NEPAD TRANSFORMING AFRICA AFRICAN UNION DEVELOPMENT AGENCY (AUDA-NEPAD) ANNUAL FINANCIAL STATEMENTS FOR THE YEAR 31 DECEMBER 2018 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 INDEX The following reports and statements are presented to stakeholders: Pages General Information 2 Management responsibilities and approval 3 Independent auditor's report 4-5 Chief Executive Officer's report 6-9 Statement of financial position 10 Statement of financial performance 11 Statement of changes in equity 12 Statement of cash flows 13 Statement of comparison of budget and actual amounts 14 Notes to the annual financial statements 15-25 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 GENERAL INFORMATION MANAGEMENT TEAM: Dr Ibrahim Assane Mayaki Chief Executive Officer Mr Amine Idriss Adoum Director of Corporate Service and Business Center Mrs Estherine Fotabong Director of Programmes ADDRESS: 230 15th Road Randjespark, Midrand Johannesburg, South Africa AUDITORS: Ghana Audit Service BANKERS: Nedbank Limited 2 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 MANAGEMENT RESPONSIBILITIES AND APPROVAL Management is required by the Heads of State & Government Orientation Committee (HSGOC), to maintain adequate accounting records and is responsible for the content and integrity of the financial statements and related financial information included in this report. It is its responsibility to ensure that the financial statements fairly present the state of affairs of the Agency as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Public Sector Accounting Standards. The extemal auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with International Public Sector Accounting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The management acknowledges that it is ultimately responsible for the system of internal financial control established by the Agency and places considerable importance on maintaining a strong control environment. To enable the management to meet these responsibilities, they set standards for intemal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Agency and all employees are required to maintain the highest ethical standards in ensuring the Agency's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Agency is on identifying, assessing, managing and monitoring all known forms of risk across the Agency. While operating risk cannot be fully mitigated, the Agency endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The management is of the opinion that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The management has reviewed the Agency's cash flow forecast for the year 31 December 2018 and, in the light of this review and the current financial position, they are satisfied that the Agency has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the Agency's financial statements. The financial statements have been examined by the Agency's extemal auditors. The financial statements set out on page 10 to 25, which have been prepared on the going concern basis, were approved by the African Uni velopment Agency (AUDA-NEPAD) on the 31st of March 2019 and were signed y: Dr Ibrahim Assane Mayaki Mr. Kossi To assi Chief Executive Officer Head of Finance AFRICAN UNION BOARD OF EXTERNAL AUDITORS AUDIT OPION ON THE FINANCIAL STATEMENTS OF AUDA-NEPAD FOR THE YEAR ENDED 31T DECEMBER 2018 24 TH MAY, 2019 INDEPENDENT AUDITOR' REPORT Report of the Independent Auditor of the Board of External Auditors To the African Union (AU) Permanent Representatives Committee Introduction 1. The Executive Council of the African Union by decisions EXCL/Dec.1027 QXII) and EX.CLIDec.16 (XXVIII), appointed External Auditors for the audit of the African Union financial statements fbr the years 2018 and 2019. Repective Respenslbilities of NPCA and the Auditors 2. The responalbility fbr the preparatlon of the accounts including adequate disclosure Is that of the Management Team of AUDA-NEPAD. This respontlblifty Includes desgning, implementing and maintaining Internal conbol relean In the preparatIon and fair presentation of the financial statements that are free from material mIsstatement, whether due to fraud or error, selecsing and applying appropriate accounting policies: and making accounting aesnat o that are reasonable In the ciumstances. 3. Our reoponalblity Is to express an opinion on the Agencys financial statements based on our audit. Beos for Opinion 4. We conducted our audit in accordance with Intemational Public Sector Accounting Standarde (IPSAS), international Standards of Supreme Audit Insttutiore (ISSA) and the African Union Rules and Regulations. These standards require that we comply with the *tWcal requirements, plan and perfom the audit to obtain reasonable assurance whether the Agency's financial statements are fre from material misstatements. 5. Our audit Involves performing procedures to obtain audit *Aidence about the amounts and disclosuree In the financial statement. 6. It also includes evaluating the appropriatenssn of accounting pollces used and the reasonableness of accounting edimateas made by the Agency, as well as evaluating the overall presentation of the financial ateament. 7. We belleve that the audit evidence we have obtained Is suliAent and appropriate to provide a bails for our audit opiniorn Key Audit Matters 8. The key audit matters are those matters that In our professional Judgment, were of most significance In our audit of the financial statements of the current period. 9. These matters were addressed in the context of our audit of the financial statements as a whole, and In forming our opInIon thereon. We believe that the matters described below are the main audit matters to be included in our report: 10. Basis for preparation of partners funded programmes and activities Incorporated into the 2018 budget for Implementation forwarded to AUC for approval, was not affirmed by donor partners. We recommanded that management should consult donor funding Institutions to affirm their commitment to programmes and activities before forwarding for AUC's approval. 11. The board of survey report recommended for the disposal of two vehicles on 18 September 2018, however one vehicle continued to draw fuel 1131 December, 2016. We recommended Immediate Initiation of the auction processes to dispose off these vehicles to avoid further loss In value. 12. AUDA-NEPAD operate* ifty-seen (57) bank accounts for Its operations and programmes, In both foreign and local currencies. We recommended that, AUDA-NEPAD should consider operating an account for each development partner Irrespective of projects the partner Ia funding and a single tmauTy account for operations, and also irwestgate and ensure that, all dormant and Inactive accounts are closed bimediatelyto overt additional charges. 