THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE PRIVATE SECTOR COMPETITIVENESS PROJECT (PSCP) IDA CREDIT NO. T5326 TA FOR THE YEAR ENDED 30TH JUNE, 2017 Controller and Auditor General, National Audit Office, 16 Samora Machel Avenue , P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel : 255 (022) 2115157/8, Fax: 255 (022) 2117527 E-mail: ocag@nao.go.tz Website: www. nao. go. tz February 2018 AR/PSCP/2016/2017 TABLE OF CONTENTS 1.0 GENERAL INFORMATION .................................................................. 1 1.2. Vision, Mission and Core Values •...•..•.....•....•.......•.....•....•.•...•.........•.... 1 1. 3 Brief History of the Project ............................................................... 1 1 .4 Project Objectives ......................................................................... 2 1.5 Financing of the Project ......•....•....••.............. Error! Bookmark not defined. 1. 6 Audit Objectives ..•.....•....••.•.•....•.•..•..•.•....••. Error! Bookmark not defined. 1.7 Audit Scope ............................................... Error! Bookmark not defined. 1.8 Audit Methodology ....................................... Error! Bookmark not defined. 2.0 AUDIT REPORT ON THE FINANCIAL STATEMENTS ................................... 4 11 Office of the Controller and Auditor General AR/PSCP /2016/2017 1.0 GENERAL INFORMATION 1 . 1. Mandate The statutory duties and responsibilities of the Controller and Auditor General are given under Article 143 of the Constitution of the URT of 1977 (revised 2005) and in Sect. 10 (1) of the Public Audit Act No.11 of 2008. 1. 2. Vision, Mission and Core Values Vision To be a highly regarded Institution that excels in Public Sector Auditing. Mission To provide high quality audit services that improves public sector performance, accountability and transparency in the management of public resources. Core Values In providing quality services, NAO is guided by the following Core Values: ./ Objectivity: We are an impartial public institution, offering audit services to our clients in unbiased manner . ./ Excellence: We are professionals providing high quality audit services based on standards and best practices . ./ Integrity: We observe and maintain high standards of ethical behaviour, rule of law and a strong sense of purpose . ./ People focus: We value, respect and recognize interest of our stakeholders . ./ Innovation: We are a learning and creative public institution that promotes value added ideas within and outside the institution . ./ Results Oriented: We are an organization that focuses on achievement based on performance targets . ./ Team work Spirit: We work together as a team , interact professionally, share knowledge, ideas and experiences. We do this by:- • Contributing to better stewardship of public funds by ensuring that our clients are accountable for the resources entrusted to them; • Helping to improve the quality of public services by supporting innovation on the use of public resources; • Providing technical advice to our clients on operational gaps in their operating systems; • Systematically involve our clients in the audit process and audit cycles; and • Providing audit staff with appropriate training, adequate working tools and facilities that promote their independence. © This audit report is intended to be used by Government Authorities . However, upon receipt of the report by the Speaker and once tabled in Parliament , it becomes a public record and its distribution may not be limited. Office of the Controller and Auditor General AR/PSCP /2016/2017 1.3. Audit Objectives To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and are prepared in accordance with an applicable financial reporting framework; and whether laws and regulations have been complied with. 1 .4. Audit Scope The audit was carried out in accordance with the, the International Standards of Supreme Audit Institutions (ISSAls) and other audit procedures as were deemed appropriate under the circumstances. This covered the evaluation of the effectiveness of the financial accounting system and internal control over various activities of the Private Sector Competitiveness Project (PSCP). The audit was conducted on a sample basis; therefore, the findings are confined to the extent that records, documents and information requested for the purpose of the audit were made available to me. Audit findings and recommen dations arising from the examination of the accounting records , appraisal of the activities as well as evaluation of the Internal Control System which requires management's attention and actions, are set out in the management letter issued separately to the Private Sector Competitiveness Project (PSCP). As an auditor, I am not required to specifically search for fraud and therefore, my audit cannot be relied upon to disclose all such matters. However, my audit was planned in such a way that I would have reasonable expectations of detecting material errors and misstatement in the financial statements resulting from irregularities including fraud . The responsibility for detection , prevention of irregularities and the maintenance of an effective and adequate system of internal control rests with the management of the Private Sector Competitiveness Project (PSCP). 1 . 5. Audit Methodology My audit approach included tests of the accounting records and other procedures in order to satisfy the audit objectives. My audit procedures included the following : • Planning the audit to identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity's internal controls. • Obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and im plementing appropriate responses to the assessed risks. • Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained. 