REPUBLIC OF KENYA FFICE OF THE AUDITOR-GENERAL 18RD1 / D REPORT A4 2019 nt ni i~nancal MAaneen Unit OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA PRIMARY EDUCATION DEVELOPMENT (PRIEDE) PROJECT (CREDIT NO.TFO18863) FOR THE YEAR ENDED 30 JUNE 2018 STATE DEPARTMENT FOR EARLY LEARNING AND BASIC EDUCATION - MINISTRY OF EDUCATION Project Name: KENYA PRIMARY EDUCATION DEVELOPMENT PROJECT IMPLEMENTING ENTITY: MINISTRY OF EDUCATION STATE DEPARTMENT OF EARLY LEARNING AND BASIC EDUCATION PROJECT ID: P146797 CREDIT NUMBER: TF018863 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 CONTENTS PAGE 1. PROJECT INFORMATION AND OVERALL PERFORMANCE...............................................................................ii 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES......................................................................vi 3. REPORT OF THE AUDITOR GENERAL ON THE PRIEDE PROJECT..................................................................vii 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 JUNE 2018.................................. 1 5. STATEM ENT OF FINANCIAL ASSETS AS AT 30 JUNE 2018............................................................................... 3 6. STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2018............................................................ 4 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS ........................................................... 6 8. N OTES TO THE FINAN CIA L STATEM EN TS.......................................................................................................... 7 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS ................................................................ 24 10. O TH ER IM PO R TA N T D ISCLO SU R ES................................................................................................................. 26 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project's official name is Kenya Primary Education Project. Objective: The key objective of the project is to improve early grade mathematics competency and to strengthen management systems at school and national levels. Address: The project headquarters office is located in Nairobi County, Kenya. The address of its registered office is: Jogoo House, Harambee Avenue, Nairobi Contacts: The following are the project contacts: P. 0. Box 30040, 00100 Nairobi 1.2 Project Information Project Start Date: The project start date is 08.07.2015 Project End Date: The project end date is 31. 03. 2019. Project Manager: The project coordinator is M/s Martha Ekirapa Project Sponsor: The project sponsor is International Development Association, Global Partners of Education and Government of Kenya which will contribute 10% of the entire grant of USD 88.4 M. 1.3 Project Overview Line Ministry/State The project is under the supervision of the Ministry of State Department of Department of the Basic Education project Project number P146797 Strategic goals of the (i) The project activities are aligned with the Government's project strategic objective of providing quality basic education for Kenya's sustainable development. Achievement of The project management aims to achieve the goals through the following strategic goals means: (i) Improvement in basic mathematics competency level of Grade 2 pupils; (ii) Number of participating schools completing top two priorities of ii Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 School Improvement Plans (SIP) (iii) EMIS data for primary education published annually from 2016 (iv) NASMLA for standard 3 pupils conducted and disseminated in 2015 and 2018 Other important The project has completed its third year of implementation background information of the project Current situation that The project was formed to intervene in the following areas: the project was (i) Improving early grade learning competencies formed to intervene (ii) Strengthening systems at schools and national levels for improving primary education service delivery Project duration The project started on 8th July 2015 and is expected to run until 31st March 2019. 1.4 Bankers The following are the bankers for the current year: Designated account: Central Bank of Kenya Head Office, Haile Selasie Account No. 112426 Project Accounts: Central Bank of Kenya Haile selasie Account No. 1000307404 Central Bank of Kenya Haile selasie Account No. 1000307398 Central Bank of Kenya Haile selasie Account No. 1000307412 1.5 Auditors Auditor-General Anniversary Towers, University Way P.O. Box 30084 Nairobi 1.6 Roles and Responsibilities The project has four components iii Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 Names Title designation Key qualification Responsibilities Martha Ekirapa Project Coordinator Educationist Overall programme coordination. Hellen Boruett Head of Component 1 Educationist Management of component 1 activities Peter Gachathi Head of Component 2 Educationist Management of component 2 activities Sebastian Owanga Head of Component 3 Educationist Management of component 3 activities Batholomeo Head of Component 4 Educationist Management of 4 Lumbasi component activities 1.7 Funding summary The Project duration is four years (from 2015 to 2019) with an approved budget of US$ 88.4 Million (use donor currency) equivalent to KES 9.02 Billion at the exchange rate of 1USD=KES102.06 as highlighted in the table below: Source of Amount rece ived to date - Undrawn balance to date (30_ Donor Cmmitment- funds (30 062018) 06 2) Donor Donor Donor Kshs Kvhs