REPUBLIC OF KENYA OFFICE OF THE AUDITORGENERAL REPORT R OF F 019E UDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE (THS-UC) PROJECT GRANT IDA CREDIT NO.5836-KE, TFOA2561 AND TFOA2792 FOR THE YEAR ENDED 30 JUNE 2018 MINISTRY OF HEALTH TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE PROJECT THS - UC PROJECT PROJECT GRANT/CREDIT NUMBER.P 152394 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 CONTENTS PAGE 1. PROJECT INFORMATION AND OVERALL PERFORMANCE..................................................................i 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES.........................................................vi 3. REPORT OF THE INDEPENDENT AUDITORS TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE (THS - UC PROJECT) ...............................OJECT)..---v..-..... ............................................... viii 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE 2018...............1 5. STATEMENT OF FINANCIAL ASSETS AS AT 30TH JUNE 2018............................................................ 2 6. STATEMENT OF CASHFLOW FOR THE YEAR 30TH JUNE 2018.......................................................... 3 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS.............................................. 4 8. NOTES TO THE FINANCIAL STAATETMEENNTS ............................................... .......................................... 5 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS................................................... 17 1 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended Jwne 30, 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project's official name is Transforming Health Systems for Universal Health Care. Objective: The Transforming Health Systems for Universal Care aims to improve the utilization and quality of primary health care (PHC) services by supporting a set of evidence-based interventions, which are expected to contribute to Universal Health Care with improved equity and enhanced efficiency. Address: The project headquarters offices are Nairobi (city), Nairobi County, Kenya. The address of its registered office is Ministry of Health P.O. Box 30016-00 100 Nairobi. The project is partly based at the Ministry of Health and at the Council of Governors. The project support county governments and the Ministry of Health departments. Contacts: The following are the project contacts Telephone: (254) -020-2717077 E-mail: ps@health.go.ke Website: www.health.go.ke 1.2 Project Information Project Start Date: The project start date is 15'h September, 2016 Project End Date: The project end date is 30" June, 2021 Project Manager: The project manager is Dr Ahmed Omar Project Sponsor: The project sponsor is Yi-Kyoung Lee II TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 1.3 Project Overview Line Ministry/State The project is under the supervision of the Ministry of Health. Department of the project Project number IDA -58360 (THS - UC WA 1) IDA - 58360 (THS - UC MOH - WA 1) TF - A- 2561 (GFF - WA 1) TF - A -2561 (GFF - MOH -WA 1) TF - A- 2792 (PH RD WA 1) Strategic goals of the The strategic goals of the project is to improve utilization and quality of primary project health care services with a focus on reproductive, maternal, new-born, child and adolescent health services. Achievement of The project management aims to achieve the goals through the following means: strategic goals (i)Improving access to and demand for quality PHC services; (ii)Strengthening institutional capacity in selected key areas to improve utilization and quality of PHC services; and (iii)Supporting cross-country and intergovernmental collaboration in the recently devolved Kenyan health system. Other important The project enhances focus on results by allocating resources to each county background information based on the improved coverage of essential services that are directly linked to the of the project Project Development Objective (PDO) and other factors including equity. The project's support to strengthen the M&E systems, including the routine HIS, will improve the quality of data for monitoring progress toward the achievement of Project Development Objective. Current situation that The Transforming Health Systems for Universal Care aims to improve the the project was formed utilization and quality of Primary Health Care (PHC) services by supporting a set to intervene of evidence-based interventions which are expected to contribute to Universal Health Care with improved equity and enhanced efficiency. Project duration The project started on 15"' September 2016 and is expected to run until 30' June 2021. 