REPUBL.;CQOF KENYi FFCE OF THE AU,f ENK REPORT KF THE FINANCIAL STATEMWENTS OF KENYA COASTAL DEVELOPMENT PROJECT GEF GRANT NO. Tf 0975.78 FORTHE YEAR EIE 30 JUN 20,17 KENYA MARIN AND FISH,IESRESEAR(CR' sm PROJECT NAME KENYA COASTAL DEVELOPMENT PROJECT (KCDP) IMPLEMENTING AGENCY: KENYA MARINE AND FISHERIES RESEARCH INSTITUTE (KMFRI) PROJECT GRANT NUMBER: TF 97578 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2017 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 CONTENTS PAGE 1. PROJECT INFORMATION AND OVERALL PERFORMANCE ...............................2 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ..................... ..... 10 3. REPORT OF THE INDEPENDENT AUDITORS ON KENYA COASTAL DEVELOPMENT PROJECT.....11 4, STATEMENT OF RECEIPTS AND PAYMENTS........................................ 12 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30 JUNE 2016........................ 13 6. STATEMENT OF CASH FLOWS................ ............................ .....14 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS ........... ............ 15 8. SPECIAL ACCOUNT RECONCILIATION............................................ 16 9. SPECIAL ACCOUNT STATEMENT................................................17 10. NOTES TO THE FINANCIAL STATEMENTS......... ................................. 18 11. ANNEX 1: EXCHANGE GAINS................................................... 26 12. ANNEX 2: DETAILED BUDGETED VS ACTUAL EXPENDITURE......... ..................27 13. ANNEX 3: PENDING BILLS......................... ........................32 1 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: Kenya Coastal Development Project, Objective: The key objective of the project is to improve management effectiveness and enhance revenue generation of the recipient's coastal and marine resources. Address: The project headquarters offices are in Mombasa City, Mombasa County, Kenya. English Point Mkomani P.O. Box 81561-80100, Mombasa. The project also has offices/branches as follows: * Taita Taveta County * Lamu County * Kwale County * Tana River County Contacts: The following are the project contacts Telephone: (254) 0773738502 E-mail: kcdp@kcdp.co.ke Website: www.kcdp.co.ke 1.2 Project Information Project Start Date: 17th November 2010 Project End Date: 30th June 2017 Project Manager: Dr Jacqueline Uku Project Sponsor: GLOBAL ENVIRONMENTAL FUND 2 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 1.3 Project Overview Line Ministry/State The project is under the supervision of the Ministry of Agriculture, Department of the Fisheries and Livestock Development/State Department of Fisheries project Project number TF97578 Strategic goals of the The strategic goals of the project are as follows: project (i) To improve management effectiveness and enhance revenue generation of Kenya's coastal and marine resources (ii) To strengthen conservation and sustainable use of marine and coastal biodiversity Achievement of The project management aims to achieve the goals through the following strategic goals means: (i) Revenue generation to GOK from near shore and EEZ fisheries; (ii) Targeting direct project beneficiaries of which 35% are female; (iii) Three (3) conservation areas brought under effective management (including co-management) as defined by Management Effectiveness Tracking Tool (METT) score of at least 55; (iv) Twenty (20) vessels licensed to fish in the Kenyan waters with Vessel Monitoring System installed ; (v) Development of 3 Fishery Management plans; (vi) Establishing the stock status of 3 key exploited fisheries species; (vii) Target areas (10,000 ha) with annually updated geo-referenced biodiversity data; (viii) Three (3) Management Plans (MPs) developed or updated; (ix) Biodiversity management information system developed, populated and updated annually; (x) Ten (10) successful community based interventions documented and disseminated; (xi) One (1) coast region, 2 county, 8 ward level land capability plans or maps developed; (xii)85 officers from lead agencies trained on ICZM & EIA (including EIA certification); (xiii) 3 Annual environmental and social audits for KCDP supported projects undertaken; (xiv) Two hundred (200) entrepreneurs identified, trained, and with 3 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 business plan developed; (xv) Two hundred (200) of HMP subprojects completed or operational; and (xvi) Development and implementation of a communication strategy. Other important The project is implemented by seven (4) agencies of the Government of background Kenya (GoK), comprising of Kenya Marine and Fisheries Research information of the Institute (KMFRI), the State Department of Fisheries (SDF), Kenya Wildlife project Service (KWS) and Kenya Forestry Research Institute (KEFRI), The activities of these agencies, within the KCDP project, are