4 Opinion 13. We have audifted the accompanying AUDA-NEPAIYS financial s~iments which compdse the Financial Poeltion as et 31 December 2018, the Statement of Financial Perfomance, Cahow Stutement, and chonges In not aetslequty state mnt for the year then ended 31 December 2018, a summory of eignificant accountng polids and olher expianary nos. 14. In our opinion, the financial «~ante present, f11ly end In all matedial repects, the financial postilon of AUDA- NEPAD' es at 31 December 2018 and the financial perft ance of AUDA-NEPAD for tho yoar then ended, In conformity with intrmational Public Secior Accounting Standards (IPSAS) and requiremente of the Afioan Union Financial Ruloes and ReguletIons. Report on omplöance 15. We can confirm tat AUDA-NEPAD has complied, In all mtedal respecig, with the lntwnadonal Public Sector Accounting Standarde and the provielane In the African Union Financial Ruin and Regulations for the yoer andad 31 December 2018. Signed by MR BEN.AMIN CUDJO Mr. Adölkader BENMAROUF DEPUTY AUDWOR GENERAL AU BoE& Chuir Pr~n For nd on bhalf of ~an Audit Svce Date: May 24, 2019 5 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 CHIEF EXECUTIVE OFFICER'S REPORT The Chief Executive Officer has pleasure in submitting his report together with the audited annual financial statements for the year. ended 31 December 2018. The legal form of the entity The NEPAD Agency is the Implementation body of the African Union and was established as per the decision Assembly/AU/Dec.283(XIV) of the 14th AU Assembly in 2010. The AU is a multilateral organisation established through a treaty of African States adopting the Constitutive Act No. 1 of 2001. The govemment of the Republic of South Africa has entered into an agreement with the AU to host the NEPAD Agency and recognising the NEPAD Agency as an international and diplomatic organisation with its headquarters in South Africa. The Host Agreement recognises the Chief Executive Officer as an official duly authorised to represent the AU on NEPAD operations and has the capacity to transact and conclude legal agreements. The host agreement further provides for certain privileges and immunities duly accorded to the Agency and its staff members. Main business and operations NEPAD Planning and Co-ordinating Agency is an office of the African Union (AU) in the Republic of South Africa. The principal activities of the Agency are: a) To ensure effective leadership of programme development and implementation. b) To drive the programme, ensuring a deep commitment by African leaders to NEPAD Agency. c) To initiate the processes of political transformation, improving governance and addressing the marginalisation of the continent. d) To accelerate economic integration at the sub-regional and continental level. e) To effectively engage development partners, the international community and multilateral organizations. Transformation of NEPAD into African Union Development Agency (AUDA-NEPAD) As per the decision Assembly/AU/Dec.691 (XXXI) of July 2018 on the Transformation of the NEPAD Planning and Coordinating Agency (NPCA) into AUDA, the Assembly on its decision Ext/Assembly/AUIDec.1-4(XI) of November 2018 considered the evolutionary trajectory of the NEPAD and the rationale behind the establishment of the AUDA as a vehicle for the better execution of the African Union Agenda 2063 and decided that the NEPAD shall be renamed as AUDA-NEPAD. African Union Development Agency (AUDA-NEPAD) 's Mandate The decision Ext/Assembly/AUIDec.1-4(XI) also approved the below listed mandates of AUDA-NEPAD: i) To coordinate and execute priority regional and continental projects to promote regional integration towards the accelerated realisation of Agenda 2063; ii) To strengthen capacity of African Union Member States and regional bodies; advance knowledge based advisory support, undertake the full range of resource mobilisation, and serve as the continent's technical interface with all Africa's development stakeholders and development partners; Key Achievements 1. Economic Integration: Science Technology and Innovation 1.1. Science Technology and Innovation The Africa Innovation Outlook has been completed. The report provides insight analysis of selected key Science and Technology Innovations (STI) performance indicators in general and Science Technology Innovation Strategy for Africa (STISA) 2024 in particular. The report highlights performance of Research and Development (R&D) and innovations and consolidates information from 8 countries (Botswana, Ethiopia, Egypt, Mozambique, Namibia, South Africa, eSwatini and Uganda) out of 23 countries that conducted R&D surveys. In addition, manuscripts for innovation policy comprehensiveness are being prepared in three countries (Zimbabwe, Zambia and Cameroon). Furthermore, the Agency has enabled the integration of STI, Education and Health indicators into the African Union policy and decision making processes. In this regard, data on indicators on education and STI is now being populated into the web-based continental data platform. Furthermore, 2 knowledge products, namely: i) Innovation Policy Comprehensiveness; and ii) Informal Sector innovations and National Innovation Systems, were produced and disseminated to Members States. This is in addition to the third series of the Africa Innovation Outlook that was published. These interventions form the critical steps in the implementation of the Science Technology Innovation Strategy for Africa (STISA) 2024. 6 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 CHIEF EXECUTIVE OFFICER'S REPORT 1.2. Enhancing Productivity and Firm Capabilities - Kaizen The NEPAD Agency partnering with the Government of the Republic of South Africa and the Japan International Cooperation Agency (JICA) launched a full range of programs to support Member States efforts to strengthen internal capacity to enable industrial productivity, organisational efficiency and innovation. The first efforts towards the enhancement of industrial productivity and innovation in African Member States consisted in a set of training programs to sensitize government experts on the importance of establishing a structured approach to process management and industrial performance. 1.3. Enhanced Preparations for Application of Emerging Technologies The African Union High Level Panel on Emerging Technologies (APET), during the June 2018, African Innovation summit II in Kigali, Rwanda, presented its recommendations on how the AU and its Member States should harness three Emerging Technologies for sustainable transformation. The three technologies are (i) Gene Drives for control and elimination of Malaria, (ii) Drones for increasing Agricultural Transformation, and (iii) Micro-Grids for community empowerment. During the year the recommendation was endorsed by the Executive Council and these three technologies were launched. 