REPUBLIC OF KENYA MINISTRY OF DEVOLUTION AND ASAL STATE DEPARTMENT OF DEVOLUTION OFFICE OF THE PRINCIPAL SECRETARY Fax No.: 2217869 Telposta Towers Telephone: +254-020-2250645 Kenyatta Avenue Web: httt: /www.devolutionplanning.go.ke P.O. Box 30004- 00100 Email: psdevolution@Pdevolutionplanning.go.ke NAIROBI Ref. No: CB & TA/KDSP/Vol.IV (160) 29th May, 2018 The Country Director World Bank Attn. Ms. Josphine Kabura FINANCIAL STATEMENTS OF THE KENYA DEVOLUTION SUPPORT PROJECT: IDA CREDIT NO.5765-KE FOR THE YEAR ENDED 30TH JUNE, 2017 As per the programme requirement, please find the attached report from the Auditor General for the FY 2016/17 for your necessary action. el1n Marwa Sospeter, EBS PRINCIPAL SECRETARY REPUBLIC OF KENYA OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA DEVOLUTION SUPPORT PROJECT IDA CREDIT NO.5765-KE FOR THE YEAR ENDED 30 JUNE 2017 MINISTRY OF DEVOLUTION AND PLANNING REPUBLIC OF KENYA KENYA DEVOLUTION SUPPORT PROJECT: STATEDEPARTMENTFOR DEVOLUTION CREDITNUMBER:5765-KE Project Preparation Advance No. V009 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2017 ISSUED ON SEPTEMBER 30, 2017 (UNAUDITED) Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) 1) PROJECT INFORMATION AND OVERALL PERFORANCE .......... 2) STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ......................... vii 3) STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30/06/2017/ 4) STATEMENT OF FINANCIAL ASSE TS AS AT 3tJ E20!7 ............................... 2 5) STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOJ-NTS ................3 th 6) STATEMENTOF CASH FLOW FOR THE PERIOD 30 JUNE 201701 7................. 4 7) NOTES TO THE FINANCIAL STATENT .............................................. ...... 8) OTHER 1M P-RTANT DISCLOSURES................................................... 4 ANNEX 1- VARIANCE EXPLANATIONS-COMPARATIVE BUDGET AND ACTUAL A M OUN TS.NT.................................. - 15 ANNEX 2--SUMMARYOFFIXEDASSETREGISTER .... ... ........ 16 APPPENDCE -P 1.......-·--. ···· - ------------. -...16 'Kenya devoluion support project (PPA) Reports and Fm ancial Statements For the financial year ended June 30, 2017 1) PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and Registered Office Name: Kenya Devolution Support Program (KDSP) Objective: ToStrengthen Capacity of core National and County Institutions to improve Delivery of devolved services at the County level. Address:The project headquarters offices are in Nairobi, Nairobi County, Kenya. Kenya Devolution Support Program for Results Ministryof Devolution and Planning State Department for Devolution Teleposta Towers P.O.Box 30004 -00100 NAIROBI 1.2Project Information Project Start Date: Effective Date: September 15, 2016 Project End Date: Expected Closure: December 31, 2020 Project Manager: Martin Anyango Project Sponsor: The program sponsors are the Government of Kenya (GOK) which will contributeUSD$87.3, and IDA which will contribute USD$200 million. Total Financing USD$287.3 million. Kenya devolution support project (PPA) eports and Financial Statements For theflnancial year ended Jrine 30, 2 17 I.3Project Overview Line Ministry The project is under the supervision of the MODP State Departmnent for Devolution Ministry. Project Number CR-5765-KE Strategic Goals of the To contribute, enhance and strengthen capacity of counties to manage Project resources and improve service delivery. 5 key result areas: a) KRA 1: Public Financial Management b) KRA 2: Planning, Monitoring and Evaluation c) KRA 3: Human Resourceand Perfa'rrnce Management d) KRA 4: Devolution and Inter-Governmental Relations e) KRA 5: Civic Education and Public Participation Achievement of KRA 1 Achievements Strategic Goals Some activities implemented by NT Departments include 47 County Governments officers trained on various Budgeting and Accounting Modules. There was Technical Support to County Governments and development of a National Framework Policy/Legislation to support County Own Revenue enhancement, and sensitisation and training on the PPDA -2015. KRA 2 Achievements MODP reviewed and developed the CADP and CIDP guidelines, through county governments and other stakeholder's consultative forums. It also provided Technical Assistance to some selected counties on M&E KRA 3 Achievements MOPSYGA