2 Office of the Controller and Auditor General AR/PSCP /2016/20 17 • Follow up on the implementation of the previous year's audit findings and recommendations to ensure that proper action has been taken in respect of all matters raised. 3 Office of the Controller and Auditor General AR/PSCP /2016/2017 2.0 AUDIT REPORT ON THE FINANCIAL STATEMENTS To: Permanent Secretary, Prime Minister's Office, 2 Magogoni Street, P.O. Box 3021, 11410 DAR ES SALAAM. RE: REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE PRIVATE SECTOR COMPETITIVENESS PROJECT (PSCP) FOR THE YEAR ENDED 30TH JUNE, 2017 Unqualified Opinion I have audited the Financial Statements of Private Sector Competitiveness Project (PSCP), which comprise the Statement of Financial Position as at 30th June, 2017, and the Statement of Financial Performance, Statement of Changes in Equity and Statement of Cash Flows for the year then ended , and Notes to the Financial Statements, including a Summary of Significant Accounting Policies of the audited Financial Statements. In my opinion , the accompanying financial statements of the Private Sector Competitiveness Project (PSCP) are prepared in all material respects, in accordance with International Public Sector Accounting Standards (IPSAS) Accrual basis of accounting and in the manner required by the Public Finance Act, 2001 revised 2004. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of my report. I am independent of Private Sector Competitiveness Project in accordance with the ethical requirements that are relevant to my audit of the consolidated financial statements in United Republic of Tanzania and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my adverse opinion. Information Other than the Financial Statements and Auditor's Report Thereon Management is responsible for the other information. The other information comprises of the Director's Report and the Declaration by the Head of Finance but does not include the financial statements and our auditor's report thereon. 4 Office of the Controller and Auditor General AR/PSCP/2016/2017 My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and , in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If , based on the work I have performed on the other information that there is a material misstatement of this other information , I am required to report that fact. I have nothing to report in this regard. Key Audit Matters This section of my auditor ' s report is intended to describe the matters selected from those communicated with [those charged with governance] that, i n my professional judgment, were of most significance in my audit of the financial statements. I have determined that there are no such matters to report. 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 entity's ability to continue as a going concern , disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the entity's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that i ncludes my opinion . Reasonable assurance is a high level of assurance, but 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 5 Office of the Controller and Auditor General AR/PSCP/ 2016/2017 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 , Sect. 10 (2 ) of the PAA No.11 of 2008 requires me to satisfy myself that, the accounts have been prepared in accordance with the appropriate accounting standards. Further, Sect. 48(3) of the Public Procurement Act No. 7 of 2011 requires me to state in my annual audit report whether or not the audited entity has complied with the provisions of the Law and its Regulations. Report on Other Legal and Regulatory Requirements Compliance with the Public Procurement Act, 2011 In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I have reviewed as part of this audit, I state that, Private Sector Competitiveness Project (PSCP) procurement transactions and processes have generally complied with the requirements of the Public Procurement Act No.7 of 2011 and its underlying Regul · of 2013. OR GENERAL February, 2018 Copy to: Permanent Secretary, Prime Minister's Office, 2 Magogoni Street, P.O. Box 3021 , 11410 DAR ES SALAAM. The Permanent Secretary and Paymaster General , Ministry of Finance and Planning, 1 Madaraka Street , 11468 DAR ES SALAAM. P.O. Box 9111 , DAR ES SALAAM. World Bank Representative, P.O. Box 2054, DAR ES SALAAM. 6 Office of the Controller and Auditor General AR/PSCP/ 2016/2017 Project Coordinator, Private Sector Competitiveness Project (PSCP), Prime Minister's Office, 2 Magogoni Street, P .0. Box 3021, 11410 DAR ES SALAAM. 7 Office of the Controller and Auditor General AR/PSCP/2016/2017 r PRIME MINISTER'S OFFICE ; ; r r FINANCIAL STATEMENTS FOR PRIVATE SECTOR COMPETITIVENESS PROJECT - ADDITIONAL FINANCING, CREDIT NO. T5326TA FOR THE YEAR ENDED 30TH JUNE 2017 · SEPTEMBER 2017 REPORT OF THE PRIVATE SECTOR COMPETITIVENESS PROJECT-ADDITIONAL FINANCING (PSCP-AF) AND ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 TABLE OF CONTENTS 1 GENERAL INFORMATION ..... ........ ......................................................... ........................................ ... ....... 2 2 SUMMARY OF ACHIEVEMENT DURING THE YEAR 2016/ 17 ......... ................... ................................. 3 3 STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 ....................... ......... .......................................................................... 9 4 STATEMENT OF DECLA TION OF THE HEAD OF FINANCE ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 ........................................................................................................ 10 f 5 STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED ....................................... 11 6 STATEMENT OF FINANCIAL POSITION AS AT 30TH JUNE 2017 ...................................................... 12 7 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2017 ................... 13 8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2017 ...................................... 