REPUBLIC OF KENYA OFFICE OF THE AUDITOR-GENERAL REPORT I JANv 2019 THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF HEALTH SECTOR SUPPORT PROJECT - SWaP SECRETARIAT (IDA CR. NO. 4771-KE AND CR. NO.5367-KE) FOR THE YEAR ENDED 30 JUNE 2018 MINISTRY OF HEALTH KENYA HEALTH SECTOR SUPPORT PROJECT SWAp SECRETARIAT CREDIT NUMBER: 4771 - KE & CREDIT NUMBER: 5367- KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Contents 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES 3. REPORT OF THE AUDITOR- GENERAL ON THE KHSSP PROJECT- SWAp SECRETARIAT.......................v 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE, 2018................................ 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE, 2018 6. STATEMENT OF CASHFLOW FOR THE YEAR ENDED 30TH JUNE, 2018018 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30TH JUNE,2201. 8. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2018.....................................5 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS....................................COMMENDATN.... ..................12 ANNEX I - VARIANCE EXPLANATIONS - COMPARATIVE BUDGET AND ACTUAL AMOUNTS......................13 ANN EX 2A - ANALY SIS OF PENDIN G BILLS.................................................................14.......... ..............................14 ANNEX 2B - ANALYSIS OF PENDING STAFF BILLS............................................................15 ........ ........................15 ANNEX 2C - ANALYSIS OF OTHER PENDING PAYABLES...................................................16... .............................16 ANNEX 3 - SUM M ARY OF FIXED ASSET REGISTER...........................................................-...17..-.. ..................... .17 1 Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For t1ie fin ancial year ended June 30, 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The Kenya health Sector Support Project - SWAp SECRETARIAT. Objective: The key objective of the project is to reduce health inequalities and to reverse the downward trend in the health of Kenyan people. Address: The project headquarters offices are Nairobi (city), Nairobi County, Kenya. The address of its registered office is Ministry of Health P.O. Box 30016-00100 Nairobi. The project is based at the National Level. The project is based at the National Level but it supports all the facilities at the Lower levels of service i.e. Level 1, 2, 3, Sub District Hospitals and the other higher levels Contacts: The following are the project contacts Telephone: (254) -020-2717077 E-mail: ps@health.go.ke Website: www.health.go.ke 1.2 Project Information Pro'ect Start Date: The roect start date is 30"' Se tember, 2010 Pro'ect End Date: The roect end date is 30t" June, 2018 Proec Mana erctT Pro'ect Manager: The roject mana er is Dr. David Kariuki [Project Sponsor g Tie rcs oect S onsor: The roject s onsor is Dr. Gandham N.V Ramana 11 Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 1.3 Project Overview Line Ministry/State The project is under the supervision of the Ministry of Health. Department of the project Project number CR - 4771 -KE & CR-5367-KE Strategic goals of the The strategic goals of the project are as follows: project (i) To ensure an improved Health services to the Kenyan population especially the poor. (ii) To reduce Health inequity Achievement of The project management aims to achieve the goals through the following means: strategic goals (i) By improving health services and strengthening systems. (ii) Providing funds to NHIF to pay for the poor. (iii)Improving referral systems. (iv) Improving environmental Health systems. Other important The project operates within a sector wide approach. The foundation is laid down background information in the National Health Sector Strategic Plan 2005-2012. of the project Current situation that The project was formed to intervene in the following areas: the project was formed (i) The Health of the Kenyan people has improved especially the large to intervene population of the Kenyan people (poor) can now access medical attention for free. (ii) The project has provided financing to commodities and has strengthened the logistics system. Project duration The project started on 30"' September 2010 and is expected to run until 30"' June 2018. 1.4 Bankers The following are the bankers for the current year: (Both Project Account and Deposit account) Co-operative Bank Ukulima Cooperative P.O. Box 74956-00100 Nairobi 1.5 Auditors Auditor General P.O Box 30084 - 00100 Nairobi. 111 Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 1.6 Roles and Responsibilities List of the different people who are working on the project. Names Title designation Key Responsibilities qualification Dr. David Kariuki Head, Directorate MB chB, Msc Project oversight and overall of policy, planning coordination of activities of and Health care the Directorate and Project Financing. Coordinator Alice Olango Project Bcom, CPA(K) Preparation of Financial Accountant reports as required from time to time e.g. IFR, Bank reconciliation, exchequer requisition, Vote book, preparation of project F/S , responding to Audit issues etc. Kevin Ogollah Accountant CPA II Preparation of Quarterly reports e.g. IFR (Interim Financial Report) ,Bank reconciliations, Voucher preparation, processing Aulgah Achieng Accountant CPA II Voucher preparation, processing and filing. iv Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 1.7 Funding summary The original credit IDA 4771 had three components i.e. HSSF, EMMS and SWAp Non Pool. So far the Government has secured two additional credits i.e. IDA 5034 and 81623. Each component has been treated as a separate entity. Under SWAp Non pool, the Ministry of Health has so far received the following amount since inception. 