had tremendous achievement in the year under review in all the Capacity Building Modalities. There was CurriculurnDevelopment and converting manuals into training materials. KRA 4 Achievements All the 47 counties opted for the program and submitted their Capacity Building plans for FY 2016/17, which have informed the National Capacity building plans. The County allocations for FY 2016/17 were included in the CARB and DORB. However, for the second disbursement against this DLI in FY 2016/17, the Government did not disburse the full amount of the first tranche to county governments as per Program entitlements. By the end of the period under review, the counties had fulfilled requirements for accessing the capacity building grants as per this DLI, but had not received the Ksh.1.41 billion because these grants were not included in the FY2016/17 CARA KCenya devolution support project (PPA) Reports and Financial Statements For the financial year ended June 30, 2017 KRA 5 Achievements The department has developed a comprehensive set of guidelines to enable effective county performance in this area. The Program will provide resources for the department to contract expertise to complement staff, and operating resources to enable outreach to counties. The department will finalize training modules, roll out a civic education program, approve and disseminate public participation guidelines and provide training and backstopping to counties. Other important KDSP is implemented using the existing intergovernmental architecture as background enshrined in the Constitution of the Republic of Kenya, 2010. The counties information of the are responsible for planning, budgeting, implementing and reporting on project Program-funded activities, consistent with their mandate under the County Government Act and the Public Finance Management Act. County Governments are also responsible for implementing activities to improve their institutional capacity in key results areas as articulated in the National Capacity Building Framework (NCBF). Several National Government Agencies are supporting the KDSP program implementation, namely, MoDP-responsible for overall Program Management; the National Treasury, MoPSYGA-DPSM and KSG provide capacity building support to Counties in the Program Key Results Areas (KRAs); and the Office of the Auditor General (OAG)-responsible for all program audits. The Program-for-Results (PforR) financing instrument is a results-based approach to building capacity for devolution which will leverage the effectiveness of other capacity building resources at both national and county levels. The PforR instrument will support the Government to introduce a well-targeted incentive structure in which clearly identified performance is linked to disbursement and leveraging the institutional outcomes which the Program is meant to achieve. Since the PforR focuses on enhancing existing Country Systems and financing for capacity building, it will reinforce Government's own program and system strengthening initiatives, including through providing Results-Based Financing (RBF) directly tb counties. Current situation that It was against the above backdrop that the Government developed the the project was National Capacity Building Framework (NCBF) in 2013 to mitigate the formed to intervene major capacity challenges posed by devolution. The overall objective of the NCBF is "to ensure the devolution process is smooth and seamless to safeguard the delivery of quality services to the citizenry." The NCBF has five pillars: Training and Induction; Technical Assistance to Counties; Inter-governmental Sectoral Forums; Civic Education and Public Awareness; and Institutional Support and Strengthening. KDSP supports national and county-level results that contribute to strengthened institutions for devolved service delivery. Essentially, the PforR supports and incentivizes national government to provide improved capacity building support to counties in each KRA, while simultaneously supporting counties to make system and capacity improvements. Project duration 4 years Kenya devoi~ suPPOTT Project ,(PPA) RePorls anzd Finlancial Statements For the jtnancial year ended June 30, 2017 L4Bankers Ihe fol1owing are the bankers for the CurrentyeaIr: ILocaIi)7ro!eCtA Coi,,,4 Ce.ntral Bankl of Kenya-AcotN raofenya ccountNo. 