REPUBLIC OF KENYA OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF WATER AND SANITATION SERVICE IMPROVEMENT PROJECT (IDA CR. 5103-KE) FOR THE YEAR ENDED 30 JUNE 2018 ATHI WATER SERVICES BOARD Transforming Life. Inspiring Prorss PROJECT NAME: WATER AND SANITATION SERVICE IMPROVEMENT PROJECT -ADDITIONAL FINANCE IMPLEMENTING ENTITY: ATHI WATER SERVICES BOARD PROJECT GRANT/CREDIT NUMBER: IDA 5103-KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 CONTENTS PAGE 1. PROJECT INFORM ATION AND OVERALL PERFORMANCE .............................................................................................................................. i 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIE ................................................................................................................. Viii 3. REPORT OF THE INDEPENDENT AUDITORS ON THE WATER AND SANITATION SERVICE IMPROVEMENT PROJECT..........................ix 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE 2018............................................................................1 5. STATEMENT OF FINANCIAL ASSETS AS AT 30 TH JUNE 20 18 ................................................... ...................... ........... .................................... 2 6. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AM UNTS ............................................................................................................ 4 7. N O TES TO TH E FINA N C IA L STATEM ENTS ....................................................................................................................................................... 5 j) O TH ER IM PO RTA N T D IS C LO SU R ES ..................... ............................................................................. ............................................................ 16 k) PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS ............................ ..............................................................-...................17 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name And Registered Office Name: the projects official name is Water and Sanitation Services Improvement Project Additional Finance Objective: The Project's development objectives are: (a) to increase access to water supply and sanitation services; and (b) to improve the water and wastewater services in the areas served by Athi Water Services Board, Lake Victoria North Water Services Board, and Coast Water Services Board. Address: The project headquarters offices are; Athi Water Services Board P.O. Box 42583-00100 GPO Africa-Re Centre, 3rd Floor Hospital Road-Upper Hill NAIROBI The address of its registered office is: Water and Sanitation Service Improvement Project -Additional Finance Ministry of water and natural resources Maji house P.O.Box 40020-00100 Nairobi The project also has offices/branches as follows: Mombasa County Kisumu County 1.1 Project Information Project Start Date: The program start date is 10/5/2012 Project End Date: The program end date is 30/4/2020 Project Manager: The Project Manager is Eng Bonnie Nyandwaro Project Sponsor: The program sponsors are the Government of Kenya (GOK), which will contribute 7%, the World Bank which will contribute 93% i Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended Jime 30, 2018 1.2 Project Overview Project description: Component 1 will provide support to the AWSB, which will assist in the rehabilitation and extension of water supply systems, including the development of additional water sources for Nairobi, drought mitigation measures, and improvements in wastewater treatment facilities in AWSB's area. Technical assistance will also be provided to the AWSB and its water services providers, the Water Services Regulatory Board (WSRB), and the Water Appeals Board (WAB). Water supply/distribution and wastewater collection and treatment Proiects Prepared under WaSSIP (designs and environmental impact assessments completed, awaiting clearance and disclosure) * Construction of northern collector tunnel (river abstractionlintake structures and 11.3 kilometer tunnel) (US$85.20 million). This sub-component is part of the recommendations from the feasibility study and master plan for the development of new water sources for Nairobi and satellite towns being undertaken by AWSB under WaSSIP. The northern collector phase 1 is part of the selected scenario, which is the most preferred of the six scenarios reviewed under this consultancy. Proposed works include cconstruction of the northern collector tunnels (11.3 kilometers), diverting the three rivers of Irati, Gikigie, and Maragua for a flow of 1.6 cubic meters per second as previously designed in 1998; improvement of Mwagu intake structure and screening equipment and construction of Mataara-Ngethu raw water main. A preliminary environmental impact assessment has been undertaken and disclosed as part of the feasibility study and masterplan. Works are ongoing and the tunnel is at 14% completion * Improvement of water and sanitation in the informal settlements in Nairobi (US$3.2 million). Designs, environmental impact assessment, and tender documents for improvements in the informal settlements exist, The informal settlements under consideration for support of water and sanitation schemes under WaSSIP AF include: Kayole Soweto, Matopeni Spring Valley, Mabatini, River Bank, Maili Saba, Huruma, Mathare and Kahawa Soweto. * Construction of water reticulation system for Ruiru and Juja (US$1.7 million). The proposed works include the construction of a water service reservoir with a capacity of 5,000 cubic meters at Ruiru and reinstatement of distribution pipes scaled down from the original WaSSIP. The development of the distribution system will release water intended for Githurai and Kahawa Sukari areas. The designs and tender documents for these works are ready and the environmental impact assessment is awaiting approval by the Bank. Consultancy Services to AWSB