THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE AUDIT OF FINANCIAL STATEMENTS OF RURAL ENERGY AGENCY- WORLD BANK FINANCED PROJECTS FOR FINANCIAL YEAR ENDED 30JUNE 2018 Controller and Auditor General, National Audit Office, 16 Samora Machet Avenue, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8, Fax: 255 (022) 2117527 E-mail: ocag@nao.go.tz Website: www.nao.go.tz December, 2018 AR/REAIWB/2017/2018 TABLE OF CONTENTS Abbreviations.....................................................................................iii 1.0 GENERAL INFORMATION..................................................................1 1 .1 . M a n d a te ................................................................................... 1 1.2. Vision, M ission and Core Va ues.......................................................... 1 1.3. A udit O bjective s ........................................................................... 2 1.4 . A ud it Sco pe .................................... ................................... 2 1.5. A udit M e thodoogy ........................................................................ 2 2.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL.........3 c1 National Audit Office AR/REA/WB/20 17/2018 ABBREVIATIONS IESBA Code International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants IPSAS International Public Sector Accounting Standards ISSAIs International Standards of Supreme Audit Institutions NAO National Audit Office REA Rural Energy Agency iii National Audit Office AR/REA/WB/20 17/2018 1.0 GENERAL INFORMATION 1.1. Mandate The statutory duties and responsibilities of the Controller and Auditor General are given under Article 143 of the Constitution of the United Republic Tanzania of 1977 (revised 2005) and in Section 10 (1) of the Public Audit Act No.11 of 2008. 1.2. Vision, Mission and Core Values Vision To be a highly regarded Institution that excels in Public Sector Auditing. Mission To provide high quality audit services that improves public sector performance, accountability and transparency in the management of public resources. Core Values In providing quality services, National Audit Office (NAO) is guided by the following Core Values: V Objectivity: We are an impartial public institution, offering audit services to our clients in unbiased manner. / Excellence: We are professionals providing high quality audit services based on standards and best practices. " Integrity: We observe and maintain high standards of ethical behavior, rule of law and a strong sense of purpose. " People focus: We value, respect and recognize interest of our stakeholders. " Innovation: We are a learning and creative public institution that promotes value added ideas within and outside the institution. " Results Oriented: We are an organization that focuses on achievement based on performance targets. " Team work Spirit: We work together as a team, interact professionally, share knowledge, ideas and experiences. We do this by:- * Contributing to better stewardship of public funds by ensuring that our clients are accountable for the resources entrusted to them; * Helping to improve the quality of public services by supporting innovation on the use of public resources; * Providing technical advice to our clients on operational gaps in their operating systems; * Systematically involve our clients in the audit process and audit cycles; and * Providing audit staff with appropriate training, adequate working tools and facilities that promote their independence. © This audit report is intended solely for the information of REA the World Bank. However, upon release by the World Bank, it becomes a public record and its distribution may not be limited. National Audit Office AR/REA/WB/2017/2018 1.3. Audit Objectives To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and are prepared in accordance with an applicable financial reporting framework; and whether laws and regulations have been complied with. 1.4. Audit Scope The audit was carried out in accordance with the International Standards of Supreme Audit Institutions (ISSAIs) and other audit procedures as were deemed appropriate under the circumstances. This covered the evaluation of the effectiveness of the financial accounting system and internal control over various activities of Rural Energy Agency (REA) World Bank Projects. The audit was conducted on a sample basis; therefore, the findings are confined to the extent that records, documents and information requested for the purpose of the audit were made available to me. Audit findings and recommendations arising from the examination of the accounting records, appraisal of the activities as well as evaluation of the Internal Control System which requires management's attention and actions, are set out in the management letter issued separately to REA. As an auditor, I am not required to specifically search for fraud and therefore, my audit cannot be relied upon to disclose all such matters. However, my audit was planned in such a way that I would have reasonable expectations of detecting material errors and misstatement in the financial statements resulting from irregularities including fraud. The responsibility for detection, prevention of irregularities and the maintenance of an effective and adequate system of internal control rests with the management of REA. 1.5. Audit Methodology My audit approach included tests of the accounting records and other procedures in order to satisfy the audit objectives. My audit procedures included the following: * Planning the audit to identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity's internal controls. * Obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks. * Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained. * Follow up on the implementation of the previous year's audit findings and recommendations in order to ensure that proper action has been taken in respect of all matters raised. 