GrantThornton Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program African Development Bank - Loan No 2000130013680 World Bank - IDA Credit No 5646 -ZM Financial statements for the year ended 31 December 2018 LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2018 Coitents Page Management's report 1 -5 Management's responsibilities in respect of the preparation of the financial statements 6 Independent auditor's report 7 -9 Consolidated statement of sources and utilisation of funds for the African Development Bank and WN/orld Bank loans 10 Separate statement of sources and utilisation of funds for the African Development Bank 11 loan Separate statement of sources and utilisation of funds for the World Bank loan 12 Designated Account statement for African Development Bank 13 Designated Account statement for World Bank 14 Notes to the financial statements 15 - 20 Statement of the special account - African Development Bank loan AppendLx I Statement of the special account - \W/orld Bank loan Appendix II Schedule of fLxed assets AppendLx III LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 Management has pleasure in presenting their report on the activities of Lusaka Water and Sewerage Company Limited (LWSC) - Lusaka Sanitation Program ("the Program") for the year ended 31 December 2018. Principal activities The Lusaka Sanitation Program's main objective is to increase access to sustainable sanitation services to Lusaka residents especially the urban poor and to strengthen Lusaka Water and Sewerage Company's capacity to manage sanitation services. The project aims to address one of Zambia's most binding constraints to economic growth through infrastructure investment in Lusaka, the rapidly urbanizing capital. The project cost is estimated at US$ 127.83 million, of which African Development Bank (AfDB) is financing US5 50 million or 39%, the World Bank (WX,'B) US1 65 million or 51%, and the Government of Zambia/ LW\/SC 10%. It was expected to start in 2015 but only became effective in June 2016. The projects under review are part of a broader Lusaka Sanitation Program (LSP) being implemented by LWSC with financing from \'orld Bank (\WB), African Development Bank (AfDB), European Investment Bank (EIB) and the German Development Bank (Kf\W/). The LSP will provide a comprehensive city-wide approach to Lusaka's sanitation challenge and design interventions that can address this challenge in line with the Sanitation Investment Master plan which covers both off-site and on-site systems. The program will implement investments consistent \with the Lusaka Sanitation Master Plan and develop L\N/SC's capacity to manage all aspects of sanitation, from conventional sewerage, to condominium, to on-site systems and fecal sludge management (FSM). The project's development objective is to increase access to sustainable sanitation services in Lusaka and strengthen L\W,SC's capacity to effectively manage sanitation services, with particular focus on the poor. Detailed Project Components The program has the following components: Component I: Sewerage Infrastructure Development and Improvements (US$ 79,5 million). * Climate resilient Sewerage Infrastructure Development (US$ 39.5 million) - AfDB This sub-component will finance climate resilient collection system upgrade and collection system expansion. The collection system upgrade and expansion will include approximately 72km of sewers to service an additional 100,000 people through 10,000 new connections. 2. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018(continued) Detailed Project Components (continued) Component 1: (continued) Sewerage Infrastructure Development and Improvements (US$ 79.5 million). (continued) * Climate resilient Sewerage Infrastructure Development (US$ 39.5 million) - AfDB (Conlinued) Works contacts are packaged in Five "sewer sheds" (the sewer network serving a particular part of the service area for Lusaka,) identified in the Iviasterplan (Manchinchi, Chunga and Matero, Ngwcrere, Chelstone and Kaunda Square sewer sheds) to be financed by the World Bank and EIB. Conventional climate resilient sewerage and climate resilient condominium sewerage will be considered as appropriate. This component will also finance rehabilitation/construction of climate resilient sewage pump stations and main collectors. The Bank will finance the works in Matero/Chunga sewer shed, Chelstone sewer shed and the Kaunda square sewer shed. * Sewerage improvements (US$ 38 million) - WB The objective of this component is to upgrade and expand sewerage systems in the Ngwerere and Manchinchi sewer sheds. Collection system upgrading and expansion will be based on priority 1 investments as identified in the Lusaka Sanitation Iaster Plan by LWSC. Year I investments will include sewer network expansion in Emmasdale and Chaisa neighbourhoods and Kafue Road and upgrade of Ngwerere Western Interceptor. Year 2 to 5 investments will be network expansion in Chawama, Kuomboka and Garden, upgrade of Ngwerere Downstream Collector and upgrade and extension of Ngwerere