in specific areas (US$22.37 million by IDA/AFD) * Design, supervision and preparation of environmental impact assessments for indicative projects to be financed under WaSSIP AF * Other consultancies including, setting up of sewer connections revolving fund, energy audits, customer identification survey, automatic meter reading, and others * Project communication Institutional support (goods and training) for AWSB and its water services providers (US$4.64 million) * Supply and installation of water and wastewater management equipment (US$2.96); and purchase of motorcycles for water services providers (US$210,000). This will include water metering programme, leak detection equipment, and supply of pipes and fittings and motorcycles for water services providers. ii Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 * Supply and installation of office and information and communications technology (US$380,000). This will include the supply and installation of hardware and software for AWSB and its water services providers, and a software for network model (WaterCAD) for NCWSC. AWSB will receive support to interlink the Board with the water services providers under its jurisdiction with internet office facilities for effective communication. AWSB will also receive technical assistance for provision of legal assistance for establishing and registering water and sewerage infrastructure wayleaves and implementation of the Resettlement Action Plan. * Training and capacity building for AWSB and its water services providers (US$850,000 million) This will entail training for project teams and wsps staff to enhance capacity in delivery of the overall project objectives * Project communication materials (US$300,000). This will support project communication activities over the 5 years of implementation. A project communications strategy will be developed to scale up and build up on gains made under WaSSIP. Support to the Water Service Regulatory Board (US$1.93 million). WaSSIP AF will help the Water Service Regulatory Board to strengthen its capacity for effective regulation. The project will support implementation of a compliance and enforcement strategy for water services boards and water services providers, strengthening management of human resources, and preparation of disaster preparedness and management plans for water services providers. Support includes procurement of information and communications technology, and training, study tours, and workshops. Support to the Water Appeals Board (US$1.0 million). The project will support the Water Appeals Board to improve its capacity to handle complaints and resolve disputes. Specifically, it will assist rehabilitation or construction of county offices and courts, strengthening of claims and dispute resolution, and implementation of public awareness campaigns. Support will include procurement of information and communications technology, and training, study tours, and workshops. Activities under the original Wassip (US$1.5 million). The budget for on-going is amount provided to carter for commitments under Wassip beyond the funds available. Implementation of drought mitigation measures (US$16.5 million) * Supply of 120 collapsible water tanks (capacity 10 cubic meters and 5 cubic meters) including a hosepipe and pumpset. * Supply of 1080 10-cubic meters plastic water tanks to public schools and institutions for rainwater harvesting including gutters, downpipes, fittings and concrete base. * Supply of 14 utility mini-lorries for carrying pipes, collapsible tanks, and similar goods. * 18 mobile water treatment units for both turbid river water and saline water from boreholes (to be pulled by a pickup). * Development of 39 borehole water sources and equipping with submersible pumpsets, electricity supply/solar panels and generator sets and water storage tanks. * Supply of ten 6 wheel drive drought monitoring vehicles-hardtops for Tana and Tanathi WSB. Summary of Performance: The project is in the fifth year of implementation and has disbursed USD 140,166,801, which is approximately 85 % of the project value. The commitments for the project were valued at 98% of the project value. 1.3 Bankers The following are the bankers for the current year: a) Special deposit account CFC Stanbic Bank Kenya Account No. 00211140021900 iii Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 b) Local project accounts Kenya commercial bank Account No.1139107380 Kipande house branch Nairobi 1.4 Auditors The project is audited by Auditor General Kenya national audit office P.O.Box 30084-00100 Nairobi 1.5 Project Governance The Project's governance framework requires the stakeholders to uphold the highest professional, ethical, moral and legal standards. This is achieved through effective segregation of duties with clear checks and balances as articulated in the Project Loan/Credit Agreement, the PFM Act, 2012, the Project Design Report, the Implementation Manual and the Finance and Procurement Manuals. 1.5.1 The Project Steering Committee (PSC) This Committee is responsible for overseeing the implementation of the Project, approving the annual work plan and budget, and ensuring that the activities are in compliance with the donor and government policies. IDA, World Bank These are the project sponsors. They are responsible for reviewing and approving the project's withdrawal applications, expenditure justifications, no objection requests, reviewing and approving the annual work plan and budget, expenditure category reallocation request, and participating in implementation support missions. The Parent Ministry The parent ministry ensures that the Project's budget is captured in its development projects and disburses the government counterpart funding. The ministry reviews and tracks the Project's annual work plan and budget against the set targets and makes the approvals. The parent ministry also oversees the execution of the project coordinating team. The Auditor The Supreme