2 National Audit Office AR/REA/WB/2017/2018 2.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL Chairperson of the Board of Directors, Rural Energy Agency, P. 0. Box 7990, DAR ES SALAAM. Report on the Audit of Financial Statements of Rural Energy Agency World Bank Financed Projects for the Financial Year Ended 30th June 2018 Unqualified Opinion I have audited the accompanying Financial Statements of Rural Energy Agency World Bank Financed Projects, which comprise the Statement of Financial Position as at 30 June 2018 and the Statement of Financial Performance, the Statement of Changes in Net Assets/Equity, the Cash Flow Statement and the Statement of Comparison of Budget and Actual Amounts for the year then ended, as well as the notes to the Financial Statements, including a summary of Significant Accounting Policies set out in the audited Financial Statements. In my opinion, the accompanying Financial Statements present fairly in all material respects, the financial position of REA World Bank financed projects as at 30 June 2018, and their financial performance and their cash flows for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS) Accrual basis of accounting and in the manner required by the Public Finance Act, 2001 revised 2004. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the financial statements section of my report. I am independent of REA World Bank financed projects in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Tanzania, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. National Audit Office AR/REA/WB/2017/2018 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 are no key audit matters to communicate in my report. Responsibilities of Management and those charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSASs, 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 entity's 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 liquidate the entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the entity's financial reporting process. Auditor's Responsibilities for the Audit of 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 ISAs 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. In addition, Section 10 (2) of the Public Audit Act No.11 of 2008 requires me to satisfy myself that, the accounts have been prepared in accordance with the appropriate accounting standards. Further, Section 48(3) of the Public Procurement Act No.7 of 2011 requires me to state in my annual audit report whether or not the audited entity has complied with the provisions of the Law and its Regulations. 4 National Audit Office AR/REA/WB/2017/2018 Report on Other Legal and Regulatory Requirements Compliance with the Public Procurement Act, 2011 In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I have reviewed as part of this audit, I state that, REA World Bank financed projects procurement transactions and processes have generally complied with the requirements of the Public Procurement Act No.7 of 2011 and its underlying Regulations of 2013. Sathina M. Mkumba Ag. CONTROLLER AND AUDITOR GENERAL 31 December, 2018 National Audit Office of Tanzania, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 Email: an !tlnao.go.tz Copy to: The Chief Secretary, State House, P.O. Box 9120, 1 Barack Obama Road, 11400 DAR ES SALAAM. Permanent Secretary and Paymaster General, Ministry of Finance and Planning, Treasury Square Building, 18 Jakaya Kikwete Road, P.O. Box 2802, 40468 DODOMA. Permanent Secretary, Ministry of Energy, Kikuyu Avenue, P.O. Box 2494, 40474 DODOMA. 5 National Audit Office AR/REA/WB/2017/2018 World Bank Representative, 50 Mirambo Street, P.O. Box 2054, DAR ES SALAAM. N u-/6 National AuditWOfice - AR/REA/WB/2017/2018 THE UNITED REPUBLIC OF TANZANIA RURAL ENERGY AGENCY ,0gs11ergy 'g Enorgising Rural Tranformation FINANCIAL STATEMENTS OF THE RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS FOR THE YEAR ENDED 30T11 JUNE, 2018 November, 2018 TABLE OF CONTENTS DE FIN ITIO N A N D A BBR EV IA TIO N ............................................................................................. II 1.0 D IR EC TO R S' R EPO R T .............................................................................................................. 1 1.1 INTRODUCTION ..................................... ............... ............. ....... ....... ... ................. - ... 1 1.2 ESTABLISHM ENT OF RURAL ENERGY A GENCY................................... .............. . ....- . 