GOVERNNIENT OF LESOTHO0 AUDIT REPORT ON THE ANNUAL FINANCIAL STATEMENTS OF SOCIAL ASSISTANCE PROJECT MINISTRY OF SOCIAL DEVELOPMENT GOVERNMENT OF LESOTHO FOR THE YEAR ENDED 31 MARCH 2018 AUDITOR - GFNERAL, P.O. BOX 502 NIASERU 100 LLSOTHO MINISTRY OF SOCIAL DEVELOPMENT SOCIAL ASSISTANCE PROJECT (P151442) SOCIAL ASSISTANCE ORIGINAL FINANCING AGREEMENT-SAP (5834-LS) Annual Financial Report For Year Ended 31st March 2018 SOCIAL ASSISTANCE PROJECT ORIGINAL FINANCING -SAP (5834-LS) MINISTRY OF SOCIAL DEVELOPMENT GOVERNMENT OF LESOTHO THE WORLD BANK-IDA FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 TABLE OF CONTENTS PAGE Report of the Auditor General 1-4 Statement of Cash Receipts and Payments 5 Notes to the Financial Statements 6-11 The accompanying financial statements set out on pages to were approved on ..................................................1.1. .A I .... 2018 and signed by: Mr. MALEF TSANE MASASA PRINCIPAL SECRETARY-MINISTRY OF SOCIAL DEVELOPMENT OFFICE OF THE AUDITOR - GENERAL P.O. BOX 502, MASERU 100 LESOTHO REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OF SOCIAL ASSISTANCE ORIGINAL FINANCING MINISTRY OF SOCIAL DEVELOPMENT FOR THE YEAR ENDED 31 MARCH 2018 Opinion I have audited the accompanying financial statements of Social Assistance Original Financing - Project Number 5834-LS, which comprise the statement of cash receipts and payments for the year ended 31 March 2018, and notes to the financial statements, including a summary of the activity in the Designated Account, summary of significant accounting policies and other explanatory notes as set out on pages 4 to 11. 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 for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS). * Report on internal controls There were no significant instances of control failures or overruns that could affect the completeness and accuracy of financial records as well as safeguarding of the Project's assets. * Report on compliance There were no material instances of non-compliance with financing agreement terms and laws and regulations governing the Project. Basis for Opinion I conducted my audit in accordance with International Standards on Auditing (ISA). 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 1 4th floor * Finance House * High Court Road * Maseru * Lesotho Telephone (+266) 22323904/22314247 * Fax (-266) 22310366 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. Key Audit Matters Key audit matters 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. 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 IPSASs, 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 or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the the project 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 2 includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA 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 ISA, I exercise professional judgment and maintain professional skepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal 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 our 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 3 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 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 report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. LUCY L. LIPHAFA (MRS) DATE: AUDITOR-GENERAL OFFICE OF THE AUDITOR-GENERAL AUDITOR GENERAL U 2 OCT 2018 P.O. BOX 502 MASERU100, LESOTHO 4 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 MARCH 2018 Social Assistance Project Original Financing (SAP) 5834-LS Notes USD LSL Opening Cash Balance Add: Source of Funds IDA Funds Component 2 38 546542 7630482 Counterpart Funding Other Income Funds Available 546542 7630482 Less: Uses of Funds by disbursement categories _Component 2 Goods 182 698 2 451 994 Consultants' services 117745 1621279 non-consulting_services 14409 201 193 Trainin_g 4436 64 292 Operating costs 3454 47940 Direct Transfer to Beneficiaries - - Exchange Rate Difference (2794) 567 431 Total expenditures 5 319 948 4954129 Cash available less total expenditure 226594 2676353 Standard Lesotho Bank (USD) A/c 7A 211 499 2 498 059 Standard Lesotho Bank (LSL) Alc 7B 15095 178293 Total Cash Balance 226 594 2676 353 The following rates were used for conversion: 1US$= 13.4400 LSL & 1US$= 11.8112 LSL (opening and closing balances) 5 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Basis of preparation The consolidated financial statements have been prepared in accordance with Cash Basis IPSAS "Financial Reporting under the Cash Basis of Accounting". The accounting policies have been applied consistently throughout