Kshs' currency currency currency (A) (A' (B) (13') (A)-(B) ') -(B' (i) Grant Category 1 -IDA 58,400,000 5,960,304,000 23,923,876 2,407,455,265 34,476,124 3,552,848,7345 Category 2-GPE 30,000,000 3,061,800,000 24,736,159 2,537,043,350 5,263,841 524,756,650 Sub Totals 88,400,000 9,022,104,000 48,660,035 4,944,498,615 39,739,965 4,077,605,385 (iii) Counterpart - funds (10%) Government of Kenya 8,400,000 857,304,000 1,408,024 143,513,993 6,991,976 713,790,007 Total 96,800,000 9,879,408,000 50,068,059 5,088,012,608 46,731941 4,791,395,392 1.8 Summary of Overall Project Performance: Budget performance against actual amounts for current year was only 87 percent. Cumulatively, the disbursement is relatively at 55 percent and actual expenditure of 50 percent compared to the project remaining life which is now 9 months. iv Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 Component 1 Procurement of 2.81million EGM Pupils books and 80,000 Key result teachers' guides for 2018 Cohort. Improvement of early grade Trained 122 Master Trainers in December 2017 and April mathematics competency 2018 during the National Training. Trained CSO and EGM champions and 93, 000 teachers. Review and adaptation of EGM books in alignment with the CBC. Development of grade 3 EGM books in alignment to the CBC. Component 2 Key result Progress Strengthening school management Grants disbursed to SIP schools have been well utilised to and accountability implement SIP priorities. Schools auditors trained on risk based audit. Procurement and distribution of tablets to 4000 head teachers for SIP schools. Implementation of TPAD which has helped to improve teacher management. Component 3 Key result Progress Strengthening capacity for evidence Draft NESSP report produced. NEMIS system developed based policy development at and currently registering of students in both primary and national level. secondary schools on going. MLA studies undertaken for pupils in class 3 and 7. Component 4 Key result Progress Project Coordination, Preparation of 2018/2019 work plan, purchase of laptops, Communication, Monitoring and printers and workstation for counties. Training of CDEs, Evaluation CPCs. 1.9 Summary of Project Compliance: The project has complied fully with the financing agieement with the IDA in terms of utilization of donor funds. v Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the Ministry of State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project are responsible for the preparation and presentation of the Project's financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year ended on June 30, 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 State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project 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 State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project 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/period ended June 30, 2018, and of the Project's financial position as at that date. The Principal Secretary for the Ministry of State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project 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 State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project 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/period under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by the Principal Secretary for the Ministry of State Department of Basic Education and the Project Coordinator for Kenya Primary Education Development Project on _ __ Emb___e_ _, 2018 and signed by them. Principa Secretary Project Coordinator Project Accountant: DR.BE 0 KIPSANG MARTHA EKIRAPA GRACE MUSYOKA ICPAK Member Number: 20546 vi REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON KENYA PRIMARY EDUCATION DEVELOPMENT (PRIEDE) PROJECT (CREDIT NO. TFO18863) FOR THE YEAR ENDED 30 JUNE 2018 - STATE DEPARTMENT FOR EARLY LEARNING AND BASIC EDUCATION - MINISTRY OF EDUCATION REPORT ON THE FINANCIAL STATEMENTS Qualified Opinion I have audited the accompanying financial statements of Kenya Primary Education Development Project set out on pages 1 to 30, which comprise the statement of financial assets as at 30 June 2018, the statement of receipts and payments, statement of cash flows and statement of comparison of budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with the provisions of Article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, 2015 and Grant Agreement No.TFO1 8863 dated 4 June 2015 between 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 effect of the matters described in the basis for qualified opinion section of my report, the financial statements present fairly, in all material respects, the financial position of Kenya Primary Education Development Project as at 30 June 2018, and its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with Grant Agreement No. TFO18863 dated 4 June, 2015. In addition, the special account statement presents fairly, transactions for the year and the ending balance has been reconciled with the books of account. Basis for Qualified Opinion 1.0 Inaccuracies in the Financial Statements The statement of receipts and payments for the year ended 30 June 2018 reflects total expenditure amounting to Kshs.2,269,209,204 while records available in the IFMIS report for the same period reflects expenditure of Kshs.2,274,469,102 resulting in a variance of Kshs.5,259,898 and which has not been explained or reconciled. In the circumstances, it has not been possible to confirm the accuracy and completeness of the expenditure