MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAM FOR SOUTHERN AFRICA PROJECT NUMBER: P 094183 CREDIT NUMBER: IDA 52030-MW FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2018 NATIONAL AUDIT OFFICE P.O.BOX 30045 LILONGWE 3 THE MINISTRY OFAGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERNAFRICA (APPSA), MALAWI - IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 Table of Contents CONTENT PAGE CONTROLLIN G OFFICER'S REPORT..................................................................................... 3 STATEMENT OF MANAGEMENT RESPONSIBILITY.......................................................... 6 STATEM ENT OF FINANCIAL POSITION ............................................................................. 10 STATEMENT OF SOURCES AND USES OF FUNDS........................................................... 1 DESIGNATED ACCOUNT ACTIVITY STATEMENT .......................................................... 12 NOTES TO THE FINANCIAL STATEM ENTS ....................................................................... 14 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI - IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 CONTROLLING OFFICER'S REPORT FOR YEAR ENDED 30TH JUNE 2018 1.0 Project Background and Description Government of Malawi prioritised the Agricultural Sector and included it in its priority within priorities as contained in the Malawi Growth and Development Strategy (MDGS). According to the MGDS, Agriculture remains the main driver of economic growth in Malawi and it contributes about 75% of foreign exchange earnings and approximately 30% of the total Gross Domestic Product. Therefore, the importance and impact of Agricultural activities on the national economy cannot be overemphasized. The Agricultural Productivity Program for Southern Africa (APPSA) was designed by the Malawi Government (GoM), the Department of Agricultural Research Services (DARS) in particular, in order to increase the availability of improved agricultural technologies in Malawi. The Project became effective on 1s September, 2013.The overall coordination, management and implementation of the Project is carried by the Department of Agricultural Research Services. The Project is being financed by a loan in the amount of US$29.8 million from International Development Agency (IDA). The Project is part of a network of similar Projects funded by the IDA in the Countries of Malawi, Zambia and Mozambique. In this arrangement, Malawi is taking a lead in Maize based agricultural research system, Mozambique is taking a lead in Rice based agricultural research systems while Zambia is taking a lead in Legume based agricultural research systems. Therefore, there is a lot of collaboration taking place among these three countries with similar research carried out in either two or all of the three countries. The Project Development Objective (PDO) The project development objective is to improve availability of improved agricultural technologies in Malawi and to Strengthen the capacity of the Regional Centre of Leadership (which is Chitedze Research Station) by among other improving the infrastructure that support and facilitate agricultural research activities across the country. The PDO will be achieved by: * Supporting a wide range of Research and Development sub-projects * Disseminating the new agricultural technologies to farmers in the country * Construction and maintenance of infrastructure in all the five research stations across the country to support and facilitate agricultural research activities and * Developing human capacity for carrying out agricultural research. 3 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERNAFRICA (APPSA), MALAWI - IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 1.1 Project Components The project design comprises activities to be implemented under two components plus project implementation and management, as a third component. Highlights of the Projects Components are given below: 1.1.1 Component 1: Technology Generation and Dissemination The objective of this project component is to support a wide range of scientific research and development projects that are researching on new agricultural technologies and then to disseminate the results to farmers. 1.1.2 Component 2: Strengthening the Regional Centre of Leadership (RCoL) The objective of this project component is to support the Government to construct up to date infrastructure in all the five research stations in the country to support and facilitate agricultural research activities. This component will also support the Government of Malawi to build capacity of its scientists involved in agricultural research by sending them to Universities both locally and abroad to pursue specialised courses in agriculture at PhD, Masters and Bachelors degrees' levels. Scientists are also supported to attend specialised short courses. Component 2 will also aim at strengthening the management systems in the Regional Centre of Leadership. 1.1.3 Component 3: Project Management This component provides implementation support to Department of Agricultural Research Services in undertaking project management in accordance with the Bank's fiduciary and other guidelines, including managing operating costs, equipment, training on fiduciary and project management issues, managing project audits and engagement of technical experts and contractors at both local and international levels to provide technical services and advice on construction of research infrastructure and other project performance initiatives. 