1.4 Bankers The following are the bankers for the current year for both the project account and designated account: Central Bank of Kenya P.O. Box 60000-00200 Nairobi 1.5 Auditors Auditor- General P.O Box 30084 - 00100 Nairobi. iii TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE R,eports and Financial Statements For the financial year ended June 30, 2018 1.6 Roles and Responsibilities List of the different people who are working on the project. Names Title designation Key qualification Responsibilities Dr. Ahmed Omar Project Manager BDS, Msc, PhD Project oversight and overall coordination of activities of the Project. Dr Sospeter Ngugi Deputy Project Bpharm MBA Assistant to the project Manager Manager. Dr Consolata Oggot Monitoring and BDS, Msc M&E of project activities. evaluation officer Caroline Ndungu Project Accountant Bcom, CPA(K) Preparation of Financial reports as required from time to time e.g. IFR, Bank reconciliation, exchequer requisition, Vote book , preparation of project F/S , responding to Audit issues etc. Joseph Wahome Project Accountant CPA II Bank reconciliation, exchequer requisition, Vote book, responding to Audit issues etc. iv TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE -Reports and Financial Statements For the financial year ended June 30, 2018 1.7 Funding summary The total cost of the project is US $ 191.1 million, of which US $ 150 million will be financed by IDA credit, a US $ 40 million will be granted by the GFF TF and US $ 1.1 million will be a grant by the PHRD TF. Below is the funding summary: Source of Donor Commitment- Amount received to date -(30 Undrawn balance to date funds 06 2018) (30 06 2018) Donor KShs Donor KShs Donor KShs currency currency currency Q)Grant TF -A 2561 40,000,000 -4,120,000,000 5,619,233 567,542,519 34,380,767 3,552,457,481 TF - A 2792 1,100,000 113,300,000 366,312 38,961,550 733,688 74,338,450 i) Loan 0 0 0 IDA - 58360 150,000,000 15,450,000,000 14,782,989 1,478,298,933 135,217,01] 13,971,701,067 Total 191,100,009 19,683,300,000 1.8 Summary of Overall Project Performance: The key beneficiaries of the project are women of reproductive age, including adolescents and children under five who utilize Primary Health Care services most. The project supports counties in ensuring that the benefits reach the people at grass root level.The projects aims to ensure that; * Children younger than one year are fully immunized; * Pregnant women attend at least four Anti-Natal Care(ANC) visits; * Births are attended by skilled health personnel;and * Women of reproductive age are using a modern FP method. 1.9 Summary of Project Compliance: The project complied with applicable laws and regulations, and essential external financing agreements/covenants and this helped us to achieve the objectives set. V TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care - (THS - UC Project) Secretariat are responsible for the preparation and presentation of the Project's financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year ended June 30, 2018. This responsibility includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care - (THS - UC Project) Secretariat accept responsibility for the Project's financial statements, which have been prepared on the Cash Basis Method of Financial Reporting, using appropriate accounting policies in accordance with International Public Sector Accounting Standards. The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care - (THS - UC Project) Secretariat are of the opinion that the Project's financial statements give a true and fair view of the state of Project's transactions during the financial year ended June 30, 2018, and of the Project's financial position as at that date. The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care - (THS - UC Project) Secretariat further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project financial statements as well as the adequacy of the systems of internal financial control. The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care - (THS - UC Project) Secretariat confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year under audit were used for the eligible purposes for which they were intended and were properly accounted for. vi TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE R,eports and Financial Statements For the financial year ended June 30, 2018 Approval of the Project financial statements The Project financial statements were approved by The Principal Secretary for the Ministry of Health and the Project Manager for Transforming Health Systems for Universal Care (THS - UC Project) Secretariat on C \ Cv be 2018 and signed by them. Principal Secr ary Project Manager Project Accountant: Name . Name " Name: v \/' \ ICPAK Member Number: LO vii TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 3. REPORT OF THE INDEPENDENT AUDITORS TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE (THS - UC PROJECT) viii REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE (THS-UC) PROJECT GRANT