Office of the Auditor General of Rwanda www. oag .gov. rw RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 OAG Core Values Integrity Accountability Independence Objectivity Confidentiality In public Interest s RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 TABLE OF CONTENTS 1. PRO JECT CH ARTER .................................................................................................2 2. STATEMENT OF MANAGEMENT RESPONSIBILITIES....................................6 3. REPORT OF THE AUDITOR GENERAL ................................................................7 4. FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 ..............9 4.1. STATEMENT OF REVENUE AND EXPENDITURE FOR THE PERIOD EN DED 30 JUNE 2020..............................................................................----.-.-.......9...9 4.2. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30 JUNE 2020 ...............................................................................................................................10 4.3. STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 202011 4.4. STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED 30 JU N E 2020....................................................................................................................12 4.5. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE PERIOD ENDED 30 JUNE 2020............................................................12 4.6. NOTES TO THE FINANCIAL STATEMENTS.....................................................13 5. REVIEW OF INTERNAL CONTROL SYSTEMS.................................................33 Office of the Auditor General of State Finances 1 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. PROJECT CHARTER 1.1. Statement of purpose Electricity remains one of the major challenges to the country's socio-economic transformation. Ensuring access to modern, sustainable, and affordable energy services is integral to Rwanda's economic development, poverty eradication, and socioeconomic transformation agenda. The Government of Rwanda (GoR), with the support of the World Bank (WB), has developed the "Rwanda Electricity Sector Strengthening Project (RESSP)," for an amount of US$ 95 Million. This had an objective of enhancing the operational efficiency of the electricity utility and increase access to electricity services. Thus, the project objective is in tandem with the GoR's initiatives elaborated in the Economic Development and Poverty Reduction Strategy II (EDPRS II) 2013-2019; and the Electricity Sector Strategic Plan (ESSP) 2013-2019. The project will be implemented by Electricity Utility Corporation Limited (EUCL). The project implementation period runs from 10 May 2016 and is scheduled to be completed by 31 October 2021. 1.2. Project information Project Start Date: The project signature of agreement date is 31/12/2015 The project effectiveness date is 10/05/2016 Project End Date: The project completion date is: 31/10/2021 The project completion extended to: N/A The project last disbursement date is: 31/10/2021 The project last disbursement extended to: N/A Project Ma.n.ager: The project manager is Mrs. Gaelle NSENGIYUMVA Project Budget by List donor(s) name, amount and currency: donor * World Bank: Loan 67.70 Million (SDR) Total cost of the SDR 67.70 Million Implementing Implementing Budget Agency is: EUCL Budget Agency 1.3. Project Overview Line Ministry of The project is under the supervision of the Ministry of Infrastructure. the project Project Name The Rwanda Electricity Sector StrengtheningProject (RESSP) Project Number P 150634 Office of the Auditor General of State Finances 2 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Line Ministry of The project is under the supervision of the Ministry of Infrastructure. the p Funding Source The project's total source of funds is summarized in the table below; Source of Amount in Exch. rate Amount in local funds foreign currency currency USD Frw IDA 95,000,000 740.007558 70,300,718,010 Total 95,000,0000 70,300,718,010 Project * Date of signature of credit/grant agreement: 31 December 2015 duration/period * Date of effectiveness: 10 May 2016 * Date of project completion is 31 October 2021 Project Manager Mrs Gaelle NSENGIYUMVA Project Sponsor World Bank-International Development Association. Strategic The objective of Electricity Sector Strengthening Project is to goals/Objectives of enhance the operational efficiency of the utility and increase the Project electricity access. There are three components to the project: Component 1: Electricity Sector Capacity Strengthening. This Component will support EUCL to establish a comprehensive Management Information System (MIS) to ensure efficient, transparent, and accountable processes covering network operations and maintenance (O&M); commercial functions; and management of corporate resources. The primary activities will include the design, supply, installation, and operationalization (including staff training) of an integrated MIS with several modules covering commercial, network operation, and corporate functions. Component 2: Increased Access to Electricity Services This component will support electricity connections of new consumers all over Rwanda and network reinforcements, where required, to ensure that network expansion does not compromise the quality of supply; and strengthening of the Kigali 15 KV distribution network to provide sufficient capacity to meet increased demand from new economic activities. Kigali City and its surrounding constitute the biggest load center in Rwanda, currently consuming about 57 percent of the total energy supplied to the national grid. Component 3: Technical Assistance and Project Implementation Support This component will finance technical assistance and project implementation support. The technical assistance will support studies required to have in place the requisite plans, bankable Office of the Auditor General of State Finances 3 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 projects, and management capacity to foster improved sector expansion and efficient operations. Specific The Output of the project are as follow: achievement of strategic * People provided with access to electricity under the project goals/outputs of the (additional 324,000 people will get access to electricity by projects connecting about 47,000 households, of which 50 percent are female beneficiaries); Improved performance of electricity sector in Rwanda: Reduction in commercial losses (from 7.6 percent to 4 percent); and reduction of technical losses (Kigali City, annual energy savings of 7.18 GWh). 1.4. Registered office The project is domiciled in Kigali, Rwanda. The address of its registered office is: EDCL/EARP-PMD, 10th Floor KCT, KN 2 ST, Nyarugenge District, P.O. Box 3855, Kigali, Rwanda. 1.5. Bankers The National Bank of Rwanda (BNR) is the banker for the current year. 1.6. Auditors The project is to be audited by the Office of the Auditor General of State Finance. 