of Kshs.1,844,175,185 included in these financial statements for the year ended 30 June 2018. Report q the Auditor-General on the Financial Statements of Kenya Primary Education Developmenl PRIEDE) Project (CREDITNo. TF018863).lfor the year ended 30 June 20/8 - State Department /br Early Learning and Basic Education - Ministry a/Education PromotingAccountability in the Public Sector 2.0 Cash and Bank Balances Excluded from cash and cash equivalents balance of Kshs.196,612,188 is an amount of Kshs.1,326,538 being payments in bank statement not captured in the cashbook some of which date back to the month of December 2017. The management has not explained the genesis of the payments. In the circumstances, the accuracy and completeness of the cash and bank balance of Kshs.196,612,188 as at 30 June 2018 could not be confirmed. 3.0 Unresolved Prior Year Matters 3.1 Special Account Statements As previously reported, the statement of receipts and payments for the year ended 30 June 2018 reflects a comparative figure of Kshs.2,458,212,857 under proceeds from domestic and foreign grants which differs with the amounts reflected in the special accounts statements of Kshs.1,415,868,504 and Kshs.976,182,343 both totaling to Kshs.2,392,050,847. The resultant difference of Kshs.66,162,010 has not been explained/reconciled as at the date of this report. 3.2 Unconfirmed Transfers As reported in the previous years, the statement of receipts and payments for the year ended 30 June 2016 reflected receipts from Government entities of Kshs.23,902,753 which is at variance with the supported disbursement to TSC and KNEC on the same item totalling Kshs.12,659,308. The resultant variance of Kshs.11,243,445 has not been explained or reconciled. In the circumstance, it has not been possible to confirm the accuracy and validity of the transfers from Government entities figure of Kshs.23,902,753 for the year. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Kenya Primary Education Development Project in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgment, are of most significance in the audit of the financial statements. Except for the matters described in the Basis for Qualified Opinion section, I have determined that there are no other Key Audit Matters to communicate in my report. Report qfthe Auditor-General on the Financial Statements of Kenya Primaty Education Development (PRIEDE) Project (CREDITNo. TF0l8863) for the year ended 30 June 20/8 - State Department/fbr Early Learning and Basic Education - Ministry of Education REPORT ON COMPLIANCE WITH LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the procedures performed, except for the matter described in the Conclusion on Compliance and Effectiveness section of my report, I confirm that, nothing has come to my attention to cause me to believe that public money has not been applied lawfully and in an effective way. Basis for conclusion on Compliance with Lawfulness and Effectiveness in Use of Public Resources 1.0 Unresolved Prior Year Matters 1.1 Non-Compliance with Approved Budget As previously reported, included in note 8.7 to the financial statements for the year ended 30 June 2017 is expenditures totalling to Kshs.251,637,245 paid to ten consulting firms to train 4,000 schools on School Improvement Planning (SIP) during the year under review against budgetary provision of Kshs.200,000,000 resulting to unapproved expenditure of Kshs.51,637,245.The unapproved expenditure of Kshs.51,637,245 was contrary to the section 3.5 of the project financial manual. The management therefore is in breach of the law. 1.2 Irregular Procurement of Consultants As previously reported, the Ministry engaged ten (10) consultants to train 4000 schools on school improvement plan(SIP) through consultant's qualification selection method of procurement for ten regions in accordance with the provisions of Public Procurement and Assets Disposal Act 2015 and the World Bank Guidelines on selection and employment of consultants of January 2011 (Revised July 2014). Examination of procurement and payment records for the consultancy services revealed that the ten (10) consultants were contracted at a total contract sum of Kshs.251,637,245. However, scrutiny of the tender evaluation reports of the request for expression of interest (REOI) revealed that no detailed analysis on how the firms were evaluated and ranked by the tender evaluation committee was availed for audit review. Further, examination of payment and contract records revealed that on 28th October, 2016 the Ministry entered into a contract for carrying out school improvement plan (SIP) training for key stakeholders in the Mau A Region with a consulting firm at a contract sum of Kshs.24,721,420. However, the tender evaluation committee report revealed that only two firms were shortlisted in the region. The Ministry awarded the contract without obtaining prior no objection from the Bank as required by the World Bank guidelines on procurement of consultants which stipulates that, if less than three firms are shortlisted the borrower should seek for a no objection from the bank. In the circumstances, the procurement of the consultants was done contrary to the Bank's Report of the Auditor-General on the Financial Statements of Kenya Primaiv Education Development (PRIEDE) Project (CREDITNo. TFO18863) br the year ended 30 June 2018 - State Department.fbr Early Learning and Basic Education - Ministry of Education procurement guidelines. The project management was therefore in breach of