Audit Institution in Kenya, that is, the Office of the Auditor General, is mandated by the Constitution of Kenya Chapter 12, Part 6, and Article 229 which establishes the Office of the Auditor General. Chapter 15, Article 248, Section 3 and Article 249, Section 2 (a) and (b) and section 10 of the Public Audit Act, 2015 provide for the independence of the Office of the Auditor General. The Auditor General is mandated to audit all national government entities, which include government development projects and present these statutory financial statements to the Parliament. This facilitates the submission of the audited report to the project's sponsors by 31 December each year. iv Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 Project Coordinating Team (PCT) This team is based in Nairobi and is responsible for the project management and coordination functions. The PCT comprises of the Project Coordinator and a team of Technical Officers. The PCT is also supported by other administrative staff. These key staffs, which form the project coordinating team that is involved in the day to day management of the project and its implementation, are: Name and contact details Title Qualifications Responsibilities designation Eng Bonnie Nyandwaro Program B-Tech-Civil & structural Coordination of the day to day activities Coordinator Eng, MTEK,PE of the Program. Michael Kimotho Finance B.Com, MBA, CPA (K), Management of the finance functions of Management ACCA. the Program. Expert Anne Gacheri Senior Msc. Procurement & Responsible for the management of the Procurement Logistics procurement process of goods and Expert -BA-Economics, services, and safety of the assets. MCIPS, MKISM V Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 County Project Coordinating and Facilitation Committee (CPCFC): Based in 2 county offices, this committee is responsible for facilitating and harmonizing the implementation of the Project at the county level. The Senior County Officials form the policy organ (CPCFC) while the County Project Coordinators (CPCs) lead the technical heads of collaborating departments. The roles of the technical heads of departments include coordinating of the project programs in line with the sectoral priorities in the respective counties, coordinating, guiding and participating in the development of action plans by participatory identification of the projects to be financed under wassip-AF Project, carrying out monitoring and evaluation of project's activities in the counties and offering oversight in the implementation of the project activities. 1.6 Funding summary The Project was for duration of 5 years from 2012 to 2017. This has however been revised to April 2020 with an approved budget of US$ 164,082,309 equivalent to 13,816,091,399 as highlighted in the table below: Below is the funding summary: r Amount received to date - (301h Undrawn balance to date Source of funds Donor Commitment- ue21) _________(0hJn 08 June 2018) (3011 June 2018) Donor Kshs Donor currency Kshs Donor Kshs currency currency (A) (A') () (B') (A)-(B) (A')-(B'" IDA GRANT 1T,660,82i 1,4S-,0*0O,4F7 1,269 1,082,058.509 6 934 63 2 405 ':21 978 IDA Loan 146,421,482 12,329,010,912 129,440,606 13,057,968,380 16,980,876 728,957,468 Govemment of Kenya Counterpart funds Total 164,082,309 13,816,091,399 140,166,801 14,140,026,889 23,915,508 323,935,490 1.7 Summary of Overall Project Performance: The project is in the fifth year of implementation and has disbursed USD140, 166,801 which is approximately 85% of the project value. The commitments for the project were valued at 98% of the project value. During the financial year three were completed and procurement for the major works was concluded. The outputs and impacts of the project will be realised on completion of the works projects whose construction period ranges from a period of 12 months to 42 months for the major works. Implementation of the project is generally satisfactory and the project is on track to achieve its objectives. The project has led to a rise in the number of people provided with access to improved water and sewerage services. An estimated 764,214 additional people are now accessing water from improved sources compared to 368,328 people (2011 baseline for WaSSIP AF), bringing the number of people benefiting from the project to 1,132,542. This is 14% below the 2016 target of 1,321,000 people. The decrease is attributed to several factors which includes; a) Drought experienced throughout the country during the reporting period. b) Decreased water production in Nairobi which stands at estimated 22% below the 2016 target of 561,000m3 per day. c) Water delivery to customers by the Nairobi Water Company now stands at 298,566 m3/day against the 2016 target of 370,333 m3/day. Vi Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 This also affected the revenue collection for the period which stood at 82%, 7% below the 2016 target. Unaccounted for water reduced from 33% to 32% in the reporting period. Challenges faced during implementation were: * The long procurement process which required a lot of consultation between AWSB and the World Bank. * Unavailability of way leaves and project sites. * Inadequate counterpart funding 1.8 Summary of Project Compliance: During the period the project complied with all the relevant laws, regulation and conditions set for the project. vii Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The project coordinator Athi water services board and the Project accountant for water and sanitation improvement project (IDA Grant No.5103-KE) 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, 2018. 