AUDITOR GENERAL'S REPORT Public Sector Modernization Project (PSMP) Financial Statements For the period July 1, 2017 to June 30, 2018 December 2018 Yusador S. Gaye, CPA, CGMA Auditor General, R. L. Auditor General’s Report on the audit of Public Sector Modernization Project (PSMP) For the fiscal period ended June 30, 2018 Table of Contents Opinion ............................................................................................................................ 3 Basis for Opinion .............................................................................................................. 3 Management Responsibility for the Financial Statements ............................................... 3 Auditor’s Responsibility ................................................................................................... 4 Statement of Receipts and Payments ........................................................................... 5 1 Project Designated Account Statement .................................................................... 6 2 NOTES TO FINANCIAL STATEMENTS ......................................................................... 9 NOTES TO THE FINANCIAL STATEMENTS....................................................................... 11 3 PROJECT DESIGNATED ACCOUNT STATEMENT ....................................................... 14 1 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 ACRONYMS USED Acronyms/Abbreviations/Symbol Meaning AFP Audit Focal Person AG Auditor General CGMA Chartered Global Management Accountant COSO Committee of Sponsoring Organization CPA Certified Public Accountant FSs Financial Statements GOL Government of Liberia FY Fiscal Year PSMP Public Sector Modernization Project IAU Internal Audit Unit IBRD International Bank for Reconstruction And Development IDA International Development Association IFRs Interim Financial Reports INTOSAI International Organization of Supreme Audit Institutions IPSASs International Public Sector Accounting Standards ISSAIs International Standards of Supreme Audit Institutions CSA Civil Services Agency OFM Office of Financial Management POC Project Oversight Committee PCO Project Coordination Office PIM Project Implementation Manual QPR Quarterly Progress Report SOE Statement of Expenditures ToR Term of Reference 2 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 AUDITOR GENERAL’S REPORT Hon. Laurine Wede Johnson Director General Civil service Agency Cary Street Monrovia, Liberia December 31, 2018 Dear Hon. Johnson Re: Auditor General Report on the Audit of the Public Sector Modernization Project (PSMP) Financial Statements Opinion We have audited the accompanying financial statements of the Public Sector Modernization Project (PSMP) for the fiscal period ended June 30, 2018 financed by World Bank (IDA 53590; TF A1263; TFA1263) which comprise the statements of Receipts and Payments, Comparison of Budget and Actual Amounts and a Summary of significant Accounting Policies and other explanatory information. In our opinion, the accompanying financial statements (IDA 53590; TF A1263; TFA1263) present fairly, in all material respects, the Statement of Receipts and Payments as at June 30, 2018, Statement of Comparison of Budget and Actual Amounts and a summary of other accounting policies and explanatory notes for the fiscal period then ended in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis of Accounting. Basis for Opinion We conducted our audit in accordance with International Standards for Supreme Audit Institutions. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements Section of our report. We are independent of the entity in accordance with the Code of Ethics for Supreme Audit Institutions together with the ethical requirements that are relevant to our audit of the financial statements in accordance with the World Bank guideline and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Management Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSAS 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. 3 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 In preparing the financial statements, management is responsible for assessing its ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to cease operations, or has no realistic alternative but to do so. The PSMP Management is responsible for overseeing the Project’s financial reporting process. Auditor’s Responsibility Our 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 our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs 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. Monrovia, Liberia December 2018 4 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 FINANCIAL STATEMENTS Public Sector Modernization Project (PSMP) Statement of Receipts and Payments For the 12 months ended June 30, 2018 Receipt Receipt FY FY Notes 2017/2018 2016/2017 Receipts US$ US$ IDA(World Bank) Fund 4 1,845,291.00 1,878,588.00 1,845,291.00 1,878,588.00 Total Receipts Less Payment: Payment Improve Pay management 5 8,940.00 148,369.00 Strengthened payroll 6 198,645.00 411,865.00 Management Improved Performance 7 185,228.00 420,340.00 Program/ project Management 8 1,131,433.00 921,147.00 Total payments 1,524,246.00 1,901,721.00 Decrease/ Increase in cash 764,869.00 443,824.00 Cash at the end of the year 9 764,869.00 443,824.00 The notes found on page 9-14 are an integral part of these financial statements 5 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 The notes found on page 5-11 are integral part of these financial statements 1 Project Designated Account Statement Account Number 1502021698 Statement Of Fund Balance And Cash Status For The Year Ended June 30, 2017 In United States dollars A. FUND BALANCE 2018 June 2017 June Balance of Project Fund b/f Add: Total Receipts during the period 443,823.00 466,956.00 Total fund available for operations 1,845,291.00 1,878,588.00 Less: Total payments during the period 2,289,114.00 2,345,544.00 Total fund available for operations 1,524,246.00 1,901,721.00 Balance of project funds at the end of the year 764,869.00 443,823.00 A. CASH STATUS: Cash at bank 764,869.00 443,823.00 Total cash on hand and in bank Difference between A and B - - The notes found on page 9-14 are an integral part of these financial statements 6 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 Public Sector Modernization Project (PSMP) Statement of comparison of the budget & Actual amounts For the period ending June 30, 2017. (Note 10) Actual Percentage Final Variance Original Budget Amounts Variance Budget US$ US$ US$ (%) Cash Inflows IDA Grant 1,845,291.00 1,845,291.00 1,524,244.00 321,047.00 17.40 Cash Outflows Improve Pay Management 2,023,636.00 64,450.00 8,940.00 55,510.00 86.13 Strengthened payroll 51.77 Management 1,496,272.00 411,870.00 198,645.00 213,225.00 Improved Performance 3,144,515.00 435,177.00 185,228.00 249,949.00 57.44 Program/ project Management 893,152.00 1,329,240.00 1,131,433.00 197,807.00 14.88 Total Payments 7,557,575.00 2,240,737.00 1,524,246.00 716,491.00 31.98 The notes found on page 9-14 are an integral part of these financial statements 7 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2018 In United State Dollars Assets Notes 2018 2017 Cash and cash equivalent 764,869.00 443,823.00 Total Assets 764,869.00 443,823.00 Fund Balance Grants 764,869.00 443,823.00 Accumulated 764,869.00 443,823.00 The notes found on page 9-14 are an integral part of these financial statements 8 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 NOTES TO FINANCIAL STATEMENTS 1. Background and Information of the project With support from the International Development association AID-Us Agency For International Development (Usaid), SIDA-Swedish Intl. Dev. Cooperation Agency (Sida); the PSM-Project is to improve pay and performance management in participating ministries, and strengthen payroll management in the civil service in Liberia. The project has four components. The PSM Project was approved by the World Bank on February 10, 2014 and other Partners with a grant amount of USD 10.71 Million. The aim of the project is: I. Improved Pay Management II. Strengthened Payroll Management III. Improved Performance IV. Program/Project Management 2. Use of Grant Proceeds The table sets out the categories of items to be financed out of the grant proceeds, the allocation of the amounts of the grant to each category and the percentage of expenditures for items to be financed in each category: Category Amount of % of grant allocated expenditure expressed in to be US$ Million financed Improved Pay Management 3.18 30 Strengthened Payroll Management 3.05 28 Improved Performance 3.38 32 Program/Project Management 1.10 10 TOTAL 10.71 100 All categories of expenditure shown in these financial statements are fully financed based on the percentage below: % of Expenditure USAID 47 IDA 19 SIDA 34 Total 100 9 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 NOTES TO FINANCIAL STATEMENTS (continued) 3. Significant Accounting Policies Basis of Accounting The financial statement have been prepared been in accordance with the Cash basis International Public Sector Accounting Standards (IPSAS) and in the manner required by the project Grant Agreement as required by the World Bank’s Operating Policies and procedures and PFMU’s Financial Management manual. This implies that all expenditures are expensed whether they are revenue or capital in nature and income is recognized when funds are received from the World Bank. Reporting currency Financial reports have been presented in United states Dollars Transactions denominated in other currencies are translated into United Stated Dollars and recorded at the rate of exchange ruling at the date of transactions. Balances denominated in other currencies are translated into United States Dollars at the rate of exchange prevailing on the reporting date. 4. Grant Grant from PSMP is held in a deferred income account when received and rae only recognized in