law and the propriety of expenditure totalling Kshs.251,637,245 could not be confirmed to be proper charge to public funds for the year. My responsibility is to express a conclusion based on the review. The review was conducted in accordance with ISSAI 4000. The standard requires that I comply with ethical requirements and plan and perform the review so as to obtain limited assurance as to whether the activities, financial transactions and information reflected in the financial statements are in compliance, in all material respects, with the authorities that govern them. A review is limited primarily to analytical procedures and to inquiries, and therefore provides less assurance than an audit. I have not performed an audit, and, accordingly, express my conclusion in the form of limited assurance, which is consistent with the more limited work I have performed under this compliance review. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON INTERNAL CONTROLS EFFECTIVENESS, GOVERNANCE AND RISK MANAGEMENT SYSTEMS Conclusion As required by Section 7 (1) (a) of the Public Audit Act, 2015, based on the procedures performed, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. My responsibility is to express a conclusion based on the review. The review was conducted in accordance with ISSAI 1315. The standard requires that I plan and perform the review so as to obtain limited assurance as to whether effective processes and systems of internal control, risk management and governance was maintained in all material respects. The matters reported are limited to the deficiencies identified during the audit that I have concluded are material to be reported. I have not performed an audit, and, accordingly, express my conclusion in the form of limited assurance, which is consistent with the more limited work I have performed under this review. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. 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 such internal control as management determines is necessary to enable the preparation of financial statements that are free from material Report qf the Auditor-General on the Financial Statements of Kenya Primary Education Development (PRIEDE) Project (CREDITNo. TFO18863) for the year ended 30 June 2018 - State Department/fbr Early Learning and Basic Education - Ministry of Education 4 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 Project's ability to continue as a going concern/ sustain services, disclosing, as applicable, matters related to going concern/ 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 in line with Article 229(6). Those charged with governance are responsible for overseeing the Project's 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 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. Report qf the Auditor-General on the Financial Statements of Kenya Primary Education Development (PRIEDE) Project (CREDITiVo. TF018863) for the year ended 30 June 2018 - State Department/fbr Early Learning and Basic Education - Ministry of Education 5 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 controls may become inadequate because of changes in conditions, or that the degree of compliance with the Project'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. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances and for the purpose of giving an assurance on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern 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 as a going concern or to sustain its services. Report ofJthe Auditor-General on the Financial Statements of Kenya Primay Education Development (PRIEDE) Project (CREDITNo. TFO18863) br the year ended 30 June 2018 - State Department br Earlv Learning and Basic Education - Ministiv of Education 6 * 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. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 24 December 2018 Report of the Auditor-General on the Financial Statements qf Kenya Primaiy Education Development (PRIEDE) Project (CREDITNo. TFO18863) br the year ended 30 June 2018 - State Department/fbr Early Learning and Basic Education - Ministy of Education 7 r"1 И_ М � �О оО О О� О � �О N О О 01 �О ' �f �-в 01 И �О О � с� оо О � � И О ы О� l� м О� и о ? и и �t и ао и оо [� t� �++ r м � ш v? 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С� U � N � и er dq м r � � N ,� � � � �. сд � о и о � � � м � о � N � � �, '_`` � й L � � �!�� О сб J i-' �� 1 � � 1 _..✓ � ' о W о�о � � __ -,.�- о Q о м й `7_ '� S й о�Ио � ш � G м о � О � � °° м' � а � у о � ti � о � о � о � °p � � � ср� �" v � � � т „б о � � � �"'„ ,�; � и С CS р , � 'U U •н м V � С� Z3 и F., р �� � Су„ '� z '-' �]., с�б Г/� � � ^' �" W ьV-+ � а С „�'С � � W � ы�-, ��� а е � �О ?, о � д' '� `cs W � � � гк �г, � й Н Р� Г� Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 5. STATEMENT OF FINANCIAL ASSETS AS AT 30 JUNE 2018 FY 2017/18 FY 2016/17 (Restated) Note Kshs Kshs Bank Balances 8.11 A 196,612,188 57,622,342 Cash Balances 8.1 1B - 9,642 Cash Equivalents (Short term deposits) - - Total Cash and Cash equivalents 196,612,188 57,631,984 Outstanding Imprests & Advances 8.11 C 229,524,185 144,140,568 TOTAL FINANCIAL ASSETS 426,136,373 201,772,552 Fund balance b/fwd 8.12 124,277,009 127,562,844 Surplus / (deficit) for the year 301,859,364 74,209,708 Prior Year Adjustment - - NET FINANCIAL POSITION 426,136,373 201,772,552 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 1-),QdC1y)W 2018 and signed by: (k vl< -, Princial Secretary Project Coordinator