Sewage Ponds. Component II: On-site sanitation and Hygiene Promotion (US$ 22 million) * Decentralised Sanitation and Hygiene Education (US$ 9 Million) - AfDB This component aims at increasing population awareness on sanitation and hygiene education, will also finance climate resilient on-site sanitation (infrastructure saitation facilities) in peri-urban areas where there is no sewerage system in addition to construction of climate resilient Feacal Sludge Management Units as a form of decentralised wastewater treatment in peri urban areas. This component therefore will be divided into the following main sub-components: (i) Sanitation, Hygiene Promotion and Education; (ii) clmate resilient On-site Sanitation Infrastructure; (iii) climate resilient Public Sanitation facilities; and (iv) climate resilient Feacal Sludge Management. 3 LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018(contiued) Detailed Project Components (continued) Component II; (continued) On-site sanitation and Hygiene Promotion (US$ 22 million) (continued) * Decentralised Sanitation and Hygiene Education (US$ 9 Million) - AfDB (continued) The component shall also support sanitation marketing and hygiene promotion, which will involve developing of Gender, informed Communication Materials in consultation with linistry of Health and Millennium Challenge Corporation (MCC) to promote improved sanitation and hygiene in the Matero/Chunga and Chelstone/ Kaunda Square Sewer sheds covered by the Bank intervention and particularly at the household level. * On-site sanitation (US$ 13 million) - WB The objective of this component is to develop a comprehensive response to the on-site sanitation challenge facing Lusaka and support on-site sanitation services and systems in priority areas. This component will focus on priority peri-urban areas that will not be sewered in the medium to long-term due to technical and financial considerations. Investments will include a support fund for on-site sanitation facilities, support to the development of FSM infrastructure and service providers, construction of a number of Decentralised Wastewater Treatment Systems (DEWXATS) systems, sanitation and hygiene promotion. The areas to be covered under this component will be selected after the completion of the feasibility study. Component III: Institutional strengthening and Capacity Building (US$ 13 million) * Institutional Support and Capacity Building (US$ 4 million) - AfDB The Project will provide technical assistance focused on capacity development through training, and improving operation and maintenance of sewerage infrastructure by providing adequate specialised equipment, sewer cleaning tools and utility vehicles to replace aged equipment and vehicles. Laboratory equipment, chemicals and reagents will be provided to enhance the quality and timeliness of water quality and wastewater quality tests. Institutional strengthening activities will also target National and Municipal Agencies such as National \Water and Sanitation Council (NWASCO), Zambia E%nvironmental Management Agency (ZEMA) and Lusaka City Council (LCC). A Memorandum of Understanding (MOU) vill be needed between L\WSC and LCC outlining roles and responsibilities for implementation of component II of the program. This will be the basis of establishing a formal mechanism of all stakeholders in the form of a Component Coordinating Committee with clear strategy and budget to steer sanitation, hygiene and education. 4. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018(continued) Detailed Project Components (continued) Component III: (continued) Institutional strengthening and Capacity Building (US$ 13 million) (continued) * Institutional Support and Capacity Building (US$ 4 million) - AfDB (continued) In addition, one staff member each from LCC, MLGH, and MCDMCH/Mol- will be seconded to LWSC Project Management Unit (PMU). Their role is to act as liaison officers with their respective parent institutions and strengthen the capacity of LWSC in their respective fields of expertise. * Institutional strengthening (US$ 9 million) - WB This component will provide technical assistance (TA) to enhance L\W,SC's capacity to implement the project, operate and maintain the facilities going forward, and to support the reforms needed to deliver sanitation services effectively and efficiently and to respond better to customer demand. This will include: (i) project management support to LWNSC to implement the project; (ti) TA to strengthen the capacity of LWSC to provide sanitation services and preparation funds for future investments and equipment for sewer maintenance and labs; and (iii) building capacity for monitoring program implementation and impacts in LWSC, LCC, M\CDMCIH and MoH. Specific activities to be included under the Technical Assistance include: (a) HR strategy to consider realigning sewerage and sanitation departments; (b) revenue enhancement strategies to ensure cost recovery of sewerage and sanitation services; (c) asset management strategy to improve management of sanitation assets; (d) improved customer care, in particular around sewerage blockages and new sanitation activities; (e) continuation of the shadow credit rating undertaken during preparation (funded by PPIAF); (f) continuation of the performance contract between LWSC management and branches; and (g) various training activities and strategic studies (such as an update of the Sanitation Master Plan). 5. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018(continued) Detailed Project Components (continued) Component IV: Programme Management (US$ 3 million) - AfDB This component includes Engineering Services and accompanying measures: A consulting firm will be recruited to carry out design reviews, detailed designs where required, prepare tender documents, assist with procurement and supervise works construction. Incremental operating costs related to Management and implementation of the project are also included, as well as the cost of annual project audits. This component also includes land acquisition and compensation, if sewers shall pass through private land, the owners will be compensated for an)' damage to property, trees and crops, etc, by Goveru-nent and according to Government's established procedures. The Project Implementation Department shall be responsible for the program implementation and successful delivery of its outputs. Eng. Jonathan Kampata 30 June 2019 AIonaginig Director 6. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM MANAGEMENT'S RESPONSIBILITIES IN RESPECT OF THE PREPARATION OF THE FINANCIAL STATEMENTS The project management are required to prepare the consolidated and separate statements of sources and utilisation of funds for the African Development Bank and the World Bank loans for each financial year which give a true and fair view of the state of affairs of the Lusaka Sanitation Program's ("the Program") financial statements and of the surplus or deficit of the project for that year. In preparing such statements of sources and utilisation of funds the project management are responsible for: * designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of statements of sources and utilisation of funds that are free from material misstatement, whether due to fraud or error; * selecting appropriate accounting policies and applying them consistently; * making judgements and accounting estimates that are reasonable in the circumstances; and * preparing the statements of sources and utilisation of funds in accordance with applicable accounting policies, the loan agreements between the Government of the Republic of Zambia and African Development Bank and the World Bank, and on the going concern basis unless it is inappropriate to presume that the project will continue in operation. The project management are responsible for keeping proper accounting records, which disclose with reasonable accuracy at an)' tine the financial position of the project and enable them to ensure that the statement of sources and utilisation of funds comply with the requirements of the Africa Development Bank and the World Bank loan agreements and regulations. The5' are also responsible for safeguarding the assets of the project and hence for talkng reasonable steps for the prevention and detection of fraud and other irregularities. The project management confirm that in their opinion:- (a) the consolidated and separate statements of sources and utilisation of funds give a true and fair view of the state of the program's affairs at 31 December 2018 and of its financial performance and its cash flows for the year then ended; (b) at the date of this statement there were reasonable grounds to believe that the project will be able to pay its debts as and when these fall due; and (c) the statement of sources and utilisation of funds is drawn up in accordance with the applicable fnancial reporting framework and the loan agreement with the African Development Bank and the World Bank. This statement is made in accordance with a resolution of the project committee. Signed at Lusaka on 30 June 2019 Engjonathan Kampata Matilda Mwansa A4aging Director Director of Finance Grant7Thornton GrantThornton 5th Floor Mukuba Pension House Dedan Kimathi Road P.O. Box 30885 Lusaka, Zambia T +260 (211) 227722-8 F +260 (211] 223774 E gtlusaka.mailbox@zm.gt.com INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM Report on the financial statements Opinion We have audited the financial statements of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program ("the Program") set out on pages 10 to 20, which comprise the Consolidated statements of sources and utilisation of funds for the African Development Bank and World Bank loans, separate statement of sources and utilisation of funds for the African Development Bank and World Bank loans for the year ended 31 December 2018, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements present fairly, in all material respects, the financial position of Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program as at 31 December 2018, and its financial performance and cash flows for the year then ended in accordance with accounting policies described in note 2 and the requirements of the loan agreements between the Government of the Republic of Zambia and African Development Bank and World Bank. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Program in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the audit of financial statements in Zambia. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Partners Edgar Hamuwele (Managing) Christopher Mulenga Wesley Beene Rodia Musonda Chilola Banda Audit a Tax a Advisory Chartered Accountants Zambian Member of Grant Thornton International VAT reg 1001696100. Registered in Lusaka. Company number 8116 Grant Thornton Zambia and other member firms are not a worldwide partnership. GTI and each member firm is separate legal entity. Services are delivered independently by the member firms. GTI and its member firms are not agents, and do not obligate, one another and are not liable for one another's acts or omissions, wWW.gt.Com.zm 8. INDEPENDENT AUDITOR'S TO THE MEMBERS OF LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM Basis of accounting and restriction on use and distribution The financial statements have been prepared in accordance with the basis of accounting described in note 2 to assist management of the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program to comply with the financial reporting provisions of the grant agreement. As a result, the financial statements and related auditor's report ma) not be suitable for another purpose. Our report is intended solely for the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program, the Government of the Republic of Zambia, the African Development Bank and the World Bank and should not be distributed to or used by parties other than the Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program, the Government of the Republic of Zambia, the African Development Bank and the World Bank. Other matters The financial statements of Lusaka Water and Sewerage Company Lirrmited - Lusaka Sanitation Program for the year ended 31 December 2017 were audited by another auditor who expressed an unmodified opinion in their report dated 30 June 2018. Other Information Nlanagement are responsible for the other information, The other information comprises the Management's report, Management's responsibilities in respect of the preparation of the financial statements and appendix I to III set out on pages 21 to 31. Other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact, We have nothing to report in this regard. Responsibilities of Management for the financial statements Management are responsible for the preparation and fair presentation of the financial statements in accordance with accounting policies described in note 2 and the requirements of the loan agreements between the Government of the Republic of Zambia and African Development Bank and World Bank, 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 are responsible for assessing the Program'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 intend to liquidate the Program or to cease operations, or have no realistic alternative but to do so. Auditors' Responsibilities for the Audit of the Financial Statements 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 auditors' 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 ISAs will always detect a material misstatement when it exists. 9 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM Auditors' Responsibilities for the Audit of the Financial Statements (continued) Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Program's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estumates and related disclosures made by management. * Conclude on the appropriateness of 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 Program's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Program to cease to continue as a going concern. * 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. We communicate with those charged vith governance regarding, among other matters, the planned scope and tining of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. C artered Accountants Rodia M Musonda (AUD/F000367) Name of partner signing on behalf of the firm Lusaka Date: 30 June 2019 10. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM CONSOLIDATED STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE AFRICAN DEVELOPMENT BANK AND WORLD BANK LOANS FOR THE YEAR ENDED 31 DECEMBER 2018 Year ended Year ended Cumulative Notes 31 Dec 31 Dec to 31 Dec 2018 2017 2018 US$ US$ US$ Funds available at 1 January 4,667,141 582,315 - Funds Received 4 13,674,435 9,480,411 26,854,108 Direct payments 5 2,785,424 1,632,686 4,424,810 Interest received 6 60,162 59,968 120,168 Other income 7 - 98767 367 Total funds available 21,17,162 11,765147 3140853 Expenditure Works 8 4,910,907 2,716,946 7,627,853 Goods 9 985,842 1,476,038 2,839,449 Consultancy services 10 7,485,209 1,737,241 11,213,194 Training 11 49,455 325,458 535,812 Programme management (Operating