IDA CREDIT NO.5836- KE,TFOA2561 AND TFOA2792 FOR THE YEAR ENDED 30 JUNE 2018 - MINISTRY OF HEALTH REPORT ON THE FINANCIAL STATEMENTS Qualified Opinion I have audited the accompanying financial statements of Transforming Health Systems for Universal Care (THS-UC) project Grant IDA Credit No.5836-KE, TFOA2561 and TFOA2792 set out on pages 1 to 20, which comprise the statement of financial assets and liabilities as at 30 June 2018, and the statement of receipts and payments, statement of cash flows and statement of comparative of budget and actual amounts and the special account statement for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with the provisions of Article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, 2015 and the Grant Agreement No.5836-KE, TFOA2561 and TFOA2792 dated 4 July 2016 between International Bank for Reconstruction and Development, International Development Association and the Republic of Kenya. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit. In my opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of Transforming Health Systems for Universal Care (THS-UC) Project as at 30 June 2018, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Grant Agreement dated 4 July 2016. Basis for Qualified Opinion 1. Imprest and Advances The statement of financial assets and liabilities reflects outstanding imprest and advances balance of Kshs.9,173,400 as at 30 June 2018 which ought to have been accounted for on or before 30 June 2018. A further review of the outstanding balance in the month of October 2018 indicated that only Kshs.50,400 had been accounted leaving a balance of Kshs.9,123,000. Consequently, it has not been possible to confirm the recoverability of the imprest and advances balance of Kshs.9,123,000 included under imprest and advances in the statement of financial assets and liabilities as at 30 June 2018. Report of The Auditor-General on Transforming Health Systems for Universal Care (THS-UC) Project Grant IDA Credit No.5836-KE. TFOA2561 and TFOA2792 for the year ended 30 June 2018 - Ministry ofHealth Promoting Accountability in the Public Sector 2. Transfers to Other Government Entities The statement of receipts and payments reflects transfers to other government entities (third parties) of Kshs.1,250,000,000 for the year ended 30 June 2018. Included in this amount is a disbursement of Kshs.14,863,473 to Taita-Taveta County. Audit inspection during the year revealed that payments amounting to Kshs.2,846,500 were incurred at the County level but did not have supporting documentations including counter receipt voucher (S13), bin cards for taking items on charge and authority and approvals to carry out activities. In the circumstance, the propriety of the expenses of Kshs.2,846,500 included under transfers to other government entities for the year ended 30 June 2018 cannot be confirmed. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Transforming Health Systems for Universal Care (THS-UC) project management in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgement, were of most significance in the audit of the financial statements of the current year. Except for the matter described in the Basis for Qualified Opinion section of my report, there were no Key Audit Matters to report in the year under review. Report on Compliance with Lawfulness and Effectiveness in use of Public Resources As required by Article 229(6) of the Constitution, based on the procedures performed, except as indicated under basis for qualified opinion section of my report, I confirm that nothing else has come to my attention to cause me to believe that public money has not been applied lawfully and in an effective way. Report on Internal Control Effectiveness Governance and Risk Management Systems As required by Section 7 (1) (a) of the Public Audit Act, 2015, based on the procedures performed, except as indicated under basis for qualified opinion section of my report, I confirm that, nothing else has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. Report of The Auditor-General on Transforming Health Systems for Universal Care (THS-UQ Project Grant IDA Credit No.5836-KE,TFOA2561 and TFOA2792 for the year ended 30 June 2018- Ministy ofHealth 2 Responsibilities of Management and Those Charged with Governance Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis)] and for maintaining effective 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 and for its assessment of the effectiveness of internal control. In preparing the financial statements, management is responsible for assessing the ability to continue to sustain services, disclosing, as applicable, matters related to sustainability of services and using the applicable basis of accounting unless the management either intends to liquidate the project or to cease operations, or have no realistic alternative but to do so. Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. In addition to the responsibility for the preparation and presentation of the financial statements described above, management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them, and that public money is applied in an effective manner. Those charged with governance are responsible for overseeing the financial reporting process, reviewing the effectiveness of how the entity monitors compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in relation to governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit The audit 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 includes my opinion in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement and weakness when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition to the audit of the financial statements, a compliance review is planned and performed to express a conclusion with limited assurance as to whether, in all material respects, the activities, financial transactions and information reflected in the financial Report of The Auditor-General on Transforning Health Systems for Universal Care (THS-UC) Project Grant IDA Credit No.5836-KE, TFOA2561 and TFOA2792 for the year ended 30 June 2018 - Ministry ofHealth 3 statements are in compliance with the authorities that govern them in accordance with the provisions of Article 229(6) of the Constitution and submit the audit report in compliance with Article 229(7) of the Constitution. The nature, timing and extent of the compliance work is limited compared to that designed to express an opinion with reasonable assurance on the financial statements. Further, in planning and performing the audit of the financial statements and review of compliance, I consider internal control in order to give an assurance on the effectiveness of internal controls, risk management and governance processes and systems in accordance with the provisions of Section 7 (1) (a) of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. My consideration of the internal control would not necessarily disclose all matters in the internal control that might be material weaknesses under the ISSAls. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of its inherent limitations, internal control may not prevent or detect misstatements and instances of noncompliance. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that conrots may become inadequate because of changes in conditions, or that the degree cf'dompliance with the Entity's policies and procedures may deteriorate. As part of an audit conducted in accordance with ISSAls, I exercise professional judgement and maintain professional skepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern or to sustain its services. If I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the project to cease to continue to sustain its services. Report of The Auditor-General on Transforming Health Systems for Universal Care (THS-UQ) Project Grant IDA Credit No.5836-KE TFOA2561 and TFOA2792 for the year ended 30 June 2018- Ministry ofHealth 4 * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information and business activities of the project to express an opinion on the financial statements. * Perform such other procedures as I consider necessary in the circumstances. I communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. FCPA Edward R.O. Ouko, CBS AUDITOR-GENERAL Nairobi 05 December 2018 Report of The Auditor-General on Transforming Health Systems for Universal Care (THS-UQ) Project Grant IDA Credit No.5836-KETFOA2561 and TFOA2792 for the year ended 30 June 2018 - Ministry ofHealth 5 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financial year ended June 30, 2018 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE 2018 Note Cumulative 2017/18 2016/17 to-date Receipts and Payme payment nts Receipts and controlled made payments Payments by the entity by controlled by made by third the entity third parties parties KShs KShs KShs KShs KShs RECEIPTS Loan from external development partners 318,928,525 1,250,000,000 515,874,477 2,084,803,002 TOTAL RECEIPTS 318,928,525 1,250,000,000 515,874,477 2,084,803,002 PAYMENTS Compensation of8. employees 8,522,815 8,522,815 Purchase of goods and 8.5 -services 211,749,143 597,524 212,346,667 Acquisition of non- financial assets 8 41,579,320 41,579,320 Transfers to other government entities 227,827,200 1,250,000,000 120,140,000 1,597,967,200 TOTAL PAYMENTS 489,678,478 1,250,000,000 120,737,524 1,860,416,002 SURPLUS/(DEFICIT) (170,749,953) 395,136,953 224,387,000 The accounting policies and explanatory notes to these financial statements are an integral part of the financi statements. Principa Secretary Project Man ger Project Accouitant Name: Name: Name C <0 ICPAK Member Number: q L4 O TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 5. STATEMENT OF FINANCIAL ASSETS AS AT 30TH JUNE 2018 Note 2017/18 2016/17 KShs KShs FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8.8 215,213,600 360,795,053 Total Cash and Cash Equivalents 215,213,600 360,795,053 Accounts receivables - Imprest and Advances 8.9 9,173,400 34,341,900 TOTAL FINANCIAL ASSETS 224,387,000 395,136,953 REPRESENTED BY Fund balance b/fwd 8.10 395,136,953 Surplus/(Deficit) for the year (170,749,953) 395,136,953 NET FINANCIAL POSITION 224,387,000 395,136,953 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 01.A 1 2018 and signed by: Principal Secretary Project Manager Project Account t Date 041 ( Date Date ( 4 J ICPAK Member Number: qoL40. 