1.4. Fighting Vector-Borne Disease A study tour to South America was organized for Ministers and senior government officials from Burkina Faso in February 2018 to understand evaluation of dossier for releasing mosquitoes for eliminating Dengue disease. The NEPAD Agency is currently working with the West Africa Health Organization (WAHO) to establish a harmonized regional regulatory system for controlling vector bome diseases using malaria as a pathfinder disease and gene drive as a pathfinder technology. The platform is being piloted in the ECOWAS region and will then be established in the other regions based on lessons to be leamt from the pilot. A West Africa Integrated Vector Management (WAIVM) Platform created as a vehicle to implement Gene Drive was also launched. The Steering Committee of WA-IVM was inaugurated and the roll-out of capacity strengthening program effectively started. 1.5. Strengthening African Union Capacity on Biosafety The National Biosafety Agency of Senegal, Burkina Faso and Uganda were supported to establish an Institutional Biosafety Committee (IBC) which will ensure that scientific research is carried out with adequate safety, The IBC has trained the scientists on how to run an IBC and also developed standard operating procedures for running the IBC. 1.6. Enhancement of Private Sector Participation in PIDA Projects In consultation with different stakeholders, specific projects on the Lamu Port South Sudan Ethiopia Transport Corridor (LAPSSET) were identified that can be advanced by NEPAD in collaboration with its partners from the public and private sectors. In addition, during the year under review, a multi-stakeholder consultation was aimed at defining concrete policy recommendations for Africa's leadership that advance infrastructure project implementation within the framework of the Programme for Infrastructure Development in Africa (PIDA). The stakeholders in the NEPAD Strategic Dialogue on Advancing Infrastructure Development in Africa endorsed the urgent need for the 5% Agenda and African Infrastructure Guarantee Mechanism. 1.7. RECs Enabling Environment and Needs Assessment conducted The Praia-Dakar-Abidjan Multimodal Multisector Corridor Development Project (PDAMMCD) is earmarked for the piloting of the PIDA ASII (The African Strategic Infrastructure Initiative) methodology. During the year Project Packaging Consultancy for Selected PIDA-ASII (The African Strategic Infrastructure Initiative) Corridor with the submission of a Corridor Development Investment and Marketing Plan is being finalized. 1.8. Other Key Activities implemented for PIDA Projects Pre-feasibility and Feasibility Study approved for PIDA Projects, PIDA Priority Projects reviewed, selected packaged and showcased, Technical Capacity for PIDA Implementation among RECs strengthened, report on the 10 Presidential Infrastructure Champion Initiative prepared, consultant for the High Speed Rail Network project recruited, discussions with Southern Africa Power Pool (SAPP) to support the synergistic integration of the Batoka, Inga Dam III, and ZTK projects undertaken, Traffic Light System (TLS) at 4 pilot One Stop Border Posts (OSBPs) developed and operationalized, and the Beta version of Job Creation Toolkit was finalised, tested and training was provided. 7 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 CHIEF EXECUTIVE OFFICER'S REPORT 2. Inclusive Prosperity: 2.1. Strengthening Africa Medical Health Regulation Following the endorsement of the AU Model Law by the AU on regulation of Medical Products in 2016, the Model Law has now been adopted in 12 African Countries (Burkina Faso, Burundi C6te dIvoire, the Gambia, Lesotho, Mozambique, Namibia, Rwanda, Seychelles, ESwatini, Tanzania, and Zimbabwe. Relatedly, progress was made on creating an enabling environment for agreed AMRH outcomes to be achieved within each implementing regional economic communities; REC MRH project work plans were discussed and adopted with strategic direction provided by the AMRH Steering committee in EAC, SADC, and ECOWAS regions. The AMRH performance indicators were disseminated to EAC, ECOWAS, SADC and all partners for experience sharing purpose across regions and to inform policy design. Furthermore, support was provided for enhanced implementation and accountability at AU, regional and country levels through targeted training and working with policy makers, media, legal experts and parliamentary health committees. An options analysis is underway to establish an AMRH fundholding facility that will support sustainable financing of National Medicine Regulatory Agencies, RECs and AMRH. On 20 May 2018, the African Ministers of Health, within the confines of the specialized Technical Committee on Health, Population and Drug Control, unanimously adopted the Treaty for the establishment of the African Medicines Agency (AMA). The AMA seeks to ensure the coordination and strengthening of continental initiatives to harmonise medical products regulation, and provide guidance and technical support to Improve access to quality, safe and efficacious medical products and health technologies on the continent. AMA will work within the existing continental architecture of Regional Economic communities (RECs) and Regional Health Organizations (RHOs) to support AU Member States. Significant progress has been achieved through domestication of the AU Model Law. Countries (Egypt, Ivory Coast, Burkina Faso, Seychelles, Zimbabwe, Lesotho, Namibia, Eswatini, the Gambia, Tanzania (Zanzibar), Rwanda, Burundi and Mozambique) have used the Model Law to review and align their legislation. 2.2. Institutional Health Strengthening to address Occupational Health Safety and TB Africa region has the highest TB incidence among the five WHO regions, estimated at 275/100 000, and in the southern Africa region the burden is estimated at 591/100 000, while the mining sector has the highest TB incident in the world, estimated at 3000 - 7000 per 100 000. In view of increase policymaker's awareness and to effectively tackle the challenges of TB, the following training were delivered: a) 48 inspectors' trained on occupational health and safety inspection in mines with focus on dust control and medical surveillance; b) 17 experts trained on basic principles of occupational hygiene and received OHTA W201: Principles of Occupational Hygiene certificates; c) 28 Medical Doctors ILO Chest x-ray classification and lung functioning; d) 34 health, labour and mines experts from Malawi and Lesotho on Introductory Course for OHS; e) Trained 23 health workers from Lesotho on Health WISE (OHS for health workers); d) A regional training manual for inspectors drafted to guide a sustainable training programme at the regional level. 