1.7. Roles and responsibilities The project management team comprised of the following: Name Role Position Contact .nformat.. . Armand ZINGIRO Chief Budget Acting Managing azingiro@eucl.reg.rw Manager Director/EUCL since 16 Tel:0780440706 December 2019. Appointed on 15th1 July 2020 Maj. Eng. Jean Chief Budget MD/EUCL left 16 December jckalisa@eucl.reg.rw 1aue A Mangeg 209 Tel: 07883007 AHIMBISIBWE Program Ag. Project Coordinator since rahimbisibwe@edcl.reg.rw Reuben Coordination 01/09/2019 up to now Tel: 0788584214 Clementine Program Project Coordinator from July cumugwaneza@edcl.reg.rw UMUGWANEZA Coordination 2017 to 31/08/2019 Tel: 0788842692 Nsengiyumva Gadlle Program Project Manager acting from 24 gnsengiyumva@eucl.reg.rw Coordination September 2018 Tel:0788300817 Appointed on 1 December 2019 Evariste Nsabimana Finance Director of Finance acting since evnsabimana@edcl.reg.rw Management 14 August 2018 Appointed on Tel:0783281805 1/11/2019 Mediatrice Accounting Chief Accountant muwitonze@edcl.reg.rw UWITONZE I Tel: 0788471178 Office of the Auditor General of State Finances 4 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1.8. Funding summary The Project is for a duration of 5 years from 2016 to 2021 and with an approved budget of US$ 95,000,000 from World Bank-International Development Association (IDA) for the year ended 30 June 2020; the remaining balance is shown in the table below: Source of Donor Cumulative Cumulative Undrawn Undrawn funds commitment amount amount balance to 30 balance 30 received to 30 received to 30 June 2020 June 2020 June 2020 1 June 2020 i USD USD Frw USD Frw (A) (B) C A B Loan IDA 95,000,0001 57,157,626.79 50,680,250,150 37,842,373.21 35,461,223,653 Total i 95,000,000 57,157,626.79 50,680,250,150 37,842,373.21 35,461,223,653 * Undrawn balance of USD 37,842,373.21 as at 30 June 2020 was translated to Frw 35,461,223,653 by using exchange rates of USD/Frw 937.077161. Office of the Auditor General of State Finances 5 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. STATEMENT OF MANAGEMENT RESPONSIBILITIES Article 66 of the Organic Law No. 12/2013 of 12/09/2013 on State Finances and Property requires budget agencies to prepare and submit to the Ministry annual financial statements in a period of one month from the end of the fiscal year and submit their annual financial statements to the Auditor General of State Finances not later than 30th September of the following fiscal year. Article 19 of the Organic Law No 12/2013 further stipulates that the Chief Budget Manager is responsible for maintaining accounts and records of the budget agency, preparing reports on budget execution, managing revenues and expenditures, preparing, maintaining and coordinating the use of financial plans, managing the financial resources for the budget agency effectively, efficiently and transparently, ensuring sound internal control systems in the budget agency and safeguarding the public property held by the budget agency. As Chief Budget Manager, I accept responsibility for the annual financial statements, which have been prepared using appropriate accounting standards applicable to Public entities as determined by Article 99 of the Ministerial Order No. 001/16/10/TC of 26/01/2016 relating to financial regulations. These financial statements have been extracted from the accounting records of Rwanda Electricity Sector Strengthening Project (RESSP) and the information provided is accurate and complete in all material respects. The financial statements also form part of the consolidated financial statements of the Government of Rwanda. In my opinion, the financial statements give a true and fair view of the state of the financial affairs of Rwanda Electricity Sector Strengthening Project (RESSP). I further confirm that RESSP maintained proper accounting records were which can be relied upon in the preparation of financial statements. I also confirm that adequate systems of internal control were maintained and operated effectively during the year to safeguard the assets of the budget agency. Nothing has come to the attention of Management to indicate that Rwanda Electricity Sector Strengthening Project (RESSP) will not continue operating as a going concern for the foreseeable future. Digitally signed by EUCL (Director of Planning) Por Date: 2020.12.24 Signature: 16:06:02 +02'00' Name: Armand ZINGIRO Chief Budget Manager/Managing Director-EUCL Date: 24 December, 2020 Office of the Auditor General of State Finances 6 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 3. REPORT OF THE AUDITOR GENERAL REPORT ON THE FINANCIAL STATEMENTS Mr. Armand ZINGIRO Chief Budget Manager/ MD-EUCL 3.1. Opinion As required by Article 165 of the Constitution of the Republic of Rwanda of 2003 revised in 2015, and Articles 6 and 14 of Law no 79/2013 of 11/09/2013 determining the mission, organization and functioning of the Office of the Auditor General of State Finances (OAG), I have audited the financial statements of Rwanda Electricity Sector Strengthening Project (RESSP) for the year ended 30 June 2020. These financial statements comprise the statement of financial position as at 30 June 2020, the statement of revenue and expenditure, statement of cash flows, statement of changes in net assets and budget execution report for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. These financial statements are set out on pages 9 to 32. In my opinion, the accompanying financial statements give a true and fair view of the financial position of RESSP as at 30 June 2020, and of its financial performance and its cash flows for the year then ended in accordance with the guidelines provided by Ministerial Order no 001/16/10/TC of 26/01/2016 relating to financial regulations and Organic Law No 12/2013/OL of 12/09/2013 on State Finances and Property. 3.2. Basis for Opinion I conducted my audit in accordance with the International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under ISSAls are described in section 3.4 of this report. I am independent of RES SP and have fulfilled my ethical responsibilities in accordance with the ethical requirements that are relevant to my audit of financial statements of public entities as determined by the Code of ethics for International Organization of Supreme Audit Institutions (INTOSAI). I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 3.3. Responsibilities of management for the Financial Statements According to Organic Law N' 12/2013/OL of 12/09/2013 on State Finances and Property, management of RESSP is responsible for keeping accounting records and books of account, and preparation of financial statements in accordance with the financial regulations prescribed by the Minister in Ministerial order no 001/16/10/TC of 26/01/2016 relating to financial regulations. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation 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 RESSP'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 Government either intends Office of the Auditor General of State Finances 7 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 to discontinue operations of the Rwanda Electricity Sector Strengthening Project (RESSP). 3.4. Auditor General's responsibilities for the audit of the financial statements My objective when conducting an audit is 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 includes my opinion. Misstatements can arise from fraud or error and are considered material if individually or in aggregate, they could reasonably be expected to influence economic decisions of users taken on the basis of these financial statements. An audit conducted in accordance with ISSAls requires an auditor to exercise professional judgment and maintain professional skepticism throughout the audit and involves: * The identification and assessment of the risks of material misstatement of the financial statements, whether due to fraud or error; design and perform procedures responsive to those risks and to obtain sufficient and appropriate audit evidence to provide a basis for the auditor's 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 controls. * Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of internal control. * Evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management. * Concluding on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the RESSP's ability to continue as a going concern as well as evaluating the presentation of the financial statements. * Evaluation of the overall presentation, structure and content of the financial statements, including disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieved fair presentation. BI O di . AU