2 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 6. STATEMENT OF CASHFLOW FOR THE YEAR 30TH JUNE 2018 2017/18 2016/17 Note KShs KShs Receipts for operating activities Proceeds from domestic and foreign grants Payments for operating activities Compensation of employees 8.4 (8,522,815) Use of goods and services 8.5 (211,749,143) (597,524) Transfers to other government entities 8.7 (227,827,200 (120,140,000) Changes in Imprests and Advances 25,168,500 (34,341,900) Adjustments during the year - Net cash flow from operating activities (422,930,658) (155,079,424) CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Assets 8.6 (41,579,320) Net cash flows from Investing Activities (41,579,320) - CASHFLOW FROM BORROWING ACTIVITIES Loan from external development partners 8.3 318,928,525 515,874,477 Net cash flow from financing activities 318,928,525 515,874,477 NET INCREASE IN CASH AND CASH EQUIVALENT (145,581,453) 360,795,053 Cash and cash equivalent at BEGINNING of the year 360,795,053 - Cash and cash equivalent at END of the year 215,213,600 360,795,053 The accounting policies and explanatory notes to these financial statements form an integral part of the financi te ts. The entity financial st ents were approved on >j LA \ \- 2018 and signed by: ncipal Sectry Project nageir Project 4ccountant Date 0 Lf) I >Dat 1,9 Date w h \_ ICPAK Member No: CO L.4 3 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financial year ended June 30, 2018 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Actual on Budget % of Receipts/Paym Original Comparable Utilization Utiliza ents Item Budget Adjustments Final Budget Basis Difference tion f=d/c a b c=a+b d e=c-d Receipts Proceeds from 4,202,088,239 (1,875,403,850) 2,326,684,389 1,568,928,525 757,755,864 67 borrowings ________ Total Receipts 4,202,088,239 (1,875,403,850) 2,326,684,389 1,568,928,525 757,755,864 67 Payments Operating costs 4,202,088,239 (1,875,403,850) 2,326,684,389 1,739,678,478 587,005,911 75 Total Payments 4,202,088,239 (1,875,403,850) 2,326,684,389 1,739,678,478 587,005,911 75 Principal Sicretagy Project Manager Project Accougant Date 0 Lf\Mtt Date (J x L Date ( 1 2 ICPAK Member No: 5 4 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1. Basis of Preparation 8.1.1. Statement of compliance and basis of preparation The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and conform to the form of presentation prescribed by the Accounting Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognizes transactions and events only when cash is received or paid out by the Project. Reporting entity The financial statements are for the Transforming Health Systems project under National Government of Kenya. The financial statements encompass the reporting entity as specified in the relevant legislation PFM Act 2012. 8.1.2. Reporting currency The financial statements are presented in Kenya Shillings (KShs), which is the functional and reporting currency of the Project and all values are rounded to the nearest Kenya Shilling. 5 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financial year ended June 30, 2018 8.2. Significant Accounting Policies a) Recognition of receipts The Project recognises all receipts from the various sources when the event occurs and the related cash has actually been received by the Government. * Transfers from the Exchequer Transfer from Exchequer is be recognized in the books of accounts when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity. * External Assistance External assistance is received through grants and loans from multilateral and bilateral development partners. Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowin2 Borrowing includes Treasury bill, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Project or any other debt the Project may take on will be treated on cash basis and recognized as a receipt during the year they were received. 