2.3. Skills and Entrepreneurship in Agriculture and Agribusiness Provided support to the countries for the National Action Plans for rural youth employment, with a special focus on rural economic value chains. The countries supported included Benin, Cameroon, Malawi and Niger. Cameroon National Action on Youth is under a validation progress, while the remaining ones are work in progress. In order to enhance their capacity to implement their national action plans, relevant personnel were trained on project execution, contract interpretation, finance, and procurement and reporting. Subsequently, the countries have started implementing their national action plans in a coordinated manner through the following interventions: All the four (4) piloted countries are catalytic set of interventions through the Africa Solidarity Trust Fund to design, develop and implement youth capacity development projects; 16 youths from all the countries were supported to participate in peer learning and knowledge exchange visits on rural youth employment and entrepreneurship in the areas of agriculture and agribusiness; A total of 178 youths (44 in Benin, 91 in Cameroon and 43 in Malawi) were equipped with skills to engage in agriculture value chain enterprises (cash crops, poultry, livestock and food processing and agro-packaging). In tum, this led to 20 business plans (5 in Benin, 10 in Cameroon and 5 in Malawi) that were developed on agriculture value chains and subsequently submitted for funding. Further 95 trainers of trainees (TOTs) capacitated in Benin, Cameroon, Malawi and Niger to teach and mentor rural youths on rural youth employment and entrepreneurship along agriculture and agribusiness value chains. 8 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 CHIEF EXECUTIVE OFFICER'S REPORT 3. Transformative Capacities: AUDA-NEPAD has developed an enterprise GIS remote sensing portal for the application of integrated planning, implementation and measurement of national development plans, in the context of A2063 and SDGs. The integrated portal which track spatial development trends are embedded in the domain of land and water (including oceans), agriculture, geology, infrastructure, demographics, human settlements; education, health, innovation, further data collection, analysis and reporting tools are also incorporated in the system. The capacity development seminars on the application of integrated approach are deployed in the RECs (EAC, IGAD, and SADC), as well as countries (Niger, Senegal, Cabo Verde, Ghana, Gambia, Mali and Cote d'lvoire). 100 Senior Officials from various Ministries of Planning and Finance, Agriculture, infrastructure, Security, Health, Mining and Education benefited from the training. Community of Practice has been established to share more experience and knowledge. The Agency is developing an integrated portal that will serve primarily country needs in terms of planning and monitoring implementation. Gradual operationalization of the portal will take place in Year 2019 and 2020. 4. Sustainable Environment and Resilient Communities: Nature based solutions for development are progressing, twenty six AU Member States have demonstrated commitment to the implementation of the African Forest Landscape Restoration Initiative (AFR100), with 86% (about 86 million hectares) of degraded land committed for land restoration. The countries include Benin, Burundi, Cameroon, CAR, Chad, C6te d'1voire, DRC, Ethiopia, Ghana, Guinea, Kenya, Liberia, Madagascar, Malawi, Mozambique, Nigeria, Niger, Republic of Congo, Rwanda, Senegal, Sudan, South Africa, ESwatini, Togo, Tanzania and Uganda. Furthermore, and for continued support to countries, the AFR100 Secretariat has been capacitated and is fully functional, housed at the AUDA-NEPAD. Financial results Deficit for the year was USD 1 685 081 (2017: Surplus USD 2 621 360) The results of the Agency for the year under review are fully set out in the attached financial statements and require no further comment. Going Concern The financial statements have been prepared on the going concern basis, since the Chief Executive Officer has every reason to believe that the Agency has adequate resources in place to continue operating in the foreseeable future. 9 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 STATEMENT OF FINANCIAL POSITION 2018 2017 Notes $ $ ASSETS Non-current assets Property, plant and equipment 2.1 276 413 243 051 Intangible Assets 2.2 40 131 187 639 Total Non-current assets 316 544 430 690 Current assets Receivables 3 976 501 752 023 Advances 5 2643461 2166576 Cash and cash equivalents 4 25 241 747 27 726 835 Total current assets 28 861 709 30645434 Total assets 29 178 253 31076124 UABILITIES Current liabilities Deferred Income 6 10873605 12328839 Employees benefits provision 7 2 982 469 3080 188 Payables 8 1722421 1385536 Total current liabilities 15578495 16794563 Total liabilities 15578495 16794563 NET EQUITY Accumulated surplus 13 599 769 14281562 TOTAL EQUITBIL 29178264 31076126 Dr Ibrahim Assane Mayaki Mr. Koss Toulassi Chief Executive Officer Head of Finance 10 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 STATEMENT OF FINANCIAL PERFORMANCE 2018 2017 Notes $ $ REVENUE Non exchange transactions African Union Contribution 9.1 11 270 225 10 333 027 Member states contribution 9.2 2275662 1 612439 Development partners funding 9.3 14073812 10 929 529 Miscellaneous revenue 10 1 644 271 2 216 764 Total Revenue 29 263 970 25 091 759 EXPENSES Staff cost 19.1 16435649 11 710929 Rental and maintenance of equipment 19.2 1 358 469 593 383 Supplies, consumables and charges 19.3 2 830 955 1 806 857 Conference and meetings 19.4 7 617 438 6 553 451 Professional fees 19.5 1 183418 1056096 Disbursements 19.6 1216116 451945 Depreciation & Amortization 19.7 307 006 294 158 Asset disposal - 3580 Total expenses 30949051 22470399 (Deficit)/Surplus for the year 17 (1 685 081) 2 621 360 11 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 STATEMENT OF CHANGES IN EQUITY Accumulated surplus $ Balance 31 December 2016 12076834 Reallocation of prior year's Deferred Income to Equity (416 632) Surplus (Deficit) for the period 2621 360 Balance at 31 December 2017 16 14281562 Prior Years Adjustment 16 1003288 Surplus for the period (1 685081) Accumulated surplus 31 December 2018 16 13599769 12 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 STATEMENT OF CASH FLOWS 2018 2017 Notes $ $ CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year (1 685 081) 2 621 360 Adjust for: Depreciation 307 006 297 739 Low Value Asset 100% Depreciation (17182) - Forex (gain)Ioss (2 687) Increase/(Decrease) in payables 336885 541 191 Increase in provisions relating to employees cost (97719) 953281 Decrease in receivables (701 363) (2 443 919) Net cash flows from operating activities (1 857 455) 1 966 964 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 2 (175 686) (49 463) Donated assets Net cash flows from investing activities (175686) (49463) CASH FLOWS FROM FINANCING ACTIVITIES Movement in deferred income and other reserves (451 946) 3 326 725 Payments made on the finance lease liability Reallocation of Reserve Net cash flows from financing activities (451 946) 3 326 725 Net (decrease) i increase in cash and cash equivalents (2 485 087) 5 244 226 Cash and cash equivalents at beginning of period 27 726 835 22 482 607 Cash and cash equivalents at end of period 4 25 241 748 27 726 835 [13 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS 2018 Variance Original Final Actual Actual vs. Approved Budget recognised approved Budget Supplementary budget Note- $ $ $ $ REVENUE Non exchange transactions African union 10 667 815 382701 11300516 11270225 30291 Member states contribution 3312248 3312248 2275662 1036586 Development partners funding 40000000 (23 000 000) 17 000 000 14 073 812 2926 188 Total Revenue 50667 815 (19 305 051) 31 612 764 27619699 3993065 EXPENSES African Union 10667815 382701 11700516 11305013 395503 Member states contribution -Voluntary 3312 248 3312248 2406 574 905 674 Skills and Employment for Youth 6 978 000 (5 578000) 1 929 185 1 270 560 658 625 Industrialization ,Science, Tech and Innovation 5937 715 1 562 285 7402601 7297 805 104 796 Regional integration and Trade 13468015 (11 318 015) 2 545 249 2119508 425 741 Natural Resource Governance 13616270 (7666270) 5 122 965 4296489 826 476 Total expenses 12 50667815 (19305051) 32012764 28695949 3316815 Deficit for the year 18 (1 076 250) 14 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 1. Accounting Policies 1.1 Statement of Compliance The African Union (AU) Office for the AUDA-NEPAD is hereby established In the Republic of South Africa with the legal status of AU office operating outside the Headquarters of AU. The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) and its interpretations adopted by the Intemational Accounting Standards Board (IASB). 1.2 Basis of preparation and accounting policies The financial statements are presented on the historical cost basis. The preparation of financial statements in conformity with IPSAS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and undedying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised If the revision affects only that period, or in the period of the revision and future periods If the revision affects both current and future periods. The functional/reporting currency of the Agency is US dollar and all figures are presented in US dollar. 1.3. Non-Current Assets 1.3.1 Property, plant and equipment Property, plant and equipment are tangible assets that: (a) Are held for use in the production or supply of goods or services, for rental to others or for administrative purposes, and (b) Are expected to be used during more than one period. Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of an item is its cash price equivalent at the recognition date. Items of property plant and equipment are initially recognised at cost, being the cash price equivalent at the recognition date. All items of property, plant and equipment with a value lower than USD 3 000 will be expensed. Depreciation is charged to the Statement of Financial Performance so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The following rates are used for the depreciation of property, plant and equipment Item Useful life Computer equipment 3 years Motor vehicles 5 years Office equipment 4 years Office furniture and fittings 10 years Audio Visual, Security & safety Equipment 7 years The residual values, useful lives and economic consumption pattems for all items of property, plant and equipment are reviewed if there is an indication that there has been a significant change since the last reporting date. If necessary, the consequent depreciable amounts, rates and methods are adjusted. Any changes are accounted for as changes in accounting estimates and included in the Statement of Financial Performance for the current and future periods by adjusting the relevant future depreciation charges. Items of property, plant and equipment should be removed from the financial statements (derecognized) on disposal or when no future economic benefits or service potential is expected from its use. Disposal can be through transfer, donation, sale, scrapping or write-off as follows: (a) Items for donation I transfer to other reporting entities - carrying value of items to be taken to donation expense or transfer expense; (b) Items for sale - difference between carrying amount and expected sale value to be evaluated, expected gain or loss on disposal is to be recorded as income or expense respectively; (c) Items for scrapping as no further use is expected - carrying value to be taken to impairment loss with subsequent de- recognition of items from the asset register; (d) Items missing - upon conclusion that items are missing (after due process of searching for them) - items are to be derecognized and carrying amount to be taken to impairment loss. 15 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 1.3.2 Intangible Assets An intangible asset is an identifiable non-monetary asset without physical substance. An intangible asset shall be recognized if, and only if: (a) potential that are attributable to the asset will flow to the entity, and (b) the cost or fair value of the asset can be measured reliably The threshold limit for recognition of an intangible asset is USD 10,000.00 An intangible asset separately acquired is measured initially at cost. The cost of the asset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and any directly attributable cost of preparing the asset for its intended use. After initial recognition, an intangible asset shall be carried at its cost less any accumulated amortization and any accumulated impairment losses. Amortization of intangible asset is calculated annually. The amortization amount of an intangible asset with a finite useful life shall be allocated using a straight line method over its useful life. Item Useful life Software Acquired Externally (SAP) and other software 3 years 1.4 Provisions A provision is recognised in the statement of financial position when the AUDA-NEPAD has a present legal or constructive obligation as a result of a past event, from which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money and where appropriate, the risks specIfic to the liability. 1.5 Funds received AUDA-NEPAD Agency funding consists of funds received from African Union, various member states/countries and a range of development partners. Funds received from Member States are voluntary contributions and are accounted for in the period that funds are actually received. Funds from African Union are recognised on the basis of actual funds received. Revenue from the various development partners are recognised when the Agency has discharged part or all obligations relating to the revenue, usually when expenses are incurred. Revenue from exchange transactions is recognised on an accrual basis in accordance with the substance of the agreement. 