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 project coordinator for the Athi Water Services Board and the Project accountant for Water and Sanitation Improvement Project (IDA Grant No.5103-KE) 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 Project coordinator for Athi Water Services Board and the Project accountant for Water And Sanitation Improvement Project (IDA Grant No.5103-KE) 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, 2018, and of the Project's financial position as at that date. The project coordinator for Athi Water Services Board and the project accountant for Water and Sanitation Improvement Project (IDA Grant No.5103-KE) further confirm 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 Project coordinator for Athi Water Services Board and the Project accountant for Water And Sanitation Improvement Project (IDA Grant No.5103-KE) confirm that the Project has complied fully with applicable Government Regulations and the terms of extemal 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 Project coordinator and the Project accountant for water and sanitation improvement project (IDA Grant No.5103-KE) on 30h August 2018 and signed by them. Chief Executive officer Project Coordinator Project Accountant Eng. Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 Viii -174-k- r- - -- - -,-r.l T,!, q~... REPORT OF THE AUDITOR-GENERAL ON WATER AND SANITATION SERVICE IMPROVEMENT PROJECT (IDA CR. 5103-KE) FOR THE YEAR ENDED 30 JUNE 2018 - ATHI WATER SERVICES BOARD REPORT ON THE FINANCIAL STATEMENTS Qualified Opinion I have audited the accompanying financial statements of Water and Sanitation Service Improvement Project (IDA Cr. No 5103-KE) set out on pages 1 to 19, which comprise the statement of financial assets as at 30 June 2018, 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 Financing Agreement No. 5103-KE dated 21 June 2012, between the International Development Association (IDA) and the Republic 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 addition, the accompanying special/ designated account statement presents fairly, in all material respects, the funds received into and disbursements made from the special/ designated account of the project during the year ended 30 June 2018 In my opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of my report, the financial statements present fairly, in all material respects, the financial position of Water and Sanitation Service Improvement Project as at 30 June 2018, and of its financial performance and cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Financing Agreement No. 5103-KE of 21 June 2012. Basis for Qualified Opinion Variance Between Special Account Statement and Project Account According to the Special Account Statement for the Project. USD 14.223,000 equivalent to Kshs.1,438.327,560 was withdrawn from the account and transferred to the Project account. However, the project's statement of receipts and payments reflects was Kshs.700,000,000 equivalent to USD 6.916,586 as having been received into the Project. resulting to an unexplained variance of USD 7.306,414 equivalent to fI D L' 1 ?3 -Ih.T)j /1,,'U -1 eia o:,,k-d 31~~ / h!/ h Lt 8 i "WIC Ia Kshs.738,327,560. It was observed that this variance had earlier been reported in the Project's statement of receipts and payments for the year under review, as cash in transit of Kshs.739,452,771. Management has not explained the above variance between the two sets of records. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Water and Sanitation Service Improvement Project 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 and internal control 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 Matters Key audit matters are those matters which, in my professional judgment, were of most significance in the audit of the financial statements. There were no Key Audit Matters to report in the period under review. REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the audit procedures performed. I confirm that, nothing has come to my attention to cause me to believe that public resources have not been applied lawfully and in an effective way. Basis for Conclusion The audit was conducted in accordance with ISSAI 4000. The standard requires that I comply with ethical requirements and plan and perform the audit to obtain assurance on whether the activities, financial transactions and information reflected in the financial statements are in compliance, in all material respects, with the authorities which govern them. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT AND GOVERNANCE Conclusion As required by Section 7 (1) (a) of the Public Audit Act. 2015, based on the audit procedures performed, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and governance, were not effective. RL'). 1 1; 11 41h ill 'I - ~c.x,, 'il !/?L. Zd F"IM .',I/ ill' " 11W 001 111aa, SCI- 1LV lill/Y 11 LI 171~ Pl-f-JVC/ ID ii c 5io3-ixE i ,07 tea L'Ll l i lh bn' 211/ N- 111H II 0Tu .eiL L'% Basis for Conclusion The audit was conducted in accordance to ISSAI 1315 and 1330. The standards require that I plan and perform the audit to obtain assurance on whether effective processes and systems of internal control, risk management and governance, were operating effectively, in all material respects. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Responsibilities of Management and Those Charged with Governance 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 maintaining effective internal control as management determines is necessary to enable the preparation of financial statements which are free from material misstatement, whether due to fraud or error and for assessment of the effectiveness of the internal control, risk management and governance. In preparing the financial statements, management is responsible for assessing the Project's ability to continue sustaining services, disclosing as applicable, matters related to sustainability of services and using the going concern basis of accounting unless the management either intends to terminate the Project, 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. In addition to the responsibility for the preparation and presentation of the financial statements described above, management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them, and