coordinated by a centralized Project Coordinating Unit (PCU) based at the Kenya Marine and Fisheries Research Institute (KMFRI). Current situation that The project was formed to intervene in the following areas: the project was (i) Component 1: Sustainable Management of Fisheries formed to intervene Resources with the objective of increasing revenue earning potential of GoK through sound monitoring, control and surveillance and a transparent process of licensing of foreign vessels. Other goals are to promote research for value addition, market chain analysis, alternatives beyond reef fishing, aquaculture and overall improvement of fisheries governance; (ii) Component 2: Sound Management of Natural Resources which aims to improve the sound management and regeneration of natural resources and biodiversity in the coastal and marine environment as well as provide assistance to communities in the development of eco-tourism ventures; Project duration The project started on 1 st July 2011 and closed on 30th June 2017 4 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 1.4 Bankers The following are the bankers for the current year: (i) Standard Chartered Bank, Treasury Square Branch (ii) Co-operative bank, Ukulima Branch 1.5 Auditors The project is audited by the Office of the Auditor-General 1.6 Roles and Responsibilities The following are key persons in the project management. Names Title designation Key qualification Responsibilities Prof. James Njiru Director, KMFRI PHD Project Supervision Dr. Jacqueline Uku Prolect Manager PHD Project Management Ms.Nabwire.M. FMS CPA (K), BCOM Finance Elizabeth Management 1.7 Funding summary The Project is for duration of 6 years from 2010 to 2016 with an approved budget of US$ 5M equivalent to Kshs 500Million as highlighted in the table below: Below is the funding summary: Undrawn balance to . Amount received to date Udanblnet Source of funds Donor Commitment- Amoun e to date (30 June 2017) USD Kshs USD Kshs USD Kshs (A) (A') (B) (B') (A)-(B) (A')-(B') Grant GEF 5,000,000 500,000,000 5,000,000 488,727,476 - 5 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 1.8Summary of Overall Project Performance: - Budget performance against actual amounts for current year and for cumulative to-date, CURRENT YEAR 2016/2017 CUMULATIVE TO DATE Budget Actual Budget Actual Kshs. Kshs. Kshs. Kshs. 125,752,382 102,386,674 488,727,476 449,506,343 - Physical progress based on outputs, outcomes and impacts since project Commencement. KENYA COASTAL DEVELOPMENT PROJECT Project Development Objective: To improve management effectiveness and enhance revenue generation of Kenya's coastal and marine resources Global Environment Objective: To strengthen conservation and sustainable use of marine and coastal biodiversity RESULT AREA ACHIEVEMENTS USD 4.086m raised in revenue Activities carried out which contributed to increase in revenue generation include licensing of vessels, Indicator One: frame survey, patrols and port state measures. Inao Oene:ao tFrame surveys information was used to enhance nevenuhoe genrand tZ Gro the licensing of vessels used in in-shore areas. near shore and EEZ fisheries Enforcement patrols and sensitization were also carried out contributing to increase in revenue generation. 46% females The range of beneficiaries are drawn from communities running woodlots and tree nurseries, participants in ICZM Training and EIA Training, Indicator Two: SMEs capacity building, staff capacity building, Direct Project Beneficiaries HMP sub-projects, scholarships and internships for (number), of which female (%) coastal students, sea weed farming, aquaculture (fin fish farming, BMU training, beach inspectors workshop, Fish quality, processing and marketing, community managed areas, tour guide training, biodiversity assessment training, school enrolment in classrooms supported by the project, paved 6 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 road users and clients of Kinondo banking hall. Further to the direct beneficiaries, the indirect beneficiaries for HMP alone are estimated at approximately 350,000 people The protected areas targeted brought under effective management are Shimba Hills, Kisite- Mpunguti and Malindi. Shimba Hills has METT Indicatorscore increased from 54 to 58; Kisite score has Number Three: increased from 51 to 58 and Malindi score brought under effective increased from 51 to 56. The activities that have broughmt uder udeffectiv contributed to the increase in METT score include management (including co- management) as defined by Biodiversity Assessments; use of Night vision Manaemet Efecivenss racingcameras to enhance security; development/review Management Effectiveness Tracking of Management plans; Strategic Adaptive effManagement (SAM) programme; Staff training and Impl6mentation of projects that enhance conservation and community welfare 50 Ha Indicator Four: 50 hectares of land has been brought under Areas outside the protected areas improved management through establishment of brought under improved seed stands, 27 Ha in Gede, 4 Ha in Mpeketoni and *management 16 Ha in Witu; 2 ha Comensumn and Amani Jipange mangrove conservation. 