costs) including salaries 12 819,862 737,713 2,143,173 Other expenses (miscellaneous) 13 il7,87 114,17 194896 Total expenditure 14,23122 7,107,70 24,55360 Surplus of funds over expenditure 6,864,040 4,657,577 6,855,249 Exchange movement 14 1,562 9564 8002 Funds available as at 31 December 6,82,478 4667,1 6,862478 Represented by: Assets Cash nd cash equivalents 15 6-862,478 6 - 478 This statement of sources and utilization of funds was approved by management on 30 June 2019 and was signed on its behalf by: Engjonathan Kampata .Niatlda M.ansa Al.aiqi Director Drector of Finaiwce LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE AFRICAN DEVELOPMENT BANK LOAN FOR THE YEAR ENDED 31 DECEMBER 2018 Year ended Year ended Cumulative Notes 31 Dec 31 Dec 31 Dec 2018 2017 2018 US$ US$ US$ Funds available at 1 January 6,416 537,936 - Funds received 4 811,260 1,510,537 Direct payments 5 2,785,424 1,632,686 4,424,810 Interest received 6 101 36 175 Other income 7 - 9,767 9,768 Total funds available 3,603,201 2,180,425 5.,945289 Utilisation of funds by Category Works 8 991,272 190,998 1,182,270 Goods 9 606,326 1,020,517 1,626,843 Consultancy services 10 1,340,941 633,826 2,057,517 Trainng 11 - 29,030 29,030 Programme management 12 203,322 185,939 466,253 Other expenses (miscellaneous) 13 71,847 114,174 194,896 Total Expenditure 3,213,708 2174,484 5509 Excess of Receipts over Expenditure 389,493 5,941 388,480 Exchange movement 14 (3,383) 475 (2,370) Net cash available 386,110 6416 38,10 Represented by: cash and cash equivalents Bank balances 15 3 386- 10 Total Cash and cash equivalents 3-W, -L W86 110 This statement of sources and utilisation of funds was approved by management on 30 June 2019 and was signed on its behalf by: Engjonathan Kampata M4atilda Mvansa '1wanging Director Director of Filance 12. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM STATEMENT OF SOURCES AND UTILISATION OF FUNDS FOR THE WORLD BANK LOAN FOR THE YEAR ENDED 31 DECEMBER 2018 Year ended Year ended Cumulative Notes 31 Dec 31 Dec 31 Dec 2018 2017 2018 US$ US$ US$ Opening Balance 4,660,725 44,379 - Sources of funds Advance to designated account Replenishment to the designated account 4 12,863,175 9,480,411 25,343,571 Direct payments (Contractors, Consultancy, Suppliers) Interest received 6 60,061 59,932 119,993 Other funds Available funds 17,583,91 9,54,72 25,463564 Utilisation of funds by Category \W/orks 8 3,919,635 2,525,948 6,445,583 Goods 9 379,516 455,521 1,212,606 Consultancy services 10 6,144,268 1,103,415 9,156,261 Training and capacity building 11 49,455 296,428 506,781 Operating costs including staff cost 13 616540 511,676,921 Total expenditure 11,109,41 4,33,86 18,998,52 Excess of receipts over expenditure 6,474,547 4,651,636 6,465,412 Exchange difference on cash balances 14 9.089 1056 Net cash available 15 63 8 4 660775 Represented by: cash and cash equivalents Bank balances 15 6,476,368 4 ,25 6,476,368 Total Cash and cash equivalents L -7 -2 6.3 This statement of sources and utilisarion of funds was approved by management on 30 June 2019 and was signed on its behalf by: Eng Jonathan Kampata Matilda Mwansa Alanaqing Director Director of Fiance 13. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM DESIGNATED ACCOUNT STATEMENT - 31 DECEMBER 2018 African Development Bank 2018 US$ Opening balance 1January 2018 Add: Initial deposit to special Account Special Account Replenishments 811,260 Reimnbursements-(transfer from K\vacha) Total interest 101 817,777 Deduct: Payments for Works 88,856 Payments for Goods - Payments for Consultancy/Services 64,259 Operating costs 203,322 Operating costs (miscelaneous) 71,847 428,284 Closing balance 31 December 2018 389,493 Exchange Difference (3383) Closing balance 31 December 2018 3 ll1 14. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM DESIGNATED ACCOUNT STATEMENT - 31 DECEMBER 2018 World Bank 2018 US$ Opening balance (1 January 2018) 4,660.725 Add: World Bank replenishments - Interim Reports 12,863,175 Reimbursements - Total interest 60.061 17.583.961 Deduct: Payments for Works 3,919,635 Payments for Goods 379,516 Payments for Consultancy 6,144,268 Staff Costs 463,028 Training 49,455 Program Management and Operating Costs 153,512 11,109,414 Exchange Difference 1.821 Closing balance (31 December 2018) 6 Kwacha Account (31 December 2018) 4,214 US Dollar Account (31 December 2018) 6472154 Closing Balance (31 December 2018) _ 6 15. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 1. Reporting entity The Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program ("Program) is domiciled in Zambia. The address of its registered office is LWSC DG Office, Plot I Chila Road, Kabulonga, Lusaka, Zambia The Program aims at supporting the Government of the Republic of Zambia's ongoing commitment to water and sanitation sector reforms by increasing access to sustainable sanitation services in Lusaka and strengthen LVSC's capacity to effectively manage sanitation sen'ices, with particular focus on the urban poor. The main components of the program include: a. Sewerage Infrastructure Improvements b. On-Site Sanitation c. Institutional Strengthening d. Programme Management 2. Basis of preparation These financial statement have been prepared on a cash basis of accounting and in accordance with the requirements of the loan agreements between Lusaka Water and Sewerage Company Limited - Lusaka Sanitation Program and the Government of the Republic of Zambia, the African Development Bank and the World Bank. Details of the Program's accounting policies are included in note 17 to the financial statements. 