that public resources are applied in an effective way. Those charged with governance are responsible for overseeing the Project's financial reporting process, reviewing the effectiveness of management's systems for monitoring compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in to governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit 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 which 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. Reasonable assurance is a high level Report of the Auditor-General on the Financial Statements of Water and Sanitation Service Improvement Project (IDA Cr. 5103-KE) for the year ended 30 June 2018 - Athi Water Services of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement and weakness 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. In addition to the audit of the financial statements, a compliance review is planned and performed to express a conclusion on whether, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them and that public resources are applied in an effective way, in accordance with the provisions of Article 229(6) of the Constitution, and submit the audit report in compliance with Article 229(7) of the Constitution. Further, in planning and performing the audit of the financial statements and audit of compliance, I consider internal control in order to give an assurance on the effectiveness of internal controls, risk management and governance processes and systems in accordance with the provisions of Section 7 (1) (a) of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. My consideration of the internal control would not necessarily disclose all matters in the internal control which might be material weaknesses under the ISSAls. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level, the risk that misstatements caused by error or fraud in amounts which would be material in relation to the financial statements being audited, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of its inherent limitations, internal control may not prevent or detect misstatements and instances of non-compliance. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls. may become inadequate because of changes in conditions, or that the degree of compliance with the Project's policies and procedures may deteriorate. 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 which 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. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. Report oflthe A uditor-General on the Financial Statements of Water and Sanitation Service Improvement Project (IDA Cr. 5103-KE) br the year ended 30 June 2018 -Athi Water Services 4 * Conclude on the appropriateness of the 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 which may cast significant doubt on the Project's ability to continue sustaining its services. 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 sustaining its services. * 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 which achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information and 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 which are identified during the audit. I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters which may reasonably be thought to bear on my independence, and where applicable, related safeguards. FCPA Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 27 December 2018 Report of the Auditor-General on the Financial Statements of Water and Sanitation Service Improvement Project (IDA Cr. 5103-KE) fbr the year ended 30 June 2018- Athi Water Services 5 ど Water And Sanitation Service Improvement Project-Additionalfinancing Reports and Financial Statements For thefinancialyear ended June 30,2018 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE 2018 Note FY 2017/2018 FY 2016/17 Cumulative to Date Receipts and Receipts and Receipts and Receipts and payments Payments made payments Payments made controlled by the by third parties controlled by the by third parties entity entity I Kshs Kshs Kshs Kshs Kshs RECEIPTS Receipts from 8.3 0 232,500,000 683,413,819 Government of Kenya Proceeds from Domestic and Foreign 8.4 61,204,939 137,775,720 0 774,199,615 Grants Loan from External 8.5 638,795,061 657,381,807 2,547,944,433 1,277,719,808 20,460,125,872 Development Partners Miscellaneous Receipts 8.6 27,792,018 14,144,377 0 127,537,306 TOTAL RECEIPTS 727,792,018 657,381,807 2,932,364,530 1,277,719,808 22,045,276,612 PAYMENTS Purchase of goods and 8.7 354,899,493 224,894,466 1,120,208,387 services I Acquisition of Non- 8.8 1,655,950,508 657,381,807 1,207,460,998 1,277,719,808 13,136,320,205 financial Assets TOTAL PAYMENTS 2,010,850,001 657,381,807 1,432,355,463 1,277,719,808 14,256,528,1592 SURPLUSIDEFICIT .1,283,057,983 0 1,500,009,066 0 7,788,748,01 -------------- - ------ - ------------ - - -- - ---- I ------------ - --- - -------- - Chief Executive fficer Project Coordinator Project Accountant Eng, Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 11 P Notes to the Siatements Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 5. STATEMENT OF FINANCIAL ASSETS AS AT 30TH JUNE 2018 Note 201712018 2016117 Kshs Ksh FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8.11 1,411,457,381 2,694,515,364 Cash Balances 0 0 Cash equivalents (short-term deposits) 0 0 Total Cash Equivalents 1,411,457,381 2,694,515,364 Accounts receivables - Imprest and Advances 8.14 0 0 TOTAL FINANCIAL ASSETS 1,411,457,381 2,694,515,364 REPRESENTED BY Fund balance brought forward 8.13 2,694,515,364 1,194,506,298 Prior year adjustments 8.16 0 0 Surplus/Deficit for the year -1,283,057,983 1,500,009,066 NET FINANCIAL POSITION 1,411,457,381 2,694,515,364 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 30th August 2018 and signed by: Chief Executive officer Project Coordinator Project Accountant Eng. Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 2 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 6. STATEMENT OF CASHFLOW FOR THE YEAR ENDED 30TH JUNE 2018 201 /2018 2016/17 Note Ksh Ksh Receipts for operating activities Transfer from Government entities 8.3 0 232,500,000 Miscellaneous receipts 8.6 27,792,018 14,144,377 27,792,018 246,644,377 Payments for operating activities Purchase of goods and services 8.7 -354,899,493 -224,894,466 Transfers to other government entities 8.9 0 0 Other grants and transfers 8.10 0 -354,899,493 -224,894,466 Adjusted for: Changes in receivables 0 Adjustments during the year 8.16 0 0 Net cash flow from operating activities -327,107,475 21,749,912 CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Assets 8.8 (1,655,950,508) -1,207,460,998 Net cash flows from Investing Activities (1,655,950,508) -1,207,460,998 CASHFLOW FROM BORROWING ACTIVITIES Proceeds from Foreign Borrowings 8.5 700,000,000 2,547,944,433 Proceeds from domestic and foreign grants 8.4 137,775,720 Net cash flow from financing activities 700,000,000 2,685,720,152 NET INCREASE IN CASH AND CASH EQUIVALENT -1,283,057,983 1,500,009,066 Cash and cash equivalent at BEGINNING of the year 2,694,515,364 1,194,506,298 Cash and cash equivalent at END of the year 8.11 1,411,457,381 2,694,515,364 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The entity financial statements were approved on 30t August 2018 and signed by: Chief Executive officer Project Coordinator Project Accountant Eng. Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 3 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Original Adjustment Actual on Utilisation of Consolidated Final Budget Comparable Comments Budget s Basis_Variance Utilisation Receipts/Payments Item A B c=a+b D e=c-d l=d/c , Receipts The funds were Receipts from received late in Roemets f K140,000,000 46,235,000 186,235,000 0 186,235,000 0% the year. They will Government of Kenya b tlzdti be utilized this financial year Loan from External Development Partners( 500,000,000 200,000,000 700,000,000 700,000,000 0 100% REVENUE) Loan from External The balance was Development 1,500,000,000 -500,000,000 1,000,000,000 657,381,807 342,618,193 66% not enough to pay Partners(A.I.A) the pending certificates Miscellaneous receipts 27,792,018 27,792,018 27,792,018 0 100% There was cash in transit from the Total Receipts 2,167,792,018 -253,765,000 1,914,027,018 2,696,023,826 -781,996,808 141% previous year that was received during the year Payments Compensation of 0 0 0 0 0 employees Use of goods and 350,000,000 350,000,000 354,899,493 -4,899,493 101% Within budget services Social Security 0 0 0 Benefits Acquisition of Non- 1,817,792,018 -253,765,000 1,564,027,018 1,655,950,508 -91,923,490 106% Within budget financial Assets Transfers to Other 0 Government Entities Other Grants and 0 0 Other Payments Total Payments 2,167,792,018 -253,765,000 1,914,027,018 2,010,850,001 -96,822,983 105% Note: The significant budget utilisation/performance differences in the last column are explained in Annex I to these financial statements. Chief Executive officer Project Coordinator Project Accountant Eng. Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 4 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. 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 Project Water and Sanitation Services Improvement Project Additional Finance 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 (Ksh), 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 from multilateral and bilateral development partners. 5 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.2 Significant Accounting Policies (Continued) a) Recognition of receipts 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 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8.2 Significant Accounting Policies (Continued) c) Recognition of payments (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. d) 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. e) 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 party deposits. 7 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8.2 Significant Accounting Policies (Continued) f) 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. g) 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. h) 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 recognized 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. i) Third party payments Included in the receipts and payments, are payments made on its behalf by to third parties in form of loans and grants. These payments do not constitute cash receipts and payments and are disclosed in the payment to third parties column in the statement of receipts and payments. During the year Kshs 657,381,807 was received in form of direct payments from third parties. 8 Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.2 Significant Accounting Policies (Continued) j) 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 recognized in the statements of receipts and payments. k) 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. 1) 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, 2018. m) 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 ) a g Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.3. Receipts from Government of Kenya Receipts from the government are either counterpart funding or other transfers. Counterpart funding represents the Government's share of contribution towards the implementation of the Project. These amounts are disbursed by the Parent Ministry in line with the budget. Other transfers from government entities represent support received by the Project from other government entities including the State Departments and Projects listed above for the implementation of its activities. During the year the project received a total of Kshs 186,235,000 as counterpart funds, however this funds were not transferred to the project account. They were utilized to pay compensation related to the projects These represent counterpart funding and other receipts from government as follows: 201712018 2016117 Cumulative