14 9 STATEMENT OF COMPARISON BETWEEN BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED ON 30TB JUNE 2017 ............................................................................................................................... 15 10 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 30TH JUNE 2017 .......... 16 L .. r REPORT OF THE PRIVATE SECTOR COMPETITIVENESS PROJECT-ADDITIONAL FINANCING (PSCP-AF) AND ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 1 GENERAL INFORMATION PRINCIPAL PLACE OF BUSINESS TACAIDS BUILDING 1 ST FLOOR , SOKOINE DRIVE /LUTHULI STREET P.O.BOX 302 1 DAR ES SALAAM BANKERS Bank of Tanzania P.O.BOX 2939 DAR ES SALAAM NATIONAL MICROFINANCE BANK, Bank House Branch l P.O.BOX 9031 , DAR ES SAMAAM Email :info@nmbtz.com l AUDITORS The Controller and Auditor General L National Audit Office of Tanzania (NAOT) Samora Avenue/Ohio Street, P.O.BOX 9080 DAR ES SALAAM Email:ocag@nao .go.tz L 2 r r MANAGEMENT REPORT AND FINANCIAL STATEMENTS OF THE PRIVATE SECTOR COMPETITIVENESS PROJECT (PSCP) FOR THE YEAR ENDED ON 30TH JUNE2017 1. Introduction This report presents the financial statement of the Private Sector Competitiveness Project Additional Financing (PSCP-AF) during the period from 1st July 2016 to 30th June 2017. The Private Sector Competitiveness Project Additional Financing (PSCP-AF) is funded through IDA 's Credit Agreement No 5326-TA. The Project is being implemented in compliance with the requirements of the Development Credit Agreement (DCA) signed between the Government of the United Republic of Tanzania and the World Bank (IDA) on 1ih January, 2014 which became effective of 19th April 2014. The PSCP-AF credit number 5326TA will scale up activ1t1es under two components of the original project: i) Strengthening the Business Environment and ii) improving access to financial services. PSCP-AF is divided into three implementing components as follows:- (i) Component I-Strengthening the Business Environment. This component is implemented by Ministry of Lands Housing and Human Settlement Development (MLHHSD), Business Registration and Licensing Authority (MIT) and President Delivery Bureau (PDB) (ii) Component 2- Improving Access to Financial Services. This component is implemented by Bank of Tanzania(BOT) (iii) Component 3 - Project Management. This is coordination unit under Prime Minister' s Office PSCP-AF main objective has been to support Strengthening of Business Environment in Tanzania including land administration reform and deepening access to financial services. The project seeks to reduce costs of doing business and increase the capacity of the local private sector to \ participate in domestic and international markets and to access appropriate financial services. The project provides an additional credit amount of about US$ 60.2 million for the period ending July 31, 2018. During the reporting period the Project implementation plan had 124 activities . As of 30th June I 2017, 104 had been committed (contracts signed and activities completed and or ongoing). The ·- commitments account for 83 % of all Project activities and equivalent to US$ 29,664,518 (80% of total planned budget). The remaining activities are at various levels of procurement. During the . - reporting period, the drawdown of USD 9,634,867 and the remaining balance pertains to pay for large activities and with long gestation period of consultancy and goods delivery. Most of the contracts initiated in financial year 2016/17 will be concluded in the year 2017 /18 . Implementation of each component summarized in the following paragraphs . .L 2 SUMMARY OF ACHIEVEMENT DURING THE YEAR 2016/17 3 r 2.1 Strengthening Business Environment This component constitutes three sub components that are Land Administration Reform, Business Registration Reform and support to Big Result ow. ·r 2.1.1 Land Administration Reform : I 2.1 .1.1 Integrated Land Management Information System(ILMIS) Progress: r The Component 1 - System Design activities are in progress including Data Modelling (general completion is about 80%), business process re-engineering - completed and the System Architecture Document, the draft of the document was submitted. ILMIS Alpha Version Proof of progress delivered and ILMIS System Architecture on Physical View Developed. It is estimated completion 50%, and it is good step forward in the system development. The completion of this component (ILMIS software developed) is planned at the end of the year. The Component 2: Data Conversion ; includes preparation of office accommodation, r acquisition of hardware, and personnel etc. The preparatory works that was on going for the inventory of Data that needs to be converted is completed; the Data convers10n methodology was completed as well as the Data conversion environment set. • The Directorate of Rural and Town Planning prepared town planning drawings using basemaps as inputs and extracts prepared based on changes in TP drawings. On inventories conducted. ILMIS project converted 1,5 00 TP drawings and 2,000 extracts of scales 1: 1,000 and 1:2,500 where applicable. The work will involve Scanning, georeferencing and vectorization. • Survey and Mapping Division prepares Survey Plan for identified areas based on TP drawings and registers the survey plans as per existing regulation. There are 14,925 (Scales 1:500; 1: 1,000; 1:2,000; 1:2,500 etc.) that were identified during inventory for the Kinondoni Municipal Council. There are about 550 other maps ; 300 (unknown scales) Restricted/Copyrighted Maps; 70 (of scales 1:250,000) East Africa Map Series; 30 (of scales 1:250,000) Regional Maps; 120 (of scales 1:200,000) District Maps and 5 (of scales 1:50,000) East Africa Maps Series) that were also identified. The maps wi ll be Scanned and recognized including (Survey Computation Files - Comp fi