792 Households Indicator Five: This includes households which have earned over lNumber of coastal households with 50USD (approximately Ksh 5,000) from sale of sea annual earnings of 50 USD or more weeds (KShs. 1.3 Million); fin fish (Kshs. 157,000); from commercial NRM activities Poles (Kshs. 1 .43 Million); tree seedlings (Kshs. supported by the project 4.5 Million) waste management (Kshs. 640,000) and ecotourism (350,000). Intermediate Result Indicators (Component One): Sustainable Management of Fisheries Resources Intermediate Result indicator 38 vessels One: Number of vessels licensed to fish in Vesse Monitoring System (VMS) already set up in the Kenyan waters with Vessel SDF office and is operational. Monitoring System (VMS) installed Intermediate Result indicator 3 plans Two: 7 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 Number of species with Fishery Ring Net Management and Lobster Management Management plans developed Plans and Aquarium Fisheries Management plans completed. 5 species Intermediate Result indicator Selection and prioritization of key commercial Three: species using SICA framework (13 selected and five prioritized - Lobster, Aquarium, Small and Nube stofk keytus epblied Medium pelagic, Seganus suta and prawns. Standard Operation Procedures for the stock assessment developed; Stock assessment for the five species has been completed with fact sheets available Intermediate Result Indicators (Component Two): Sound Management of Natural Resources 25,000 HA assessed Intermediate Result indicator Biodiversity assessments done in Shimba Hills One: Ecosystem, Kisite-Mpunguti Marine Park and Target areas with annually updated Reserve and its environs; Lamu, Lake Kenyatta geo-referenced biodiversity data and Lake Jipe (Taita); Update assessments done in South Coast (marine environment) and Shimba Hills (terrestrial environment). Intermediate Result indicator 4 plans Two: Number of Management Plans Two plans were developed namely Mangrove Plan (MPs) developed or updated and Witu Forest plan while two plans were reviewed - Kisite Mpunguti and Malindi-Watamu. In addition to these plans, two conservation and management strategies were developed for Sable Antelope and Coral Reef/Sea Grasses. Intermediate Result indicator Implemented Three: Biodiversity management Consultancy to establish the system was information system is developed, undertaken and installation of the hardware and pBplated and updated annually software done Intermediate Result indicator 10 projects Four: Number of successful community The consultancy to document the successful based interventions documented interventions was undertaken and dissemination to and disseminated stakeholders done. 8 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 - List the implementation challenges and recommended way forward. IMPLEMENTATION CHALLENGES RECOMMENDED WAY FORWARD 1. There has been noticeable improvement The Project has worked to overcome most of in project performance since the the challenges it faced over the formative years Midterm Review and since Mid Term Review it has managed to achieve most of its development obiectives. 2. Insecurity experienced during the year This to some extent hindered implementation in in parts of Coast Region parts that were most affected. However, with the National Government's relentless efforts in improving the security situation, such parts are now accessible and implementation is going on smoothly. 1.9Summary of Project Compliance: So far there are no significant cases of non- compliance with applicable laws and regulations. 9 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Director for Kenya Marine and Fisheries Research and the Project Manager for KCDP 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 ended on June 30, 2017. This responsibility includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Director for Kenya Marine and Fisheries Research and the Project Manager for KCDP 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 Director for Kenya Marine and Fisheries Research and the Project Manager for KCDP 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 ended June 30, 2017, and of the Project's financial position as at that date. The Director for Kenya Marine and Fisheries Research and the Project Coordinator for KCDP 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 Director for Kenya Marine and Fisheries Research and the Project Manager for KCDP confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year 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 Director Kenya Marine and Fisheries Research and the Project Coordinator for KCDP on gnne Or 2017 and signed by them. Project Manager 10 REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON KENYA COASTAL DEVELOPMENT PROJECT GEF GRANT NO. TF 097578 FOR THE YEAR ENDED 30 JUNE 2017 - KENYA MARINE AND FISHERIES RESEARCH INSTITUTE REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Coastal Development Project GEF No. TF 097578 set out on pages 12 to 32 which comprise the statement of financial Grant assets and liabilities as at 30 June 2017 and the statement of receipts and payments, statement of cash flows, and statement of comparative budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with the provisions of Article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, and Grant Agreement No. TF 097578 dated 17 November 2010 between the Republic of Kenya and International Bank for Reconstruction and Development (IBRD). I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit. In my opinion, the financial statements present fairly, in all material respects, the financial position of Kenya Coastal Development Project GEF No. TF 097578 as at 30 June 2017, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with Grant Agreement No. TF 097578 dated 17 November 2010. In addition, the special accounts statement presents fairly, transactions for the year and the closing balance has been reconciled with the books of accounts. Further, I confirm that public money has been applied lawfully and in an effective way as per Article 229(6) of the Constitution. Basis for Opinion The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Kenya Coastal Development Project GEF No. TF097578 management in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Report of the Auditor-General on the Financial Statements of Kenya Coastal Development Project GEF Grant No. TF 0975 78 for the year ended 30 June 2017 Kenya Marine and Fisheries Research Institute Promoting Accountability in the Public Sector Emphasis of Matter Low Absorption of Funds I draw attention to Note 10.2 to the financial statements which indicates that the Kenya Coastal Development Project-GEF Grant No.TF 097578 received a total of Kshs.488,727,476 for six years up to 30 June 2017 (2011-2017). However, the project returned Kshs.4,813,549 to the designated account at the closure of the project on 30 June 2017. The under absorption of Kshs.4,813,549 may have curtailed implementation of critical activities and delivery of services to the residents of Coast region. Although the management indicated that the under absorption was occasioned by factors beyond their control, such as project restructuring, slow disbursement of funds and insecurity in some parts of Coast, it implies that the Grant to the Government of Kenya did not fully achieve its objectives. My opinion is not qualified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current year. There were no Key Audit Matters to report in the year under review. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue sustaining services, disclosing, as applicable, matters related to sustainability of services and using the applicable basis of accounting unless the management either intends to have the Project cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. 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. Auditor-General's Responsibilities for the Audit of the Financial Statements I [It dUUIL UUJt LIVtZ ditV LU L LOIII IMasolloUl assurance akwuut vI statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. Reasonable assurance is a high level of assurance, but Re~port ofthe Auditor-General on the FinancialStatemnews of Keny-a CoaStal Development Project GEF Grant No, TF 0 97.5 78 fo h eredd3 ue21-Kenya Marine und Fisheries Rescurch Institute Jbi-theYea endd 3 hie ? is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, I exercise professional judgement and maintain professional skepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances and for the purpose of giving an assurance on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern 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 the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the Project to express an opinion on the financial statements. I communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships Report of the Auditor-General on the Financial Statements of Kenya Coastal Development Project GEF Grant No. TF 097578 for the year ended 30 June 2017- Kenya Marine and Fisheries Research Institute 3 and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. FCPA Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 21 December 2017 Report of the Auditor-General on the Financial