1.6 Deferred Income All funds received from the development partners are accounted for as a liability; until the project is implemented at which time it will be recognised as revenue from non-exchange transactions. All partner funds received and for which contractual obligation is discharged within a financial year are recognized as revenue. 1.7 Foreign currency translation All transactions are recorded at source currency and then converted into functional currency, US Dollars, using monthly average rates as published by United Nations Treasury. At year end all transactions and balances maintained at source currency are converted into USD. Translation to US Dollars ZAR EUR GBP Average rate 13.630 0.879 0.783 Transactions Closing rate 14.460 0.876 0.743 Balances The foreign exchange differences were taken to Statement of Financial Performance. 16 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 1.8 Financial instruments The Agency recognises rights to trade receivables and obligation to settle short term payables as financial Instruments. Settlement is through fixed payments. The receivables and payables are not quoted in an active market. Such instruments are recognized Initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these instruments are measured at amortized cost using effective Interest method. The Agency derecognises financial instruments when the contractual rights to pay or receive cash flows expire. Cash and cash equivalents comprise cash held with bank in current and investment accounts. No revenue or costs arise subsequent to initial measurement. 1.9 Fair value The Agency's only financial instruments are short term receivables and payables. The carrying amount of the financial instruments approximates their fair value due to the short term nature of the instruments. 1.10 Management fee Income Management Fees is a levy on grants received from partners for the purpose of ensuring sustainability of the Agency. The fee is calculated on at least 10 percent of total disbursement made to the Agency by development partners implementing various projects. This is recognised as percentage of actual expenditure incurred. 1.11 Related Parties Parties are considered related to AUDA-NEPAD if there is an element of control of the Agency's daily operations or are a member of key management of the Agency. 1.12 Employee benefits Employee benefits are grouped under three categories: Terminal Benefits, Gratuity Fund and Annual Leave. The Agency recognizes a liability and an expense for termination benefits when it is demonstrably committed to either: (a) Terminate the employment of employees before the normal retirement date; or (b) An employee's decision to accept voluntary redundancy in exchange for those benefits. Other long term employee benefits Include accrued annual leave, and travel upon separation. The Agency operates defined contribution benefits. Thus the actual and investment risks are bome by the employees. The accruals for employee and other operating costs are considered part of the working capital used in the entity's normal operating cycle. These are current liabilities and may be settled any time after the reporting date. 1.14 Change in Accounting Estimates There Is a change on the value of asset that requires capitalization. The Agency capitalizes all Property, Plant and Equipment with value greater than or equal to US$ 3 000 from 2018. 17 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 2. Non-Current Assets: 2.1 Property, plant and equipment 2018 2017 Accumulated Accumulated Cost depreciation Carrying value Cost depreciation Carrying value $ $ $ $ $ $ Computer equipment 122 680 (69 970) 52 710 326 175 (268 999) 57 177 Office equipment 52 090 (24 231) 27 859 40 695 (34 823) 5872 Motor vehicles 322 472 (176 944) 145 527 276 635 (162 186) 114 450 Furniture and fittings 69993 (19 676) 50317 79513 (13 959) 65553 Total 567 235 (290 821) 276 413 723 018 (479 967) 243 052 The carrying amounts for 2018 are reconciled as follows: Opening balance Additions Adjustments Disposal Depreciation Caerying value at end of year $ $ $ $ $ $ Computer equipment 57175 61 742 (51 107) (15 101) 52709 Office equipment 5 873 29562 (1 576) (5 999) 27860 Motor vehicles 114449 89135 (4759) (53297) 145528 Furniture and fittings 65553 (8 382) (6 854) 50 317 Total 243 050 180439 (61 065) (4759) (81 251) 2 7 641 4 The carrying amounts for 2017 are reconciled as follows: Carrying value at Opening balance Additions Adjustments Disposal Depreciation end of year $ $ $ $ $ $ Computer equipment 154 374 (48) (4692) (92 458) 57 175 Office equipment 4258 4 094 (2478) 5 873 Motor vehicles 115 000 43 512 (44 063) 114 449 Furniture and fittings 67 546 5951 ( 2 9 6 ) (7648) 65 553 Total 341 178 49463 4 0 46 (4988) (146 647) 243 050 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 2.2 Intangible Assets 2018 2017 Accumulated Accumulated Cost Amortization Carrying value Cost Amortization Carrying value $ $ $ $ $ $ SAP & Other software 466 772 (426 641) 40131 471 709 (284 071) 187 639 Total 466772 (4264) 40 131 471709 (28407) 187 639 The carrying amounts for 2018 are to be reconciled as follows: Carrying value at Opening balance Additions Adjustments Disposal Amortization end of year $ $ $ $ $ $ SAP & Other software 187 639 - (147 484) 40 154 Total 187763963 - (147484) 40154 The carrying amounts for 2017 are to be reconciled as follows: Carrying value at Opening balance Additions Adjustments Disposal Amortization end of year $ $ S $ $ $ SAP software 335100 - 49 (147511) 187638 Total 33551001 49 (147511) 187638 3. Receivables There was no impairment in the values of trade and other receivables presented below. VAT values which has been considered as potential irrecoverable have been provided for in the current year based on the rejection status from SARS. Other trade receivables constitute Staff travel advance, accrued interest and trade receivable. 2018 2017 Receivables $ $ AU Headquarter claim 132855 (50814) Other trade receivables 404171 527267 VAT claims 256 565 275 570 NPCA-Regional Office Account 182 910 976501 752023 4. Cash and cash equivalents Cash balances at year end comprise: Main operations bank Accounts 14282940 14156584 Projects bank Accounts 10958808 13570251 25241 748 27726835 5. Advances $ $ Receivables Sub-grantee 2643461 2166576 2643461 2166576 19 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 6. Deferred Income 2018 2017 $ $ Opening balance 12328839 8585482 Funds received 11929716 14922827 Less: Portion utilised during the year (13 392 767) (10929530) Reallocation to Retained Earning of MSC 7 817 (249940) Closing balance 10873605 12328839 7. Employees benefits provision Gratuity fund 5496 4985 Annual leave 2 368 494 2 047 236 Terminal benefits 503 586 354 795 Staff Salary Payable 104893 673171 Total employee's benefits 2982469 3080187 8. Trade and other payables Trade payables 789550 934032 Accruals 932 869 451 504 Total trade and other payables 1722419 1385536 9. Revenue from