Project Accountant: DRrLIO KIPSANG MARTHA EKIRAPA GRACE MUSYOKA 1CPAK Member Number: 20546 3 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 6. STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2018 FY 2016/17 Note 2017- 2018 (Restated) Kshs Kshs CASH FLOWS FROM OPERATING ACTIVITIES Receipts for operating income Receipts from Government of Kenya 8.3 55,000,000 64,611,240 Proceeds from Domestic and Foreign Grants 8.4 2,001,854,744 2,458,212,857 Miscellaneous Receipts 8.6 79,754,706 286,815,697 2,136,609,450 2,809,639,794 Payments for operating expenses Use of goods and services 8.7 219,521,019 476,853,581 Transfers to Other Government Entitiess 8.9 660,200,400 1,163,276,505 Other Grants and Other Payments 8.10 (898,400,000) (1,095,300,000) 1,778,121,419 2,735,430,086 Adjusted for: Change in Imprests & Advances 85,383,617 248,374,748 Adjustments during the year 8.12 77,495,543 369,465,779 Net cashflow from operating activities 195,608,871 46,881,323 CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Non-financial Assets 8.8 56,628,667 - Net cash flows from Investing Activities (56,628,667) CASHFLOW FROM BORROWING ACTIVITIES Loan from External Development Partners 8.5 Net cash flow from financing activities -_- 4 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NET INCREASE IN CASH AND CASH EQUIVALENT 138,980,204 46,881,323 Cash and cash equivalent at BEGINNING of the year 57,631,984 104,513,307 Cash and cash equivalent at END of the year 196,612,188 57,631,984 The accounting policies and explanatory notes to these financial statements form an iite ral part of the financial statements. The entity financial statements were approved on rol' rn-4 2018and si y: Princi al Secretary Project Coordinator Project Accountant: DR. LIO KIPSANG MARTHA EKIRAPA GRACE MUSYOKA ICPAK Member Number: 20546 5 о о о о о о о о о О о о � а о о � о о о w'�.� о N и О оо N t� М О �б р сд v [� О� О� О� и о0 О о0 � С � \о ^ о �; � � � Ч:. у О оО � �U �"� N М О О И и � N [� Й � � �О О � С сС �р .-� �у- �С О� N О� О N • у,", И � И 00 � И U О О �у Q� о0 l� О [� [� [� �о Q� ,7 b О � О� 00 О о0 О� О С c�l l� М �h l т м У � О �� � � � и У � � р и сб �U О N �О О� ОО I� О О И � � •й О � I� с}' � М � О О 'г"" Й «3 О 00 � М �о t� О О д' w О С� О ао и � О [� О О оо й N о О ОО l� �О N О� N V [� � � Й �О О� �--� О О О о0 О� .Я_ � С сд b и � � И �У N �n о�0 N О SСΡ] аС+ 7.. +-' д U Сд ('Ч N N '-r � С v� д °" � � �Оч � [� о � � ��"� z V д о `� � и.•> � � � �и>уΡ � д F-� � � °м о м ° о °о о м � �--✓ J � U ¢ � ° � `и° ° о�о й ом о о о�о � ° Г� �" и-� W � rn t� �о rn [� о о �о � д'". С7 U � 11 и v о о о� о о о ш � С c i [� й � � � ооо й � � U � N N N � � С 1 А о о � о � о о z С о о й Q,' °� °о о � � � о о а> Е"'i � °о о '� �' W :� и И ' й•_ ��. ;�. Рч А д � � � �_ v � о о � о о о о о о ��'° � W н � д 4� ° о м � о о о м `'-' о W р � �е +✓ и о �о и о о о �с 'b r�� � н р� и м ао и м о о оо � �, �ч у � •� „С � и � �о rn г� о о �о р •й � '., •�. о "' � ° ° °� о °о N � о � � � р W � о ,-Nч ° v оо о, �а � �^ � N �о �' � � с� eS �. � о •у °p � � о� у О о > N о � С 1 � .. �' bA � й и q _ `1 � S'. �Ti � �" и N .� о �j ,� Q о ,�w д � � С � л � L•' С О Е"'� д cGd и • г� � сд bЛ �' . ��'''� Z Е � � °' � � а b � � '� , ,�� � й `� � w о .с � С7 � `и � � • N й � � О � д � �ч � F С ° �1 °' �d о .� �° .� `� Gи-� о) � � s.. и Я �-+ .., С ш�-. �� � д v л � � � а й о р й � ол �� у� у � а� са о о о • -n о +, ' а� s. С�, � � �i ,.�`", �".ч G й и � СО й � �, и О � и р� 'О и и и и с� � д bЛ � �'" С7 i�ч Е-' L]. W � О''„ й С, д. а. � и � й�i а� `'''•' ^ й,� н _ � iy а. С й й U �� � � л а� б �•;� ,� са а� . 0.'1 о� С� О о а� д и °�, о сс и � � С +� с о i. � I� fг, � U С4 Гх n: а С7 � Н л� � д Е-� w О F Z а Г� SPECIAL ACCOUNT STATEMENT 1F7cr period ending 30th JUNE, 2018 Account No. 1000241322 Depository Bank CENTRAL BANK OF KENYA. Address CENTRAL BANK OF KENYA. Related Loan (K) PRY EDUC. DEV PRJ-TF 018863'A' Credit Agreement Currency USD -art A, - Ac c o u n t Ac tiv i ty :--ance of 1st July, 2017 --e- --C-S.K. Ledger Account 414,449.23 -- ---------------------------------------------------------------------------------- deposited by World Bank 13,513,797.25 ------------------------------ ------------------------------------------------------ "-7-st earnings if deposited in account amount refunded to cover ineligible 7-" -re Xr!,- 01 -' L! Deduct: Total amount withdrawn --------------------------------------------------------------- 9,199,023.00 Total service charges if not included above in amount withdrawn Ending balance on 30th June,2018 --------------------------------------------------------------- 4,729,223.48 ------------------------- = __ ------------------- AUTHORISED REPRESENTATIVE SIGNATURE: CENTRAL BANK OF KENYA ---------------------------- - --- -------------------- DATE AUTHORISED REPRESENTATIVE EXTERNAL RESOURCES SIGNATURE: DEPARTMENT-TREASURY DATE NOTE:The ending balance as per Central Bank of Kenya Ledger Account and the off-shore Special Account as at 30th June,2018 have been reconciled and a copy of the supporting Reconciliation Statement is attached. KENYA PRLMARY EDUCATION DEVELOPMENT PROJECT (PRIEDE) STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 JUNE 2018 Credit No.: IDA CREDIT NO. TF 18863-KE DA A Bank Account No.: 1000241322 held with CENTRAL BANK OF KENYA NOTES AMOUNT AMOUNT USD USD aJ. anced by IDA 9000,000.00 .ount documented :Outstanding amount to be documented 9,000,000.00 Repreented bN: gSpcial account Balance as as 30 June 2018 4.729.22-48 claimed but not credited as at 