les 4,200; Survey Division Files - I 83 and Control Point Descriptions - 300). While all datasets will be converted, only the Survey Plans will be vectorised. Moreover there a 6 transactions that were identified for ILMIS implementation namely: Creating a Survey, Mutation of a Parcel, creating deed plan etc. • Land Administration Division undertakes functions such as giving occupiers of the land CRO, setting development conditions etc. ILMIS project has identified 23 transactions being undertaken by Land Administration Division. Data conversion involving entire land administration process will be scanned, indexed and made available to Land 4 Officers based on their roles. It is estimated that there are 80,000 files at the Ministry r and a total of 80,000 for Ubungo and II ala Councils. • Registrar of Title undertakes certificates and documents registrations based on existing legislation. A total of 59 transactions have been identified and they will be implemented in ILMIS. Data conversion involving these transactions will be scanned, indexed and made available to Registrars and others based on their roles. It is estimated that there are 80,000 files at Zonal Office that will be converted into digital formats. • Valuation Unit undertakes General Valuation and Premium Estimation in relation to land administration functions. The Valuation unit will be involved with setting premium values in ILMIS as well as providing valuations with regard to subsequent transactions on registered land. Moreover, the Unit will have access to all ILMIS data including basemap and registered occupiers. • The capacity Building and Training started and the plan is prepared, the first study visit (of four planned) has been held to Uganda in April 2017. ext visit to Georgia is under the preparation and is planned in July 2017 . The time for remaining two visits will be discussed after completion of the visit to Georgia. Noted: Implementation progress per component; In the Land Records & Data Conversion, It has been estimated the completion at 25%. Registration & Cadastral integration has been estimated the completion at 15% and ILMIS System Roll Out, it has estimated the completion at 25%. ILMIS contract is estimated to have been completed by about 40% on average. (iv) Production of Base map for Land Administration in Dar es Salaam Basemap information are required in town planning, valuations, land management, environment and survey work. Information is obtained via Ariel photograph or satellite imagery. A separate basemap project is being implemented covering 4,300 KM 2 in DSM and Cost Regions in collaboration with COWi A/S of Denmark (July 2016 to March 2017). 10 CM Digital Orthorectified Imagery - DOI has been delivered. The Area covered are Kinondoni MC (KM 2 3 7 5) and Other DSM areas (KM 2 1861) and Cost Region (KM 2 2064). Capacity Building through training of selected Ministry Staff member is being implemented as per contract whereby training at COWi Local office has been completed and the same group was attended training at CO WI Office in ew Delhi India as well. 2.1.1.3. Field wo rk for Coordinate Transform ation and Awa reness Campaign to Surveyors on new Geod etic Network The Ministry completed the establishment of a new geodetic network comprising of 16 zero points, 72 first order points and 525 second order point. The new network computation has been recently completed based on the "International Reference Frame of 51 2014 (ITRF 14)" with 1 January 2011 as the reference epoch and because of that the new network has been named as Tanzania Reference Frame of2011-TAREF11 ". Procedures 5 to publish the Zero and First order control points on official government gazette is underway. The computation of Second Order points (525) is planned to be completed and results published for the use at the end of July 2017. The formal announcement of ew Tanzania Horizontal Datum based on the International Terrestrial Frame is planned to be . ... done also by the end of July 20 17. 2.1.1.4 Establishment of National Land Information Centre (NLIC), Establishment of ational Land Information Centre completed, the rehabilitation of National Land Information Centre (NL/CJ completed. As of now, the operationalization of the Center is in place 2.1.1.5 Preparation of the New National Land Policy and Implementation Strategy. • The revised National Land Policy, 2016 was completed and produced in English and Swahili versions. Implementation strategy completed • The Land Use Planning Act has already been translated; the Ministry is only waiting management approval for the translation of regulations for Urban Planning Act. 2.1.1.6 Land Use Plan in Urban Areas and Regularization of Tenure rights 4,857 plots have already been demarcated , 4333 plots coordinated, 17 urban plan drawings approved and 21 survey plans approved in Kilungule A, Kilungule B and Mavurunza Sub-wards of Kimara ward. 2.1.2 Business Registration reform: • Blueprint for Regulatory Licensing Reform in Business Environment completed and L approved for cabinet discussion. Some recommendations were implemented through the 2017 /18 finance bill. • Class A license which was issued by the Ministry of Industry and Trade. From Jul y, 20 17 MIT will start issuing Class A license through BRELA Head Office and Zone office. • Ministry of Agriculture during financial year 20 17/2018 budget mentioned to slash estimated 80 fees, permit and levies including license that are affecting small scale farmer and private sector at large. • Procurement of the office equipment for Licensing Reform Committee. 