1 1.3 RURAL ENERGY FUND............................................................................................................ 1.3 OPERATION AND O BJECTIVES OF REA ...................EA.2...... .......- ......... -..--........ 2 1.4 FINANCING .............................................................................................................................. 2 1.5 M ANAGEM ENT STRUCTURE....................................................................................................... 2 1.6 VISION, M ISSION AND CORE VALUES .......................................................................................... 3 1.7 INTERNAL CONTROLS ............................................................................................................. 3 1.7.1 A CCOUNTING SYSTEM ............................................................................................................ 3 1.7.2 INTERNAL A UDIT..................................................................................................................... 3 1.7.3 A UDIT COM M ITTEE.................................................................................................................. 3 1.7.4 TENDER BOARD....................................................................................................................... 4 1.7.5 STATUTORY A UDIT..................................................................................................................4 1.7.6 TRUST A GENT ............................................................................................................................. 4 1.8 THE RURAL ENERGY BOARD...................................................................................................4 1.9 STAFF AND RECRUITM ENT....................................................................................................... 5 1.10 PROJECTS PERFORMANCE FOR 2016/17 FINANCIAL YEAR...................................... 5 1.11 FU TU RE O UTLO O K ............................................................................................................. 5 FINA NC IA L STA TEM EN TS ............................................................................................................... 7 Definition and Abbreviations a) Financial Statements means The following Statements. Notes and Supporting Schedules of the Rural Energy Agency World Bank Financed Projects for the year ended 30th June, 2018 were prepared according to the IPSAS requirement (Accrual Basis). A complete set of Financial Statements comprises of: i. Statement of Financial Position ii. Statement of Financial Performance iii. Statement of Cash flows ( Using the direct Method) iv. Statement of Change In Net Assets/Equity v. Statement of Comparison of Budget and Actual Amounts in Net Asset/Equity vi. Notes to the Financial Statements b) Abbreviations IDA - International Development Association IPSAS - International Public Sector Reporting Standards REA - Rural Energy Agency REEP - Rural Electrification Expansion Program REF - Rural Energy Fund SREP - Scaling up Renewable Energy Programme TEDAP - Tanzania Energy Development and Access Expansion Project TF - Trust Fund TREEP - Tanzania Rural Electrification Expansion Programme SCF - Strategic Climate Fund 1.0 DIRECTORS' REPORT 1.1 Introduction This Report presents Financial Statements of the Rural Energy Agency World Bank Financed Projects for the year ended 30t June, 2018 for the four projects which are;- a) IDA Credit No. 47260 (Additional Financing) b) TF No 19390 Rural Electrification Expansion Program c) IDA Credit No. 58940 Tanzania Rural Electrification Expansion Programme TREEP d) TF No Strategic Climate Fund 1.2 Establishment of Rural Energy Agency The Rural Energy Agency (REA) was established by Act No.8 of 2005 as an autonomous institution to promote and facilitate access to modern energy services in rural areas of Mainland Tanzania. The Agency is governed by the Rural Energy Board (REB), which is also entrusted to oversee administration of the Rural Energy Fund (REF). The main function of the Agency is to facilitate provision of modem energy services in rural areas of Mainland Tanzania by providing grants, subsidies, technical assistance, training and capacity building to rural energy project developers. The Agency also works with key partners from the Government, development partners, private sector, non-governmental organizations (NGOs) and community-based organizations (CBOs) to mobilize resources for its work. 1.3 Rural Energy Fund The Rural Energy Fund (REF) provides capital subsidies for the development of rural energy projects. Approved subsidies to qualified project developers are disbursed through the Trust Agent. Funding from REF is intended to buy down the capital investment costs of rural energy projects with a view to enable a significant number of rural households and institutions to afford energy services and products supplied to them. REF provides resources for: a) Training and capacity building; b) Capital investments of projects implemented by a qualified developers; c) Investments in innovative pilot and demonstration projects, and d) Provision of technical assistance to qualified project developers. 