6 I I 7 o th or"I i Loan IDA - 47710 24,582,682 2,067,872,262 24,582,682 2,067,872,262 - IDA - 53680 41,000,000 4,100,000,000 36,546,557 3,654,655,700 4,453,443 445,344,300 Total 65,582,682 6,167,872,262 61,129,239 5,722,527,962 4,453,443 445,344,300 1.8 Summary of Overall Project Performance: - Over ambitious work plan - The Project was able to achieve the targeted objectives as they were set in the work plan of 2017/2018. 1.9 Summary of Project Compliance: - The project complied with applicable laws and regulations, and essential external financing agreements/covenants and this helped us to achieve the objectives set. V Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support Project - SWAp Secretariat 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 financial year ended June 30, 2018. 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 financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support Project - SWAp Secretariat 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 Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support Project - SWAp Secretariat are of the opinion that the Project's financial statements give a true and fair view of the state of Project's transactions during the financial year ended June 30, 2018, and of the Project's financial position as at that date. The Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support project - SWAp Secretariat further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project financial statements as well as the adequacy of the systems of internal financial control. The Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support project - SWAp Secretariat confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by The Principal Secretary for the Ministry of Health and the Project Coordinator for Kenya Health Sector Support project - SWAp Secretariat on a= rvft%t aMiS (iL.. 2018 and signed by them. Mr. Peter K. Tum Dr. Pyi ki Principal Secretary Project Coordinator vi REPUBLIC OF KENYA Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON HEALTH SECTOR SUPPORT PROJECT - SWaP SECRETARIAT (IDA CR. NO. 4771-KE AND CR. NO.5367-KE) FOR THE YEAR ENDED 30 JUNE 2018 - MINISTRY OF HEALTH REPORT ON THE FINANCIAL STATEMENTS Qualified Opinion I have audited the accompanying financial statements of Health Sector Support Project - SWaP Secretariat set out on pages 1 to 17, which comprise the statement of financial assets and liabilities as at 30 June 2018, and the statement of receipts and payments, statement of cash flows and statement of comparison of budget and actual amounts and the special account statement for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with the provisions of Article 229 of the Constitution of Kenya and Section 35 of the Public Audit Act, 2015. 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, except for the effects of the matter described in the Basis for Qualified Opinion section of my report, the financial statements present fairly, in all material respects, the financial position of Health Sector Support Project - SWap Secretariat as at 30 June 2018, 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 Financing Agreements No. 4771-KE and No. 5367- KE dated 10 February 2012 and 21 January 2014 respectively between International Development Association and the Republic of Kenya. Basis for Qualified Opinion 1. Imprests and Advances The statement of financial assets and liabilities as at 30 June 2018 reflects imprests and advances of Kshs.21,106,696 out of which Kshs.490,098 has been outstanding for more than six (6) years. Under the circumstances, full recoverability of the outstanding imprest of Kshs.21,106,696 is doubtful. 2. Cash and Bank Balances - Stale Cheques The statement of financial assets and liabilities reflects bank balance of Kshs.239,647,556 for the Co-operative bank account No.01141134282300 as at 30 June 2018. However, the bank reconciliation statement reflects payments in the Report of the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4771-KE and CR. No.5367-KE) for the year ended 30 June 2018 - Ministly of Health Promoting Accountability in the Public Sector cashbook not reflected in the bank statement (unpresented cheques) totalling to Kshs.225,375,658 out of which cheques totalling Kshs.928,200 were stale as at 30 June 2018 and had not been reversed in the cashbook. In addition, the clearance status of cheque no.001884 of Kshs.138,000 and cheque no.001901 of 212,250 was not provided for audit verification. In the circumstances, the accuracy of bank balance of Kshs.239,647,556 as at 30 June 2018 could not be confirmed. 3. Receipts - Loan from External Development Partners The statement of receipts and payments for the year ended 30 June 2018 reflects receipts - loan from external development partners of Kshs.1,791,653,860 which as disclosed under Note 8.2 to the financial statements comprised of Kshs.1,030,500,740 from KHSSP - SWap special account and Kshs.761,153,120 from KHSSP-HSSF. On the other hand, the special account statement shows that a total of Kshs.1,146,923,320 was withdrawn and transferred from the special account to the project account during the year under review. No explanation or reconciliation has been provided for the resultant difference of Kshs.116,422,580. Further, the amount of Kshs.1,030,500,740 from KHSSP - SWap special account differ by Kshs.1,349,796 from the figure of Kshs.1,031,850,536 reflected in the development exchequer issue notification from the National Treasury. The difference has similarly not been explained or reconciled. Under the circumstances, the accuracy and completeness of the receipts - loan from external development partners balance of Kshs.1,791,653,860 could not be ascertained for the year ended 30 June 2018. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Health Sector Support Project - SWap Secretariat management 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 qualified audit opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current year. Except for the matter described in the Basis for Qualified Opinion section of my report, there were no Key Audit Matters to report. REPORT ON COMPLIANCE WITH LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the procedures performed, except for the matter described in the Basis for Conclusion on Compliance and Report of the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4771-KE and CR. No.5367-KE) for the year ended 30 June 2018- Ministry of Health 2 Effectiveness section of my report, I confirm that, nothing else has come to my attention to cause me to believe that public resources have not been applied lawfully and in an effective way. Basis for Conclusion on Compliance with Lawfulness and Effectiveness in Use of Public Resources Transfers to Other Government Entities Note 8.7 to the financial statements indicates that a total of Kshs.1,625,129,741 was transferred to five (5) entities as detailed below: Institution Amount Amount Un-confirmed Transferred Confirmed Balance (Kshs) (Kshs) (Kshs) KEMSA 782,668,696 782,668,696 0 National Council for 216,271,280 0 216,271,280 Population Development (NCPD) AMREF 100,563,430 43,085,756 57,477,674 Ministry of Health-KMTC 139,300,137 0 139,300,137 UNICEF 386,326,198 0 386,326,198 Total 1,625,129,741 825,754,452 799,375,289 However, confirmations totalling to Kshs.799,375,289 had not been received from the beneficiary institutions as at 30 June 2018 contrary to the Public Sector Accounting Standards Board requirement contained in the revised reporting template dated 30 June 2018 that require duly signed confirmations to be obtained from the beneficiary institutions and attached as an appendix to the financial statements. No explanation has been provided for the omission. My responsibility is to express a conclusion based on the review. The review was conducted in accordance with ISSAI 4000. The standard requires that I comply with ethical requirements and plan and perform the review so as to obtain limited assurance as to whether the activities, financial transactions and information reflected in the financial statements are in compliance, in all material respects, with the authorities that govern them. A review is limited primarily to analytical procedures and to inquiries, and therefore provides less assurance than an audit. I have not performed an audit, and, accordingly, express my conclusion in the form of limited assurance, which is consistent with the more limited work I have performed under this compliance review. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Report of the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4 771-KE and CR. No.5367-KE).fbr the year ended 30 June 20/8 - Ministiy of Health 3 REPORT ON INTERNAL CONTROLS EFFECTIVENESS, GOVERNANCE AND RISK MANAGEMENT SYSTEMS Conclusion As required by Section 7 (1) (a) of the Public Audit Act, 2015, based on the procedures performed, except as indicated under basis for qualified opinion and conclusion on compliance with lawfulness and effectiveness in use of public resources sections of my report, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. My responsibility is to express a conclusion based on the review. The review was conducted in accordance with ISSAI 1315. The standard requires that I plan and perform the review so as to obtain limited assurance as to whether effective processes and systems of internal control, risk management and governance was maintained in all material respects. The matters reported are limited to the deficiencies identified during the audit that I have concluded are material to be reported. I have not performed an audit, and, accordingly, express my conclusion in the form of limited assurance, which is consistent with the more limited work I have performed under this review. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Responsibilities of Management and Those Charged with Governance 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 maintaining effective 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 and for its assessment of the effectiveness of internal control. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern/ sustain services, disclosing, as applicable, matters related to sustainability of services and using the applicable basis of accounting unless the management either intends to liquidate the Project's or to cease operations, or have no realistic alternative but to do so. Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. In addition to the responsibility for the preparation and presentation of the financial statements described above, management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are Report of the Auditor-General on the Financial Statements of'Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4771-KE and CR. No.5367-KE) fbr the year ended 30 June 2018 - Ministry of'Health 4 in compliance with the authorities which govern them, and that public money is applied in an effective manner. Those charged with governance are responsible for overseeing the Project's financial reporting process, reviewing the effectiveness of how the entity monitors compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in relation to governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit 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 auditor'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. 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 and weakness 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 to the audit of the financial statements, a compliance review is planned and performed to express a conclusion with limited assurance as to whether, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities that govern them in accordance with the provisions of Article 229(6) of the Constitution and submit the audit report in compliance with Article 229(7) of the Constitution. The nature, timing and extent of the compliance work is limited compared to that designed to express an opinion with reasonable assurance on the financial statements. Further, in planning and performing the audit of the financial statements and review of compliance, I consider internal control in order to give an assurance on the effectiveness of internal controls, risk management and governance processes and systems in accordance with the provisions of Section 7 (1) (a) of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. My consideration of the internal control would not necessarily disclose all matters in the internal control that might be material weaknesses under the ISSAls. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Report of the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4771-KE and CR. No.5367-KE)Jbr the year ended 30 June 2018 - lWinistry of Health 5 Because of its inherent limitations, internal control may not prevent or detect misstatements and instances of non-compliance. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the Project's policies and procedures may deteriorate. As part of an audit conducted in accordance with ISSAls, 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 adit proce ures responsive to those risks, and obtain audit evidence that is &dfficient a'nd appropriate to provide a basis for my opinion. The risk of not detecting a*material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * 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 continue 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 continue to sustain its services. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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. Report of the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 4771-KE and CR. No.5367-KE) br the year ended 30 June 2018 - Ministry ofHealth 6 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 14 December 2018 Report of/the Auditor-General on the Financial Statements of Health Sector Support Project - SWaP Secretariat (IDA CR. No. 477/-KE and CR. 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STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE, 2018 Notes 2018 2017 Kshs Kshs FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8.8 A 239,647,556 392,318,961 239,647,556 392,318,961 Imprests and Advances 8.8 B 21,106,696 30,399,668 TOTAL FINANCIAL ASSETS 260,754,252 422,718,629 REPRESENTED BY: Fund Balance b/fwd 8.12 422,718,629 128,874,522 Surplus/Deficit for the year (161,964,379) 293,844,107 Prior year adjustments NET FINANCIAL POSITION 260,754,250 422,718,629 The accounting policies and explanatory notes to these financial staternents form an integral part of the financial statements. The financial statements were approved on-'S?a= 011W 2018 and signed by: Mr. Peter K. Tum Dr:ID il,,-:a`riuki Project Aountant Principal Secretary Project Coordinator Alice Olango ICPAK NUMBER: 3iL, I I ( I lua Date Date Date Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 6. STATEMENT OF CASHFLOW FOR THE YEAR ENDED 30TH JUNE, 2018 2017-2018 2016-2017 Notes Kshs Kshs Receipts for operating income Miscellaneous receipts 8.3 426,233 190,154 Payments for operating expenses Compensation of employees 8.4 (2,603,410) (3,257,262) Purchase of goods and services 8.5 (655,007,118) (123,164,965) Transfers to other government entities 8.7 (1,238,803,543) (1,471,854,527) Adjustments during the year 9,292,972 (23,903,390) Net cash flow from operating activities (1,886,694,866) (1,621,989,990) CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Assets 8.6 (57,630,400) (183,819,028) Net cash flows from Investing Activities (57,630,400) (183,819,028) CASHFLOW FROM BORROWING ACTIVITIES Loan from external development partners 8.2 1,791,653,859 2,075,749,735 Net cash flow from financing activities 1,791,653,859 2,075,749,735 NET INCREASE IN CASH AND CASH EQUIVALENT (152,671,407) 269,940,717 Cash and cash equivalent at BEGINNING of the year 392,318,961 122,378,244 Cash and cash equivalent at END of the year 239,647,554 392,318,961 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statement inancial statements we roved on 1 2018 and signed by: Mr. Peter K. 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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2018 The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1 Statement of compliance and basis of preparation The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and conform to the form of presentation prescribed by the Accounting Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognises transactions and events only when cash is received or paid out by the Project. Recognition of revenue and expenses The Project recognises all revenues from the various sources when the event occurs and the related cash has actually been received by the Project. In addition, the Project recognises all expenses when the event occurs and the related cash has actually been paid out by the Project. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks 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 authorised public officers and/or institutions which had not been surrendered or accounted for at the end of the financial year. 5 Kenya Health Sector Support Project - SWAp Secretariat Reports and Financial Statements For the financial year ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2018 SIGNIFICANT ACCOUNTING POLICIES (Continued) iii. Budget The budget is developed on the same accounting basis (cash basis), the same accounts classification 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 as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. A high-level assessment of the Project's actual performance against the comparable budget for the financial year under review has been included in an annex to these financial statements. iv. Comparative figures Where necessary comparative figures for the previous financial year have been amended or reconfigured to conform to the required changes in financial statement presentation. V. Subsequent events There have been no events subsequent to the financial year end with a significant impact on the financial statements for the year ended June 30, 2018. 6 The original had problem with text extraction. pdftotext Unable to extract text.