2.2 Improve Access to Financial Services The project also supported various activities coordinated by the Bank of Tanzania as follows : (i) Develop new products e.g. Exchange Traded Funds, Data Vending, Index based products and listing of resource companies; total list of 28 new products have been identified and submitted to DSE for consideration. (ii) Establishment of Tanzania Commodity Exchange (TCX). Various preliminary establi shment activities have been completed including study visits, awareness 6 workshops; commodity contracts and TMX rules, high level policy maker's sensitization, exchange premises and exchange hall design . (iii) Concurrently with the process of establishment of TMX, the process to engage a Commodity Exchange Operation Expert (Resident Advisor) for the Commodity Exchange Project for one year has been initiated (iv) A study has been conducted and completed on establishment of Motor Third Party Compensation Fund, Motor Vehicle Third Party Regulation for operations of the fund , Guidelines for operations of the funds and sample of various forms . (v) The assignment for establishment of Legal and Regulatory Framework for Islamic Insurance (Takaful) was completed. (vi) TIB Development Bank (TIB-DB) has successfully completed three activities i.e. upgrading credit risk management system, supply of hardware, IT network and communication equipment. (vii) Awareness creation to Board of Directors, Regional and District Officials on warehouse receipt system as well as Commodity Exchange which brought positive thoughtful on how it can solve some challenges facing Warehouse Receipt System was conducted by Warehouse Receipt Regulatory Board. (viii) Procurement of office equipment for Warehouse Receipt Regulatory Board. 2.3 Proj ect Coordination Unit (i) The Project extended operational support to The National Economic Empowerment Council (NEEC) specifically launching of National Multi-Sectoral Strategic Framework (ii) The 10 1h Meeting of ational Business Council conducted in Dar es Salaam. (iii) Stakeholders meetings to collect data as an input to the revision of the National Tourism Sector in Lake zone, Southern Island Zone, Eastern Zone and Western zone were conducted (iv) Support on assessment of Trading across Boarder indicator and access the implementation and impact of one stop border posts for Tanzania since its establishments. (v) Training on doing business methodology to all MDAs focal persons coordinating implementation of the Government Roadmap on improvement of business environment and investment climate in Tanzania was conducted. 2.3. 1 Contingent Risk: Funds Allocated to the IDA Credit # 5326T A L The allocated (approved) credit as stipulated in the Development Credit Agreement is SDR 39,200,000 equivalent to USD 60,200,000.00 as signed between the Government of the United Republic of Tanzania and the World Bank (IDA) on 17th January, 2014 which became effective of 19th April 2014. As at 30th June 2017 the allocated credit SDR 39,200,000 was equivalent to USD 55,391 ,857 there is a loss of USD 4,808,143 due to fluctuation of SDR against USD that may lead to underfunding of some project activities. 2.3.2 Funds Disbursed to th e Proj ect during th e Year 2016/17 7 During the year 2016/17 the total amount of US$ 9,200,000.00 was disbursed to the project from IDA Credit. The project spent US$ 9,634,866.84 out of planned fund of USD 38,625,657.89 as shown in the table below . • Components Implementing Project Planned Funds Actual Expenditure (USD) (USD) r Component 1: Strengthening of Business Environment • Land Administration Reforms 28,553,090.00 5,625,328.51 r • • Business Registration Reform Support to Big Result Now (BRN) 663,820.00 155,000.00 418,192.12 27,904.85 • Support to develop National Tourism Plan 500,000.00 78,856.07 Component 2: Improving Access to Financial 6,989,240.40 2,314,458.83 Services Component 3: Project Management 1,764,507.49 1,170,126.46 Total 38,625,657.89 9,634,866.84 l L L 8 ·L . 3 STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30™ JUNE 2017 It is Management' s responsibility to prepare financial statements which give a true and fair view of the state of affairs of the project showing the results of the operations of the project at the end of each financial year. The management responsibility at any time, is to ensure that proper accounting records disclose with reasonable accuracy the financial position of the project. Further, the management is responsible for safeguarding the assets of the project, ensuring the project's compliance with all regulatory and legal requirements; and consequently taking reasonable steps for the prevention and detection of fraud, error and other irregularities. The management accept responsibility for the annual financial statements of PSCP-AF, which have been prepared using appropriate accounting policies and standards supported by reasonable and prudent judgments and estimates, in conformity with International Public Sector Accounting Standards for the year ending 301h June 2017. The Management is of the opinion that the financial statements give a true and fair view of the state of financial affairs of the Project and its financial performance. The Management accept responsibility for the maintenance of accounting records as well as adequate systems of internal financial control which may be relied upon in the preparation of financial statements. ~ ~'i' Accounting Officer ~~' .:, PERMAN£NT SE.CRUAl!l 75:'.,RfME MINISTER'S Offlc:£ Date: __ L::, __.._,,__, _____ \, \"\Jo\ i _ 9 4 STATEMENT OF DECLATION OF THE HEAD OF FINANCE ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 The National Board of Accountants and Auditors (NBAA) According to the power conferred under the Auditors and Accountants (Registration) ACT No. 33 of 1972, as amended by Act No.2 of 1995, requires financial statements to be accompanied with the statement of declaration issued by the Head of Finance/ Accounting responsible for the preparation of financial statement of the entity concerned . It is the duty of professional accountant to assist the Management to discharge the responsibility of preparing the financial statement of the project showing true and fair view position of the project in accordance with the International Public Sector Accounting Standards (IPSAS) and the requirements Financing Agreement/Development Credit Agreement. Full legal responsibility for financial statements rests with the management. I Veronica Amos being the Head of Finance of Private Sector Competitiveness Project here by acknowledge my responsibility of ensuring that financial statements for the year ended 30th June 2017 have been prepared in compliance with the International Public Sector Accounting Standards and the Financing Agreement/Development Credit Agreement. I thus confirm that the financial statements give true and fair view position of the Private Sector :i: i: d~~:cial'.