1.3 Operation and Objectives of REA The main function of REA is to promote and facilitate rural energy development in Tanzania to increase energy access to all rural inhabitants and improved productive use of energy to stimulate rural economic and social development. Pursuant to Section 16 of the Rural Energy Agency Act No. 8 of 2005, the functions of the REA among others include:- (a) To act as the executive body and Secretariat to the Board and keep all records of the affairs and the meetings of the Board and ensure implementation of its decisions and directives. (b) To propose criteria for selection of the Trust Agent (TA) of the Fund in accordance with Section 23 of the Act and recommend such an agent to the Board following a competitive selection process. (c) To prepare application procedures, guidelines, selection criteria, standards and terms and conditions for grants and submit to the Board for approval. (d) To select projects for evaluation and contract suitably qualified persons to evaluate their social and economic impacts. (e) To recommend to the Board projects for approval. (f) To prepare proposals to the Board for additional means and sources of finance to be used for the benefit of rural energy service provision. (g) To ensure timely collection of all funds specified in the Act and deposit in the account of the Fund. (h) To promote itself and the Fund to appropriate local and national government authorities, and facilitate co-ordination of its activities with other rural development activities. (i) To facilitate provision of capacity building activities as appropriate in the preparation, installation, operation and management of rural energy systems (j) To facilitate provision of technical assistance to qualified developers by the use of private entities related to technical design, management, financial analysis, project finance and sound business practices. (k) To facilitate preparation and appraisal of projects applying for grants. 1.4 Financing The source of funds is World Bank 1.5 Management Structure The Director General is the Chief Executive Officer of Agency and Fund. A management team comprising of Directors, Managers and Heads of sections form the Management Team that supports the Director General. The organization structure of the Agency is comprised of five directorates namely, Finance and Resources Mobilization; Human Resources and Administration; Market Development and Technologies; Planning, Policy and Research; and Technical Services . 1.6 Vision, Mission and Core Values The Vision of the Agency is transformation of rural livelihoods through provision of modern energy services; while the Mission is to promote and facilitate availability and access to modern energy services in rural Mainland Tanzania. The Agency's core values include integrity, honest and transparency as here under described: Integrity: We treat our customers and other stakeholders fairly and with courtesy. We are ethical in the course of discharging our duties and uphold confidentiality. Honesty: We are determined to treat customers honestly. We build value- added relationship with customers and stakeholders. Transparency: We are transparent and accountable for what we do; Goals and objectives are aligned and clearly articulated; our actions are open to the public scrutiny; and we are honest about our performance. 1.7 Internal Controls 1.7.1 Accounting System. The Financial Statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) which apply to the accrual basis of accounting. During the Financial Year under review, the Agency applied a computerized accounting package called Sage Accpac. 1.7.2 Internal Audit The Public Finance Regulations 28 requires the Accounting Officers to establish an effective Internal Audit Unit. The Internal Audit Unit is required to appraise the soundness and application of accounting, financial and operational controls within the Agency. The Agency has the Internal Audit Unit which functionally reports to Audit Committee and administratively reports to Director General. 1.7.3 Audit Committee Regulation 30 of the PFR 2001 requires the Accounting Officer to establish an effective Audit Committee. The Rural Energy Agency established an Audit Committee. The Commitee as at 30th June, 2017 was composed of the following Members: S/N NAME POSITION ORGANISATION PROFESSIONAL 1. Jones Olotu Chairman REA Electrical Engineer 2. Amina Lwayasye Member REA Lawyer 3. Frank Mugogo Member REA IT Engineer 4. Dickson Austin Member MoF&P Accountant 1.7.4 Tender Board The Public Procurement Act No.07 of 2011 Sections 31 and 37requires the Accounting Officer to form a Tender Board and establish a Procurement Management Unit (PMU) respectively. The Rural Energy Agency established both the Tender Board and the Procurement Management Unit on 21st August 2008. The current Tender Board was appointed in January 2017. 1.7.5 Statutory Audit The Rural Energy Act 2005 provides under Sec 24 (1) that Annual Accounts of the Fund including expenditure of the Agency shall be audited by a competent and qualified external Auditor appointed by the Board after receiving a recommendation from the Auditor General. Since its establishment Financial Statements of the Fund have been audited by Controller and Auditor General. 