KI ..ffice of the A t 2020 Office of the Auditor General of State Finances 8 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4. FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.1. STATEMENT OF REVENUE AND EXPENDITURE FOR THE PERIOD ENDED 30 JUNE 2020 Description Notes 12 months to 12 months to 30 June 2020 30 June 2019 Frwi Frw Revenues Revenue from non-exchange transactions Transfers from central treasury 2 1,184,937,122 - Transfers from public entities 3 2,033,224,766 - Fines, penalties and licenses 4 10,770,433 Revenue from exchange transactions Other revenue 5 434,568,775 361,645,004 Borrowings External borrowings 6 1 24,569,882,937 15,449,441,650 Total revenue 28,233,384,033 i 15,811,086,654 Expenses Goods and services 7 2,113,952,505 1,596,412,932 Acquisition of fixed assets 8 24,781,421,3801 14,956,896,813 Other expenses 9 22,574,159 5,048,046 Total expenses 26,917,948,044 16,558,357,791 Surplus /(deficit) for the period 1,315,435,989 (747,271,137) Office of the Auditor General of State Finances 9 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.2.STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30 JUNE 2020 Description Notes Balance as at Balance as at 30 June 2020 30 June 2019 Frw i Frw Current assets Cash and cash equivalents 10 5,206,898,294 4,078,538,823 Receivables from exchange transactions 11 6.620,648 Advance paymenis 12 2,920,944,554 Total current assets 8,127,842,848 4,085,159,471 Total assets (A) 8,127,842,848 4,085,159,471 Less: Financial liabilities Current liabilities Payables 13 (2,169.167.166) (218.758.884) Total current liabilities (2,169,167,166) (218,758,884) Net assets C = A-B 5,958,675,682 3,866,400,587 Surplus ron previous year 14 3,866,400,587 4,613,671,724 Prior year adjustments 15 776,839,106 Surplus/deficit of the period 1,315,435,989 (747.271,137) Total closing balance 5,958,675,682 3,866,400,587 These financial statements should be read in conjunction with the accompanying notes (including accounting policies). The notes on pages 12 to 32 form an integral part of the financial statements. The financial statements were approved by management of RESSP on ........... an.................................................. and w ere signed on its behalf by: Prepared by: UWITONZE Mediatrice Chief accountant Si na tie Date Reviewed by; Evariste NSABIMANA Director of Finance Sinaltt Date Checked by: Reuben AHIMBISIBWE r Aa. Coordinator -. ___ 4 ('- SQignr N Date DigitOly Agncd by Approved by: Armand ZINGIRO EUCL(Directr of Chief Budget Manager/ Date: 2020.12.24 MD-EUCL 16:05:02+0200' Signaturc Date Office of the Auditor General of State Finances 10 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.3. STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2020 Deseription 12 Months to 12 Months to 30 June 2020 30 June 2019 Frw Frw Cash flow from operating activities Revenues Revenue from non-exchange transactions Transfers from central treasury 1,184,937,122 Transfers from public entities 2,033,224,766 Fines, penalties and licenses 10,770,433 Revenue from exchange transaetions Otherrevenue 434,568,775 361,645,004 Goods and services (2,113,952,505) (1,596,412,932) Other epees225419(54846 Adiusted for: Changes in receivables (2,914,323,906) -6,620,648 Changes in payables 1,950,408,282 (213,659,111) Prior year adjustments 776,839,106 Net cash flows from operating activities (A) 1,339,897,914 (1,460,095,733) Cas losfrom investing activities --- Acquisition of fixed assets ..................( 24,"7 '8, "4'2'*1,'380) (1I'4,9"5 "6,89"6,-8 -1_3) Net cash flows from investing acivtivities (B 24 781,421,380 (14,956,896,813) Cash flow from financing activities Proceeds from borrowings 24,569,882,937 15,449,441,650 Net cash flow from financing activities (C) 24,569,882, 15,449,441,650 tin cash and cash 1,128,359,471 (967,550,896) eD.ivalents: D= A+B+C Cash adcasheq"ui"valents at beginning ofperiod 4,078,538,823 5,046,089,719 Cash and cash equivalents at end of perod 5,206,898,294 4,078,538,823 Office of the Auditor General of State Finances 11 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.4. STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED 30 JUNE 2020 Description Accumulated Adjustments Total surplus/ls Fw Frw Frw Balance as at 301h June 2018 4,613,671,724 4,613,671,724 Prio. . .. . ..adjustnient. Net Surplus/(Deficit) for the (747,271,137) - (747,271,137) financial year Balance as at 301 June 2019 3,866,400,587 - 3,866,400,587 Balance as at 30th June 2019 3,866,400,587 3,866,400,587 Prior year adjustments: Receivables and other - 714826.262 - financial assets Payables and other liabilities 62,012,844 Net Surplus/(Deficit) for the 1,315,435,989 - 1,315,435,989 financial yea Balance as at 3011 June 2020 5,181,836,576 776,839,106 5,958,675,682 4.5. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE PERIOD ENDED 30 JUNE 2020 B de lie/cityRevised budget .........................Actual Variances Performance Receipts Grants and trans 3,286,841,000 3,218,61,888 68,679,112 98 Other revenues 445,339,208 - alreceip s Ep uen iu e , Goods and services (,7,2,8) (,1,5,0) (6,7,8)9 Other expenses ,- ,2,7,5) 2,7,5 Tot al payments (276,729,69) (,362664) (14,0,25) 94 Operating balance 1,1,1,1 ,26,97,43 (16,6,11 Transactions in non- financial assets Capital expenditure (28,520,501,267) (24,781,421,380).(3,739,079,887) ~ 87 Total non-financial assets (28,520,501,267) (24,781,421,380) (3,739,079,887) 87 Net lending/ (27,510,389,956) (23,254,446,948) (4,255,943,008) I85 (borrowing) Fnanging386,058 3864057 id * oog g- extera 3639938 2,6,8,3 58359 0 Total net incurrence of 27,510,389,956 28,436,283,524 (925,893,569) 103 liabilities___________ ______________________ ______ _____ The notes on pages 12 to 32 form an integral part of the financial statements. Office of the Auditor General of State Finances 12 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.6. NOTES TO THE FINANCIAL STATEMENTS 1. Significant accounting policies Public entities maintain their books of account on a modified accrual basis of accounting as prescribed in basis for preparation. 1.1. Statement of compliance The financial statements have been prepared in accordance with the Organic Law no 12/2013 of 12/09/2013 on State Finances and Property and related legal framework. These financial statements have been authorized for issue by The Chief Budget Manager on 14 December 2019. The financial statements have been prepared on a going concern basis and the accounting policies have been applied consistently throughout the period. The presentation and classification of items in the financial statements are consistent from one period to the next and takes into consideration progressivve improvements as contained in the Government of Rwanda roadmap to migrate to accrual IPSAS. 