Statements of Kenya Coastal Development Project GEF Grant No. TF 097578 for the year ended 30 June 2017- Kenya Marine and Fisheries Research Institute 4 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 JUNE 2017 2016/2017 2015/2016 Cumulative RECEIPTS Ksh. Ksh. Ksh. Restated Restated Loan from external development partners 10.2 30,939,798 186,285,457 488,727,476 Total receipts 30,939,798 186,285,457 488,727,476 PAYMENTS Purchase of goods and services 10.3 74,930,515 100,218,794 363,500,345 Acquisition of non-financial assets 10.4 27,456,159 57,707,072 86,005,998 TOTAL PAYMENTS 102,386,674 157,925,866 449,506,343 SURPLUS/DEFICIT FOR THE YEAR (71,446,876) 28,359,591 39,221,133 Dire*orKIAFN Project M ager Date:I Date:- l imt1 12 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30 JUNE 2017 FINANCIAL ASSETS 2016/2017 2015/2016 Kshs Kshs Restated Cash and Cash Equivalents Bank Balances 10.5A 38,529,193 172,890,744 Cash Balances 10.5B 194,542 476,481 Outstanding Imprest 10.5C 79,337 Inter Project Advances 10.5D 4,536,957 6,793,640 Inter Project Borrowings 10.5E (4,039,559) (69,572,193) TOTAL FINANCIAL ASSETS 39,221,133 110,668,009 REPRESENTE BY: Cash and cash equivalents b/fwd 110,668,009 82,308,418 Surplus/Deficit for the year (71,446,876) 28,359,591 NET FINANCIAL POSITION 39,221,133 110,668,009 *Accounts Restatement see Note 10. 6 Direct NM Project Manager Date Date 13 KENYA COASTAL DEVELOPMENT PROJECT PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 6. STATEMENT OF CASHFLOW FOR THE YEAR 30 JUNE 2017 2016/2017 2015/2016 Kshs Kshs Restated PAYMENTS FOR OPERATING EXPENSES Purchase of Goods & Services 74,930,515 100,218,794 Acquisition of Non-Financial Assets 27,456,159 57,707,072 Net cash flow from operating activities 102,386,674 157,925,866 CASHFLOW FROM BORROWING ACTIVITIES Proceeds from Foreign Borrowings 30,939,798 186,285,457 Net cash flow from financing activities 30,939,798 186,285,457 NET INCREASE IN CASH AND CASH EQUIVALENT (71,446,876) 28,359,591 Cash and cash equivalent at BEGINNING of the year 110,668,009 82,308,418 Cash and cash equivalent at END of the year 39,221,133 110,668,009 Director/KMRI Project Manager Date Date 14 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS . Actual on % of Receipts/Payments Item Budget Adjustments Final Budget Comparable Variance Variance Basis A B c=a+b D e=c-d f=e/c % Receipts Proceeds from borrowings - External 125,752,382 0 125,752,382 30,939,798 94,812,584 75% Sources Total Receipts 125,752,382 0 125,752,382 30,939,798 94,812,584 75% Payments Purchase of goods and services 93,105,867 0 93,105,867 74,930,515 18,175,352 20% Acquisition of non-financial assets 32,646,515 0 32,646,515 27,456,159 5,190,356 16% Total Payments 125,752,382 0 125,752,382 102,386,674 23,365,708 19% Director/ Project/ Manager Date Date 15 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 8. STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 JUNE 2017 GRANT NO: TF NO 097578 - KE - IBRD COOPERATIVE BANK OF KENYA, NAIROBI BANK ACCOUNT NO: 02120134490200 CURRENCY: USD No USD 1 Amount advanced by GEF 4,741,458.36 2 Less: Total amount documented 3,764,649.25 3 Outstanding amount to be documented 976,809.11 Represented by: 4 Ending Special account balance as at 30th June 2017 5 Amounts claimed but not credited as at 30th June 2017 6 Amounts withdrawn and not claimed 976,809.11 7 Service Charges (if not included in lines 5 and 6 above) 8 Interest earned (if included in Special Account) Total advance to Special Account year ended 30 Jue217976,809.11 June 2017 Discrepancy between total appearing in line 3 and 9 - The amount appearing on line 6 is eligible for financing by Worldbank and shall be documented in subsequent IFRs (The Project closed on 301h June 2017) 16 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 9. SPECIAL ACCOUNT STATEMENT FOR THE PERIOD ENDING 30 JUNE 2017 GRANT NO: TF NO 097578 - KE - IBRD r COOPERATIVE BANK OF KENYA, NAIROBI BANK ACCOUNT NO: 02120134490200 CURRENCY: USD r- USD Part A - Account Activity Beginning balance of 1st July, 2016 as per CBK Ledger Account 1,428,150.17 Add: Total Amount deposited by World Bank 296,254.76 Total Interest earnings if deposited in account - Total amount refunded to cover ineligible expenditure Deduct Total amount withdrawn 1,724,404.93 Total service charges if not included above in amount withdrawn Ending balance on 30th June 2017 NOTE: The ending balance as per Central Bank of Kenya Ledger Account and the offshore Special Account as at 30th June, 2017 have been reconciled and a copy of the supporting Reconciliation Statement is attached. 17 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 10. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 10.1 Statement of compliance and basis of preparation The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and conform to the form of presentation prescribed by the Accounting Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project and all values are rounded to the nearest one Shilling. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognises transactions and events only when cash is received or paid out by the Project. i. Recognition of revenue and expenses The Project recognises all revenues from the various sources when the event occurs and the related cash has actually been received by the Project. In addition, the Project recognises all expenses when the event occurs and the related cash has actually been paid out by the Project. ii. In-kind donations In-kind donations are contributions 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 of in-kind donations can be reliably determined, the Project includes such value in the statement of receipts and payments both as revenue and as an expense in equal and opposite amounts; otherwise, the donation is not recorded. iii. 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 18 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) * PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 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 authorised public officers and/or institutions which had not been surrendered or accounted for at the end of the financial year. iv. 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 are simply disclosed as an Annex to the financial statements. 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. v. Budget The budget is developed on the same accounting basis (cash basis), the same accounts classification 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. A high-level assessment of the Project's actual performance against the comparable budget for the financial year under review has been included in an annex to these financial statements. vi. 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 are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments. 19 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 vii. Comparative figures Where necessary comparative figures for the previous financial year have been restated to conform to the required changes in financial statement presentation. viii. Restatement The 2015/2016 Financial Statements has been restated on the following balances * Cash and Cash Equivalent b/f: Being expenditure of Kshs 975,500 paid by GEF on behalf of IDA in 2015/2016 and captured as an advance when IDA refunded GEF. This led to an increase in expenditure. * Surplus for the year: Being amount of Kshs 975,500 captured as expenditure in FY 2015/2016 ix. Subsequent events There have been no events subsequent to the financial year end with a significant impact on the financial statements for the year ended June 30, 2017. 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 gb D 2017 and signed by: Director/K Project Maneger Date Date 20 KENYA COASTAL DEVELOPMENT PROJECT PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 10.2 PROCEEDS FROM DOMESTIC AND FOREIGN GRANTS During the 12 months ending 30 June 2017, USD 296,259.76 was transferred to the Project Designated Account equivalent of Kshs 30,483,470.25. The National Treasury transferred Kshs.175, 328,922.40 to the project account. An exchange gain from the translation of the funds in the designated account was Kshs.456, 328.03. Amount in Loans received Name o Donor Datelon Lasrcie Name of Donor received loan in cash Cumulative currency Total amount in Kshs FY 2016/2017 FY 2015/2016 FY 2014/2015 FY 2013/14 FY 2012/13 FY 2011/12 USD Kshs. Kshs Kshs Kshs Kshs Kshs GEF 42,887,109 42,887,109 GEF 42,931,001 42,931,001 GEF 67,149,710 67,149,710 GEF 16/3/2017 296,259.76 30,483,470 33,132,660 68,139,037 74,271,141 72,515,003 40,466,314 319007,62 Exchange Gains 456,328 184,975 15,020,554 1,326,174 16,988,031 Refunds -236,000 -236,000 Total 296,259.76 30,939,798 186,285,455 83,159,591 75,597,315 72,279,003 40,466,314 488,727,476 21 KENYA COASTAL DEVELOPMENT PROJECT PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.3 PURCHASE OF GOODS AND SERVICES 2016/2017 2015/2016 Cumulative Kshs Kshs Kshs Utilities, supplies and services 153,146 403,615 5,432,379 Communication, supplies and services 1,152,034 213,874 5,136,311 General Office Supplies 1,983,031 688,988 2,672,019 Domestic travel and subsistence 46,359,624 65,791,912 243,335,462 Foreign travel and subsistence - 577,801 8,049,791 Printing, advertising and 2,025,636 190,003 2,849,148 - information supplies & services 117,002 291,900 408,902 Rentals of produced assets 1,262,505 1,128,755 2,502,610 Training expenses 3,102,926 2,939,875 12,663,006 Hospitality supplies and services 168,450 168,450 Specialized materials and services - 6,425,943 18,272,405 Other operating expenses 639,112 9,366,423 27,280,425 Refined Fuel & Lubricants 