1.7.6 Trust Agent Section 23 (1) of the Rural Energy Act, 2005 empowers Rural Energy Board to appoint a Trust Agent. The Trust Agent is responsible for disbursement of grant payments from Rural Energy Fund to project developers and ensuring that the developers meet the pre-conditions set by the Board for making grant payments. The current Trust Agent is M/s CRDB Bank in consortium with M/s.INTERFINi. 1.8 The Rural Energy Board The REB is mandated to manage the Rural Energy Fund and Agency as stipulated by the Rural Energy Act, 2005. The Board is comprised of representatives from the Ministries responsible for Energy, Finance and Regional Administration and Local Government; Private Sector; Civic Society; Tanzania Bankers' Association; Consumers and Development Partners as an observer. The Board as at 30th June, 2017 was composed of the following Members: 1. Dr. Gideon H. Kaunda - Board Chairman 2. Eng. Amos Maganga - Board Secretary 3. Eng. Innocent Luoga - Board Member 4. Ms.Happiness Mhina - Board Member 5. Mr. Theobald Sabi - Board Member 6. Ms. Amina H. Chinja - Board Member 7. Ms.Scolastica H. Jullu - Board Member 8. Mr. Michael P.Nyagoga - Board Member 9. Ms. Stella Cosmas Mandago - Board Member 1.9 Staff and Recruitment As at the 30th June 2018, the Agency had a total of 49 employees out of which 17 are female (34.6%) and 31 are male (65.3%). The number dropped after the recent Government exercise of verifying the employees' secondary education certificates which resulted in terminating employment of five employees of the Agency who were found with forged certificates. Further, two operational staff who failed to fulfill the condition of acquiring secondary education had also to be terminated and one employee passed away. The Agency recruits staff on competitive and transparent basis to fill vacant positions in order to ensure that functions of the Agency are performed efficiently and effectively. During the end of the financial year, The Agency through National Recruitment Agency Conducted interviews to fill 29 vacant positions as per current establishment. 1.10 PROJECTS PERFORMANCE FOR 2016/17 FINANCIAL YEAR During the Financial Year 2017/18, the Agency continued to promote, facilitate, finance and supervise implementation of planned projects. The projects that were implemented were under IDA Credit No. 47260 (Additional Financing) and Rural Electrification Expansion Program TF No 19390. These projects were financed by the World Bank 1.11 FUTURE OUTLOOK The Agency looks forward for more challenging years ahead as a result of new developments reforms in the energy sector, and the government target to provide access to electricity to all villages in Mainland Tanzania by 2021. The Agency aims to take all necessary steps toward achieving its mission of promoting and facilitating availability and access to modern energy services in rural Mainland Tanzania. For the next Financial Year (2016/17-2020/21), the Government target is to have all villages in Tanzania Mainland electrified either through grid extension of off-grid renewable energy. In order to achieve this target, several initiatives have been developed and some of them are in various stages of implementation. These include expansion of the national grid, development of decentralized (small) networks using renewable sources of energy and installation of stand-alone systems, development of mini and micro grids, and installation of stand-alone systems. At present, a total of 4,395 villages out of 12,268 which is about 36% have been connected to electricity. The plan is to provide access to electricity to 7,873 remaining villages by 2021. For the envisage targets to be achieved, the Agency is set to tap on all opportunities available and take all necessary measure to address challenges that will be encountered. Some measures will include: a) To put concerted efforts to mobilize more funds to the Rural energy Fund. To achieve this, the new orgamiosational structure will be enforced. b) Continued collaborate with the Ministry of Finance and Planning, and the Ministry of Energy to get tax and duties exemption for goods and services to be used for rural electrification projects. c) Collaborate with the Ministr y of Energy, Ministry of Finance and Planning and Developement Partiners to ensure timely disbursement of approved funds to REF and Special Purporse Accounts and BY ORDER OF THE BOARD Signed by Board Chairman 04.11.2018 Diate FINANCIAL STATEMENTS STATEMENTS OF RESPONSIBILITIES STATEMENT OF RESPONSIBILITY ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2018 These Financial Statements have been prepared by the management of Rural Energy Agency in accordance with the provisions of Section 25(4) of the Public Finance Act. No 6 of 2001. The Financial Statements comply with Generally Accepted Accounting Principles as required by the said Act and are presented in a manner consistent with the International Public Sector Accounting Standards (IPSAS) - Accrual basis. The Management of REA is responsible for establishing and maintaining a system of effective Internal Control designed to provide reasonable assurance that the transactions recorded in the accounts are within the statutory authority and that they contain the receipt and use of all public financial resources by Rural