RLUBL BI C OF Z BI A- ZESCO LIMITED LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) P133184 IDA CREDIT 52600 FINANCIAL STATEMENT FOR NINE MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 I (iSAKA, ZMIA ZESCO LIMITED LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR NINE MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) PROJECT NUMBER: IDA CREDIT 52600 Contents Page Statement of project management's responsibilities 1 Report of the independent auditors to the Auditor General 2 Statement of sources and utilisation of funds 3 Description of Project 4-5 Notes to the financial statements 6-8 Statement of project assets 9 LUSAKA TRANSMISSION AND DiSTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 STATEMENT OF PROJECT MANAGEMENT' S RESPONSIBILITIES The project management is required to prepare statements of sources and utilization of funds for each financial year which g ves a true and fair view of the state of affairs of the Lusaka Transmission and Distribution Rehabilitation Project (LTDRP). In preparing such statements of sources and utlization of funds the project management is responsible for: 1. Designing ,imprementing and maintaining internal controls relevant to the preparation and fair presentation of statements and utilization of funds that are free from material misstatements 2. Selecting appropriate accounting policies and applying them consistently 3. Making judgments and accounting estimates that are reasonable in the circumstances 4. Preparing the statements of sources and utilization of funds in accordance with the applicable financial reportng framework. The project management is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the project and enable them to ensure the statement of sources and utilization of funds, comply with World Bank regulations. They are also responsble for safeguarding the assets of the project and hence taking reasonable steps for the prevention and detection of fraud and other irregularities Tne project management confirms that in their opinion the statement of sources and utilizaton of funds gives a true and fair view of the state of the projects s affairs as at 31 December 2014 Signed at Lusaka o n ... ...................................... Managing Director P t Manager ZESCO Limited ZESCO Lirited/LTDRP 1 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 Report on the Financial Statements I have audited the accompanying financial statements of Lusaka Transmission and Distribution Rehabilitation Project (LTDRP) - P133184 for the nine (9) months period from 1" Apri, 2014 to 31 December, 2014. These financial statements conprise the Statement of Sources and Utilisation of Funds for the period then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the project agreement and legislation, 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. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards for Supreme Audit Institutions. These standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, incuding the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In rraking those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion n my opinion the financial statements on pages 3 to 6 present fairly, in all material respects the Lusaka Transmission and Distribution Rehabilitation Project (LTDRP) as at 31" December, 2014 and its performance in accordance with the International Public Sector Accounting Standards (IPSAS) and Project regulations. Dr. Anna 0. Chifungula (FCCA, FZICA) AUDITOR-GENERAL Date....-.Y.... /2015 2 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE PERIOD 1 APRIL TO 31 DECEMBER 2014 Notes 31-Dec-14 31-Dec-14 SOURCES OF FUNDS (9 months) (9 months) ZMW USD Income from the World Bank 3 63,751,038.97 10,259,259.57 Other income: Deposits on A/C 22,979.37 3,698.00 Interest on JSD Account 59,894.45 9,638.63 Total Financing & Other Income 63,833,912.79 10,272,596.20 Less: UT1LISATION OF FUNDS Consultancy Part 1(a) Goods Part 1 (b) Non Consultancy,consultancy & Training 4 (1,175,728.57) (189,206.40) Goods and equipment - Operational costs 5 (3,401,603.01) (547,409.56) Total Expenditure Utilized (4,577,331.58) (736,615.96) Excess of income over Expenditure 59,256,581.21 9,535,980.24 Exchange gain/oss - - Closing Balances 6 59,256,581.21 9,535,980.24 Signature ......................... Signatureure. Name: Victor M Mundende Name: Wilbroad Chanda Designation: Acting Managing Director Designatfon: Project Manager ZESCO Limited ZESCO Limited/LTDRP LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FiNANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRiL TO 31 DECEMBER 2014 NOTES TO THE STATEMENTS OF SOURCES AND UTILiSATION OF FUNDS 1. DESCRIPTION OF THE PROJECT 1.1 BACKGROUND The Government of the Republic of Zambia has received USD 246 million equivalent from two financiers namely World Bank and European Investment bank towards the cost of the Lusaka Transmission and Distribution Rehabilitation Project. ZESCO as the implementing agent is expected to make available USD 40 million towards the project. The Financing agreement-Credit Number 52600 was signed on 3rd October, 2013 and became effective on the 28th February 2014 The project commenced on 1 April 2013 and will remain in force until 28 February 2019. 