Component 1: Improving the Teaching and Learning Environment in Targeted Primary and Junior Secondary Schools Goods Non Consulting Services Consultants' Services Training 34351 34351 Operating Costs Sub-Total 1 34351 34351 Component 2: Strengthening School Accountability for Student Learning and Retention in Targeted Schools Goods Non Consulting Services Consultants' Services 52028 52028 Training 242933 242933 Operating Costs Grants Sub-Total 2 294961 294961 Component 3: Strengthing institutional Capacity and Project Management Goods Non Consulting Services Consultants' Services Training Operating Costs 35750 35750 Sub-Total 3 35 750 35 750 Total Expenditure 365062 365062 Cash Available less Expenditure 3 835 696 3 835 696 Closing Balance Designated Account Note 6 3 835 696 3 835 696 Current Account Note 6 TOTALS 3 835 696 3 835696 12 BUDGET PERFORMANCE FOR THE YEAR ENDED 31' MARCH 2018 DONOR: GPE (US DOLLARS) Current Current Difference % year actual year (Budget- Difference budget Actual) Sources of Funds Funds received from GPE 355,639 737,300 381,661 52% Total 355,639 737,300 381,661 52% Uses of Funds Component 1: Improving the Teaching and Learning Environment In Targeted Primary and Junior Secondary Schools Goods 101,800 101,800 100% Non Consulting Services 5,900 5,900 100% Training 2,818 214,000 211,182 99% Sub-Total 1 2,818 321,700 318,882 99% Component 2: Strengthening School Accountability for Student Learning and Retention in Targeted Schools Non Consulting Services 3,100 3,100 100% Consultants' Services 4,405 214,200 209,795 98% Training 20,389 9,900 -10,489 -106% Sub-Total 2 24,794 227,200 202,406 89% Component 3: Strengthening Institutional Capacity and Project Management Goods 2,500 2,500 100% Training 26,000 26,000 100% Operating Costs 2,975 159,900 156,925 98% Sub-Total 3 2,975 188,400 185,425 98% Total Expenditure 30,587 737,300 706,713 Surplus/Deficit 325,052 13 BUDGET PERFORMANCE FOR THE YEAR ENDED 31s MARCH 2018 DONOR: GPE MALOTI 7 Current Current iDifference % year actual year (Budget- Difference budget Actual) Maloti Maloti Maloti Sources of Funds Funds received-GPE 4,867,7381 9,915,948 5,048,210 51% 4,867,738 9,915,948 5,048,210 51% Uses of Funds COMPONENT 1: Total Improving Teaching & Learning Environment Goods 1,369,108 1,369,108 100% Non Consulting Services 79,349 79,349 100% Training 34,351 2,878,086 2,843,735 99% 34,351 4,326,543 4,292,192 99% COMPONENT 2: Strengthening Accountability at School Level Non Consulting Services 41,692 41,692 100% Consultancy 52,028 2,880,776 2,828,748 98% Training 242,933 133,145 -109,788 -82% 294,961 3,055,613 2,760,652 90% COMPONENT 3: Strengthening Institutional Capacity and Project Management Goods 33,623 33,623 100% Training 349,674 100% Operating Costs 35,750 2,150,495 1 2,114,745 98% 35,750 2,533,792 2,498,042 99% TOTAL EXPENDITURE 365,062 9,915,948 9,550,886 Surplus 4,502,676 14 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH 2018 These financial statements are for the first year of project implementation of the Lesotho Basic Education Improvement Project implemented under the Ministry of Education and Training. The Project was approved on 29th June 2017, signed 20th July 2017 and declared effective on 20th July 2017 and the implementation is intended to run for three years from July 2017 to August 2020. The financial statements presented in this report are therefore aligning to the notes detailed below: 1. Accounting Policies These financial statements for the period ending 31st March 2018 (April 2017 to March 2018) are prepared and reported under the historic cost convention. 2. Method of Accounting The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) with emphasis on the Cash Basis of Accounting. Cash Basis of accounting recognises transactions when cash is received or paid. 3. Reporting Entity The financial statements are for the Public Sector Entity as the Lesotho Basic Education Improvement Project is implemented by the Ministry of Education and Training. The project implementation is governed by the GoL national laws and regulations, World Bank policies, procedures and guidelines. 4. Treatment of Foreign Currency i. All transfers from the Designated Account to Current Account are translated into Maloti at the actual rate of transfer. ii. All expenditures incurred in Local Currency are translated into US Dollars at the rate ruling on the date of the payment. iii. Foreign currency and local currency balances held at the end of the financial year are translated at the closing rate. iv. The amount of M666, 979.68 represents foreign exchange loss from the closing balance of Designated Account and the amount USD301.66 represents foreign exchange loss on closing balance of Maloti Account at 31' March 2018. v. Closing Exchange Rate at 31t March 2018 USD 1 = LSL 11.8112 15 5. Funds from GPE DATE DESRIPTION AMOUNT AMOUNT USD LSM 2017/18 04 December 2017 WA01 2017-18 - Initial Advance 355,639.00 4,867,737.68 TOTAL 355,639.00 4,867,737.68 6. Closing Balances MALOTI DENOMINATED BANK ACCOUNTS Balance at Balance at 01 April 2017/18 2017/18 31 March Dollar Bank/Account Title 2017 Receipts Withdrawals 2018 Equivalent Dollar Maloti Maloti Maloti Maloti Basic Education Improvement Grant - 365,122 365,122 - TOTALSS- 365,122 365,122 - USD DENOMINATED BANK ACCOUNTS Balance at Balance at 01 April 2017/18 2017/18 31 March Maloti Bank/Account Title 2017 Receipts Withdrawals 2018 Equivalent Maloti Dollar Dollar Dollar Dollar Basic Education Improvement Grant - 355,639 30,888 324,751 3,835,696 TOTAL - 355,639 30,888 324,751 3,835,696 *Exchange Rate USD1: LSL 11.8112 16 7. Schedule for Non - Current Assets Fixed Assets are classified as capital costs and written off to the receipts and payments statement in the year of disbursement. The fixed assets consist of school equipment, office furniture and equipment. No assets were procured during the financial year 2017/18. 8. Procurement All procurement to be financed under the project is carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011, revised July 2014, and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated January 2011, revised July 2014 and the provisions stipulated in the Legal Agreement. For International Competitive Bidding (ICB) and National Competitive Bidding (NCB), all procurement of goods and non-consultant services will be done using the Bank's Standard Bidding Documents. All consultant selection undertaken for firms will be done using the Bank's Standard Requests for Proposals. The project will carry out implementation in accordance with the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants" dated October 15, 2006 and revised January 2011 (the Anti-Corruption Guidelines). 17