6 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 Undrawn external assistance These are loans and grants at reporting date as specified in a binding agreement and relate to funding for the Project currently under development where conditions have been satisfied or their ongoing satisfaction is highly likely and the project is anticipated to continue to completion. An analysis of the Project's undrawn external assistance is shown in the funding summary * Other receipts These include Appropriation-in-Aid and relates to receipts such as proceeds from disposal of assets and sale of tender documents. These are recognized in the financial statements the time associated cash is received. b) Recognition of payments The Project recognises all payments when the event occurs and the related cash has actually been paid out by the Project. * Compensation of employees Salaries and Wages, Allowances, Statutory Contribution for employees are recognized in the period when the compensation is paid. * Use of goods and services Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they shall be disclosed as pending bills. * Interest on borrowing Borrowing costs that include interest are recognized as payment in the period in which they incurred and paid for. 7 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 SIGNIFICANT ACCOUNTING POLICIES (Continued) * Repayment of borrowing (principal amount) The repayment of principal amount of borrowing is recognized as payment in the period in which the repayment is made. The stock of debt is disclosed as an annexure to the consolidated financial statements. * Acquisition of fixed assets The payment 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 payments and receipts 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 receipt and as a payment. A fixed asset register is maintained by each public entity and a summary provided for purposes of consolidation. This summary is disclosed as an annexure to the consolidated financial statements. c) In-kind donations In-kind contributions are donations that are made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment or personnel services. Where the financial value received for in-kind contributions can be reliably determined, the Project includes such value in the statement of receipts and payments both as receipts and as payments in equal and opposite amounts; otherwise, the contribution is not recorded. d) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks at the end 8 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE AReports and Financial Statements For the financial year ended June 30, 2018 of the financial year. For the purposes of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year. Restriction on cash Restricted cash represents amounts that are limited/restricted from being used to settle a liability for at least twelve months after the reporting period. This cash is limited for direct use as required by stipulation. Amounts maintained in deposit bank accounts are restricted for use in refunding third part deposits. e) Accounts receivable For the purposes of these financial statements, imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year is treated as receivables. This is in recognition of the government practice where the imprest payments are recognized as payments when fully accounted for by the imprest or AIE holders. This is an enhancement to the cash accounting policy. Other accounts receivables are disclosed in the financial statements. f) Pending bills Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. As pending bills do not involve the payment of cash in the reporting period, they recorded as 'memorandum' or 'off-balance' items to provide a sense of the overall net cash position of the Project at the end of the year. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. 9 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 g) Budget The budget is developed on a comparable accounting basis (cash basis), the same accounts classification basis (except for accounts receivable - outstanding imprest and clearance accounts and accounts payable - deposits, which are accounted for on an accrual basis), and for the same period as the financial statements. The Project's budget was approved as required by Law and National Treasury Regulations, as well as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. The Development Projects are budgeted for under the MDAs but receive budgeted funds as transfers and account for them separately. These transfers are recognised as inter- entity transfers and are eliminated upon consolidation. A high-level assessment of the Project's actual performance against the comparable budget for the financial year under review has been included in an annex to these financial statements. h) Third party payments Included in the receipts and payments, are payments made on its behalf by to third parties in form of loans and grants. These payments do not constitute cash receipts and payments and are disclosed in the payment to third parties column in the statement of receipts and payments. During the year Kshs 1,250,000,000 billion being loan disbursements were received in form of direct payments from third parties. 