the period. Reporting entity The Government of Lesotho (GoL) through Ministry of Social Development (MoSD) has received two credits (Credit number 5834-LS & 5932-LS) from the International Development Association (IDA) administered by the World Bank under a project called Social Assistance Project (P151442). The objective of the Social Assistance Project and its Additional Financing (SAP+AF) is to support the Government of Lesotho in improving the efficiency, equity and shock responsive function of selected social assistance programs and, in the event of an eligible crisis or emergency, to provide immediate and effective response to the emergency/crisis. For the purpose of the project, selected social assistance programs are the Child Grants Program (CGP), OVC Bursary Scheme (OVC)/Post-Primary Bursary Scheme (PPB), Public Assistance Program (PA) and Old Age Pension Program (OAP). Reporting currency The entity maintains its records and prepares financial statements in both Lesotho Maloti and US Dollars to satisfy the reporting requirements for both the donors and the government of Lesotho. Assets and liabilities at the end of the reporting period are translated at the rate ruling at that date. Transactions during the year are translated at the selling rate used to transfer funds from the foreign currency bank to operational account over the reporting period. Gain and losses on exchange are dealt with in the Sources and Uses of Funds Statement. Fixed Assets Fixed assets are expensed in full on acquisition. A fixed assets register is maintained for all assets under the organizations control. Financial Year The Financial Year follows the Lesotho Government Financial Year April to March each year. 6 2. Cash During the reporting period the accounting records were maintained on cash basis with cash being recognized when received rather than earned, and expenses recognized when paid rather than when incurred. The accounting records separately identify funds received from different sources and disbursements there from. Cash comprises cash on hand, demand deposits and cash equivalents. Amounts received by the entity are deposited into the entity's dedicated bank accounts and are controlled by the entity. Cash included in the Sources and Uses of Funds Statement comprise of cash balances with Central Bank of Lesotho and Standard Lesotho Bank as a commercial bank. 3. Disbursements from International Development Agency A. Component 1 is structured around 21 of Disbursement-Linked Indicators (DLIs) (see tables 2 and 6for the list of DLis). Disbursements take place once technical proof that the DLIs have been met, as well as financial evidence on adequate Government spending under the Eligible Expenditure Program, are presented to the World Bank. For the current FY, Four DLIs have been achieved out of 11 due this year, namely, DLI 1, 2, 3 and 15. The total value received is $3, 198, 597 (equivalent to LSL 43, 740, 508) and all these funds has been deposited straight into the Consolidated Account of The Government of Lesotho. Reimbursement-DLI 1 Achievement 08/09/2016 LSL 21168 623,27 $1486122,30 Reimbursement DLI 2 Achievement 13/04/2017 LSL 13 232 778,65 $ 962 937,90 Reimbursement DL3Achievement 08/12/2017 LSL 3387774,11 $ 250946,23 Reimbursement DLll5Achievement 21/03/2018 LSL 5951332,35 $ 498591,05 TOTAL I LSL 43 740 508,38 $ 3198597,48 B. Component 2 directly finances activities, such as emergency top ups to the CGP, the livelihoods pilot, consultancies for technical assistance and goods, to support implementation of the key reforms and improvements planned under the project. This component follows standard World Bank procedures for investment financing. For the current reporting period, the Project received two disbursements to the value of $546, 542 (equivalent to LSL 7, 630, 482). These funds were deposited into the project Designated Account held with Central Bank of Lesotho. 