1000307366 f4aileSelassie Avenue. P.O.Box60000-O200, Nairobi,Kenya Spec ial Deeosit Account Central Bank ofKenya-AccountNo.1000291688 lieai3e.-lassie Avenue, P.O.Box 60000-0200, Nairobi,Kenya L5 Auditors Auditor General Office ofAuditor General AnniversaryTowAers,Uaniversity Way P.O.Box30084 Nairobi, Kenya L6Projeet -Governance The Projects governance frame work requires the stakeholders to uphold the Ighest Professional, ethical, moral and legal standards, This is achieved through effective segregation of duties with clear checks and balances as articulated .in the Project Loan/Credit A greement, the PFM Act 2012,the Project Design Report, the -iplementation Manual and the Finance and- Procurement Manuals. 1. The Project Steering Committee (PSC This Committee is responsible for overseeing the implementation ofthe Project, approving the annual work pman and bUdget, and en1SUring thatb thel~e-r donor and governmfent policies.~cv e con ~ *Ah . 2-T-he Word-Rank- These are the project sponsors. They are responsible for reviewing and approving the project's withdrawal applications, expenditure justification n objection requests, reviewing and approving the annual work plan and budget, expenditure category reallocation request, and participating in implementation SUppdort miessionit Kenya devolution support project (PPA) - Reports and Financial Statements For the financial year ended June 30, 2017 3. The Parent Ministry The parent ministry, State Department of Devolution, ensures that the Project's budget is captured in its development Projects and disburses the government counterpart funding. The Ministry reviews and tracks the Project's annual work plan and budget against these targets and makes the approvals. The parent ministry also oversees the execution of the project coordinating team. 4. TheAuditor The Supreme Audit Institution in Kenya, that is, the Office of the Auditor General, is mandated by the Constitution of Kenya Chapter 12, Part 6, and Article 229 which establishes the Office of the Auditor General. Chapter 15,Article 248,Section 3 and Article 249,Section2(a) and (b) and Section 10 of the Public Audit Act,2015 provide for the independence of the Office of the Auditor General. The Auditor General is mandated to audit all National Government entities, which include government development projects and present these statutory financial statements to the Parliament. This facilitates the submission of the audited report to the project's sponsors by 3 1 December each year. 5. Project Coordinating Team (PCT) This team is based in Nairobi and is responsible for the project management and coordination functions. The PCT comprises of the Project Coordinator and a team of Technical Officers. The PCT is also supported by other administrative staff. These key staff, who form the project coordinating team that is involved in the day to day management of the project and its implementation are: Name and Contact Title Qualifications Responsibilities details Designation Mr. Martin Anyango Program MBA (Finance) Coordination of the day 0722749638 Coordinator B.Com(Accounting today Email: Option), Activities of the Program. Postgraduate Diploma in Governance Nyabicha Onang'o. IGFR B.Comr(Accounting Provide Leadership to the 0722701923 Expert/Team option), MSc(Finance), team of Experts and support Email: Leader of CPA(K) project on IGFR activities Consultants Kenya devolution supportproject (PPA) Reports and Financial Statements ' For tlefinancialyeair ended June 30, 2017 Mr. Simon Ochieng. Monitoring & MA (International Support national and County 1-!167484 EvaluatIon Studies); MA (Project ImLementation Agencies in Eert Planning & l reas of M&E and Management): PGD reporting (Project Planning, Absolom Ayodo Capacity BA (Economics) Lead the capacitv Building 0722823599 Building l Strategy and ensure its Email: Expert implementation as envisaged absayodo@yahoo.c in KDSP at National and om County Level Treza Bwanzo Public MBA(Finance) Support Project 0721771103 Financial BA Degree (Economics) Coordination in KIRA I - Emai: Management CPA (inancia trezabodhiambo@g Expert Maae-n - i mail.com Management activities Alice Wanjiru Project MBA(Finance) Managing monitoring and Iwanki. Accountant eB(co unting and reporting on the