10 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE reports and Financial Statements For the financial year ended June 30, 2018 SIGNIFICANT ACCOUNTING POLICIES (Continued) i) Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments. j) Comparative figures Where necessary comparative figures for the previous financial year have been amended or reconfigured to conform to the required changes in financial statement presentation. k) 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, 2018. 1) Errors Material prior period errors shall be corrected retrospectively in the first set of financial statements authorized for issue after their discovery by: i. Restating the comparative amounts for prior period(s) presented in which the error occurred; or ii. If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. 11 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.3. LOAN FROM EXTERNAL DEVELOPMENT PARTNERS During the 12 months to 30 June 2018 we received funding from development partners in form of loans negotiated by the National Treasury donors as detailed in the table below: Loans Received from Multilateral Donors (International Organisations) IDA - WORLD BANK 6/4/2017 3 10,454,477 310,454,477 30/6/2017 205,420,000 205,420,000 Basic salaries of permanent em5loyees 8,522,815 8,522,815 8,522,815 Total 8,522,815 8,522,815 8,522,815 12 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statenents For thefinancialyear ended June 30, 2018 8.5. PURCHASE OF GOODS AND SERVICES KShs KShs KShs KShs KShs Utilities, supplies and services 5,440,999 5,440,999 5,440,999 Domnestic travel and subsistence 162,407,374 162,407,374 575,024 162,982,398 Training payments 11,346,308 11,346,308 11,346,308 Hospitality supplies and services 447,347 447,347 22,500 469,847 Specialised mýaterials and services 24,739,400 24,739,400 24,739,400 Routine mnaintenance - vehicles 4,411,665 4,411,665 4,411,665 Consultancy services 2,956,050 2,956,050 2,956,050 Total 21249.143 5 2 212. 8.6. ACQUISITION OF NON-FINANCIAL ASSETS furniture & general e uipment 9,892,249 9,892,249 9,892,249 Total 4157U9.320 41.579 41.579.32" 13 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Reports and Financial Statements For the financial year ended June 30, 2018 8.7. TRANSFERS TO OTHER GOVERNMENT ENTITIES During the 12 months to 30 June 2018, we transferred funds to reporting government entities as shown below: KSsKShs KShs KShs KShs National K.M.T.C 227,827,200 227,827,200 120,140,000 347,967,200 Transfers to347.967,200 Government List attached 1,250,000,000 1,250,000,000 ______ 1,250,000,000 TOTAL 227,827,200 1,250,000,000 1,477,827,200 120,140,0 1,597,967,200 We have confirmed that the beneficiary institutions have received the funds and have recorded these as inter-entity receipts. We have attached these duly signed confirmations as an Appendix to the financial statements. 8.8. CASH AND CASH EQUIVALENTS CARRIED FORWARD Bank accounts (Note 8.13A) _215,213,600 360,795,053 Total _a1523o0.&2910M5 The project has one project account maintained within the Ministry of Health and two foreign currency designated accounts managed by the National Treasury as listed below: 14 TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financial year ended June 30, 2018 8.8A Bank Accounts Project Bank Accounts Foreig!n Currency Accounts Central Bank of Kenya [A/c No 1000308621) 2,055.00 Central Bank of Kenya [A/c No 1000308637) 1,252,357.09 Total Foreign Currency balances(USD) 1.254.412.09 Local Currency Accounts Central Bank of Kenya [A/c No 1000313878......] 215,213,600 360,795,053 Total local currency balances(KSHS) 21521.60Z30.9505 Below is the Special Deposit Account (SDA) movement schedule which shows the flow of funds that were voted in the year. These funds have been reported as loans/grants received in the year under the Statement of Receipts and Payments. Special Deposit Accounts Movement Schedule (i) A/C Name [A/c No 10003086371 Opening balance 35.00 0.00 Total amnount deposited in the account 4,431,904.74 4,999,885.00 Total amount withdrawn (as per Statement of Receipts & Payments) (3,179,548.00) 4,999,850.00 (318,928,525/101 Closing balance (as per SDA bank account reconciliation attached) 1,252,357.09 350 (ii) A/c Name [A/c No 1000308621......] Opening balance (as per the SDA reconciliation) 60.00 0.00 Total amount deposited in the account 1,995.00 12,500,000.00 Total amount withdrawn (as per Statement of Receipts & Payments) 0.00 12,500,000.00 Closing balance (as per SDA bank account reconciliation 00 attached) 2501 15 TRANSFORMING HEAL TH SYSTEMS FOR UNIVERSAL HEALTH CARE Peports and Financial Statements For the financialyear ended June 30, 2018 