1st Disbursement SAP component 1 SAPJV1704001$ 03.04.17 $ 339962,00 LSL 4746339,40 2nd Disbursement- IDA 58340001005 SAPJV1803001$ 19.03.18 $ 206580,00 LSL 2884142,32 TOTAL _ $ 546-542,00 LSL 7630481,72 7 4. Eligible Expenditures Program (EEP) The Eligible Expenditures Program are the expenditure on transfers to beneficiaries for the following five programs: - Child Grants Program (CGP) - Orphan, Vulnerable Children Bursary Program (OVC) - Public Assistance program (PA) - Old Age Pension (OAP) - Post Primary Bursary program As well as salaries for the MSD staff. The aggregate EEP is 100%. Thus, aggregate disbursements under SAP shall not exceed the aggregate EEP. The EEP is extracted from the GOL Financial System (IFIMIS). The EEP for the current reporting period is LSL 119, 499, 088 (equivalent to $9, 150, 007) SAP Retroactive Financing EEP Period LSL 111084597,23 $8505711,89 EEP SAP July- September 2017 LSL 8 414490,23 $ 644 294,81 TOTAL I LSL 119 499 087,46 $9 150 006,70 5. Component 2 Expenditure In USD Row Labels MOF MOSD PIU Grand Total Consultants Services 117745 117745 Exchange Rate Diffence (2 794) (2 794) Goods 83193 99505 182698 Non-consulting Services 4 001 4 330 6 079 14 409 Operating Costs 1383 2070 3454 Training 4436 4436 Grand Total 4001 93342 222605 319948 8 In LSL Row Labels MOF MOSD PIU Grand Total Consultants SenAces 1 621 279 1 621 279 Exchange Rate Diffence 567431 567431 Goods 1 118062 1 333932 2451 994 Non-consulting SeNces 53 504 62 753 84 935 201 193 Operating Costs 18500 29440 47940 Training 64292 64292 Grand Total 53 504 1 263 607 3 637 018 4 954 129 6. Disbursement Linked Indicator Control Account The aggregate EEP is 100%. Thus, aggregate disbursements under SAP shall not exceed the aggregate EEP. The EEP is extracted from the GOL Financial System (IFMIS). The EEP for the current reporting period is LSL 119, 499, 088 (equivalent to $9, 150, 007). For the current FY, Four DLIs have been achieved out of 11 due this year, namely, DLI 1, 2, 3 and 15. The total value received is $3, 198, 597 (equivalent to LSL 43, 740, 508) and all these funds has been deposited straight into the Consolidated Account of The Government of Lesotho. E bpRm Nunn WS NIWO f lAkmg N EIIINT'B1 11199 11 8 _____ 19 kiuu R1144m1u BINI Immgl ~ 617~1~ ________ $21 0 $91 9 7. Disbursement Linked Indicator Report DLI DLI Trigger DLI Planned Actual Burn Achieved Description of a Disbursement Linked Indicator # US$ US$ Rate Yes/NO DLI 1 486 The NISSA-CBT targeting approach was designed and tested 1 1 500 000 122 99% Data cross matching mechanism between the OAP and the Civil DLI Service Pensions databases was established 2 1 000 000 962 938 96% Post-primary OVC Bursary was consolidated in the OVC DL1 Bursary scheme 3 250000 250946 100% OVC and PA adopted harmonized targeting procedures based DLI on NISSA-CBT and categorical filters 4 250 000 - 0% DLI Enrollment in CGP reached at least 38,000 households. 5 1 500 000 - 0% Key managerial positions of the Social Assistance Department DU have been included in the MoSD payroll 6 150 000 - 0% Harmonized procedures of application, enrollment, grievance DLI and redress mechanism for CGP, OVC and PA were adopted 7 150 000 - 0% 100% of OAP beneficiaries found to be ineligible through the regular cross checks with Civil Service Pensions databases are DLI eliminated from the OAP roster 8 400 000 - 0% 100% of ineligible OAP recipients detected June 30, 2017 are eliminated as a result of the new OAP proof of life verification DLI requirements applied to all current beneficiaries 9 1 300 000 - 0% All new beneficiaries of PA and OVC entered in the calendar year were selected using the harmonized targeting procedures DLI adopted in Year 1 10 500000 - 0% The coverage of NISSA-CBT registry reached at least 75% of DLI Community Councils in the country 15 500 000 489 591 98% 3 189 Total 7 500 000 597 43% 10 8. Closing Cash & Bank Balances In LSL Ust A- LSLDenominated Bank Accounts Held at Standard Lesotho Bank Bank/Account Title Account Number USD LSL RATE * OLD'0140019339001 NEW Social Assistance Project LSL 9080005469216 15095,28 178293,42 11,81 TOTALS - 15095,28 178293,42 11,81 Notes: IN USD List B - Foreign Currency Bank Accounts Held at with Central Bank of Lesotho Balance at 31 March 2018 Currency Bank/Account Title Curr Account Number Amt Exchange Rate M Social Assistance (USD) Project USD 100008-9405-USD-32 211499,18 11,8112 2498059,11 TOTAL 211499,18 12498 059,11 Notes: All balances are restricted for use on specific projects. 11 � ,� � � ,� и� ч� �э CD г С? й � [�з 1� G � � iC] �7 СС) � F�- fti С� � � ц� �f7 е`' � 00 �s7 ,� � ,г,,, 'а- 00 О N {'�? 07 Q С �} 1� t$ � � � � � � �, � �t} - � � � � '� i .� �w � � � � � � ili ^ .� � � й С U iO � � � гn О .�н � G � .� �G С пз ,t� � � � ` � � � .� � � � � , � � � л.+ ч� +� U � .Q L it а� � � � � s�'w � ��t, сису � � п c�t7 � � � r_ с�7 г- г- с� у w r� ra " "� й � � ��'.а с cmv_ с��э �и i � аз r• е� с+� г� uS (� � О t37 ��г- С г -� � `� � �. ,м„ � ' г � � т � � ii. о о ;� � � ,�, '�- ч-. � и р р .ы� �а и г,сз © 'г� � - � с ar ' гs тs �, . } О V � о � � � � � а ° � '� L С � � sэ" � �' 4а+ с�з `Z � � С� � � '� '� '� U � � �� �� ` '�; Q � � с � � � �' '� �-а � � � • 0 F- ti% !- ч_ С) ..� �1t ;� г% •�.' 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