non-exchange transactions 9.1. African Union Subventions 11020225 9833132 Projects 250000 499895 Total African Union Contribution 11270225 10333027 9.2 Member States Contribution includes Rwanda 100000 99955 Kenya 143407 105616 Ethiopia 99 955 Senegal 480 802 South Africa 512249 518958 South Africa - in kind contribution through hosting agreement 520 006 Nigeria 1 000 000 Sudan 200000 Mali 107153 Total member states contribution 2275662 1612439 9.3. Development partners Funds directly recognised 681 018 Funds transferred from deferred income 13392794 10929529 Total funds from the Development partners 14073812 10929529 Total revenue from Non exchange transaction 27619699 22874995 10. Miscellaneous revenue Interest received Main Operations and Projects 655 235 454 178 Gain on sale of Assets: 12972 - Management fee 318 638 474203 Gain on exchange difference 143 824 Other refunds 513601 175512 Year End Revaluation 1 112872 Total Miscellaneous income 1644 270 2216764 20 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 11. Related Parties Relationship Parent Organisation African Union Key management personnel Dr. l.A. Mayaki, Mrs. E. Fotabong and Mr A. ldriss Parent Organisation Key management Total 2018 Transactions Subvention received 11 270 225 - 11 270 225 Employee benefits . - Cost to company 621 199 621 199 Leave provision 49613 49613 11270225 670812 11941037 2017 Transactions Subvention received 10333027 - 10333027 Employee benefits . Cost to company 2 412075 412075 Leave provision - 153054 153 04 10333027 565129 10898156 12. Budget Variance The original annual budget approved for the year ended 2018 amounted to $50 667 816. This budget was 18% more compared to the previous year's budget During the period under review, the AU assembly recommends the creation of the AUDA-NEPAD with a new mandate and new mission. This recommendation from Member states triggered a change of approach from development partners. In July 2018 following the decision of the AU Assembly to create AUDA-NEPAD, the leadership made the decision to revise the budget based on a new strategic outcomes and presented to the policy organs a request for budget revision. The revised approved budget for 2018 was therefore $32 012 764. The Agency also received additional allocation amount of $650 000 for implementation of the African Integrated High Speed Railway Network Projects and for AU-EU partnership post 2020. As presented on the statement of financial performance, the total expenditure for the period was $30 949 051 which is 97% of the approved budget and 38% more compared to the previous years total expenditure. The details of the budget performance report by each category is presented below: African Union Subvention: An amount of $11 020 210 was received as the subvention from the AU against the approved operational budget for the 2018 financial year. In addition $650 000 was received to finance project activities of Agenda 2063 which are African High Speed Railway and AU-EU partnership post 2020 projects. The execution rate is 100% compared to the approved budget. Member States Contribution: The contribution from Member States is a voluntary fund that AUDA-NEPAD directly receives from Member States. The total fund expected during the year was $3 312 248 while the funds raised was $2 275 662, which was 69% of the budget. The amount recognized during the year includes contribution in-kind amount of $520 006 from the Government of South Africa for hosting the Agency. The actual amount realized during the year under this category was not adequate to finance activities planned; the Agency therefore will settle all the accrued expenditures from upcoming contributions. The total expenditure for the year was $2 406 574 which was 73% of the approved budget. AUDA-NEPAD Investment Areas: Skills and Employment for Youth: The main activities under this category relates to empowerment of Women in Africa financed by the govemment of Spain and Promoting Decent Rural Youth Employment and Entrepreneurship in Agriculture and Agribusiness skill and employment program financed by FAO. The execution rate was 66%. The main reason for the variance was due to the delay retiring of advances disbursed to implementing countries and Regional Economic Communities. Industrialization, Science, Technology and Innovation: This investment area mainly focuses on strengthening Africa's Medical Health Regulation, Occupational Health Safety and TB Southern Africa, integration of Science, Technology and innovation on Education and Health and Biosafety. The execution rate of 99% was achieved against the budget approved for the year. Regional Integration and Trade: AUDA-NEPAD plays an important role in Africa's infrastracture, free trade, high speed and Energy. It has been engaging countries, RECs and private sectors in this arena. The execution rate for the period was 83% of the revised budget . Natural Resource Governance: This investment area implemented projects which enhances sustainable environment and resilient Communities in Africa. The focus was on land restoration & governance, water and sanitation, climate smart agriculture, Gender and Climate and rural futures. The overall execution rate was 84%. The main reason for the variance was delay in disbursing funds to Implementing institutions. 21 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 13. Investments The Agency invests any excess or unused funds Into various short term fixed deposit and call accounts. The investments generate interest at the date of maturity and if not required, it is reinvested. The investments are available for use by the Agency unless otherwise stated. The total Interest generated from the fixed deposit Is presented below. Opening Foreign 2018 balance Movement Interest gaintloss Closing balance $ $ $ $ $ Main Operating Investments 3693767 239 678 3933 445 Project Investments Dormant grants 522 331 37 830 560 162 SANBIO 29603 29 603 e-Africa 42616 42616 COHRED 29353 29353 BMGF-AMRH & Emerging Technology 2595832 (1 064 585) 186 512 1 717 759 SIDA 77907 (47471) 8808 39244 3297642 (1112056) 233150 2418737 6991409 (1 112056) 472828 26335218 Opening Foreign 2017 balance Movement Interest gainfloss Closing balance $ $ $ $ $ Main Operating Investments 3478499 215 268 3693767 Project Investments Dormant grants 495 413 26918 522 331 SANBIO 28187 1416 29603 e-Africa 40718 1898 42616 OOHRED 29353 29353 BMGF AMRH 36 288 2 439 216 120 328 2 595 832 SIDA 334681 (283182) 26408 77907 964640 2156034 176969 3297642 4 4 4 3 1 3 9 2 1 5 6 0 3 4 3 9 2 2 3 6 -6 9 914 0 9 14. Financial Risk Management 14.1 Categories of financial instruments Loans and Amortized Total carrying Receivables costs amount 2018 Current Assets Receivables 719936 719936 Cash and cash equivalents 25 241 747 25241747 Current liabilities Payables 1 722421 1 722421 Total financial instruments 25961683 1722421 27684104 Loans and