30th June 2018 -wunarawn and not claimed 4,270,776.52 7S eC -s (if not included in lines 5 and 6 above) fere ed (if included in Special Account) 9 Total ad' ance to Special Account Year ended 30 June 2018 9,000,000.00 Dicrepanc" bet,ween total appearing on line 3 and 9 Notes: 1 Expla:n the discrepancy between totals appearing on lines 3 and 9 above (e.g amount due to be refunded to cover i expenditures paid fion the Special/Designated Account) 2 indicate if amount appearing on line 6 is eligible for financiang by IDA and provide reasons for not claiming the expenditures The amount appearing on line 6 is eligible for financing by World Bank and shall be documented in subsequent IFRs AUTHORISED REPRESENTATIVE RESOURCE MOBILISATION DEPARTMENT DATE: THE NATIONAL TREASURY SPECIAL ACCOUNT STATEMENT For period ending 30th JUNE, 2018 Account No. 1000241349 Depository Bank CENTRAL BANK OF KENYA. Address CENTRAL BANK OF KENYA. Reiated Loan (K) PRY EDUC. DEV PRJ-TF 018863 'B' Credit Agreement Currency USD -oi t July, 2017 'ccount 205,878.91 Ss ed by World Bank 10,192,013.90 - :ýs if deposited in account e to cover ineligible 10,192,043.00 --S if not included above in -e30th June,2018 205,849.81 ý SED REPRESENTATIVE SIGNATURE: CBAÅNK OF KENYA DATE -SED REPRESENTATIVE E==ÅL RESOURCES SIGNATURE: TM1JENT-TREASURY DATE - - - ^: zalance as per Central Bank of Kenya Ledger Account and the off-shore at 30th June,2018 have been reconciled and a copy of the supporting c'_i 5ta-ement is attached. LAI KENYA PRIMARY EDUCATION DEVELOPMENT PROJECT (PRIEDE) STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 JUNE 2018 Credit No.: IDA CREDIT NO. TF 18863 - DA B Bank Account No.: 1000241349 held with CENTRAL BANK OF KENYA NOTES AMOUNT AMOUNT USD USD 1 Amount advanced by IDA 14,000,000.00 Less: 2 Total amount documented 3 Outstanding amount to be documented 14,000,000.00 Represented by: 4 Ending Special account Balance as as 30 June 2018 205,849.81 5 Amounts claimed but not credited as at 30th June 2018 6 Amounts withdrawn and not claimed 13,794,150.19 7 Service Charges (if not included in lines 5 and 6 above) 8 Interest earned (if included in Special Account) 9 Total advance to Special Account Year ended 30 June 2018 14,000,000.00 Discrepancy between total appearing on line 3 and 9 Notes: 1 Explain the discrepancy between totals appearing on lines 3 and 9 above (e.g amount due to be refunded to cover ineligible expenditures paid fron the Special/Designated Account) 2 Indicate if amount appearing on line 6 is eligible for financiang by IDA and provide reasons for not claiming the expenditures The amount appearing on line 6 is eligible for financing by World Bank and shall be documented in subsequent IFRs AUTHORISED REPRESENTATIVE RESOURCE MOBILISATION DEPARTMENT DATE: (.) V3I)10i THE NATIONAL TREASURY Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 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 Cash-basis IPSAS financial reporting under the cash basis of Accounting, as prescribed by the PSASB and set out in the accounting policy note below. This cash basis of accounting has been supplemented with accounting for; a) receivables that include imprests and salary advances and b) payables that include deposits and retentions. The financial statements comply with and conform to the form of presentation prescribed by the PSASB. The accounting policies adopted have been consistently applied to all the years presented. 8.1.2. Reporting entity The financial statements are for the Kenya Primary Development Project under National Government of Kenya. The financial statements encompass the reporting entity as specified in the relevant legislation PFM Act 2012 . 8.1.3. 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. 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. 7 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 borrowing 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. 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 recognised 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. 8 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 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 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 9 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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/period 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 425,034,019 Million was received in form of direct payments from third parties. 10 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 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/period 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/period 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/period 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 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.3. RECEIPTS FROM GOVERNMENT OF KENYA These represent counterpart funding and other receipts from government as follows: 2017/18 2016/17 Cumulative Cumulative to Date Prior Year KShs KShs KShs KShs Counterpart funding through State Department for Basic Education Counterpart funds Quarter 1 0 0 0 Counterpart funds Quarter 2 18,000,000 37,500,000 79,402,753 61,402,753 Counterpart funds Quarter 3 0 0 0 Counterpart funds Quarter 4 37,000,000 27,111,240 64,111,240 27,111,240 0 Other transfers from government 0 entities State Department for Environment 0 State Department for Natural 0 Resources 5500.0Q 64P611,240 143,513,993 88,513,993 12 °о оо °о о t� � г � v о�о ~ м rn N �о оо N .--� �--� � r ev � и О� ао 00 N .