~ .. . Competitiveness Project as on that date and that they have been prepared based on the properly NBAA Membership No ... f. .C.P ~. .JU).J.3.1. Date: . SefP_@(a,~ .... ,2017 10 5 STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 TH JUNE 2017 2016/17 2015/16 Notes USD USD Revenue from non-exchange transactions Grants revenue 4 9,531 ,026 11 ,186,723 Amortisation of capital grants 4 14,351 9,614 9,545,377 11,196,337 Revenue from exchange transactions Foreign currency exchange gain/(loss) 103,841 34,567 Other income 103,841 34,567 Total revenue 9,649,218 11,230,904 Expenses Depreciation 9 14,351 9,614 Salaries and staff benefits 5 763,587 947,809 Operating expenses 6 8,871 ,280 10,273,481 9,649,218 11,230,904 Surplus/( deficit) for the year Note 4-9 forms an integral part of these financial statements . . .s:s.~.;'.:1. . . PERMANENT SECRt 1Al< l ............ \.~..~.\\~.~·~······· PRIME. MINISTE.R'S OFFICE ACCOUNTING OFFICER DATE 11 6 STATEMENT OF FINANCIAL POSITION AS AT 30TH JUNE 2017 2016/17 2015/16 Notes USD USD ASSETS CURRENT ASSETS Cash and Cash Equivalents 7 9,335,802 9,666,828 Other receivables 13 87,957 116,627 9,423,759 9,783,455 NON CURRENT ASSETS Property, Plant and equipment 9 25,046 32,078 25,046 32,078 TOT AL ASSETS 9,448,805 9,815,533 LIABILITIES CURRENT LIABILITIES Deferred income grant 8 9,422,349 9,783 ,455 Other payables 12 1,410 9,423,759 9,783,455 NON-CURRENT LIABILITIES Capital Grants 11 25,046 32,078 TOT AL LIABILITIES 9,448,805 9,815,533 NET ASSETS 0 0 NET ASSETS Accumulated Surplus 0 0 Note 7-11 form integral part of these financial statements .................................................... c .. \ ~ \t t~\"( Rt. ·1 P.Rl .............. ............. . ....... . ACCOUNTING OFFICER PE.RMANE.NT JC.\ OFftCE. DATE PRIME. MINISTE.R 12 ' 7 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2017 ACCUMULATED TOTAL SURPLUS USD USD At Ol July2016 r Surplus/(deficit) for the year At 30 June 2017 r· At 01 July 2015 Surplus/(deficit) for the year At 30 June 2016 L L 13 8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2017 2017 2016 Note USD USD CASH FLOWS FROM OPERATING ACTIVITIES Receipts Grants received 9,200,000 11 ,360,000 Other income 9,200,000 11,360,000 Payments Payments Employees & Service Providers (9,627,549) (1 1,202,603) Cash flows used in operating activities (427,549) 157,397 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, Plant and equipment (7,3 18) ( 18,687) Cash flows used in investing activities (7,318) (18,687) CASH FLOWS FROM FINANCING ACTIVITIES Capital grants received 0 0 Decrease in cash and cash equivalent (434,867) 138,710 Cash and cash equivalent at 01 July 9,666,828 9,493,551 Gain/(loss) in exchange fluctuation 103,841 34,567 Cash and Cash Equivalent at 30 June 7 9,335,802 9,666,828 ····~pE~~tNT.. it(.~t. 1'.RE······\~.\!.\~\~ ............... INISTf.R S Off IC ACCOUNTING OFFICEftflME. M . DATE 14 9 STATEMENT OF COMPARISON BETWEEN BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED ON 30TH JUNE 2017 Budget Item Original Final Budget Actual Variance Budget Budget (USD) (USD) (USD) (USD) Utilization in% component l: 21% Strengthening of Business 29,871 ,910.00 29,871 ,910.00 6,150,282 23 ,72 1,628 Environment component 2: 33 % Improving Access to 4,674,781 2,314,459 Financial 6,989,240.40 6,989,240.40 Services component 3: 66% Project 594,389 1,764,507.49 1,764,507.49 1,170,126 Management 25 % Grand Total 38,625,657.89 38,625,657.89 9,634,867 28,986,155.94 ,II • 10 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 30TH JUNE 2017 NOTE 1: PRINCIPAL ACCOUNTING POLICIES (i) Basis of Preparation These financial statements of Private Sector Competitiveness Project (PSCP) includes all sub-Programme covered in the Development Credit Agreement number 5326TA between Government of Tanzania and International Development Association (IDA). The financial statements have been prepared in accordance with International Public Sector Accounting Standards accrual basis. (ii) Expenditure Recognition Expenditures for the supply of goods and services are generally recognized at the time of payment. However, invoices not paid at the end of the year for services offered and goods supplied are accrued and included in the list of creditors. (iii) Foreign Currency Translation All amounts are in USD. All transactions denominated in local and other foreign currencies are translated into United States Dollars at the approximate exchange rate ruling at the date of settlement/transaction basing on the Bank of Tanzania US$ exchange rates. The resulting differences from conversion and translation are disclosed in the statement of financial performance as reconciling item. (iv) Property, Plant and Equipment Property, Plant and equipment are stated at cost less depreciation and impairments. Depreciation is provided so as to allocate the cost of assets on a straight-line basis over the expected useful lives of the assets concern. The principal rates used for this purpose are: O/o Motor Vehicles 20 Office Equipment 12.5 Software 40 Furniture & Fittings 12.5 Computer Equipment 33.33 