Energy Agency. To the best of my knowledge, the system of Internal Control has operated adequately throughout the reporting period and that the Accounts and underlying records provide a reasonable basis for the preparation of the Financial Statements for 2017/2018 Financial Year. I accept responsibility for the integrity of the Financial Statements, the information they contain and their compliance with the Public Finance Act No. 6 of 2001(revised 2004) and instructions issued by Treasury and the World Bank in respect of the year under review. Signed by Accounting Officer 04 11 2018 Date STATEMENT OF RESPONSIBILITY ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 T JUNE, 2017 The National Board of Accounts and Auditors (NBAA) according to the power conferred under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act. No. 2 of 1995 requires Financial Statements to be accompanied with a declaration issued by the Head of Finance/Accounting responsible for the preparation of Financial Statements of the entity concerned. It is the duty of a Professional Accountant to assist the Board of Directors/Governing Body/Management to discharge the responsibility of preparing Financial Statements of an entity showing true and fair view of the entity position and performance in accordance with applicable international Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of Financial Statements rests with the Management as under Management Responsibility statement on an earlier page. I, CPA George M.J Nchwali being the Director of Finance and Administration of Rural Energy Agency, hereby acknowledge my responsibility of ensuring that Financial Statements for the year ended 30th June 2018 have been prepared in compliance with applicable accounting standards and statutory requirements. I, thus, confirm that the Financial Statements are correct in all material respects of the Word Bank Financed Project administered by REA as on that date and that they have been prepared based on properly maintained financial records. Signed by: ................... ............................ Position: DIRECTOR OF FINANCE AND ADMINISTRATION NBAA Membership No: ACPA 631 RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS STATEMENT OF FINANCIAL POSITION AS AT JUNE 30T", 2018 2017/2018 2017/2018 2016/2017 2016/2017 USD TZS USD Notes TZS (000) (000) (000) (000) ASSETS Current assets: Cash and Cash Equivalents 2 122,878,726 54,488 6,679,667 2,980 Accounts Receivable 3 2,550,903 1,131 3,034,817 1,354 Total Current assets 125,429,630 55,619 9,714,484 4,334 Non Current assets: Accounts Receivable 4 3,629,768 1,610 4,756,246 2,122 Total Non Current assets 3,629,768 1,610 4,756,246 2,122 Total Assets 129,059,397 57,229 14,470,731 6,457 Current Liabilities 5 1,278,048 567 35,405 16 Total Current Liabilities 1,278,048 567 35,405 _ 16 Non Current Liabilities Total Non Current - - Liabilities Total Liabilities 1,278,048 567 35,405 16 Net Assets 127,781,349 56,662 14,435,326 6,441 Net Assets/ Equity Accumulated Surpluses 127,781,349 56,662 14,435,326 6,441 Total Net Assets/ Equity 127,781,349 56,662 14,435,326 6,441 BOARD CHAIRMAN SECRETARY OF THE BOARD Date: 04.11.2018 Date: 04.11.2018 RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS STATEMENT OF FINANCIAL PERFORMANCE AS AT JUNE 30, 2018 2017/2018 2017/2018 2016/2017 2016/2017 Notes TZS (000) USD (000) TZS (000) USD (000) Fund received 6 115,685,894 51,990 - - Exchange rate Gain 7 1,561,777 - 67,266 - Interest from Credit Line 8 564,108 250 452,778 202 Loan Repayments 117,811,779 52,240 520,044 202 EXPENDITURE Operational Costs 9 (129,855) t (74) (189,013) (83) Grants 10 (3,691,603) (1,641) -- TOTAL EXPENDITURE (3,821,457) (1,715) (189,013) (83) SURPLUS/(DEFICIT) FOR THE PERIOD 113,990.321 50,524 331,031 119 4, BOARD CHAIRMAN SECRETARY OF THE BOARD Date: 04.11.2018 Date: 04.11.2018 RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS CASH FLOW STATEMENT AS AT JUNE 30, 2018 2017/2018 2017/2018 2016/2017 2016/2017 TZS (000) USD (000) TZS (000) USD (000) CASH FLOW FROM OPERATING ACTIVITIES Cash Receipt from REA-SREP Designated 434,032 193 - - Account Cash Receipt from REA-TREEP Designated 110,179,559 49,546 Account Cash Receipt from REA-SCF Designated 5,072,302 2,250 Account Cash Receipt from TIB (PFIs via Credit line 1,323,046 337 2,331,469 1,467 Facility) Cash Paid to finance Operational expenses 4 (33,336) 81 (103,975) (745) ('ash Paid to finance Grants and TIB (2,902,430) (1,149) administration (Co.1 Cash Paid Back to WB - - (18,203,297) (8,313) CASH GENERATED FROM 114,073,174 51,257 (15,975,804) (7,591) OPERATIONS CASH FLOW FROM INVESTMENT ACTIVITIES Interest from Credit line Loan repayments 564,108 250 - - CASH GENERATED FROM INVESTMENT ACTIVITIES 564,108 250 - NET INCREASE IN CASH AND CASH EQUIVALENTS 114,637,282 51,508 (15,975,804) (7,591) Cash and Cash Equivalents at beginning of 6,679,667 2,980 22,655,471 10,571 Period Exchange rate gain 1,561,777 - - - CASH AND CASH EQUIVALENTS AT 122,878,726 54,488 6,679,667 2,980 END OF PERIOD BOARD CHAIRMAN SECRETARY OF THE BOARD Date: 04.11.2018 Date: 04.11.2018 RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS STATEMENT OF CHANGE IN NET ASSET/EQUITY FOR THE YEAR ENDED JUNE 30, 2018 Note Accumulated