to Date KShs KShs KShs Counterpart funding through State Department for Water Services Counterpart funds Quarter 1 0 Counterpart funds Quarter 2 0 0 Counterpart funds Quarter 3 0 0 Counterpart funds Quarter 4 232,500,000 683,413,819 Other transfers from government entities 0 0 0 Appropriations-in-Aid 0 0 0 01 232.500000 683.413819 10 j P ae Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.4 PROCEEDS FROM EXTERNAL DEVELOPMENT PARTNERS During the 12 months to 30 June 2018 we received grants from donors as detailed in the table below: Loans Amount in Loans . as Name of Donor rcie loan received in . Total amount in Kshs currency cash rect payment FY 2017- FY 2016- 2018 2017 Loans received from international development 604,756 61,204,939 61,204,939 137,775,720 Association (IDA) Total 604,756 61,204,939 61,204,939 137,775,720 8.5 PROCEEDS FROM EXTERNAL DEVELOPMENT PARTNERS During the 12 months to 30 June 2018 we received loans from donors into the project account as detailed in the table below: Loans Amount in Loans Lon Name of Donor Date loan received in received as Total amount in Ksh received loan cie direct currency cash pamn _______________ payment' Ksh Ksh FY 2017-2018 FY 2016-2017 Loans received from international 6,311,830 638,795,061 657,381,807 1,296,176,868 1,194,703,803 development Association (IDA) Total 6,311,830 638,795,061 657,381,807 1,296,176,868 1,194,703,803 11 P a ge Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8.6 Miscellaneous Receipts These comprise of other receipts including fines, penalties and other fees and charges. TOTAL RECEIPTS Cumulative to- date Receipts controlled by Receipts controlled the entity in Cash by third parties Ksh Ksh Ksh Ksh Ksh Interest on Deposits 27,792,018 0 27,792,018 14,144,377 94,124,384 27,792,018 0 27,792,018 14,144,377 94,124,384 8.7 Purchase of Goods and Services These comprise the total value of goods and services consumed by the Project. Cumulative to Total Payments date date Payments Payments made by the made by third FY 2017/18 FY 2016/17 Entity in Cash parties KShs KShs KShs KShs KShs Operation costs 339,544,788 0 339,544,788 224,065,031 1,057,668,199 Training 15,354,705 0 15,354,705 829,435 62,540,188 Total 354,899,493 0 354,899,493 224,894,466 1,120,208,387 Utilities, supplies and services include payments for water and electricity. Domestic travel and subsistence are payments made in relation to monitoring and management of the implementation of the Project. Other routine expenses include sundry payments made by the Project, including bank charges, routing office maintenance and office supplies. 8.8 Acquisition of Non-Financial Assets These represent the payments made to acquire property, plant and equipment and other assets in the year. These are expensed in the year of purchase as per the accounting policy. A fixed assets register has been attached as an appendix to these financial statements, incorporating these assets purchased in the year. 12 Pa ge Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 Cumulative to- Total Payments dt date Payments made by the Entity in Pymts ae FY 2017118 FY 2016/17 Cash by third parties Cash Ksh Ksh Ksh Ksh Ksh Works 1,291,550,970 657,381,807 1,948,932,777 1,987,382,983 10,969,404,742 Goods 41,740,429 0 41,740,429 165,209,437 717,655,533 Services 322,659,110 0 322,659,110 332,588,387 1,449,259,930 Total 1,655,950,508 657,381,807 2,313,332,315 2,485,180,806 13,136,320,205 The amounts spent in construction of building and civil works comprise payments made to purchase the materials that will be used in the implementation of the project. Construction of roads represents amount used in rehabilitating access roads to the dam construction site. Research studies, project preparation, design and supervision costs represent amounts spent in scoping, planning and designing of the civil works and in the execution of studies and stakeholder sensitization. 8.9 Transfers to other Government Entities These comprise non-compulsory disbursement to MDAs, Projects and to the County Government in line with the County Revenue Allocation Act. There were no transfers to other government entities 8.10 Other Grants and Transfers and Payments There were no other grants and transfers. 8.11 Balances Carried Forward These comprise of cash book bank and cash balances and short term deposits as at 30th June 2018 and comparatives for financial year to 30t June 2017 represented by bank balances. FY201712018 FY 2016/17 Ksh Ksh Bank accounts (Note 8.13A) 1,411,457,381 2,694,515,364 Cash in hand (Note 8.13B) 0 Cash equivalents (short-term deposits) (Note 8.13C) 0 Outstanding imprests and advances (Note 8.14) 0 Total 1,411,457,381 2,694,515,364 The project has one project accounts and one foreign currency designated accounts managed by the National Treasury as listed below: 13 Pa g e Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.13. A) Bank Accounts a) Project Bank Accounts FY 2017/18 FY 2016117 Ksh Ksh CFC Stanbic kenya [A/c NoOl 100000487923] 1,289,634,677 1,328,362,369 Total Foreign Currency balances 1,289,634,677 1,328,362,369 Local Currency Accounts Cash in Transit - 1,353,240,630 Kenya Commercial Bank [A/c No: 1139107380] 121,822,704 12,912,365 Total local currency balances 121,822,704 1,366,152,995 Total bank account balances 1,411,457,381 2,694,515,364 b) Special Deposit Accounts The balances in the Project's Special Deposit Accounts as at 301h June 2018 are not included in the Statement of Financial Assets since they are below-the-line items and are yet to be drawn into the Exchequer Account as a voted provision. The Special Deposit Account (SDA) movement schedule which shows the flow of funds that were voted in the year is presented below. These funds have been reported as loans/grants received in the year under the Statement of Receipts and Payments. Special Deposit Accounts Movement Schedule 201712018 2016117 Ksh Ksh Central Bank of Kenya [A/c NO:0100000487923] Opening balance 1,328,362,369 