С И U И гп М о �r w х N С ооо И�U '�д' `r" О И �G ° 00 � r G l� l� 00 СС в-� И М 00 О ,�,�, .С N ..С Й � N 3 � N Н� Gтч ыТв N д' о � b ,д � а� Т, � р .� д и L v'х С�,П/ О О О � CJ Lы, .� и:и О О С N и О О О а--+ сб � И о0 М . � М 00 "(� -К � оИо О � С.' М� О '� � .,-ч ч.и+ �.ь, С и ONi О � С • у � .rч � •-� � � � С.7 г.�, 'О О. ы�i � N � и � С/1 и �р о И Е..,� iм � М И �--1 > Z О �� � о Г � 'Ci �'" �СΡ �" °` �р и G� � -�ч r.гП+ �' М И 00 И и � Н I� Z �н у�, � й ° °о о � ,� р Uн' � С7 .5 х � N �] с V �+ ьд ' ° � о О о �., [.�� Гг, � �, �., � и � у Z А •� ��°�' �, � N ° м р W Z � °•� а� А � � м � � � 7-�ч Qi L'С1 U � о О� �-Ч W U 1�1 � о � � � W � � о w °,�° и с� �; •„ > � N � О � А L о� ,.., А � J °; о, U о � � � о vj � � � т о � � ° � � .� м Н � и � � д W � � ° о х А о �: ;� ��гу � Н W N L �� N �� у � V а� о � w о о � � �, F" а � А � ° � �; �+r � � �-1 од о и s�. � с�д � о � н � � � � U U „� р � i i � o�i e�i о � �' � � °� а а о � г� �г, Z оо Q z С7 а с7 �7 Е-� Kenya Primary Education Development Project Reports and Financial Statements for the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.5. LOAN FROM EXTERNAL DEVELOPMENT PARTNERS No loans were received during the year 8.6. MISCELLANEOUS RECEIPTS TOTAL RECEIPTS Cumulative to- date Receipts Receipts FY FY 2016/17 controlled by controlled 2017/18 the entity in by third Cash _ parties KShs KShs KShs KShs KShs Cash deposits 1,824,622 1,824,622 1,824,622 Net cashbook 434,542 434,542 434,542 -adjustments county refunds 77,495,542 77,495,542 286,815,697 364,311,239 =,=754 706 286 79.754,706 0 7=9 815,697 14 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.7. PURCHASE OF GOODS AND SERVICES Total Cumulative Cumulative Payments to- date Prior Year Payments Payments FY 2017/18 FY 2016/17 made by the made by Entity in Cash third parties KShs KShs KShs KShs KShs KShs Utilities, supplies and 5,649,538 5,649,538 48,971,383 54,620,921 48,971,383 services Communication, supplies 4,472,392 4,472,392 1,016,454 5,488,846 1,016,454 and services Domestic travel and 74,610,416 74,610,416 84,274,961 158,885,377 84,274,961 subsistence Foreign travel and 18,713,191 18,713,191 6,996,187 25,709,378 6,996,187 subsistence Printing, advertising and 43,510,961 240,685,329 284,196,290 35,783,944 517,075,679 232,879,389 information supplies & services Training expenses 24,807,201 24,807,201 10,646,106 35,453,307 10,646,106 Hospitality supplies and 886,898 886,898 16,473,798 75,717,286 74,830,388 services Asset 0 0 Transfer to Foreign affairs 0 0 2,377,593 2,377,593 2,377,593 Other operating expenses - 2,350,260 2,350,260 2,350,260 flights Routine maintenance - 2,261,535 2,261,535 318,893 2,580,428 318,893 vehicles and other transport equipment Consultancy services: - 42,118,677 42,118,677 269,994,262 312,112,939 269,994,262 Technical and professional services 0 0 Total 1,192,372,014 732,30561 15 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.8. ACQUISITION OF NON-FINANCIAL ASSETS Total Payments Cumulative Cumulative Prior Year to-date Payments made Payments FY 2017/18 FY by the Entity in made by 2016/17 Cash third parties KShs KShs KShs KShs KShs KShs Purchase of vehicles & other 0 22,440,720 22,440,720 transport equipment ICT equipment, Software and 50,660,883 184,348,690 235,009,573 275,327,620 40,318,047 ICT asset Purchase of office furniture & 5,967,785 5,967,785 0 10,126,177 4,158,392 general equipment Acquisition of other 0 0 intangible assets Total 56,6288,6 3 8 6.1 16 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.9. TRANSFERS TO OTHER GOVERNMENT ENTITIES During the 12 months to 30 June 2018, we transferred funds to reporting government entities as shown below: Cumulative Payments to-date Payments made by made by FY 2016/17 the Entity in Cash third FY 2017/18 (Restated) parties KShs KShs KShs KShs KShs Transfers to National Government entities Kenya National Examination Council 86,858,661 - 86,858,661 - 114,837,019 Teachers Service Commission 46,711,858 46,711,858 2,877,208 49,589,066 133,5703519 - 133,5519 2877208 164,426,085 Transfers to County Government Various county Governments 526,629,881 526,629,881 1,160,399,297 1,672,329,543 County Refunds 526,629,881 - 526629881 116Q 399,297 1,672,329,543 TOTAL 6004- 000 1.163.276,505 1.836.7 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. 17 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June , 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.10. OTHER GRANTS AND TRANSFERS AND PAYMENTS Payments Paymen Total FY 2016/17 Cumulative made by the ts made Payments to-date Entity in Cash by third FY 2017/18 parties KShs KShs KShs KShs KShs Grants for scholarships 0 0 Transfers to lower levels 898,400,000 898,400,000 1,095,300,000 1,993,700,000 of government e.g schools Miscellaneous payments 0 0 Total 898,400,000 0 898,400,000 1,095,300,000 1,993,700,000 18 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.11. CASH AND CASH EQUIVALENTS CARRIED FORWARD CASH AND CASH EQUIVALENTS C/FWD FY 2017/18 FY 2016/17 KShs KShs Bank accounts (Note 8.11 A) 196,612,188 57,622,342 Cash in hand (Note 8.11B) 0 9,642 Outstanding imprests and advances (Note 8.11C) 229,257,460 153,298,942 Total 425,869.649 210.930926 The project has 3 project accounts spread within the project implementation area and 2 foreign currency designated accounts managed by the National Treasury as listed below: 8.11. A Bank Accounts Project Bank Accounts 11 A Bank Accounts FY 2017/18 FY 2016/17 Local Currency Accounts KShs KShs Central Bank of Kenya [A/c No 1000307398] 131,893 4,039,836 Central Bank of Kenya [A/c No 1000307404] 194,511,432 53,485,338 Central Bank of Kenya [A/c No 1000307412] 1,968,863 97,168 Total local currency balances 196.612.188 57,622342 Foreign Currency Accounts USD USD Central Bank of Kenya [A/c NO: 1000241349] 205,850 205,879 Central Bank of Kenya [A/c NO: 1000241322] 4,729,223 414,449 Total Foreign Currency balances 4 5,073 620,328 19 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June , 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) Special Deposit Accounts The balances in the Project's Special Deposit Account(s) as at 30 June 2018 are not included in the Statement of Financial Assets since they are below the line items and are yet to be drawn into the Exchequer Account as a voted provision. 