surplus Accumulated surplus TZS (000) USD (000) Balance as at 30th June, 2017 14,435,326 6,441 Surplus net Changes for 2017/18 FY (644,298) (303) Restated Balance 13,791,028 6,137 Charges for 2017/2018 FY 113,990,321 50,524 Balance as at 30th June, 2018 127,781,349 56,662 BOARD CHAIRMAN SECRETARY OF THE BOARD Date: 04.11.2018 Date: 04.11.2018 RURAL ENERGY AGENCY WORLD BANK FINANCED PROJECTS STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS IN NET ASSET/EQUITY FOR THE YEAR ENDED JUNE 30, 2018 BUDGET ON ACCRUAL BASIS ORIGINAL ORIGINAL & FINAL & FINAL ACTUAL ACTUAL BUDGET BUDGET 2016/2017 2016/2017 2016/2017 2016/2017 BUDGET ITEM TZS (000) USD (000) TZS (000) USD (000) % REVENUE Fund received 115,685,894 47,509 107,140,000 47,509 108 Exchange rate Gain 1,561,777 - 1,561,777 - 100 Interest from Credit Line Loan Repayments) 564,108 250 564,108 250 100 TOTAL REVENUE 117,811,779 47,759 109,265,885 47,759 108 EXPENDITURE Operational Costs (129,855) (74) (129,855) (74) 100 Grants (3,691,603) (1,641) (3,691,603) (1,641) 100 TOTAL EXPENDITURE (3,821,457) (1,715) (3,821,457) (1,715) 100 BOARD CHAIRMAN SECRETARY OF THE BOARD Date: 04.11.2018 Date: 04.11.2018 NOTES TO THE 2017/2018 FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these Financial Statements are set below: 1: Accounting Policies 1.1 Basis of Preparation The Financial Statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) which apply to the accrual basis of accounting. The Financial Statements are presented in United States Dollar (USD) and Tanzanian shillings (TZS) currencies, rounded to nearest thousands and prepared under the historical cost conversion. The Transaction Curries are also both United States Dollar (USD) and Tanzanian shillings (TZS). The Financial Statements have been audited by National Audit Office (NAO). The reporting date of the Finacial statement is Is' July 2017 to 31s' June 2018 and the Financial Statements Authorised for issue by the Rural Energy Board on 2nd November 2018. Fundamental Assumptions: 1.1.1 The Fund adopted the following fundamental assumptions. a) Going Concern b) Accrual basis of Accounting c) Consistency Financial Regulations: 1.1.2 Policies as detailed in the Financial Regulations were developed taking into account the following criteria. a) Prudence b) Substance over form c) Relevance and materiality 1.2 Summary of Significant Accounting Policies for the Year Ended 30 June 2018 1.2.1 Property, Plant and Equipment No property, plant or equipment acquired during the period under review. 1.2.2 Cash and Cash Equivalents For the purpose of Cash Flow Statement, Cash and Cash Equivalents comprise of cash at bank. No cash in hand nor short term investment was available during the reporting period. 1.2.3 Revenue Recognition Revenue is recognized when cash is received and its nature is non-exchange revenue 1.2.4 Advances Advances and Receivables are included in current assets in the Statement of Financial Position. 1.2.5 Comparatives The Financial Statements for 2016/2017 Financial Year have been presented as comparative figures. 2 Cash and Cash Equivalents 2017/2018 2017/2018 2016/2017 2016/2017 TZS USD) TZS USD REA-SREP (USD) BOT 3,686,823.16 1,634.84 74,104,359.36 33,064.00 REA STRATEGIC CLIMATE 5,074,106,400.00 2,250,000.00 - FUND (USD) BOT REA-REF (TZS) BOT 5,858,538,305.39 2,597,837.10 3,684,038,305.39 1,643,750.02 REA OPERATIONS (USD) BOT 854,524,237.56 378,919.83 2,921,524,585.76 1,303,530.45 REA TREEP (USD) BOT 111,087,870,655.66 49,259,453.64 TOTAL 122,878,726,421.77 54,487,845.41 6,679,667,250.51 2,980,344.47 3 Current Accounts Receivable 2017/2018 2017/2018 2016/2017 2016/2017 TZS USD) TZS USD NBC Bank - Loans to PFis - 196,567,236.72 87,704.68 CRDB Bank - Loans to PFIs 1,126,478,571.40 499,511.60 1,126,478,571.40 502,613.99 Tanzania Investment Bank - Principal 1,424,424,630.18 631,629.08 1,258,993,184.04 561,739.57 Receivable Tanzania Investment Bank - Interest - 452,777,983.85 202,021.20 Receivable TOTAL 2,550,903,201.58 1,131,140.67 3,034,816,976.01 1,354,079.43 4 Non Current Accounts Receivable 2017/2018 2017/2018 2016/2017 2016/2017 TZS USD) TZS USD NBC Bank - Loans to PFIs CRDB Bank - Loans to PFIs 3,629,767,857.20 1,609,538.95 4,756,246,428.60 2,122,149.54 TOTAL 3,629,767,857.20 1,609,538.95 4,756,246,428.60 2,122,149.54 5 Current Liabilities 2017/2018 2017/2018 2016/2017 2016/2017 TZS USD TZS USD Tanzania Investment Bank - 35,404,559.00 15,796.51 M/S Genex Technology 92,534,892.00 41,032.52 - M/S Esri Eastern Africa 220,644,697.86 97,839.93 - M/S Mars Communication Ltd 107,300,000.00 47,579.77 - M/S Sekela 40,000,000.00 17,737.10 - - M/S Christopher Awina 88,000,000.00 39,021.62 - - M/S Johannes G. Lottering 114,568,812.20 50,802.96 - - Multconsult Asa 615,000,000.00 272,707.92 - - TOTAL 1,278,048,402.06 566,721.83 35,404,559.00 15,796.51 6 Fund Received TZS USD Trust/Credit Number SREP PROJECT - TF No 19390 434,032,295.29 193,487.00 STRATEGIC CLIMATE FUND 5,072,301,900.00 2,250,000.00 TREEP PROJECT 110,179,559,358.25 49,546,020.90 TOTAL 115,685,893,553.54 51,989,507.90 7 Exchange rate Gain This is a gain caused by increase of value of foreign currency when reported at TZS reporting currency using the closing rate. Four USD Bank Accounts maintained at the Bank of Tanzania generated a total TZS 1.5 6 Billion as exchange rate gain as per table below USD Amount Equivalent TZS Equivalent TZS Exchange rate Account Name at Closing Amount as at 31st Amount as at 31st Gain in TZS Date June 2018 June 2019 using Amount the Closing Rate BOT REA OPERATIONS 378,919.83 849,415,118.06 854,524,237.55 5,109,119.49 USD ACCOUNT REA TANZANIA RURAL 49,259,453.64 109,533,453,496.05 111,087,870,655.66 1,554,417,159.61 ELECTR.. EXP.. PROG..