85,102,826 Total amount deposited in the account 1,400,724,079 3,465,836,903 Total amount withdrawn 1,439,451,771 2,222,577,360 Closing balance (as per SDA bank account reconciliation 1,289,634,677 1,328,362,369 attached) 14 a ge Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 AWSB through The Ministry of Water and Sanitation made an exchequer request of Kshs 1,443,918,960 The National Treasury managed to release Kshs 258,581,300.00 which we received in our account on 13th March 2018. The balance of Kshs 1,166,800,000.00 was later released by The National Treasury to The Ministry of Water and Sanitation on 19th March 2018 according to The National Treasury bank statement (attached). Athi water services board received Kshs 441,418,700 on 25th June 2018 leaving a balance of Kshs 739,452,771 which we have not yet received to date. AWSB has made several follow ups as evidenced by correspondences to the ministry (see copies attached) 8.13 B) Cash In Hand There was no cash in hand in the project. 8.13. C) Cash equivalents (short-term deposits) There were no cash equivalents (short term deposits) 8.14. Outstanding Imprests and Advances The project did not have any outstanding imprests and advances during the year financial year 2017-2018 8.15. Fund Balance Brought Forward 201712018 2016117 Ksh Ksh Bank accounts 1,411,457,381 2,694,515,364 Cash in hand 0 Cash equivalents (short-term deposits) 0 Outstanding imprests and advances 0 cash in transit (previous year) Total 1,411,457,381 2,694,515,364 8.16. Prior Year Adjustments There were no prior year adjustments 15 P a e Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 9. OTHER IMPORTANT DISCLOSURES PENDING ACCOUNTS PAYABLE (See Annex 2A) These schedules of pending bills are provided for disclosure purposes since the financial statements are prepared on cash basis. These comprise of unpaid bills that the Project had incurred as a result of contracted goods and services as at the end of the FY 2017/2018 as shown below. These pending bills are further analysed in the Annexes to the financial statements. ACTUAL PENDING BILLS FY 2017118 Supplier Amount Due Irrico 2,661,860 Prof Elijah Biamah 1,451,520 Eng Rutere 700,000 Angelina Nduta Mwenda 400,000 Dr loannis Karavokyris 763,300 China Ghezouba 365,472,950 China State 289,924,990 Total 661,374,620 16 P a g e Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2015 10. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS The following is the summary of issues raised by the external auditor, and management comments that were provided to the auditor. We have nominated focal persons to resolve the various issues as shown below with the associated time frame within which we expect the issues to be resolved. Timeframe: Focal Point Status: Reference persont (Res (Put a date No. on the person to (Resolved when you external Issue / Observations from Auditor Management comments resolve the /Not ehentyou issue (Name and Resolved) expect the audit Report designation) issue to be resolved) There were no pending issues raised by the external auditors in the previous years audit --------- Chief Executive officer Project Coordinator Project Accountant Eng. Michael M. Thuita Eng. Joseph Kamau Michael Kimotho ICPAK No: 6490 Date: 18/12/2018 Date: 18/12/2018 Date: 18/12/2018 17 Page N'oes 10 th Statenets Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 ANNEX 1 - VARIANCE EXPLANATIONS - COMPARATIVE BUDGET AND ACTUAL AMOUNTS Original on Utilisation % of Consolidated Origa Adjustments Final Budget Comparable Comments Budget Bss Variance Utilisation Basis A B c=a+b D e-c-d f = d/c Receipts/Payments Item Receipts The funds were received late in Reips f140,000,000 46,235,000 186,235,000 0 186,235,000 0% the year. They will be utilized this financial year Loan from External Development 500,000,000 200,000,000 700,000,000 700,000,000 0 100% Partners( REVENUE) Loan from External Development 1,500,000,000 -500,000,000 1,000,000,00 657,381,807 342,618,193 66% The balance was not enough to Partners(A.I.A) pay the pending certificates Miscellaneous receipts 27,792,018 27,792,018 27,792,018 0 100% There was cash in transit from Total Receipts 2,167,792,018 -253,765,000 1,914,027,018 1,385,173,825 528,853,193 72% the previous year that was received during the year Payments Compensation of employees 0 0 0 0 0 Use of goods and services 350,000,000 350,000,000 354,899,493 -4,899,493 101% Within budget Social Security Benefits 0 0 0 Acquisition of Non-financial 1,817,792,018 -253,765,000 1,564,027,018 1,655,950,508 -91,923,490 106% Within budget Assets_________ Transfers to Other Government 0 0 Entities Other Grants and Other 0 0 Payments Total Payments 2,167,792,018 -253,765,000 1,914,027,018 2,010,850,001 -96,822,983 105% 18 Pa e Water And Sanitation Service Improvement Project-Additional financing Reports and Financial Statements For the financial year ended June 30, 2018 ANNEX 2A - ANALYSIS OF PENDING BILLS Supplier Original Amount Amount Paid During the year Pending Bills Irrico 27,272,056.85 24610196.51 2661860.34 Prof Elijah Biamah 3,472,124.00 2,020,604.00 1,451,520.00 Eng Rutere 700,000.00 - 700,000.00 Angelina Nduta Mwenda 762,068.95 362,068.95 400,000.00 Dr loannis Karavokyris 1,831,416.25 1,068,116.60 763,299.65 China Ghezouba 1,160,946,990.30 795,474,039.90 365,472,950.40 China State 372,902,152.42 82,977,162.65 289,924,989.77 Total 1,567,886,808.77 906,512,188.61 661,374,620.16 19 111 a 14 e SPECIAL ACCOUNT TATEM NT d30th JUNE, 2018 Account No. 0100000487923 Depository Bank STANIC BANK-NAROB5 AddressWAlYAKI WAY, WESTLANDS,NRB Reated Loan PART 1 ATHI WATER SERVICES reiý Aooreren 4376-KE VIot withdraw 14230 M rv:ce r ct i icluden abOve in Accun une20 70 ast perA .BAKde AccKEnA308,357 Add:E ~ ~ OPIED 'IR E 'TTIVE1 70talAon deposited by ord Bnk1372508.3 DATELG Nol : p etc as per Central Bank o Ledgee psccunt and the o al r n ts at 30t ingne,2018 ta cole anda copy o re car gesfnoniliation State ent is attache 篆＿&