accountinC 0722866754 Fnne 072286 4 inance) functions of the Proiect. mail: CPA (K) alwapeterl@yahoo.c1 om 1.7 Funding Summary The -Projeet- was for duration of -One year- ~from A Jly-21-to-30 Iue 20-1-7 with -an- approved budget of (Unit of Account) USD 1,000,000 equivalent to about KShs. 101,170,000 as higblighted in the table below: ource of funding mAnount received todate Undrawn balance todate summary Donor Commitment L Source of (30 June,2017) funds th 7fiuinds (30 June,2017) onor Donor onor currentt precUrren cy USD Kshs (USD) JKShs J(USD) KSs ()(A') (B) (B') (A) (A') LOANSUMMARY World Bank 1,000,000 101,170,000 999,900 101,159,88 100 10,117 Total Grants 1,000,000 101,170,000 999,900 101,159,88 100 10,117 Kenya devoiiuiion supportpo.cf (P~ Reports and Financial Statements Fo the financial year ended June 30, 2017 1.8 Summary of Overall Project Performance: During the year under review, the Project received KShs. 101,159,883 and incurred a cumulative expenditure of KShs. 99,995,994.00. 1.9 Receipts Utilization The Project received KShs. 101,159,883 against a final budget of KShs. 101,170,000. This represented utilization of 99.99%. 1.10 Payments Utilization The Project paid KShs. 99,995,994.00 against a final budget of KShs. 101,170,000. This represented utilization of 98%. Challenges Encountered The table below summarizes the challenges encountered and recommends way forward: Challenges 1 haleB e Recommendation/WayForward 1 Budgetary Allocations to the Sensitization of the Chief Finance Officers to NMAs enhance MDA budgets so as to cater for program activities. 1.11 Summary of Project Compliance The Program has ensured that all its activities carried out are within the laws of the Republic of Kenya and that all regulations and procedures have been followed. Among the regu lat ionsinc ou the Environmental and Social Impact Assessment(ESIA) for which authority was issued for the implementation of the project. In casesof inconsistency between the GOK Regulations and those of the donors, the latter have been applied. Vii PaK Keny devludo SuPOrN project (FFA4) Repots and Financial Staternenia Fr the financial year ended June 30 2017 2) STATEMENT OF PROJECT MANAGEMENT RESPONSIBMITIES The Principal Secretary for the State Department For Devolution and the Project Coordinator for KDSP 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 Iancial ar ended on Te,ta 2017. 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 financialn ri I roj ect; I iii reasgnab implementing and maintaining internal controls relevant to the preparationi and fair presentation of the financial statement and ensuring that they are fee from material misstatements, whether due to error or fnaUi4sga gthe set Ro the rojct;() slectne nd Dolv toerro orfau;(iv)safeguarding the assets of the Proiect.(vM selecting and av lving appropriate accounting policies; and(vi)manLing, accounting estimates that are reasonable in the circumstances. The Principal Secretary for the State Department for Devolution and the Project Coordinator for KDSP 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 Pricipal Secretary for the State Department For Devolution and the Project Coordinator for KDSP project are of the oinio that the Project's financial statements give a true and fair view ofule state of Proect's transactions during the financial year ended June 30,2017, and of the Project's financial position as at that date. The Principal Secretary fror the State Department For Devolution and the Project cordsainta for tP project, farther confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of he Project fLmanc statements as wcno as the adequacy of the systems of internal financial control. I_ Thd -~nr iciPI S-6cferayS I 6-r-thcStae -a61' andn- Fathvii6nnd-fe - arojct Coordinator for KDSP proect confirm that the Pro ect has com Prje appcabe Govenment Regulations andtte ero s cmplied fully with that Project funds received during the financial year under audit Were used for the eligible purposes for which they were intended ander propere u nte for.Approval of the Project financial statement.operly accounted Approval of the Project financial statements The Project financial statements were approved by the Principal Secretary for the State Department for Devolution and the Project Coordinator for KDSP projection 29h September, 2017 andsigned by them. Principal SecretaryPrjcCodiar Micah Pkopus Powon Martin Anyango Prt Acutn A ice Wanjini Mwaniki REPUBLIC OF KENYA Telephone: +254-20-342330 P0. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: wwwkenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON KENYA DEVOLUTION SUPPORT PROJECT IDA CREDIT NO.5765-KE FOR THE YEAR ENDED 30 JUNE 2017 - MINISTRY OF DEVOLUTION AND PLANNING REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Devolution Support Project IDA Credit No. 5765-KE set out on pages 1 to 18, which comprise the statement of financial assets as at 30 June 2017,and the statement of receipts and payments, statement of cash flows and statement of comparative budget and actual amounts, 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 Financing Agreement Credit Number 5765-KE dated 15 April 2016 between International Development Association (IDA) 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, the financial statements present fairly, in all material respects, the financial position of the Kenya Devolution Support Project as at 30 June 2017, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the terms of the Financing Agreement Credit No. 5765-KE dated 15 April 2016. In addition, the special account statement presents fairly, transactions for the year, and the closing balance has been reconciled with the books of account. Further as required by Article 229(6) of the Constitution, I confirm that public money has been applied lawfully and in an effective way. Basis for Opinion The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Kenya Devolution Support 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. Report of the Auditor-General on the Financial Statements of Kenya Devolution Support Project IDA Credit No.5765-KEfor the year ended 30 June 2017- Ministry of Devolution and Planning PromotingAccountability in the Public Sector Key Audit Matters Key audit matters are those matters that, in my professional judgement, were of most significance in the audit of the financial statements of the current Year. There were no Key Audi Matters to report in the year under review. Responsibilities of Management and Those Charged with Governance for the Financial Statements The 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 misstatement, whether due to fraud or error. In preparing the financial statements management is responsible for assessing the Project's ability to continue sustaining services, disclosing, as applicable matters related to sustainability of services and using the going concern basis of accounting unless management either intends to have the Project cease operations or have no realistic alternative but to do so. Management is also responsible for the submission of the financial statements to the AuditorGeneral in accordance with the provisions of Section 47 of the Public Audit Act, 2015. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor-General's Responsibilities for Audit of the Financial Statements 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 audtor'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 of Kenya. 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 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 h As part of an audit conducted in accordance with ISSAes, 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 rom error, as fraud may involve Report of theAudhor-General on the Financial Statements f Kenya Devolution Support Project ID4 Credit No.5765-KEfr the year ended 30 June 2017- Minstry of Devolution and Planning 2 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 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 sustain its services. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether 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 28 December 2017 Report of the Auditor-General on the Financial Statements of Kenya Devolution Support Project IDA Credit No.5 765-KE for the year ended 30 June 2017 - Ministry of Devolution and Planning 3 Kenya devolution support project (PPA) Reports and Fimancr. l Statements For the financial year ended June 30, 2017 3) STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30/06/2017 Cumulative Note FY2016/17 FY2015/16 ToDate Receiptsand Receiptsand payments payments Kshs Kshs Kshs rCEIPTS Loan from External Development Partners 8.5 101,159,883 - 101,159,883 TOTALRECEIPTS 101,159.883 - 101,159,883 AYMENTS Purchase of goods and services 8.8 52,568,743 - 52,568,7431 Acquisition of Non- Financial Assets 8.10 46,449,271 - 46,449,271 Other grants and transfers and payments 8.12 977,980 - 977,980 TOTALPAYMENTS 99,995,995 - 99,995,995 SURPLUS/DEFICIT 1,163,8891 - 1,163,889 The accounting policies and explanatory notes to these financial statements are an integral part of the financial statements. The Project Financial Statements were approved on 29th September, 2017 and signed by; Principal Secretary Project Coordinator Projeof Accountant Micah Pkopus Powon Martin Anyango Alice Wanjiru Mwaniki 1 Pag e KCenya dev'oLution sw~ .~P~IC P/ 'eports and Finan ar projeclate, (p r or the ianca atri nt j i fiei yer ended Ju0e 30 2017 41 STA4TEMEI OFIFNANCIAL ASSETS AS A.T30th Note ~2016/1720 16 INANCIAL AÅSSE T8 KSs 0h/s Jash and Cash Equivalept Bank Balances 8.131 L otal Cash Equiv,alentis l6,89 ,TOTAL FINANCIAL ASSE TS EPRESENTED By Funa Balan e B/forward Suarplus/Deficit for fhe year 63,8.89 ET FINANCIAL POSIION The accounlting -p-o.6388 ntegai prt o h lcieS anld explanatorynostot 29ra SPember, 201 tde fiaa statements. The financial statenracnents forma anvd o M lcah Pkopus PowOrl Mrt iAnyango PojeJt AContn Ahc WnjruMwanik; Kenya devolution Suppotprjc(P4 Reports and FIr a tca jaeer'TPA For the financial year ended June 30, 2017 5) STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Original Actual on Consolidated Origet Final Comparable Utilization %of Budget djustments Budget Basis Variance Utilization Receipts/Payments A B c=a+b D e=c-d f=d/c% Item Receipts Loan rom External Development Partner - 48 59 140 44921 6 Total Receipts - 101159883 101 159883 100% Pa ments - 101 159 883 101 15994 8 Use of goods and services T 52g6fian budge uem Acquisition of - 26073 5258%4 on-financial sa100% Assets - 45110 j-AA - Other Grants ad- 459,4 464921 2 141 869 86% Otalr Pa ments ~- 977,980 -977,980 Tota Pa en- 101 159,883 99 995 994 1r 16388 Ne: iTheigAnifcant bugtHtlzatonperfmrmance differences in the last column are Prncpane SereAy x oteefnacattmns Principal Secretary Project Coordinator Projecf Accountant Micah Pkopus Powon Martin Anyango Alice Wanjiru Mwaniki 311 P ePits ad F" a12ci-r ýai c (Pt 1ear ended June 30. 20% 6) STATEMENT OF CASH FLOW FOR THE PERIOD 30th JUNE 2017 2016/17 2015/16 Recei ts for o eratin activities Note 20 6 7 25/ KShs Payments for afillg acb *f*i Purchae of gods ads ra t ies . Other grants and transéers 8.8 0,81 (52,568,743) Adiustedfor: 29) Net cash flow fron o eratin activities CASHFLOWFROMIN 5,546,723 CAHsil nOW FROM INVESTING ACTIVITIES Acquisition urfAssets e casli o s a esano tes (4 ea 6,449,27i) CASH---- FLWFO1OR (46,449,27 n CeS FOm Fori Borro NG ACTIVITIES Neash low from fie 8 55088 nancino atin Anaa101,159,883 NE T INCREAsE IN CASH 10,159,88 EQUDVALENT ADCS ear euvenatBEGINNN: fte6,8 Cash and cash e Ulvalent at END of the year- The accouintin o i-e n- ,6,8 sflri'w-ttiniýs g-hedni bylrarea-l-stafeet-e re po-r an integral part Micah PkOUS-PowonMartin Anyango Prje coutiiL Aliée Wanjiru Mwaniki Ji) A'enya devoJu1:10j_ SiqPpor'projea~ pA) RePolts and Financial Statements F1 tfe financial year ended June 30, 2017 7) 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 noted below. This cash basis of accounting has been supplemented with accounting for; a) receivables that include imprests and salary advancesand 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 Devolution Support Programme (KDSP)under the State Department for Devolution. The financial statements encompass the reporting entityas 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 recognizes all receipts from the various sources when the event occursand the related cash has actually been received by the Government. *Transfers from the Exchequer Transfer from Exchequer is recognized in the books of accounts when cash is Receive. 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. 