(TREEP) USD ACCOUNT _ REA-SREP BOT USD 1,634.84 3,240,248.32 3,686,823.16 446,574.84 ACCOUNT BOT REA STRATEGIC 2,250,000.00 5,072,301,900.00 5,074,106,400.00 1,804,500.00 CLIMATE FUND (SCF) Total Exchange Rate gain 1,561,777,353.94 8 Interest from Credit Line Loan Repayments The Government of Tanzania and World Bank signed the Credit Line Facility number IDA Credit No. 47260 (Additional Financing) in the year 2010 with a purpose to enable and sensitize the local financial institutions to provide long term loans to project developers engaged in developing electricity generation plants using renewable energy sources. The Facility refinanced long term loans provided by banks to be repaid within 15 years with an interest. During a Financial year, a Total of Tshs 564.1 Million recognised as interest received from Credit Line Loan Repayments from Four Project Developers as per table below. INTEREST COLLECTED BY TIB FROMI 1ST JULY 2017 TO 30TH JUNE PROJECT DEVELOPER 2018 Mwenga Hydro Power Plant 188,915,638.68 Darakuta Hydro Power Plant 103.205,168.26 | Ngombeni Biomass Power Project 7,916,543.52 Andoya Hydro Electric (Facility 1) 161,732,564.07 Andoya Hydro Electric (Facility II) 102,337,739.64 TOTAL 564.107,654.17 9 Operational Expenses 2017/2018 2017/2018 2017/2018 2017/2018 TZS USD TZS USD TEDAP CREDIT LINE Operational 96,519,426.87 58,935.60 35,606,669.00 15,889.16 Exp SREP Preparation Expenses 33,335,523.40 14,918.40 153,406,065.60 66,936.00 Total 129,854,950.27 73,854.00 189,012,734.60 82,825.16 10 Grants 2017/2018 2017/2018 2016/2017 2016/2017 TZS USD TZS USD SREP Preparation Grants 1,104,156,885.19 504,957.67 0.00 0.00 TREEP GRANT 647,260,160.00 286,567.26 0.00 0.00 TEDAP CREDIT LINE Grants 1,940,185,481.82 849,878.16 0.00 0.00 Total 3,691,602,527.01 1,641,403.09 - - The details of the Grants amount of Tshs 3,691,602,527.01 equivalent to USD 1,641,403.09 as per note 8 above are as per table below:- S/N SUPPLIER/CONSULTANT PROJECT NAME TF/CR GRANT GRANT NO AMOUNT (TZS) AMOUNT (USD) I M.KALOKOLA SREP TF 1930 48,000,000.00 26,853.51 2 C.AWINIA SREP TF 1930 108,900,000.00 48,867.14 3 J. LOTTERING SREP TF 1930 114,568,812.20 50,803.00 4 SHEDRACK WILLILO SREP TF 1930 50,321,605.05 30,000.00 5 GENEX TECHNNOLOGY SREP TF 1930 123,340,780.00 54,928.26 6 DAVID NGULA SREP TF 1930 142,825,000.00 64,527.96 7 DIG SILENT BUYISA (RTY) LTD- SREP TF 1930 148,255,990.08 65,820.88 EURO 56,739.68 8 ESRI EASTERN AFRICA SREP TF 1930 220,644,697.86 97,840.00 9 MARS COMMUNICATION LTD SREP TF 1930 107,300,000.00 47,579.81 10 SEKELA SREP TF 1930 40,000,000.00 17,737.11 11 MULTCONSULT ASA TREEP CR 58940 647,260,160.00 286,567.26 12 TEXPOL DEVELOPMENT CO. LTD- TEDAP ADDITIONAL CR 47260 62,754,720.00 28,000.00 IFUPA FINANCE 13 TURIAN HYDRO POWER CO. LTD TEDAP ADDITIONAL CR 47260 110,147,981.04 49,146.00 FINANCE 14 KARITAS ELECTRIC POWER-IBULA TEDAP ADDITIONAL CR 47260 62,166,394.50 27,737.50 FINANCE 15 IKONDO-MATEMBWE VILLAGE TEDAP ADDITIONAL CR 47260 238,692,060.00 106,500.00 FINANCE 16 LUMAMA- MAWENGI -ENERGIE TEDAP ADDITIONAL CR 47260 134,474,400.00 60,000.00 BUREAU FINANCE 17 MUFINDI HYDRO TEDAP ADDITIONAL CR 47260 67,666,442.28 30,191.52 PLANTS/NYALAWA FINANCE 18 LUNG'ALI NATURAL TEDAP ADDITIONAL CR 47260 672,372,000.00 300,000.00 RESORCES/KILOLO/MADEGE FINANCE 19 ST BENEDICT NJOMBE-IMILIWAHA- TEDAP ADDITIONAL CR 47260 326,996,916.00 145,900.00 | LUPALI FINANCE 20 ISIGULA-KISANGANI BLACKSMITH TEDAP ADDITIONAL CR 47260 264,914,568.00 118,200.00 AND RENEWABLE TECHNOLOGY FINANCE CO. LTD TOTAL 3,691,602,527.01 ,657,199.95 11 EVENTS AFTER REPORTING DATE There was no material event to report after reporting date. 12 TEDAP- CREDIT LINE STATUS AS AT 30TH JUNE 2018 The Government of Tanzania and World Bank signed the Credit Line Facility number IDA Credit No. 47260 (Additional Financing) in the year 2010 with a purpose to enable and sensitize the local financial institutions to provide long term loans to project developers engaged in developing electricity generation plants using renewable energy sources. The Facility refinanced long term loans provided by banks to be repaid within 15 years with a grace period of up to five years. The status of the loans as at 30th June 2018 is as per table below. LOAN AMOUNT PAID AMOUNT LOAN BALANCE BENEFICIARIE'S USD TZS USD TZS USD TZS S/N NAME BANK 000 000 000 000 000 000 I Mwenga Hydro Ltd CRDB 3,062 4,804.100 1,997 2,402,050 1.065 2,402,050 Andoya Hydroelectric CRDB 2 Company Ltd 1.704 2,694,500 957 1.0 10.438 747 1,684,063 3 Ngombeni Project NBC 574 904,209 574 904,209 0 0 Andoya Hydroelectric CRDB 4 Company Ltd 225 399.500 70 49,938 155 349.563 Darakuta Hydro Power CRDB 5 Company Ltd 210 374,000 68 53,429 142 320.571 TOTAL TEDAP CREDIT LINE - CREDIT NO 47260 5.775 9,176,309 3.666 4,420,063 2,109 4,756,246