1.2. Basis of preparation The financial statements have been prepared on the basis of historical costs unless otherwise stated. The cash flow statement is prepared using the direct method. The specific accounting basis for major items in the financial statements are provided below. Except for the subsidiary entities affiliated to the decentralised entities, public entities shall maintain their books of account on a modified accrual basis of accounting. The subsidiary entities affiliated to the decentralised entities shall maintain their books of account on a modified cash basis of accounting and progressively move to the same accounting basis as that of the rest of the public entities. In this context modified accrual basis of accounting means that financial transactions and events shall generally be recognized in the books of account when they occur and not only when cash or its equivalent is received or paid, except in the following circumstances when transactions will be treated on a cash basis; (i) Public debt (principal and interest) - involving Treasury bills, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Ministry or any other debt the State may take on will be treated on cash basis and recognized as revenue during the year of receipt and as expenditure in the year of repayment. However, loans acquired directly by a public entity and any associated interest shall be treated on an accrual basis and recognized as liabilities. (ii) Inventories - these are assets: a. in the form of materials and supplies to be consumed in the production process, b. in the form of materials to be consumed in the rendering of services, c. held for sale or distribution in the ordinary course of operations, d. in the process of production for sale or distribution. Office of the Auditor General of State Finances 13 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Inventories include assets such as consumable stores, maintenance materials, ammunition, land and other properties held for sale, strategic stock piles e.g. fuel reserves. These will be treated on cash basis and recorded as expenditure during the year of acquisition and treated as revenue in the year of disposal. (iii) Non-exchange transactions: - These arise where an entity receives value from another entity without giving approximately equal value in exchange. These include taxes, fines and penalties, transfers, gifts and donations and shall be recognised when cash is received. (iv) Non-current assets (tangible and intangible assets): - such as vehicles, furniture, equipment, finance leases, Plant and tools and investment property will be treated on cash basis and recorded as capital expenditure during the year of acquisition and revenue in the year of disposal. (v) Investments excluding those directly made by public entities: - shareholding in public corporations, investments in associates, equity interest in joint ventures, lending and on- lending by government entities will be treated on cash basis and recorded as capital expenditure during the year of acquisition and revenue in the year of disposal. (vi) Student loans: - Student loans shall be treated on a cash basis at the time of disbursements and recognized as expenses. Similarly, they will be recognised as revenue when loan repayments are received from the students. The financial statements are presented in Rwanda Francs (Frw), being the currency of legal tender in Rwanda which is the functional and reporting currency of the Government of Rwanda. 1.2.1. Reporting project The Financial Statements have been prepared by Rwanda Electricity Sector Strengthening Project pursuant to Articles 19 and 66 of the Organic Law on State Finances and Property No 12/2013 of 12/09/2013 that empowers the Chief Budget Manager to prepare the financial statements. 1.2.2. Reporting periods The Government of Rwanda Fiscal Year runs from 1st July to 30th June. These financial statements cover the period from 1st July 2019 to 30th June 2020. The comparative figures reflect the 12 months ended 30t" June 2019. 1.2.3. Key assumptions and judgements These financial statements, as a component of the Government consolidated financial statements, reflect the Government's financial position as at 30 June 2020, and the financial results of operations and cash flows for the year ended on that date. Included in these financial statements are a number of judgements, estimations and assumptions. The assumptions are based on information available at the time of the preparation of the financial statements. It should therefore be noted that actual results may differ from the Office of the Auditor General of State Finances 14 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 assumptions stated and thus have a material impact on the financial statements. The key assumptions are discussed below: 1.2.4. Presentation currency The functional currency of the Government of Rwanda is the Rwandan Franc. For reporting purposes, the financial statements are translated into Rwandan Francs. The rates used to translate foreign currency balances is the average rate applicable by National Bank of Rwanda as at 30 June 2020. 1.2.5. Areas of significant estimation These financial statements do not have significant estimates so far. For the non-current asset and inventory balances disclosures, the acquisition cost before depreciation has been used. 1.2.6. Adoption of new and revised standards The government is in the process of transitioning to IPSAS through a phased approach that involves a six-year implementation plan. The current year is year 2 of the transition process. By the end of the six-year implementation period, the government plans to have fully transitioned to IPSAS and adopted all relevant standards. 1.2.7. Recognition I. Revenue recognition a) Revenue from non-exchange transactions V Tax revenue Tax revenues are recognized in the books of accounts when cash is received. Cash is considered as received when notification of tax remittance is received. Rwanda Revenue Authority is the principal revenue collector of Government revenue mainly in form of taxes. Local governments have also been allowed to collect certain forms of taxes within their area ofjurisdiction, with the RRA also entrusted to collect some of the tax revenue on their behalf. Tax on revenue is further sub-categorized as follows: a) Taxes on Income, Profits or Capital Gains; b) Taxes on Property Income; c) Taxes on goods and services; and d) Taxes on international trade and transactions. / Grants Grants are transfers received by government units, from other resident or non-resident government units or international organizations that do not meet the definition of a tax, subsidy, or social contribution. This includes current and capital transfers received from foreign Office of the Auditor General of State Finances 15 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Governments, international organizations and from other general government units. Transfers from other general Government units includes Transfers from National Treasury, Inter-entity and intra-entity transfers. Inter-entity transfers refer to transfers between cost or revenue centres belong to different public entities while intra-entity refers to transfers between cost or revue centres within the same public entity. A transfer is a transaction in which one institutional unit provides a good, service, or asset to another unit without receiving from the latter any good, service, or asset in return as a direct counterpart. Grants are normally receivable in cash, but may also take the form of the receipt of goods or services (in kind). Grants receivable are classified first by the type of unit providing the grant and then by whether the grant is current or capital. A grant may be a sum of money or services given by a government body for specific purposes. Usually, the money given can only be used for the intended purposes stated in the grant writing or application. These transfers could be classified according to the sector of the counterparty and whether they are current or capital transfers. The grants and transfers shall be sub-categorized as follows: * Grants received from Foreign Governments; * Grants received from International Organizations; and * Grants received from other general Government units which includes Treasury Transfers, Inter-entity and intra-entity transfers. Grants and similar financing for capital items, to the extent that they have not been eliminated on consolidation, are recognised immediately in the Statement of financial assets and liabilities unless it is likely that the grant will need to be repaid, in which case the grant is deferred in the Statement of financial assets and liabilities. The following applies to grants and transfers: * Grants are recognized in the books of accounts when cash is received and in case of grant