2,739,677 629,024 3,368,701 Routine maintenance:- Motor vehicles and other transport Equipment 1,748,546 904,482 7,215,713 Routine maintenance:- other assets 238,880 8,800 247,680 Contracted Professional Services 13,239,946 10,657,399 23,897,345 Total 74,930,515 100,218,794 363,500,347 10.4 ACQUISITION OF NON-FINANCIAL ASSETS 2016/2017 2015/2016 Cumulative Kshs Kshs Kshs Purchase of office furniture & general equipment - 56,742,987 56,759,987 Purchase Of Seeds, Breeding Stocks & Live - 964,085 1,789,852 Animals Purchase of Boats 5,846,926 - 5,846,926 Purchase of ICBIMS Equipment 8,516,573 - 8,516,573 Purchase of Furniture 793,603 - 793,603 Renovation of ICIBIMS Server Room 1,139,980 - 1,139,980 Renovation of Lukore Fence - Materials & Labour 8,266,761 - 8,266,761 Renovation of Shedrick Falls - Materials & Labour 2,147,316 - 2,147,316 Purchase of Laptops/Computers 745,000 - 745,000 27,456,159 57,707,072 86,005,998 22 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 10.5A Bank Accounts 2016/2017 2015/2016 Kshs Kshs Restated Foreign Currency Accounts Co-operative Bank of Kenya [A/c No 02120134490100] 144,389,124 Total Foreign Currency balances 144,389,124 Local Currency Accounts Standard Chartered Bank: GEF Master Account 34,495,766 668,699 KMFRI Account 862,264 1,393,567 KWS Account 3,368 11,953,550 KEFRI Account 1,288 2,483,068 SDF 3,166,507 7,536,181 Funds in Transit 4,466,555 Total local currency balances 38,529,193 28,501,620 Total bank account balances 38,529,193 172,890,744 10.5 B Cash at hand 2016/2017 2015/2016 Kshs Kshs SDF 126,271 476,481 KWS 54,101 - KEFRI 14,000 KMFRI 170 - 194,542 476,481 10.5C. Outstanding Imprest 2016/2017 2015/2016 Kshs Kshs KEFRI - 79,337 - 79,337 23 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 10.5D. Inter Project Advances 2016/2017 2015/2016 Kshs Kshs Advance to KEFRI Institute 174,820 577,640 Funds transfer to IDA master account - 6,216,000 Advance from KWS IDA 89,600 - Advance from SDF & Blue Economy 2,180,307 Advance to PMU 2,092,230 - Total 4,536,957 6,793,640 The borrowings were necessitated to fast track GEF project activities when the GEF account didn't have sufficient funds. 10.5E. Inter Project Borrowings 2016/2017 2015/2016 Kshs Restated - Kshs Advance from IDA (800,000) (7,530,436) Advance from IDA -KMFRI (2,000,000) Advance from IDA - KEFRI (539,757) (539,757) Funds from GOK Counterpart (25,000,000) Funds from GOK Counterpart (34,500,000) Excess funding by the Ministry (2,000) (2,000) Borrowing from IDA - PCU (2,697,802) Total (4,039,559) (69,572,193) The borrowings were necessitated to fast track GEF project activities which were paid for by IDA. 24 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 10.6 Restatement: 2015/2016 KSHS Restated Surplus Surplus 27,384,091 Add back: IDA Expenditure reported under GEF 975,500 Restated Surplus Balances 28,359,591 2015/2016 KSHS Restated Cash and Cash Equivalents Surplus 109,692,509 IDA Expenditure reported under GEF 975,500 Restated Cash and Cash Equivalent 110,668,009 * Refer to explanation on page 20 25 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 ANNEX 1: EXCHANGE GAINS 2016-2017 USD SPOT RATE KSHS Balance b/f 1,428,150.17 101.1022 144,389,124 Transfer from Worldbank 296,259.76 102.8944 30,483,470 Total Funds Available 1,724,409.93 174,872,594 Disbursed to GEF Master 1,428,000.00 101.29 144,642,120 Disbursed to Gef Master 296,404.93 103.53 30,686,802 Total Disbursed 1,724,404.93 175,328,922 Balance as per transaction rate 456,328 Balance as per closing rate - Exchange Gains 456,328 26 KENYA COASTAL DEVELOPMENT PROJECT PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 ANNEX 2: DETAILED ACTIVITY BUDGETS VS ACTUAL EXPENDITURE KEFRI Activity Budget Actual Variance Remarks Maintenance of 16.9 hectares of rehabilitated sites (River Lumi, River 706,270 697,809 8,461 Ramisi, Kasigau, Kilibasi, Mackinnon, Voi and Samburu) Operations Costs (KEFRI) The budget overrun is due to 1,528,700 1,655,969 (127,269) increase of motor vehicle repair costs Biophysical characterization and The budget overrun due to an biodiversity assessment oversight in KEFRI requirement to have the final 567,236 1,013,200 (445,964) report reviewed and edited by the Editorial committee before final printing of the report. Establishment and Maintenance of Seed Reallocated to Operations Ks. Stands 127,269.20 and to 1,654,085 1,283,663 370,422 Biophysical characterization and biodiversity assessment Ksh. 243,153 Nursery Management and Training 220,925 218,539 2,386 Support to community nursery groups 55,694 55,680 15 Total 4,732,910 4,924,860 (191,949) 27 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 KENYA WILDLIFE SERVICES Activities Budget Expenditure Variance Comments Ksh. Ksh. Ksh. Renovation of Sheldrick Falls 3,144,551 3,159,150 (14,599) Consultancy To assess