1.2 Development Objectives The overalI objective of the project is to increase capacity and improve the reliability of the Electricity transmission and distribution system in the Lusaka area. The project scoping includes upgrading of the existing 88kv and 132kv transmission networks, constructing new 132 kv transmission lines, constructing new 33kv 33 kv Lines, replacing /upgrading of 33kv and 11kv cables and constructing new 11kv switching stations. The delivery of this project will also address some of ZESCO's Critical Success Factors (CSFs) such as: Stop Load shedding . Improve Customer Service . Increase Customer Base Managing Working Capital 1.3 Size and Implementation arrangements The project implementation will be in two scopes and these are: Component 1 Rehabilitation of the 132 kv and 88kv Transmission Network in Lusaka area (estimated Cost: USD130 million: USD 95 million from IDA and USD 11 million from ZESCO) 4 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 NOTES TO THE FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING PRINCIPLES 2.1 Basis of preparation of the statements of the Sources and Utilisation of Funds The projects statement of sources and utilization of funds is prepared in accordance with Historical cost convention on a cash receipts and payment basis, 2.2 Sources of funds The Sources relate to funds received from the International Development Association (IDA) in the period and are recognized when funds are received from IDA 2.3 Utilisation of funds Utilisation of funds represents amounts paid out during the period and expenditure is recognised when payment is made. 2.4 Assets All assets including those of a capital nature are expensed at the time of acquisition 2.5 Expenses Expenses are recognized at the time of payment while advances are expensed when they are retired. 2.6 Translation of Foreign currencies Transactions are translated back into the functional currencies using the exchange rates used to convert the United States dollars into Zambian kwacha. Items included in the Sources and Utilisation of funds statement are measured using Zambian Kwacha. 6 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 2.7 Exchange rates The Exchange rate used for the opening balance and translating expense from the US Dollar amounts into Zambian Kwacha was the closing mid- rate which stood at 2 USD to ZMK 6.214 as at 31 December 2014. 32-Dec-14 31-Dec-14 (9 mrnths) (9 months) 3 Receipts ZMW USD Opening cash Barance income from the World Bank 62,140,000,00 10,000,000.00 Replenishments 1,611,038.97 259,259.57 Total Receipts 63,751,038.97 10,259,259.57 4 Training & Consultancy Consultancy . Non Consultancy 753,995.51 121,338 19 Training Cost 421,733.06 67,868.21 Total Amount 1,175,728.57 189,206.40 5 Operational costs 8 Project vehicles 2,663,184.62 428,578.15 Rentals 241,205.30 38,826.43 Office equipment & others 497,213.09 80,014.98 3,401,603.01 547,409.56 7 LUSAKA TRANSMISSION AND DISTRIBUTION REHABILITATION PROJECT (LTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 6 Closing balances The project maintains two accounts at Barclays Bank in Zanbian Kwacha and US DoHars The cosing balance has been arrived at as follows: Cash Total closing Balance ZMK a/c Exchange Approximate Dollar a/c Balance Rate US $ amount US$ Equivalent LTDRP 4,635,408.68 6.214 745,962.13 8,790,018.05 9,535,980.18 TOTAL . 9,535,980.18 8 LUSAKA TRANSMISSION AND DISTRIBUTION REHABiLITATION PROJECT ILTDRP) - P133184 IDA CREDIT 52600 FINANCIAL STATEMENTS FOR THE NINE (9) MONTHS PERIOD 1 APRIL TO 31 DECEMBER 2014 APPENDIX 1: SCHEDULE OF FIXED ASSETS-2014 DATE DESCRIPTION OF ASSET QUANTITY AMOUNT PAIN AMOUNT PAID ZMW ACQUIRED USD 17.03.14 Shredder 1 2,735.75 17,000,01 17.03.14 Binding machine 1 4,023.17 24,999.98 02.05.14 Small safe 1 329.90 2,050.00 22.05.14 High Back Chair 11 3,537.82 21,984.01 22.05.14 Work Station 2 4,248.72 26,401.55 1105.14 Kgh glass door cabinet 7 4,482.66 27,855.25 11.06.14 Round executive table 1 664.63 4,130,01 23.06.14 L combination table 1 933.38 5,800.02 02.07 14 Large Safe 1 772.45 4,800.00 14.07.14 Executive desk 1 1,055.50 6,558.88 14 07.14 High Back Chair 1 519.01 3,225.13 17.0714 Visitors chairs (Black) 6 2,654.34 15,494.07 21.08.14 Sansung Led TV 1 4,511.87 28,036.76 01.09.14 Leather executive chairs 4 2,83748 17,632.10 08.10.14 Esuzu double cab 8 428,518.66 2,662,814.95 21.10.14 HP Enterprise printer 9 10,609.65 65,928.37 21,10.14 HP Scanner(N63100) 7 5,631 99 34,997.19 21.10 14 Toshiba Laptop 9 15,876.72 98,657.94 21.10.14 HP Desk top computer 5 6,122.95 38,048.01 . 500,066.66 3,107,414.23 KEY The payments of assets were made in Kwacha and hence the dollar amounts are indicative figures translated at the prevailing rate when the USD amount was translated to Zambian kwacha. The rest of the payments were made in dollars 9