in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. * Transfer from Treasury are recognized in the books of accounts when cash is received. * Transfers received from Govermnent entity for onward payment to a third party are not treated as an inter-entity (revenue) rather, such transfers shall be recorded as transit fund (liability) in the books of the receiving entity. * Transfers from Treasury that are not related to current fiscal year budget are not treated as cash transfers. Instead, such transfers shall be treated as inter-entity transfers. * Transfers from entities to Treasury which does not relate to the current fiscal year budget are treated by Treasury as inter-entity transfers. * Funds returned to Treasury at the end of the fiscal year as a result of zero balance accounts sweeping are not recognized as inter-entity transfers. Instead, those funds will reduce the cash transfer account balance for the same year. Where such transfers are received by Treasury in the subsequent fiscal year (such as embassies and foreign missions) such transfers are recognized as inter-entity transfers. / Fines, penalties and licenses These are non-tax revenue collected by Rwanda Revenue Authority and other Government Office of the Auditor General of State Finances 16 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Agencies. They are recognised when cash underlying the fee, fine, penalty or licence is received. b) Revenue from exchange transactions / Property income Property income is the revenue receivable in return for putting financial assets and natural resources at the disposal of another unit. Revenue in this category may take the form of interest, distributed income of corporations, investment income, and rent. Distributed income of corporations includes dividends, withdrawals of income from quasi-corporations, and reinvested earnings on foreign direct investment. Investment income includes property income from investment income disbursements, and holders of investment fund shares. / Sales of goods and services Sales of goods and services consist of the sales by market establishments, administrative fees charged for services, incidental sales by nonmarket establishments, and imputed sales of goods and services. Sales of goods and services are recorded as revenue without deduction of the expenses incurred in generating that revenue. An entity may receive revenue from sale of government property: * Disposal of tangible fixed assets; * Sale of inventories; * Sale of valuables; * Sale of non-produced assets; * Sale of financial assets - domestic (including repayments of advances and loans issued by government considering that the advances or loans are expensed when issued); and * Sale of financial assets - foreign. / Proceeds from sale of capital items This refers to the fees collected from the sale of Disposal of Tangible Fixed Assets Sale of Inventories Sale of Valuables, Sale of Non-Produced Assets, Disposal of Financial Assets - Domestic, Disposal of Financial Assets - Foreign. Proceeds from sale of capital items are recorded as revenue without deduction of the expenses incurred in generating that revenue. V Other revenue These are other revenue not classified in other classes of revenue. This includes claims from insurance and guarantees seized. Revenue from exchange transactions shall be recognized on accrual basis. c) Borrowings The Ministry of Finance and Economic Planning is the principal borrowing agent for Central Office of the Auditor General of State Finances 17 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Government. Public debt and associated interest is recognized on cash basis. Proceed from loan borrowing is recognized as revenue during the year of receipt at cost and repayment as expenditure in the year of repayment. Cash is considered as received when recipient entity received a transfer advice from the partner rather than when cash is received in the bank account of the receiving entity. Other loans (principal and any associated interest) acquired directly by a public entity (e.g., those acquired by Decentralized Entities) are treated on an accrual basis and recognized as liabilities. II. Expenditure All expenditure is recognised on accrual basis however the point of recognition may be different according to their categories. / Compensation of employees Compensation of employees is the total remuneration, in cash or in kind, payable to an individual in an employer-employee relationship in return for work performed by the latter during the reporting period. Expenditure relating to compensation of employees is accounted for on an accrual basis and recognized in the books of accounts when an expenditure is incurred regardless of the time associated cash and cash equivalent are paid out. Staff costs include salaries and wages, the costs of pensions and other employee benefits. Public sector pension scheme costs include current service costs and past service costs. / Goods and services Goods and services consists of the value of goods and services used for the production of market and nonmarket goods and services. The value of goods or services is recorded when the goods or services are actually used rather than when they were acquired or paid for. In practice, these events often coincide for inputs of services but not for goods, which may be acquired some time in advance of their use. The value of goods purchased and held for resale is recorded as goods and services when they are sold. V Grants Expenditure relating to grants includes grants to international organisation and foreign governments, grants to subsidiaries etc. Grants are accounted for on cash basis and recognized in the books of accounts when cash and cash equivalent is paid out. Cash is considered as paid when consideration for payment such as EFT, Cheque, Payment Order are signed rather than when cash and cash equivalent are debited from the bank statement. / Subsidies Subsidies are current unrequited transfers that government units make to enterprises on the basis of the level of their production activities or the quantities or values of the goods or Office of the Auditor General of State Finances 18 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 services they produce, sell, export, or import. Subsidies are receivable by resident producers or importers, and in exceptional cases, non-resident producers of goods and services. Subsidies may be designed to influence levels of production, the prices at which outputs are sold, or the profits of the enterprises. Subsidies include payable tax credits receivable by enterprises for these purposes. By the nature of subsidies, only government units incur an expense in this form. / Transfers to public Entities Transfers to public entities are made in the form of direct/indirect cash transfers and direct payments to public reporting entities. Payments from the Central Treasury account are originated and approved by the respective Public entities before they are forwarded to the Treasury for payment. Direct/indirect cash transfers are transferred together with associated activities to be performed. The expenditure/receipt is recognised when actual cash is transferred. Cash is considered as transferred when consideration for payment such as EFT, Cheque, Payment Orders are approved level 2 rather than when cash and cash equivalent are debited from the bank statement. For direct payments expenditure is recognized when goods/services are received and when commitment is approved for all other expenditures. During the consolidation process while the actual spending reported by budget agencies is regarded as expenditures. V Social assistance Social benefits are current transfers receivable by households intended to provide for the needs that arise from social risks-for example, sickness, unemployment, retirement, housing, education, or