51 P a Icenv de,olutor s Pprpro/eal (PP4) ReOports and F_inancial Staltents For the financial year ended June 30, 2017 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.2 Significant Accounting Policies (Continued) a) Recognition of receipts AIOaCions and gran&' Sa ons sha e rognized in the books of accounts when cash is receivedt e i osiyee reei dwhen 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 itemn and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Borrowing includes 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 receivedIc. undawn exernal1assi--nc These are loans and grants at reporting date as specified in a binding agreement and relteto uningfo -te rojctcurently 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 exernal asSIstanice is shown in the funding summary b) Recognition of p7ynents The Project recognizes all payments when the event occurs and the related cash has actually been paid out by the Project. *Compensation of employees 0alaries 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/servies5 are consumed, they sifiall b0e diSCIIoSed as pDI1inig 1111S L61 il Kenya devOlution support project (PPA) Feports and Financial Statements Fdr the financial year ended June 36, 2617 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.2 Significant Accounting Policies (Continued) b) Recognition of Payments (continued) *Repayment of borrowing(PrincipalAmount) The payment of principal amount of borrowing is recognized as payment in the period in which the payment is made. eAcquisition 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 asreceipt 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 Bank account balances include amounts held at the Central Bank of Kenya, 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 authorized public officers and/or institutions which were not surrendered or accounted for at the end of the financial year but there were no cash imprests and advances. 71 11a g e, Kenya devolution support project (PPA) Reports and Financial Statements For the financial year ended June 30, 2017 8. NOTES TO THE FINANCIAL STATEMENTS (contfinued) 8.2 Significant Accounting Policies(Continued) e) Accounts receivable For the purposes of these financial statements, imprests and advances to authorized Public officers and/or institutions which were not surrendered or accounted or 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 There were no pending bills at the end of the financial year. g) Budget The budget is developed on a comparable accounting basis (cashbasis), the same accounts classification basis(except or 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 s-by t he p arti cipatin-g- dvMe-ft-y-a Budget Printed Estim tes for the year. The Development Projects are budgeted for separately. These transfers are recognized as in the 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. Kenya devolution SWOITProjea (pp Reports and.Financial Statements F6r the ancia'Year ended June 30, 2017 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.2 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 Scurrencies during the year/period are converted into the functona currency using the exchange rates prevailing at the dates of the transactions. Any forign 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 recognized in the Statements of Receipts and Payments 8.3.Receipts from Government of Kenya Receipts from the government are either counter part funding or other transfers. Counterpart funding represents the Government's share of contribution towards the implementation of the Project. These amounts are disbursed by the Parent Ministry in line with the budget. Other transfers from government entities represent support received by the Project from other government entities including the State Departments and Projects listed above for the implementation of its activities. 8.4. Proceeds from Domestic and Foreign Grants These are grants received from development partners directly through the Exchequer and through Ministries and Departments during the 12 Months to 30 June 2017. 