The assets' residual values and useful lives and methods of depreciation of property and equipment are reviewed and adjusted if appropriate, at each reporting date.Gains and Losses on disposal of assets are determined and included in the results for the year. (v) Reporting Currency As per Development Credit Agreement the reporting currency is USD. These financial statements are therefore presented on the basis of USD currency. (vi) Employee's benefits a) Retirement benefit obligation 16 • The project employees are members of Government Employee Provident Fund GEPF. The scheme will bear all pension obligations. Both employer and employees contribute the statutory fee to the pension funds and the amounts are charged to the statement of financial performance when due . • b) Other entitlements The estimated monetary liability for employees' accrued annual leave entitlement at the reporting date is recognized as an expense accrual. The Project also accrues and pays gratuity of 25% of basic salary to its employees who employed in contract terms. • Termination benefits are also payable when employment is terminated before the normal retirement/contract expiry date or whenever an employee accepts voluntary redundancy in exchange for these benefits. (vii) Cash and cash equivalent Cash and cash equivalents are carried in the statement of financial position at face value. For the purpose of cash flow statements cash and cash equivalents, comprise cash in hand and cash at bank. (viii) Financial Risk Management The project activities expose it to a variety of financial risks mainly currency risk. The project's overall risk management Programme focuses on the identification and management of risks and seeks to minimize potential adverse effects on its financial performance. The disclosures below summarize the way the Fund manages key risks. (ix) Foreign Currency Risk Foreign currency risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the entity's functional currency. The project transacts both in United States Dollar and Tanzanian Shillings. The foreign exchange exposures are reviewed and controlled by the project on a regular basis. (x) Revenue recognition Revenue from non-exchange transactions Grants Grants are not recognized until there is reasonable assurance that the project will comply with the conditions attaching to them and the grants will be received. Grants whose primary condition is that the project should purchase, construct or otherwise acquire non- current assets are recognized as deferred income in the statement of financial position and transferred to statement of financial performance on a systematic and rational basis over the useful lives of the related assets. Other grants are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial • 17 support to the project with no future related costs are recognized in the statement of financial performance in the period in which they become receivable. Revenue from exchange transaction Fees The project recognizes revenues from fees when the event occurs and the asset recognition criteria are met. To the extent that there is a related condition attached that would give rise to a liability to repay the amount, deferred income is recognized instead of revenue. Other non-exchange revenues are recognized when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the fair value of the asset can be measured reliably. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. 2. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the project's financial statement requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and Liabilities and the disclosure of contingent liabilities, at the reporting date. Uncertainty about these assumptions and estimates could require a material adjustment to carrying amount of the asset or liability affected in the future periods. Judgments In the process of applying the project's accounting policies, no significant judgments were made by management. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Asset useful lives The useful lives of items of property, plant and equipment are estimated annually and are in line with the rate at which they are depreciated. During the year under review the 18 management reviewed useful lives for property, plant and equipment. The useful lives are disclosed in Note 1 to these financial statements. Impairment of non-financial assets The project assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. If indicators exist, an impairment test is done and any identified impairment loss is recognized in the financial statements. There is no impairment of non-financial assets during the year. Inventories . Inventories are expensed in full at the date of purchase and are recognized as expenditure in the financial statement in the financial performance report. However stores ledger is kept to show the closing balance of each stores item at the end of the year. 3. ST AND ARDS ISSUED BUT NOT YET EFFECTIVE • IPSAS 33 - First-time Adoption of Accrual Basis International Public Sector Accounting Standards: • IPSAS 34 - Separate Financial Statements • IPSAS 35 - Consolidated Financial Statements • IPSAS 36 - Investments in Associates and Joint Ventures • IPSAS 37 - Joint Arrangements • IP SAS 3 8 - Disclosure of Interests in Other Entities. All the above standards are effective for accounting period beginning on or after OI January 2017. • IP SAS 3 9 - Employee Benefits with effect from 1st January 2018 The standards have no impact in the financial statements of the PSCP project. NOTE4 : 2016/17 2015/16 USD USD GRANTS REVENUE Recurrent grants ote 10 9,531 ,026 11,186,723 Amortisation of capital grant Note 11 14,351 9,614 9,545,377 11,196,337 19 • NOTES: . SALARIES AND STAFF BENEFITS Gratuities 148,966 181 ,160 Leave passage 19,959 66,458 • Consultancy fees 567,525 664,725 Medical Expenses 27,137 