Capacity and establish coastal Balance to be used in paying Biodiversity Information System In Mombasa - Consultancy 8,972,284 3,076,212 5,896,072 consultant Fee and other activity costs not met by consultant ICBMS Workshops and Stakeholders engagements 2,000,000 588,686 1,411,314 Consultancy to assess and document successful community based projects - Consultancy fee and other 3,000,000 901,334 2,098,666 Pending bill of Ksh. 1,650,000 direct costs not met by consultant Procure hardware and software for establishing Biodiversity 11,140,000 9,985,938 1,154,062 Pending bill of Ksh. 716,184 information manaqement system Procurement of Computers 800,000 745,000 55,000 Lukore Fence 10,000,000 9,997,400 2,600 Printing of Witu Management plan 551,000 551,000 - Printing of Kisite Management plan 551,000 551,000 - Review of Watamu management plan 1,024,680 999,480 25,200 Printing of Watamu Management plan 449,000 - 449,000 Balance to be used to pay pending bill of Ksh. 437,171 Printing of Malindi Management plan 406,000 - 406,000 Balance to be used to pay pending bill of Ksh. 406,000 Operations 1,956,625 1,784,023 172,602 Total 43,995,140 32,339,223 11,655,917 28 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 KENYA MARINE AND FISHERIES RESEARCH INSTITUTE ACTIVITIES BUDGET ACTUAL VARIANCE COMMENTS Installation of Mooring Bouys 2,765,450 2,747,650 17,800 Beach seine Fishery rapid assessment in Lamu 985,265 982,900 2,365 Capacity building (Training) for long term stock assessment 940,000 939,000 1,000 Ringnet fishing nets for Shimoni BMU 1,300,000 16,690 1,283,310 Pending bill of Ksh. 1,112,380 Upscaling of sea weed (minimum support, EMP and monitoring) 1,930,000 1,929,218 782 Upscaling of Finfish/shelifish (minimum support, EMP and 1,892,291 353,361 monitoring) 1,538,930 County engagement in Aquaculture 955,200 954,077 1,123 Artemia up scaling 1,256,350 1,225,075 31,275 Operations 2,000,000 1,950,080 49,920 Mapping of coastal & marine critical biodiversity/conservation 12,703,261 13,536,376 (833,115) areas in Kwale, Kilifi & Mombasa Dissemination of information to sensitize communities on research findings & recommendations for management (printing 600,000 597,900 2,100 of documents & dissemination workshops) CMA Boat and Equipment 1,995,220 1,897,611 97,609 Participatory pilot restoration of a degraded coral reef and see grass habitats in Kilifi and Kwale Counties (including baseline 3,500,000 3,498,906 1,094 data) Finalize Mangrove Management Plan (county disclosure, printing 3,238,351 2,985,508 252,843 & launch) 3,238,351 2,985,508 252_843 TOTAL 36,061,388 34,799,921 1,261,466 29 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financialyear ended June 30, 2017 STATE DEPARTMENT OF FISHERIES Ksh. Ksh. Ksh. Activities / Sub-Activities Budget Actual Variance Comments Preparation of financial plans for 15 BMUs in Malindi-Ungwana 2,194,160 2,194,160.00 Bay and Shimoni -Vanga CMAs Presentation of Malindi-Ungwana Bay and Aquarium Fishery management plans to County Executives and 1,989,335 1,989,335 Intergovernmental Secretariat(I GS) Documentation of Revenue generation evidence from the 500,000 500,000 counties. Operations cost 2,476,575 2,439,367 37,208 Dissemination of CAS and Frame survey results to counties 2,267,005 2,241,716 25,289 CAS data analysis and report writing 775,491 775,491 - Supervision of installation and monitoring of Shimoni/Kibuyuni fish bandas and Shimoni/ Faza Ice plants during the six 2,198,000 1,923,080 274,920 months of default liability Operationalization of Shimoni business Plan 1,268,310 1,259,172 9,138 CMA Consultancy - Shimoni/Vanga 12,900,000 8,951,383 3,948,617 30 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 Two Boats Malindi/Ungwana Bay and Shimoni Vanga CMA 5,566,744 4,268,239 1,298,505 FADs 400,000 400,000 - Finalization of Aquarium Fishery Management plan 1,126,695 1,126,695 - Fabrication and trials of artisanal prawn gear in Malindi - 1,143,000 1,131,010 11,990 Ungwana Bays Finalization Maps on Fishery and gear interactions 465,000 453,580 11,420 FAD final steering committee meeting 50,000 49,442 558 Pending Basket Trap Consultancy 1,550,000 620,000 930,000 bill of Ksh. 930,000 Total 36,870,315 30,322,670 6,547,646 31 KENYA COASTAL DEVELOPMENT PROJECT (KCDP) PROJECT GRANT NUMBER: TF 97578 Reports and Financial Statements For the financial year ended June 30, 2017 ANNEX 3: LIST OF PENDING BILLS NO ACTIVITY AMOUNT 1. SUPPLY OF RINGET FISHING NETS 1,112,380 2. PRINTING OF WATAMU MANAGEMENT PLAN 449,000 3. PRINTING OF MALINDI MANAGEMENT PLAN 406,000 4. SUPPLY OF ICBIMS HARDWARE AND SOFTWARE 716,184 CONSULTANCY TO DOCUMENT SUCCESSFUL 5. COMMUNITY PROJECTS 1,650,000 CONSULTANCY TO ASSESS CAPACITY AND ESTABLISH 6. ICBIMS SYSTEM 5,896,072 7. CMA CONSULTANCY 3,948,617 8. BASKET TRAP CONSULTANCY 930,000 TOTAL 15,108,253 32