8.9. OUTSTANDING IMPRESTS AND ADVANCES Gaudencia Mokaya 10-Jul-17 30-Jul-17 IMP.2856904 1,774,900 Alice Olango 11-Sep-17 30-Sep-17 IMP.2856914 323,000 Alice Olango 15-Dec-17 28-Dec-17 IMP.2856945 95,600 Jecinta Wangui 11-Sep-17 29-Dec-17 IMP.2856763 1,037,400 Winfred Akose 11-Sep-17 29-Dec-17 IMP.2856781 389,200 Felister Njeri 1-Sep-17 29-Dec-17 IMP.2856761 1,226,100 David Gicheru 15-Dec-17 28-Dec-17 IMP.2856933 50,400 Wesley O. Ooga 15-Jan-18 30-Jul-18 IMP.2856946 36,600 Benedette Ajwang 29-Jan-18 28-Feb-18 IMP.3083270 1,471,800 Alice A. Olango 30-Jan-18 28-Feb-18 IMP.3048812 182,000 Julius 0. T.Ogato 8-Mar-18 10-Apr-18 IMP.3103233 625,900 Laban M. Thiga 8-Mar-18 10-Apr-18 IMP.3103223 632,900 Hellen W. Kiarie 8-Mar-18 10-Apr-18 IMP.3103222 1,071,000 Mary W. Gathitu 18-Apr-18 5-May-18 IMP.3205431 25,200 Jeremiah M. Mumo 18-Apr-18 5-May-18 IMP.3205429 25,200 Abdi S. Mohamed 15-Jun-18 30-Jun-18 IMP.3205430 37,800 John 0. Wanyungu 15-Jun-18 30-Jun-18 IMP.3294621 50,400 Paul K. Mutai 15-Jun-18 30-Jun-18 IMP.3294628 118,000 Total 9400 34341900 8.10. FUND BALANCE BROUGHT FORWARD Banik accounits 360,795,053 Outstanlding Imprests 34,341,900 Total 395,136,953 16 ,��='.И;,`,�� � ..о � a�i � ' � � > и �°�`:,'-v � a�i � ° Т ���'�' i с � z �' пк �, у:, � L � -� �, � у: и� �� о ш и i'Ог _ и О s.�, 'р � � �удг � � � С . О �,!.;4.� � сС и N О 4; и � �ti�C�г ш �}�1� й о о О° л� � •,1 а� �, N � с � ,�' �r., � �-+ � сб 'Г� � ° } 1z , .� � о � � �. > N +� � 'н�а? �у,�Х ai � .� ш о ~ Г/ N ���'г оr�уΡ�, Qм�; i- Э �� й ...ир. �/J V О N j, �"� л�W'.ц��улr. tЭI � s. ++ й ��'б `^' �у � bA �k�f t^�� : 1 F-� й'� .�' [� 3 с�б -�"_' � Н � �в , � •кУ � .� � � � � � � УiгУ� ��_ � � 45 �t`ss �„ �у � ��'.i±}i, Si, S.'�' t1{ ��• � ���ь���+ Э 1 W W L"" 4� �� �1»�� �S/��i�� { г � ,� ��q � 1�j � �! � � �7.'. ��� ^' Т'+' � �� С V1! �''� ,�'Zцr Jд�� . �, 7-r 1r �''+дСi1 у' -_v: �1 о � 5 t�., � Ч. � � � � о;;:? ,' ai �� � о ��' s. 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INAA R 0 5 i 7 TC.cpnom AC. 3/140 Vol. 51(19) Date: 21" December, 2017 All ConyriiitteeýMeinbers Finpnýe,iii,d'j,coiio,iii[,cPlatining voll -åre awa-le, the County Allocation of RevýCIILI(ý Act 2017 provides fär an affiount of Kshs. 2.75ý1,(100s000 Avith World Bänk funds in licaitli Caire Systern. Att,aölied is Eni Immedialu, säed,ule for World Bank fändsih suýpört tö Universal licaltli (ýaré,systci3-is in yöLn C0111)ýCV. Tfi is is iii e. fi i-si traF.c11c disbui ýýemcnt klinounit in to 1,,;.shs. 1,25 0,000,0 0 0 tö ål-I the Counti cs. The amount ld in respe-ci- !o your C0111117 NVOS credited tö Countv Revenuc Fund (CRF) accouin. on 13`11' December, 2 0 1 j ust y r books accordin 1-v. Kindly take no'. e and a. 01-1 BERNARP NDUNGU MA4S MP 1' CI OR C, ENER-M- CCOUNTING ýERVICES QUALITY ASSURA-N CE of Bud-ýc' -P 0. E 36 1,6 00.10 2 8 DEC 2,017 Cilicfl, V,ý:écutlvýc Officer RO:Box 404:01 ý7 Thic Comitry AV01.1d Bank .P.0. Bo-, 3.0577 - 06100 NAIROB-I. 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J'NTS IN CASH B00` NOT YET RECO-RDED IN BANIK STATSVIEINT DIATE )UNTýYns) 31IIIG DIRECTOR NHIF 14,300.00 IÄýV'JJ -1.-`,iNJIKU THEURI 2-JuI-18 25,200.00 CYRUS ivý;!jGENDJ MURITI-II 2-Jul-13 25,200.00 NAUKUSI WANGIA 2-Jul-18 31,500.00 YEBESH i\IibRAA NYAKUNDI 2-Jul-18 35,250.80 PatliDgoy-eDc:hieng 2-Jul-18 35,250.80 ELPHAS OKWAKO AKULIMA 2~Jul-18 35,250.80 EfvIDAANUE! KOYOPEI 35,250.so PATRICK OMWANDA AMOTH 2-Jul-18 37,800.00 ANNE WANJIKU THEURI 2-JuI-18 50,000.00 JOSEPH WAHOME GATIGI 2-Jul-18 50,400.00 MICHAEL NYALE DECHE 2-Jul-18 102,005.75 TOBIAS OUTI A130NYO 2-Jul-I 8 102,600,75 KUTA JEMIMAH MADRIDA 2-Jul-I 8 104,805.75 Paul Kiprop 2-Jul-18 131,386.60 ESTHER NJERI KAMAU 2-Jul-18 146,938.75 The Take Out Place 2-Jul-18 217,80D.00 MARA VVAYS TOURS AND TRAVEL LIMITED 2-Jul-I 3 241,605.00 amref he;rýlth africa - kenya 2-JuI-18 568,792.00 RAM.II HARIBHAl DEVANI LIMITED 2~Jul-I 8 2,500,000.0o 4,491ý8ý ,July 7 20] 8 Customer: 120374 MINSTRY OF/AH ialance DaJ: June 30, 2018 001848 RCMINISTYeOFrey CvEAL W0181478 NTKEE 536.969,577.57 H100181688 DIEVMINISTRY OF HEAL TH -E --508 ------- i.~~ 6ff________ KES__________ ES 85,089,372.05 ÖÖfŠ T ElKES 0182 i6 j DBl65-MVJNISRY OF u IIEA. IJLS T------ --0i8'60I C1K165~MINISTRYCOF IJ-EALTIH V2,700 000 00 I001 87131 HE ALT H SECTOR SERVICES FUND KES 371,373,612. - 000187158 KEIINYA I-ýEALTH¯SECTOR S PPot KES- I,,JO0 187204 -lOSP.ITAL MANAGEME NT SE,R V - -CE S-- FUND _ __ 00oo II187263 E.A PUBLIC HEALTI- AiD -KES _ LAB.NETWORK ..00 -H187468 HEALTH SEC SUP PRJ AND Si S - --6.24i.i6 E1M1M K,5363,246,246.96 198858 E. PUBLIC HEALTHLAD. NET WORK KES 144,666,428.11 :;2 13124 HIV AND DS TRIBUNAL 0.00 EA CENT.OF F-XC,-SKILL.ED -BIOMED S KEIS 60053 255¯K T g gy-L40,543.151 98488 KENYA ITALY DEBTYFOR DEV (IDDP) 30,20,929.401I I 0 13878 TRANSFORM.HEALTH-I SYST. 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