family circumstances. These benefits are payable in cash or in kind to protect the entire population or specific segments of it against certain social risks. Social assistance is accounted for on cash basis and recognized in the books of accounts when cash and cash equivalent is paid out. Cash is considered as paid when consideration for payment such as EFT, Cheque, Payment Order are signed rather than when cash and cash equivalent are debited from the bank statement. / Finance cost Finance cost includes bank interest paid on borrowings which is accounted for on cash basis and recognized in the books of accounts when cash and cash equivalent is paid out. Cash is considered as paid when consideration for payment such as EFT, Cheque, Payment Order are signed rather than when cash and cash equivalent are debited from the bank statement. V Acquisition of fixed assets The expenditure on acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of these items are treated as expenditure and income items respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as revenue and as Acquisition of Fixed Assets otherwise it not recorded rather a fixed asset register which contains details of assets is maintained by each public entity. Office of the Auditor General of State Finances 19 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 / Repayment of borrowings Expenditure relating to principal loan repayments, investments, lending and on-lending, are accounted for on cash basis and recognized in the books of accounts when cash and cash equivalent is paid out. Cash is considered as paid when consideration for payment such as EFT, Cheque, Payment Order are signed rather than when cash and cash equivalent are debited from the bank statement. / Other expenses Any other expenses not part of the ones above will fall into this category and shall be for on cash basis of accounting and recognised in books of accounts when cash and cash equivalent is paid. III. Assets and Liabilities / Cash and cash equivalents Cash comprises cash on hand, demand deposits and cash equivalents. Demand deposits and cash equivalents comprise balances with banks and investments in short-term money market instruments which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Bank account balances include amounts held at the National Bank of Rwanda, foreign bank for the case of embassies and high commissions and at various commercial banks at the end of the reporting period. / Inventories Inventories are expensed in the period in which they are acquired by the Government and its entities. / Receivables These receivables include the receivables from the exchange transactions, prepayments and other receivables. Receivables from non-exchange transactions and these relating to on lending transactions are recorded when cash and cash equivalent is received. / Payables These mainly relate to invoices for goods and services which were outstanding on the date of the closure of the fiscal year. These are recognized as liabilities for that specific fiscal year. All goods received notes are recognised as liabilities if not yet paid as at the end of the period. It also includes short term borrowings received by budget agencies from Local Commercial Banks as these are not regarded as public debt. Office of the Auditor General of State Finances 20 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 IV. Other relevant information / Changes in accounting policies and estimates When presentation or classification of items in the financial statements is amended or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so. / Foreign currency transactions Transactions denominated in foreign currencies are initially translated to the Rwandan Franc at the foreign exchange rate at the date of transaction. The National Bank of Rwanda provides exchange rates for major foreign currencies on a daily basis. These are presented for selling rate (rate the bank will sell foreign currency to its clients), buying rate (rate the bank will buy foreign currency from its clients) and average rate (average between the selling and buying rate). During the year, revenue items are translated using the selling rate (this equals the Buying rate presented at BNR website) of the transaction day whereas the Expense items should be translated using the buying rate (this equals the Selling rate presented at BNR website) of the transaction day. The associated exchange losses are recorded as other expenditure while exchange gains should be recorded as other revenue. At the end of the year, book balances, Assets (such as bank and cash and accounts receivables) and liability (such as accounts payables), denominated in foreign currencies are converted into the Rwanda Franc at the average rate of exchange ruling on that closing date, as issued by the National Bank of Rwanda. The associated exchange losses/gains are recorded as expenditure/income in the books. V Comparative figures Adjustments have been made on the opening balances of the current financial period with respect to adjustments made by individual entities relating to the comparative periods. V 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, 2020. / Related parties The Government 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 it, or vice versa. Members of key management are regarded as related parties and comprise the councillors, the executive committee members, the city manager, deputy city manager and senior managers. Office of the Auditor General of State Finances 21 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 / Contingencies The Project does not recognize a contingent liability but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. Project has no contingent assets. V Notes to the statement of comparison of budget and actual amounts The original budget for 2019/2020 was approved by the Parliament/ District council for Local Government on (date). Subsequent revisions or additional appropriations were made to the approved budget in accordance with specific approvals from the appropriate authorities. The additional appropriations are added to the original budget by the Government upon receiving the respective approvals in order to conclude the final budget. Accordingly, the Government recorded additional appropriations of (date) budget in accordance with specific instructions of the Cabinet/Parliament. * Government's budget is prepared on a different basis to the actual income and expenditure disclosed in the financial statements. The financial statements are prepared on accrual basis using a classification based on the nature of expenses in the Statement of revenues and expenditures, whereas the budget is prepared on a cash basis. The amounts in the financial statements were recast from the accrual basis to the cash basis and reclassified by presentation to be on the same basis as the approved budget. A comparison of budget and actual amounts, prepared on a comparable basis to the approved budget, is then presented in the statement of comparison of budget and actual amounts. In addition to the Basis difference, adjustments to amounts in the financial statements are also made for differences in the formats and classification schemes adopted for the presentation of the financial statements and the approved budget. * Timing differences occur when the budget period differs from the reporting period reflected in the financial statements. There are no timing differences for Government. * Project differences occur when the budget omits program/activity or a project that is part of the project for which the financial statements are prepared. 