Amortized Total carrying 2017 Receivables costs amount Current Assets Receivables 476 453 476 453 Cash and cash equivalents 27 726 835 27 726 835 Current liabilities Payables 1 385 536 1 385 536 Total financial instruments 28203288 1 385 536 29 588 824 22 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 14.2 Market risk Market risk is the risk that the Agency's income will be adversely affected by movements in the level or volatility of market rates or prices such as interest rates and foreign exchange rates. There is no risk attached to the market prices as the Agency does not earn income from trading. Majority of income is through grants from donor countries and organisations. The effect of foreign exchange rates is lImited to difference in exchange rates between date of signature of the contract and date of actual receipt of funds for the contracts that are based on foreign currency. This risk is minimal. The organisation does not borrow or lend funds, apart from the funds in the bank accounts; hence interest risk is insignificant. Interest Risk Sensitivity Analysis The AUDA-NEPAD has used a sensitivity analysis technique that measures the estimated change to profit or loss of an instantaneous increase or decrease of 1% in market interest rates, from the rate applicable at 31 December, for interest income with all other variables remaining constant. This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation. 2018 2017 (Decrease)Ilncrease In deficit (Decrease)Increase in surplus Downward Upward Downward Upward change change in change in change in in interest rate interest rate interest rate interest rate Interest income 6 552 (6 552) 4 542 (4 542) Notes 2018 2017 $ $ 14.3 Credit risk Credit risk is the risk that the Agency will suffer financial loss, should any counterparties fail to fulfil their contractual obligations to the Agency. The credit risk that the Agency faces arises mainly from VAT input receivable and interest receivable. There is low risk on their recoverability as at year end. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as at year end was: Trade and other receivables 3 976 501 752 023 Cash and cash equivalents 4 25241 748 27 726 835 Total Exposure 26218249 28478858 14.4 Liquidity risk Liquidity risk is defined as the risk of failure to meet all financial obligations on a timely basis, when due, and in the currency due without incurring additional costs. In the case of the Agency this risk specifically arises from the inability to honour obligations with respect to trade and other payables and gratuity provision. The Agency has significant available uncommitted cash resources to meet its immediate obligations which are mainly due within 60 days. Exposure to liquidity risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to liquidity risk as at year end was: Deferred Income 6 10873605 12328839 Employees benefits provision 7 2982469 3080187 Trade and other payables 8 1 722419 1385536 Total Exposure 15578493 16794562 23 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 15. Capital Management The Agency does not manage any capital as it receives funding from development partners for the implementation of projects and from the African Union and its Member States that contribute voluntarily to its annual operating expenditure. 16. Prior period adjustment in the presentation of deferred income and Equity 2018 2018 Deferred Description Income Equity Balance 31 December 2017 12328839 11660201 Retained Earning 2017 2 621 360 Opening balance 1 January 2018 12328839 14 281 561 Opening balance 1 January 2017 12328839 14281561 Movement during the year: Funds Received during the year 11 929716 - Portion- utilised during the year (13392767) - Net Income (1685081) Prior Year Adjustment for the current year 7817 1003288 Balance 31 December 2018 10873605 13599768 2017 2017 Deferred Equity Description Income Opening balance 1 January 2016 8 585 482 11 674 555 Retained Earning 2016 402 278 Balance 31 December 2016 8585482 12076833 Opening balance 1 January 2017 8585482 12076833 Movement during the year: Funds Received during the year 14922827 - Portion utilised during the year (10 929 530) - Net Income 2621 360 Adjustment: (249940) (416632) Other Adjustment Balance 31 December 2017 12328839 14281561 17. 2018 Deficit: The Agency reported deficit during the year. The main reason for the deficit was the forex revaluation related to the non US Dollar bank accounts. The South African Rand has been weak against dollar compared to the rates reported in 2017. 18. ReconcilIation Budgetary result with Performance Result: Deficit as per Statement of Comparison of Budget and Actual (1 076 250) Basis Difference: Accumulated Depreciation (307 006) Purchase of Fixed Asset 175686 Leave paid out 83 329 Leave Provisions (563 581) Bank Revaluation (1 641 528) Other Income 1 644 271 Net Result as per Financial Performance: (1 685079) 24 AFRICAN UNION DEVELOPMENT AGENCY-NEPAD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NOTES TO THE ANNUAL FINANCIAL STATEMENTS 19. Expenditure 19.1. Staff cost Basic Salary 7238112 5557696 Home Leave - 1348 Dependency allowance 61 352 44785 Recruitment costs 287644 44355 Life insurance 494479 73314 Welfare and Education allowance 206876 140395 Housing Allowance 2 649 597 1 942 662 Medical Expenses 414697 300087 Pension Scheme 1 508664 1 074626 Post Adjustment 2844300 2019349 Termination benefits 150549 91 106 Annual Leave 563581 394959 Travel on home leave 15798 26248 Non residence allowance - - Total staff cost 16435649 11710930 19.2. Rental and Maintenance of Equipment Fuel and Lubricants 29308 23700 Insurance 28 721 23513 Maintenance 258959 131 995 Rental of equipments 102468 117358 Annual software renewal 414138 198628 Security services 83355 98189 Lease of building 441 521 Total Rental and Maintenance of Equipment 1 358 470 593 383 19.3. Supplies, consumables and charges Cellphones 136228 104453 Courier & postage 4659 15102 Internet 57456 198789 Telephone 34378 43249 Forex difference 208284 191479 Bank charges 99416 80905 Translation 47423 86621 Stationery and supplies 87 350 80 032 Printing, design and binding 169942 238489 Publication 23 653 30 272 Agency fees 22 457 474 203 Electricity and water 89638 2127 Media services 208 543 257 367 Customs 0 3770 Y/E Revaluation 1 641 528 Total Supplies, consumables and charges 2830955 1806 858 19.4. Conferences and Meetings Interpretation 197850 187075 Daily subsistence allowance 2708158 2062455 Catering 99559 126811 Accommodation 729 724 834 593 Air travel 2 489 926 2 263 827 Car hire 199078 212385 Conferencing 1 130358 848954 Visa 62785 17351 Total Conferences and meeting 7617438 6553451 19.5. Professional fees 1 183418 1056096 19.6. Disbursements 1216116 451945 19.7. Depreciation & Amortization 307 006 297 739 Depreciation 159522 150228 Amortization 147484 147511 Total Depreciation and Amortization 307 006 297 739 25