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 FY 2017/18 FY 2016/17 KShs KShs (i) A/C Name [A/c NO: 1000241349] Opening balance 205,879 0 Total amount deposited in the account 10,192,014 14,059,879 Total amount withdrawn (as per Statement of Receipts 10,192,043 13,854,036 & Payments) Closing balance (as per SDA bank account 205850 reconciliation attached) (ii) A/c Name [A/c No 1000241322] Opening balance (as per the SDA reconciliation) 414,449 970 Total amount deposited in the account 13,513,797 6,916,203 Total amount withdrawn (as per Statement of Receipts 9,199,023 6,501,753 & Payments) Closing balance (as per SDA bank account 47292415,449 reconciliation attached) The Special Deposit Account(s) reconciliation statement(s) has (have) been attached as Appendix (iv) support these closing balances. 20 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 8.11.B Cash In Hand FY 2017/18 FY 2016/17 KShs KShs Cash and cash equivalents c/fwd 0 9642 Total cash balances 9,642 21 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.11. C OUTSTANDING IMPRESTS AND ADVANCES Name of Officer or Institution Amount Due Date of Amount Balance Balance 2017 Taken Surrender Surrendered 2018 Kshs Kshs Kshs Kshs a b c=a-b Various county Governments 564,755,591 526,629,881 38,125,709 77,495,542 TSC 35,755,270 46,711,858 28,290,904 39,247,492 KNEC 225,911,723 86,858,661 162,102,599 23,049,537 Outstandingstaffmprest 1,004,973 1,004,973 3,798,197 Receivable from SEQUIP - 549,800 827,427,557 660,200,400 229,524,185 144,140,568 8.12. FUND BALANCE BROUGHT FORWARD CASH AND CASH EQUIVALENTS B/FWD 2017/18 2016/17 KShs KShs Bank accounts 57,622,342 104,460,265 Cash in hand 9,642 53,042 Cash equivalents (short-term deposits) - Outstanding imprests and advances 144,140,568 392,515,316 County refunds - 77,495,543 - 369,465,779 Total 124,277,009 127,562,844 22 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.13 PRIOR YEAR ADJUSTMENT 2017/2018 Debit of transfer to other government entities 14,699,635 Credit of outstanding imprest and advances 14,699,635 During the year under audit the following errors relating to prior year were discovered and corrected in the current year in compliance with paragraph 1.5 of IPSAS cash basis Receipt recognition. 1. The expenditures for counties were understated by Kshs.5, 541,261 and Kshs.9, 158,374 a total of Kshs.14,699,635 and this has been corrected in the current year. 2. The account receivables on advances to counties was overstated by Kshs.5,541,261 and Kshs.9,158,374 a total of Kshs.14,699,635 and this has been corrected in the current year. 23 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS The following is the summary of issues raised by the external auditor, and management comments that were provided to the auditor. We have nominated focal persons to resolve the various issues as shown below with the associated time frame within which we expect the issues to be resolved. The balances at The outstandmg Y The outstanding KNEC and TSC imprest and advances of were to be Outstanding Kshs.158,840,203 utilised in the 30th imprest and . current financial HAU & CFO Resolved adanesdisbursed mnform of ya,ndJune,2018 advances vaiu year, and AIE to vcounties counties, KNEC refunded the and TSC. balances of 76M Expenditure MoE Non- totalling to Kshs. Managemnet Project consultated the coordinator th compliance 251,637,245 World bank and and Resolved 30 with approved against a budgetary desi n as C pe June,2018 butge of ydesign was Component butget of changed and lead Kshs.200,000,000 apoa dn approval done. 10 Consultants to Consultancy Project Irregular train the 4000 SIP was advertised, coordinator 3th schools through and a common procurement of cols criteria use fo and Resolved June,2018 conultnts Consultants critenia used forCopnt Qualification evaluation and a Cmoe Selection Method 'No objection' The funds were transferred to the project Special acuto 0ht Apcn The difference of account on 303 Account June,2016 and HAU & CFO Resolved 30 Stteens Kshs.66,162,010 te ct ofJune,201 8 Statements the cut off issued resulted to the difference. 24 Kenya Primary Education Development Project Reports and Financial Statements For the year ended 30 June, 2018 Guidance Notes: (i) Use the same reference numbers as contained in the external audit report; (ii) Obtain the "Issue/Observation" and "management comments", required above, from final external audit report that is signed by Management; (iii) Before approving the report, discuss the timeframe with the appointed Focal Point persons within your entity responsible for implementation of each issue; (iv) Indicate the status of "Resolved" or "Not Resolved" by the date of submitting this report to National Treasury. 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