1.2 Key Achievements 1.2.1 Number of Technologies released The Agricultural Productivity Program for Southern Africa (APPSA) is supporting 22 Research &Development (R & D) projects led by Malawi and collaborating in about 42 projects from Mozambique and Zambia. Malawi is leading in 7 R&D projects from each of 1st, 2nd and 3rd calls and one project in the 4th call. So far, the program has released 21 technologies: two on rice varieties, 8 maize hybrids, 6 bean varieties, 5 agronomic practices (4 rice agronomic and one on irrigation). It is anticipated that more technologies will be released at the end of the current agricultural season from the 4 new generated ones under 4 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 maize research. The program through 4 R&D projects led by Malawi rcommendedl8 technologies as follows; 4 rice agronomic practices, 8 maize hybrids and 6 bean varieties to the national extension service through the Agricultural Technology Clearing Committee (ATCC). 1.2.2 The Program has exceeded the targeted number of beneficiaries The program reached out to 1,021, 363 direct beneficiaries against a target of 234, 000 where, Lead farmers constituted 12,278 (4,242 Females). The beneficiaries are enumerated by including all individuals that are benefiting in one way or another from the products of the program. The program supported 97 field days where 82,540 farmers participated. 1.2.3 Infrastructure development Infrastructural development has been completed for Bvumbwe and Kasinthula Research Stations and have been handed over to the department. Construction works for Chitedze Research Station are progressing well where Laboratory and office complexes and Rehabilitation of Tarmac and Gravel Roads are under construction. Roads construction and rehabilitation for Chitedze Research Station are expected to be finished by December 2018. G. Nyandule Phiri SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT 5 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERNAFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE YEAR ENDED 30TH JUNE, 2018. The management of Agricultural Productivity Program for Southern Africa (APPSA) is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the project as at the end of the financial year/period and of the operating results for that year. The management is also required to ensure that the project maintains a proper system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and all liabilities are recognized. It is Management's responsibility to prepare financial statements which disclose with reasonable accuracy at any time the financial position of the project and to ensure that the financial statements comply with the financial agreements and statutes. In preparing the financial statements the management accepts responsibility for the following: * Maintenance of proper accounting records; * Selection of suitable accounting policies and applying them consistently; * Making judgment and estimates that are reasonable and prudent; * Compliance with applicable accounting standards when preparing the consolidated financial statements, subject to any material departures being disclosed and explained in the consolidated financial statements. The management also accepts responsibility for taking such steps as are reasonably open to them to safeguard the assets of the project and to maintain adequate systems of internal controls to prevent and detect fraud and other irregularities. The management is of the opinion that the financial statements give a true and fair view of the financial affairs of the project and of its operating results for the year ended 30th June 2018. G. Nyandule Phiri Mackson H P Ban a SECRETARY FOR AGRICULTURE, PROJECT COORDINATOR IRRIGATION AND WATER DEVELOPMENT 6 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined that there is no need to communicate key audit matters in my report due the nature of the project. Responsibilities of Management for the Financial Statements Management of the Agriculture Productivity Programme for Southern Africa is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSAS) Financial Reporting under the historical cost convention and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of the financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibilities for the Financial Statements My 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls) will always detect a material misstatement 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. As part of an audit in accordance with ISSAls, I exercise professional judgment and maintain professional scepticism 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, but not for the purpose of expressing an opinion on the effectiveness of the internal control. 