2. Transfers from Central treasury During the period ended 30t" June 2020, we received transfers from Central Treasury as detailed below: ID Account Description 12 months to 12 months to 30.June.2020 30.June.2019 Frw Frw 139101 Treasury Direct Payments 1,184,937,122 Total 1,184,937,122 - Office of the Auditor General of State Finances 22 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 3. Transfers from reporting public entities During the period ended 30th June 2020, we received transfers from government reporting agencies as detailed below: ID Description 12 months to 12 months to Account 30 June 2020 30 June 2019 Frw 1 Frw 139104 Transfers from Central Government (EDCL) 2,033,224,766 Total 2,033,224,766 - 4. Fines, penalties and licences This refers to non-tax revenue collected by Rwanda Revenue Authority and other Government agencies. ID Account Description 12 months to 12 months to 30 June 2020 30 June 2019 Frw Frw 1432 Penalties 10,770,433 Total i10,770,433 5. Other revenue During the 12 months to 30 June 2020, we received funds from various other sources as detailed in the table below: ID Account Description 12 months to 12 months to 30 June 2020 30 June 2019 Frw Frw 145 Gain on exchange 434,568,775 361,645,004 Total 434,568,775 361,645,004 6. Proceeds from borrowings During the 12 months to 30 June 2020, we received loans from World Bank as detailed in the table below: Name of Date received Disbursed Amount Exchange rate 12 months to 12 months to Partner 30 June 2020 30 June 2019 USD Frw Frw (A)(B) (C==A* B) 162 Foreign Loan (Loan Received in Cash) IDA 01/07/2019 1,459,627.06 889.539071 1,298,395,341 28/10/2019 1,996,367.84 904.2532748 1,805,222,957 I2/1/2019 1,374,108. 52 908.0572 1,247,769,135 - 06/01/2020 1,363,176.60 913.82025 1,245,698,381 - 06/01/2020 3,078,474.45 913.82025 2,813,172,292 - Office of the Auditor General of State Finances 23 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Name of Date received Disbursed Amount Exchange rate 12 months to 12 months to Partner 30 June 2020 30 June 2019 USD Frw Frw 19/02/2020 3,289,195.44 91.940177 3,022,573,840 15/04/2020 3,321,223.14 92.51 3,061,033,378 15/05/200 4586,152.72 91508 ,235,338-270 25/06/2020 28644,472.5 927.2056 2,451,976,220 S/total 26807,963.20 21,181,178,814 11,964,424,737 162 Foreign on o 30 Jne by Direct payment)a vi n IDA [ crio84n 891.015248 23,923,403 2 m Ágcoun 24, ______) un Que _ 2211 Offic S es2,1370 a os9u4m5a1109 2 395 00 62 i 23/01/2020 165,287.14 925.0619975 60,394,6511- 23/01/2020 273,696.30 915.903861 250,679,498 23/01/2020 248,544.48 915.923861 227,642,849 ..'"0-1 ' '-20 567,281.83 915.903861 519,575,6.18 I__ .28/01/2020 I 912,864.27 916.4267 836,575,902- I 28/01/2020 I 632,134.33 916.42967 593665__ . otal e x p t,016,913 G/total ________ 26,807,963.20 ________ 24,569,882,937 1 15,449,441,650 7. Use of goods and services During the 12 months to 30 June 2020, we consur ed goods and services as detailed in the table below: ID Deseription 12 months to Sa12 months to Account 30 June 2020 30 June 2019 Frw Frw 2211 Office Supplies and Consurnables623508 4,872 22 13 R e tal" "C osts ........ .................................... ..«19«,-8 -1-0,0 8 3- ......... 2,2 14 Commuýnic,ation.-Costs-............................ 13,040,000 2216 IBank charges and commissions and other 25,679,434I financial costs 2221 Professional and contractual Services 1,839,144,606 1,471,570,434 2231 Trans-poltand Travel 134,453,078 37,334,456 2261 Training Costs 16,774,785 23,099,280 Total ____________________ 2,113,952,505 1 1,596,12,932 8. Capital expenditure During the 12 months to 30 June 2020, we incurred capital expenditure as detailed in the table below: Office of the Auditor General of State Finances 24 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 ID Description 12 months to 12 months to Account 30 June 2020 30 June 2019 Frw ~ Frw 231 1 Acquisition of fixed assets 1,039,849,337 3,182,309,521 234 Non-Produced Assets 23,741,572,043 11,774,587,292 Total I____________________ 24,781,421,380 ]14',9ý56,896,813 9. Other expenses During the 12 months to 30 June 2020, we consumed other expenses as detailed in the table below: ID Description 12 months to 12 months to Account 30 June 2020 30 June 2019 10. Cash and cash equivalents The bank amounts shown in the table below have been reconciled to the bank statements as at 30 June 2020. ID Account Balance as at Exchange Balance as at Balance as at Account No. 30 June 2020 rate 30 June 2020 30 June 2019 USD Frw Frw A B C=A*B 31 130 11000036327 ~,,, ?5,3 3:711 5,206,898,294 i4,078,538,823 Total ____I 5, 5 , 3 I __________ 5,206,898,294 i4,078,538,823 11. Account receivable The following were the accounts receivable as at 30 June 2020 ID Description 12 months to 12 months to Account 30 June 2020 30 June 2019 Frw[ Frw Maternity leave _ 6,620,648 Total1 _____________________- 6,620,648 12. Advance payments This refers to the amount receivable other than fees, sales of goods and Services and property income as at 30 June 2020 Office of the Auditor General of State Finances 25 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 ID Description Balance as at Balance as at Account __ __ _ ____ __ 30 June 2020 30 June 2019 Frw Frw 312801 Advance Payments on Works, Goods and Service Contracts CENTURY ENGINEERING 670,949,874 IICONTRACTOR ROUSANT INTERNATIONAL 135,326,823 BURHANI ENGINEERS LTD 554,744,2 17 STEG INTERNATIONAL SERVICES I 316,610,236 TAKAOKA ENGINEERING 810307022 HEXING ELECTRICAL CO., LTD 7,637,159 LUCKY EXPORTS 258,301,273. NR ENGINEERING CO., LTD 21,572,904 I NHEET2TER CO., LD27,153,200 ~ ___ RWANDA REVENUE AUTHORITY 118,341,846 Total 1 2,920,944,554 155,710,731 13. Accounts payable The following were the accounts payable as at 30 June 2020. ID Description 12 months to 12 months to account 30 June 2020 30 June 2019 i ,.-- Frw Frw 4121 Accounts Payables -Third parties CHAMPIONS INVESTMENT - 1,116,698 CLUB HOUSE LA PALISSE HOTEL 4,581,865 HOTEL HILLTOP S i77,929 PAG GLOBAL COMPANY - 197,288 CENTURY ENGINEERING CONTRACTOR 11,794,898 NPD) 313,050,303 LUCKY EXPORTS 158,474,543 102,941,845 HUAWEI TECHNOLOGY LTD - 46,795,106 NR ENGINEERING 139,509,408 SABA ENGINEERING 46,497,840 NINGBO SANXING SMART ELECTRIC 84,050,054 STEG INTERNATIONAL 1,130,150,272 [Subtotal 1 1,883,527,318 155,710,731 412301 I a a lsto Government Budget Agencies .................. ...----- Net Salary 5,869,470 PAYE 2,866,237 ______ Office of the Auditor General of State Finances 26 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 ID Description 12 months to 12 months to account 30 June 2020 30 June 2019 i Frw' Frw Pension Contribution 683,197- Medical contribution 1,120,870 - Maternity leave contribution 51,240 CBHI 29,4951 - Subtotal 2 10,620,509 - 4124 Tax Liabilities Withholding tax 275,019,339 63,048,153 Subtotal 3 275,019,339 63,048,153 G/total: (1) +(2) +(3) 2,169,167,166 218,758,884 14. Accumulated surplus (deficit) from previous year These include cash book reconciled bank balances, petty cash balances, accounts payables balance as well as accounts receivables balances existing at the beginning of the year. ID Description Closing balances Adjustments Restated closing Account submitted for balances consolidation iFrw Frw jFmw 511101 Cash and cash 4,078,538,823 - 4,078,538,823 equivalent 511102 Accounts receivables 6,620,648 6,620,648 511103 Accounts payables (218,758,884) - (218,758,884) Total 3,866,400,587 3,866,400,587 15. Prior year adjustments The following are the prior year adjustments to opening balances: ID Description Notes Adjustments Adjustments Account made during the made during year ended 30 the year June 2020 ended 30 June 2019 Frw Frw 512102 Receivables and other financial 15.1. 