91 P a e Kenya devolition Support project (PPA Renorts and Financial Statements For the financial year ended June 30, 2017 8. NOTES TO TIHE FINANCIAL STATEMNTS (continued) 8.5. Loan from External Development Partners Tresle comp o i CeintS reeihed from borrowing from bilateral, multilateral and commercial lending institutions. Duringr the 12 months to 30 June 20 ,crcivdfidn from development partners in form of loans negotiated by the National Treasury as detailed in the table below: Nameof Date Amount in Loans Donor I a loan received in cash receiven currency Total amount Sh Loans Received from Multilateral Donors (International Organizations) USD KShs KShs KShs IDA 11/10/2016' 999,900 101,159,883 01,159,883 Total 0999,900 101,159,883 101,159,8831 8e6, Miscellaneous Receipts There were no other receipts like fines, penalties and other fees and charges for the project 8.7. Compensation of Employees There were no compensation of employees during the financial year ending 30th June, 2017. 10! Kenya dev'oiulji-, Sp ortroects(pA J?eors ad Inancial Statements ancialyear ended June 30,2017 8. NOTES TO THE F'NANCIAL STATEAETS (Continued) 8.8. Purchase of Goods and Services These comprise the total value of goods and services consumed by the Project. Total Paayments Cumulative Payments made by todate the Entity FY2016/17 FY2015/16 Trainin ex enses vis t KShs KShs KShs Total 52568743 52,568,743 KShs 522568774 8.9. Social Security Benefits There were no Payments in relation to Social Security Benefit for the project. 8.10. Acquisition of Non-Financial Assets Thesereprse thayments mdm ct aquire propey, plant and equipment and other assets teassets pustrhasbe inahe as an appendix to these financa taotunts poilrporatntg Total Payments Cumulative Paymentstode ade by the utity Purchase of vehicles &other KhFY0Kh FY2015/16 Trans ort e u* metKhs Kh Pure ase oo ulcentur 18621,150 18,621,150 GeneraI e ui ment 1 2 5 Total 27 828 121 27 828 12127 811 46 449 271 46 449 271 46 449 271 46 449 27 Kenya devolution support projects(PPA) Reports and Fmnancial Statemients For thiefinancial year ended June 30,267 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.11. Transfers to other Government Entities There were no non-compulsory transfers to either MDAs, Projectsand County Governments. 8.12. Other Grants and Transfers and Payments Included in other transfers and payments are disbursements to other non-reporting entities. These are considered as payments at the point of transfer. Cumulative Total Payments to-date Payments Made by Payments Mate made by KShs KShs KShs KShs KSh.4 T\ifScellaneous 9.7,98011 977,989790 an eus 1 Total 977,980~ 977,980~979O otal97,8 8.13.Cash and Cash Equivalents carriedForward These comprise of cash book bank and cash b ances and short-termdeposs as at3h Jun 21 7and comparatives for financial year to 30 June2 016 representedbybank balances. FY2016/17 FY2015/16 KShs KShs Ban accounts(Note8.13A) 1,163,889 Total 1,163,889 121 Pag e II'efiYaaevOlUt'Or, S uPPO,IProjeca(PJ,4) &RPOrts` and Financial Statements F61 thefinancial year ended June 30, 2017 8.NOTESTOTHEFINANCIALSTATEMENTS(continued) 8.13. A) Bank Accounts i) Project Bank Accounts Local Currenc Accounts FY216/17 FY2015/16 Central Bank of Kenya[A/cNo.1000307366] 1,163889 KShs Total local currency balances Total bank account balances 1 163 889 ii)Special DepositAccounts The balances in the Project's Special Deposit Accounts as at 30th June 201 7are 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. The Special Deposit Account (SDA) movement schedule which shows the flow of funds that were voted in the year is presented below. These funds have been reported as loans/grants received in the year under the Statement of Receipts and Payments Lch.eule 2016/172061 ()Cntral Bank of KenYal[A/cNO:J USD" 20KSh Total amountdpstdiih con deosillinhe cunt25,817,919.44 2,611,998,909.75 Total amount withdrawn(as per Statement of (99190 11,98 3 Recei t Pa ents101,159,883 Closing balance(as per SDA bank account 24,818,01944 2,510,83902675 Reconciliation attached The Special Deposit Account reconciliation statements have been attached as Appendix v to support these closing balances. 13 1 P~ kt Kenya devolution support project (PPA) Reports and Financial Statements For the financial year ended June 30, 2017 8. NOTES TO THE FINANCIAL STATEMENTS (continued) 8.13. B) Cash inHand There were no cash balances held at the different Project implementation locations 8.13. C) Cash equivalents(short-term deposits) There were no amounts held with various financial institutions for the purposcs of earning interest. 8.14. Outstanding Imprestand Advances There were no outstanding imprest and advances for the project. 8.15. 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