the project’s income statement when utilized. The notes found on page 9-14 are an integral part of these financial statements 10 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS Funds received under the Public Sector Modernization Project For the twelve (12) month ended June 30, 2018 FY Grant Receipt 2017/2018 FY In United State Dollars US$ 2016/2017 US$ PSMP/MFDP/006-IDA 53590 - 94,000.00 PSMP/MFDP/001-TF A1263 - 1,784,588.00 PSMP/MFDP/002-TF A1263 1,845,291.00 - Total 1,845,291.00 1,878,,588.00 The notes found on page 9-14 are an integral part of these financial statements 11 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 Expenditures incurred under the Public Sector Modernization project (PSMP) For the twelve (12) month ended June 30, 2018 FY Note FY 2016/2017 2017/2018 Improve Pay Management 5 Develop CSA Pay Strategy - 27,111.00 Civil Servants mapped-grades 30,878.00 - Training-Grading Job Evaluation & Class 90,000.00 - CSA aware of pay reforms - - Strengthening Pension Unit 380.00 8,940.00 TOTAL 8,940.00 148,369.00 Strengthening Payroll Management 6 CSA & MAC HR Office Employees - 4,226.00 HRMIS-Biometrics Decentralization 92,070.00 85,794.00 Produce Biometric ID cards 106,575.00 313,463.00 IT Infrastructure Upgrade & Supp - 8,382.00 TOTAL 198,645.00 411,865.00 Improved Performance 7 Org design model & methodology 8,357.00 167,712.00 Org diagnoses carried out MACs - 3,500.00 Reversal org structure 10 MACs-GC 26,642.00 68,077.00 Armed mandate & function of MACs 113,524.00 126,716.00 Heads of Department & Divisions Training 34,435.00 32,390.00 Perf Management Training rolled out in MAC 2,270.00 21,945.00 TOTAL 185,228.00 420,340.00 Program/Project Management 8 Workshop/Retreat/Forum 53,173.00 43,596.00 General Operations 486,305.00 211,016.00 program Implementation Support 44,819.00 12,893.00 Office-Capacity Support 2,498.00 - Consultancy 12 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 801,474.00 378,353.00 PFMU Services 18,453.00 TOTAL 1,131,433.00 921,147.00 9. Statement of Comparison of Budget and Actual Amount With support from the International Development Association, AID-US Agency for International Development (USAID), SIDA-Swedish: Intl. Development cooperation Agency (Sida); the PSM- Project is to Improve pay and Performance management in participating ministries, and strengthen payroll management in the civil service in Liberia. The project has four components. The PSM Project was approved by the World Bank on February 10, 2014 and other partners with a grant amount of USS10.71 Million. The aim of the project is:  Improved Pay Management  Strengthened Payroll Management  Improved Performance  Program/Project management The total Grant amount approved by the IDA (“World Bank”) for the above mentioned project, covering the period under audit was US$1,845,291.00 the actual amount disbursed to the Public Sector Modernization Project (PSMP) of the Civil service Agency US$ 1,524,246.00 The 31.98% variance represents unspent amount intended for activities to be undertaken by the Public Sector Modernization Project (PSMP). 10. Cash at the end of the year The total fund balance is US$ 764,869.00 is reported as Cash in bank (Cash balance); while US$8,940.00 is reported as Improve Pay Management paid to PSMP, US$198,645.00 to Strengthening Payroll Management paid to PSMP, US$185,228.00 to Improved Performance paid to PSMP and US$1,131,433.00 to Improved/Project Management paid to PSMP under the specific expenditure components. Comparative amounts The total amount approved by IDA is US$1,845,291.00 of this amount US$1,524,246 was spend while US$321,045.00 representing 31.98% is unspent shown in the financial Statement. The amount of US$8,940.00 spend on Improve Pay Management, US$198,645.00 spend on Strengthening Payroll Management, US$185,228.00 expended on Improved Performance with US$1,131,433.00 expended on Program/ project Management. The 31.98% variances are as a result of implementation being slowed down and also due to the election period. The notes found on page 9-14 are an integral part of these financial statements 13 Promoting Accountability of Public Resources Auditor General’s Report on the audit of the Public Sector Modernization Project (PSMP) Financial Statements For the fiscal period ended June 30, 2018 NOTES TO FINANCIAL STATEMENT (continued) 2 PROJECT DESIGNATED ACCOUNT STATEMENT Account Number 1502021698 Account Type Current Account Depository Bank Central Bank of Liberia Address Ashmun Street Monrovia, Liberia Related Grant Agreement Grant No. IDA 53590 Currency : In United States Dollar In United States Dollar 2018 2017 June June Total Grant Received 1,845,291.00 1,878,588.00 Total grant income reported 1,845,291.00 1,878,588.00 Amount spent 1,524,246.00 1,901,721.00 Balance as at July 1 443,823.00 466,956.00 Balance as at June 30 764,869.00 443,823.00 The notes found on page 9-14 are an integral part of these financial statements 14 Promoting Accountability of Public Resources