714,826,262 Iassets 512103 Payables and other liabilities 162,012,844 Total __ _776,839,106 - Office of the Auditor General of State Finances 27 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 15.1. Adjustments on accounts receivable Description Amounts Frw Lucky Advance Payment not recovered 258,301,273 N 111Engi i Adance Payment not recovered 21,572,904 Steg Advance Payment not recovered/EPC South 84,747,247 Steg Advance Payment not recovered/EPC East 129,563,962 Steg Advance Payment not recovered/EPC East 53,096,532 Steg Advance Payment not recovered /EPC South 49,202,498 RRA Advance Payment not recovered On Lucky Export 45,525,722 RRA Advance Payment not recovered /EPC South 8,682,794 RRA Advance Payment not recovered/EPC South 31,899,120 RRA Advance Payment not recovered/EPC East 9,369,976 RRA Advance Payment not recovered/EPC East 22,864,234 Total 714,826,262 15.2. Adjustments on accounts payable Description Amounts Frw Invoices returned to Supplier/Lucky Export - .- - --63,765,056 Withholding taxes on invoices returned to Supplier/Lucky Export 11,326,282 Salary Regularization for year 2017-2019 (13,078,494) Total 62,012,844 16. Changes in accounts receivable and payable These comprise of changes in account receivables and accounts payables from previous year to this year. Once the change in accounts receivable is positive, it represents the cash outflow while the negative change in accounts receivables implies cash inflows. As far as accounts payable are concerned, the positive change implies more cash inflows whereas the negative trend of accounts payable implies the cash flowing outside the entity. Below is the movement within accounts receivable and accounts payable. Description Balance as at Movement Balance as at Movement 30th June during the 30th June 2020 during the 2019 current year previous year Frw Frw Movement in 6,620,648 (2,914,323,906) 2,920,944,554 (6,620,648) accounts receivables Movement in (218,758,884) 1,950,408,282 (2,169,167,166) (213,659,111) accounts payable Total (212,138,236) (963,915,624) 751,777,388 (220,279,759) Office of the Auditor General of State Finances 28 RWANDA ELECTRICITY SECTOR STRENGTHENING PROJECT (RESSP) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 17. Important disclosures 17.1 Breakdown of the inventory of supplies and consumables Description Balance as at Additions Consumed Balance as at 30 June 2019 _disposed off 30 June 2020 Frw Frw Frw Frw Work in progressl4,452,668,202 24,418,963,16 38,871,631,362 Total 14,452,668,202 24,418,963,160 - 38,871,631,362 17.2 Summary of physical assets and reconciled to the fixed asset register Categories Opening balance Acquisition of Net carrying amount As at 1 July 2019 assets as at 30th June 2020 A B C=A+B Frw Frw Frw OffIce Equi pment 7,4400 7,444,000 CT quipment 335,429,933 362,458,220 697,888,153 Total 342,873,933 362,458,220 705,332,153 Office of the Auditor General of State Finances 29 � � � м ,.�� `Мд N °И` � о °о � й � � о�, � о р � о�0 oN0 N N О•--� N О� N о0 И � (г� � О � д' N �У � О М О� И� ct О� И 01 М l� \U М\О М И �-+ М О � �� О И д' �U О l� о0 �--� l� о0 О �--� М l� М И •--� •--� И N N� � �� �О •-+ И М 00 N М N . ......................__ .............,..........,..,.....,.....................,........_..........,,.................._................_................,..............................,.,........................................................................_....... �� � � � � � � М д" � N Q� ............. .............._.,,........ .�.....�...,.. ._.а.._� ��1 N а1 � 00 и и 00 М •-� N И 01 � �� 01 О �у оМ И И М ���� О � > й N дИ• N �� � О О N М .., М � ы М �i I � � ,� �� � А 1 � ЭМ ..............._..._.__.._...�.�................�...........,.............. ..........._.............I_.........._._....._..............._.._..........._._...._..................................... ..................,............._......_........ _�.__...�-_-_�.__.___ Э_,__ i � � � i � i � �р � i i i i д' О и� �� i� i М N_ �CJ ,'� ; а� Г� о �О �О ^� i Г=.� � ~ N � .� ,� г� о � � о N � оо �r о� _ N � � � � � � о �, f м W 1. 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REVIEW OF INTERNAL CONTROL SYSTEMS 5.1 Unexplained difference between bank balance as per cash book and the amount shown on the monthly bank reconciliation statements. Observation Review of cash and cash equivalents revealed unexplained differences for each of the 9 monthly bank reconciliation statements as shown in the table below: Month Bank balance as per cash Bank balance as per Unexplained difference book shown in bank cash book reconciliation statement .... . ........... - '- ............................... . .. . ...... . .... . ........ . . . ... . .......... . .......... .. ......... . . ...... . . . . . ....................... . ............. ......................... . . . ..... . ............ . ..... ... . ... . ............. . ... ................. . ...... . . ...... .......... .... . ...... .......... ... . ................................. ............ . . . . ........ . ...... ....... ... ... .. - ...................................... . . . .... . .............. . . . . ............................ ... ......... . ......... .. ... .......... ........... . ... . ..................... .. . ... Frw Frw Frw .................... ........... . .................. . ... .... .... . .. . . ..... . ................ .. .............. . .. - '-- ..... - ------- ........................... ... ........ .. . ....................... ................... - - . . ..... . ..... .... . ...... . ............................ . ...... _§ ep-19 4,109,6 .......... .......... Oct-I 4,800,701,530 4,803,021,176 2,319,646 - - - - --- - - - - - ---- -- ----------------------- ............................ - - ----- ....... .. . .......... 1 ".1- 1.11.1-1-1 ........ ... 1 1.1-1.11-1 .............. ............ . 1-11-1-11 ............... - ------ ........... .. . ".1"... ................ - .11- 1-11 . . ......... ........ . .. - Nov-19 5,279,641,841 5,261,189,494 (18,452,347) .......... ...... .......... . . . . ... .. .... . . 2 8-1, 2 ;- ............... ....... . . ... ...... ..... ..... . .... . .. . ... . .... .. .. . ..... . . .......... .... ------ Jan-20 3 5 8 2 2 34,301 3,576,34 8 89 82 1 . . . . ... . J ...... .......... . . . ....... . ... - 1 26157 5 33 7 2-8. . ...... 4-2-4 088 1,848,455 ................... . . . ..... . .......... ..... ....... . ..... . ... .......................... .... ...... . ................... ..... . . . . . .. . .......... . ... . ......... .. . . ...... ... ....... . . . . . ..... ...................... Mar-20 493,9. ? 2,508 15,756,145 3 4 1 3 3 4 3 19,029,707 .................................................. . . . ............... - ..... . ...... . . . . ........... . ...................... ..... . ... . ............. . ... . .. - . . .......... . .... May-20 3,612,150,952 3,662,082,840 49,931,888 Monthly bank reconciliation is a control tool for ensuring completeness and accuracy of cash and bank transactions at any accounting date. Therefore, this did not provide such control on a continuous basis. Risk Errors and fraud may be passed without being detected on time due to failure to prepare correct bank reconciliation. Recommendations " Management should ensure that the bank reconciliation statements are adequately prepared and reviewed before being approved by the chief budget manager. " Management of RESSP should ensure that bank transactions recorded in the cash book are complete and accurate. In addition, the management should consistently enforce this important control throughout the project life. Management comment The differences were made by changes that happened subsequently after submitting monthly financial reports due to feedbacks gotftom MINECOFIN and internal se f-review done before submission of annualfinancial report. The purpose of making corrections was to have correct balance at the end of the year. Infuture, RESSP management will ensure that no discrepancy between GL bank balance and bank balance in bank reconciliation statements. Office of the Auditor General of State Finances 33