8 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENTAGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 DESIGNATED ACCOUNT ACTIVITY STATEMENT FOR THE YEAR ENDED 30TH JUNE 2018 DATE DESCRIPTION AMOUNT (USD) 01.07.2017 Opening Balanace 613,889.92 04.07.2017 Transfer from FCDA to holding account (600,000.00) 03.08.2017 IDA Loan - Funds received from IDA 2,162,924.45 15.08.2017 Transfer from FCDA to holding account (700,000.00) 15.08.2017 Transfer from FCDA to holding account (100,000.00) 12.09.2017 Payment to MSV International 12% of Technologa Invoice (14,321.24) 12.09.2017 Transfer from FCDA to holding account (800,000.00) 04.10.2017 Payment to CIMMYT - Maize double Haploid project (11,000.00) Stipend allowance for Horace Kakhiwa -Asian Inst. of 04.10.2017 Technology (1,396.55) Payment of Student stipend to Louis Mwamlima - Egerton 13.10.2017 University (2,600.00) 19.10.2017 Transfer from FCDA to holding account (400,000.00) 13.11.2017 IDA Loan - Funds received from IDA 1,772,626.58 16.11.2017 Student Stipend for Nollipher Mponya University of Birmingham (1,733.73) 04.12.2017 Payment Molecular characterization fees - Maize germplasm (6,061.13) 04.12.2017 Bench fees for Nollipher Mponya University of Birmingham (10,773.60) 04.12.2017 Excess baggage allowance for Horace Kakhiwa Asian Institute (1,339.97) 04.12.2017 Transfer from FCDA to holding account (800,000.00) 04.12.2017 Tuition fees for Louis Mwamlima Egerton University (4,748.75) 14.12.2017 Student stipend for Kelvin Dambuleni University of Reading (7,888.69) 14.12.2017 Transfer from FCDA to holding account (200,000.00) 27.12.2017 Tuition fees for Elisa Mazuma University of Nottingham (20,938.14) 19.01.2018 Transfer from FCDA to holding account (600,000.00) 25.01.2018 Student stipend for Lloyd Liwimbi University of Bristol (6,003.48) 31.01.2018 IDA Loan - Funds received from IDA 1,664,802.60 25.01.2018 Student stipend for Mwamlima Egarton University Kenya (4,055.00) 06.02.2018 Tuition fees for Ulemu Msiska - Makerere University (4,749.00) 06.02.2018 Tuition fees for Kelvin Dambuleni University of Reading (15,281.82) 06.02.2018 Tuition fees for Nollipher Mponya University of Birmingham (22,919.24) 14.02.2018 Transfer from FCDA to holding account (1,000,000.00) 08.03.2018 Tuition fees for Lloyd Mwamlima University of Bristol (25,696.50) 16.03.2018 Transfer from FCDA to holding account (700,000.00) 16.03.2018 Transfer from FCDA to holding account (50,000.00) 12 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENTAGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW PROJECT IDENTITY NUMBER: P094183 NOTES TO THE FINANCIAL STATEMENTS - CONTINUED FOR THE YEAR ENDED 30TH JUNE 2018 3.0 Funding Funding from IDA DATE REFERENCE DETAILS AMOUNT (USD) 01.07.2017 Opening balance 613,889.92 03.08.2017 001FIC1172150001 Funds from IDA 2,162,924.45 13.11.2017 001FIC1173180001 Funds from IDA 1,772,626.58 31.01.2018 001FIC1180310001 Funds from IDA 1,664,802.60 11.04.2018 OO1FIC1181010001 Funds from IDA 2,023,377.57 30.06.2018 Total Cumulative funding 7,623,731.20 4.0 Non-current assets FURNITURE BUILDINGS COMPUTERS PLANTS MOTORVEHICLES AND EQUIP TOTAL Opening Balance 4,460,900.00 130,941,912 138,789,009 341,688,149 193,243,109 809,123,078 Additions - 296,948,519 - - - 296,948,519 Closing Balances 4,460,900 427,890,431 138,789,009 341,688,149 193,243,109 1,106,071,597 15 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI -IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 NOTES TO THE FINANCIAL STATEMENTS - CONTINUED FOR THE YEAR ENDED 30TH JUNE 2018 5.0 Cash and Bank ACCOUNT MWK USD IDA Designated Account (US$) 36,006,499 50,359 Holding Account (MWK) 656,357,841 917,983 Bvumbwe Holding account (MWK) 21,867,416 30,584 Operating account (MWK) Bvumbwe Operating account (MWK) - 714,231,757 998,926 6.0 Advances 01.07.2017 Opening Balance 4,930,000 30.06.2018 Closing Balance 5,000,000 7.0 Total Expenditures Total Expenditures 2018 2017 Cumulative Consultants 1,430,281,740 462,428,277 1,892,710,017 Non-Consulting 123,130,956 471,127,756 594,258,712 Training 423,447,226 654,472,656 1,077,919,882 Workshops 1,688,733,934 1,411,543,304 3,100,277,238 Operating costs 2,441,021,507 704,935,237 3,145,956,744 6,106,615,362 3,704,507,230 9,811,122,592 16 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENTAGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERNAFRICA (APPSA), MALAWI- IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 NOTES TO THE FINANCIAL STATEMENTS - CONTINUED FOR THE YEAR ENDED 30TH JUNE 2018 8.0 Government of Malawi Funding DATE AMOUNT(MWK) BALANCE(MWK) 28/08/2017 600,000.00 600,000.00 10/10/2017 287,200.00 887,200.00 12/10/2017 991,660.00 1,878,860.00 1/12/2017 287,500.00 2,166,360.00 1/12/2017 80,000.00 2,246,360.00 11/12/2017 1,600,000.00 3,846,360.00 3/1/2018 433,754.00 4,280,114.00 8/2/2018 717,000.00 4,997,114.00 14/2/2018 300,000.00 5,297,114.00 6/6/2018 107,700.00 5,404,814.00 TOTAL 5,404,814.00 9.0 Foreign Exchange Gain System Amount Date Amount($) Amount realized Gain MWK USD 4/7/2017 600,000.00 429,000,000 502,600,000 73,600,000 102,937 15/8/2017 700,000.00 500,500,000 574,400,000 73,900,000 103,357 15/8/2017 100,000.00 71,500,000 71,800,000 300,000 420 12/9/2017 800,000.00 572,000,000. 574,400,000 2,400,000 3,357 19/10/2018 400,000.00 286,000,000. 287,500,000 1,500,000 2,098 4/12/2017 800,000.00 572,000,000 574,400,000 2,400,000 3,357 14/12/2017 200,000.00 143,000,000 143,600,000 600,000 839 19/1/2018 600,000.00 429,000,000 430,800,000 1,800,000 2,517 14/2/2018 1,000,000.00 715,000,000 717,000,000 2,000,000 2,797 16/3/2018 700,000.00 500,500,000 501,900,000 1,400,000 1,958 17 THE MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT AGRICULTURAL PRODUCTIVITY PROGRAMME FOR SOUTHERN AFRICA (APPSA), MALAWI - IDA LOAN NUMBER: 52030-MW, PROJECT IDENTITY NUMBER: P094183 16/3/2018 50,000.00 35,750,000 35,850,000 100,000 140 20/4/2018 800,000.00 572,000,000 573,600,000 1,600,000 2,238 20/4/2018 200,000.00 143,000,000 143,400,000 400,000 559 17/5/2018 800,000.00 572,000,000 574,400,000 2,400,000 3,357 11/6/2018 150,000.00 107,250,000 107,700,000 450,000 629 11/6/2018 50,000.00 35,750,000 35,900,000 150,000 210 Gain for the year 165,000,000 230,769 Opening Balance 740,983,068 Cumulative gain 905,983,068 18