35,466 763,587 947,809 NOTE6: • OPERA TING EXPENSES Clearing charge 6,25 1 0 Accommodation 6,687 48 ,3 62 Book Reference and periodicals 0 3,237 Advertisement & Publicity 44,481 72,835 Repair & Maintenance of air conditioner 459 0 Airfreight cost 67,500 0 Catering Service 0 17,130 clearing charges 15,513 0 Computers, printers, scanner, and other 7,172 0 computer related equipment Conference facilities 42,283 307,545 Consultancy fee 2,990,998 2,136,225 Courier services 0 184 Hotel accommodation 0 10,232 Diesel 24,158 89,345 Electricity 7,395 8,066 Internet and Email Connection 3,047 6,630 Food and refreshment 43,104 2,036 Gifts and prizes 0 5,073 Freight & Clearing Charges 7,326 0 Ground Travel(Bus, Railway, Taxi, Etc) 19,611 49,763 MDA Assets (Note 9) 4,295,462 4,006,477 Meal allowance 0 7,906 Motor Vehicle insurance 0 1,864 Office furniture 0 3,854 Office consumables 12,138 49,764 Office Machines and equipment 0 30,954 Computers and Accessories 7,318 Office renovation 1,222 568,23 1 Office Stationary 27,786 0 Other Operating Cost 79,064 0 Periodical and ews Paper 0 1,337 Post and Dispatch 0 265 • 20 Per Diem-Domestic 685,173 650,244 Per Diem-Foreign 121,090 774,988 Periodicals and Newspapers 1,600 0 Professional fee 14,663 0 Printing and Photocopying Costs 13,690 526,918 Printing Materials flayer, Posters and 2,836 0 photocopying Bank charges and commissions 76 1,765 Rent office accommodation 69,384 Service and repair(vehicles) 35,787 45 ,926 Staff Training Costs 13,173 0 Stationery and Thesis 11 ,869 11 ,037 Telephone and Mobile charges 8,932 23,245 Training I Trainer Fees 316 0 Transport cost 4,457 860 Travel Ticket- Foreign 64,467 261,570 Travel Tickets-Domestic 5,838 14,532 Tuition fee 108,955 425 ,309 Visa Application Fee 0 1,022 8,871,281 10,273,481 NOTE 7:CASH AND CASH EQUIVALENTS 2016/17 2015/16 USD USD BOT - USD Account 8,9 17,322 9,55 1,829 MB - TZS Account 59,785 30,508 NMB - USD Account 358,695 84,491 9.335.802 9.666.828 NOTE 8: DIFFERED INCOME GRANT 2016/17 2015/16 USD USD Cash and Bank Balance 9,335,802 9,666,828 Other Receivable 87,957 116,627 Accounts Payable (1,410) Q 9.422.349 9,183.455 • 21 NOTE 9: PROPERTY, PLANT AND EQUIPMENT • Comput Furniture er& and Equipm Fittings ent Total USD USD USD Cost As at 1 July 20 16 11,422 32,657 44,079 Additions 7,318 7,318 At 30 June 2017 11,422 39,975 51,397 Accumulated depreciation As at 1 July 2017 2,079 9,922 12,001 Charge for the year 1,428 12,923 14,35 1 At 30 June 2017 3,507 22,845 26,352 Carrying amount At 30 June 2017 7,916 17,130 25,046 At 30 June 2016 9,343 22,735 32,078 Note that the carrying amount of Asset shown above are assets whjch are maintained at the fixed assets Register held at PCU. However there are assets acquired during the year which are held at MDA's respective Ministries as follows; COMPONENTS 2016/17 2015/16 USD USD Component I: Strengthening of Business Environment • MLHHSD 2,572,386 1,067,851 • MIT 45 ,560 37,615 • PDB 27,905 706,376 Component 2: Improving Access to Financial Services • BOT 1,642,205 2,194,634 Component 3: Project Management-PMO 7,405 0 4,295,461 4,006,476 • 22 2016/17 2015/16 USD USD . NOTE 10: RECURRENT GRANTS Balance at 1 July 9,666,828 9,493 ,551 Receipts during the year Government of Tanzania 0 0 World Bank 9,200,000 11 ,360,000 Grants available 18,866,828 20,853,551 Grants utilised during the year NOTE 4 9,531 ,026 11 ,186,723 Closing balance - Deferred income as at 30 June 9,335,802 9,666,828 NOTE 11: CAPITAL GRANTS At 01 July 32,078 23 ,005 Additions made during the year 7,318 18,687 Amortisation of Capital Grant (14,351) (9,614) Write-offs As at 30 June 25 ,045 32,078 Note 12: OTHER PAYABLES Accounts payable 1,410 1,410 NOTE 13: ACCOUNTS RECEIVABLE Staff debtors 26,503 45 ,616 Receivable-MDA 61 ,454 71,011 As at 30 June 87,957 116,627 • 23 • • NOTE 14: RELATED PARTY TRANSACTIONS AND DISCLOSURES The entity regards a related party as a person or an entity with the ability to exert control individually or jointly, or to exercise significant influence over the entity, or vice versa. Members of key management are regarded as related parties and comprise the Project Coordinator, Financial Management Specialist and Procurement Specialist. NOTE 15: KEY MANAGEMENT PERSONNEL REMUNERATIONS Key management short term benefits which were paid included consultancy fees, gratuity and social security contributions as follows: - 30.06.2017 30.06.2016 USD USD Consultancy fee 170,778 189,770 Social security contribution 23,850 22,714 Leave passage 9,560 27,133 Gratuity 70,371 77,571 Total 274,559 317,188 NOTE 16: TAXATION The PSCP Project is subject to income tax laws of Tanzania under the Income Tax Act, 2004 except where tax exemptions has been sought and granted by the Tanzania Revenue Authority (TRA). NOTE 17: CONTINGENT LIABILITIES As at 30th June, 2017, there were no contingent liabilities requiring disclosure in these financial statements. NOTE 18: EVENTS AFTER THE REPORTING PERIOD There are no material events, adjusting or non-adjusting, which have occurred between the reporting date and the date when financial statements are authorized for issue. NOTE 19: COMPARATIVE FIGURES Where necessary, comparatives figures have been adjusted to conform to changes in presentation in the current year. 24 NOTE 20: Foreign Exchange Gain/ (Loss) for the year- USD 103,660 There is a net gain of USD 103,660 resulting from translation of transactions which are denominated in local currency into USD reporting currency NOTE 21: Rate of Exchange for Balance Sheet Items All Assets and liabilities in the Balance Sheet, denominated in local currency have been converted at the exchange rate of 1 USD =2,219.05 TZS, a rate ruling at the reporting balance sheet date. The resulting differences from conversion and translation have been disclosed in the financial statement in the statement of financial performance. 25