3. Functional and presentational currency The financial statements are presented in United States American Dollars (USD), which is the Program's functional currency. Except as otherwise indicated, the financial information presented has been rounded off to the nearest Dollar. 16 LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 4, Funds received 2018 2017 US$ US$ Africa Development Bank World Bank 1,37984 These relate to amount received into the special accounts of the respective donors during the year, 5. Direct payments Africa Development Bank Direct payments relate to expenditure paid for direcdy by the donors, 6. Interest received Africa Development Bank 101 36 World Bank 60,061 59,932 60,162 59.68 7. Other income Africa Development Bank Other income relates to unutlised funds transferred back to the special account from the Kwacha account, 8. Works /1ikan Development .Bank Construction of public toilet facilities 991,272 190298 991,272 1909-98 IWorld Bank Sewer Network expansion and upgrade Kafue road 1,282,372 657,723 Sewer Network expansion and upgrade Ei-nasdale 2,611,814 1,851,734 Livelihood restoration for year 1 PAP's 15,015 16,491 Household connections To35 2248 Total Works 4,910,907 21DAi 17. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 9. Goods 2018 2017 US$ US$ African Development Bank Support to NWASCO LWSC 606,326 L.00,20 606,326 2 1 World Bank Supply and delivery of equipment for sewer maintenance 216,241 22,948 Supply and delivery laboratory equipment 145,662 332,803 Supply and delivery of motor bikes* 97,128 Supply and delivery of office equipment 10,428 Supply and delivery of office furniture 7,185 - Supply and installation of softvare 79,516 4A55,521 Total Goods 985,842 *This relates to 37 motor bikes for LCC, LWISC and MoH. 10, Consultancy services African Development Bank Support to NNASCO 41,610 22,524 Support to LCC 10,289 33,055 L\WSC 1289,42 5247 1,340,941 I Vorld Bank Supervision of year 1 works 1,365,042 507,100 Detailed design and supervision of year 2-5 sub projects 1,405,113 181,249 Shadow credit rating - 31,000 Sanitation marketing services 997,445 143,750 Technical assistance to set up monitory and evaluation system 394,585 147,144 Consultancy for design supervision 254,694 - Consultancy services for Year 2-5 ESIA and RAP 608,180 7 Support to LW/SC social safe guard teams - 2,786 Development of national monitory & evaluation framework - 90,386 Consultancy for FSM Business development model 1,009,158 - Cholera emergency funds 19,127 ZEMA assessment review fees 90,24 Total consultancy services 7-4 2 1737,241 18. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 11. Training 2018 2017 US$ US$ African Development Bank World Bank 4 228 Total training 92555 12. Program management frikam Deve/opment Bank Support to NWASCO Other - LWSC 203,32 185939 20 322 1B5,939 Vorld Bank StaIff cost 463,028 468,784 Advertising, evaluation and other cost 153512 Total program management 819862 73,1 13. Other expenses African Development Bank 71 848 14, Exchange movement African Development Bank (3,383) 475 World Bank 15. Cash and cash equivalents African Development Bank 386,110 6,416 World Bank 6,48 4,60725 Total 16. Subsequent events There were no subsequent events requiring disclosure or adjustment to these financial statements. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 17. Significant accounting policies The Project has consistently applied the following accounting policies to all periods presented in these financial statements. Set out below is an index of the significant accounting policies, the details of which are available on the pages that follow. a) Income recognition b) Foreign currencies c) Cash and cash equivalents d) Employee benefits e) Expenditure 0 Capital expenditure g) Taxes a) Income recognition Grant income Grant income is recognised when funds are received from African Development and World Bank. Direct pqyment Direct payment to third parties by the financier are recognized as income when the financier make payments directly for goods, services or contractor for \vorks. hinlereslicccome Interest income recognised when earned and received. b) Foreign currencies The financial statements are prepared in USD. Funds received are converted from USD to local currency at the exchange rates ruling at the date of the transactions. The cash balances at the yearend are translated at the closing rate obtained from the bank were the accounts are held and any exchange gains or loss are recognized in the income and expenditure. c) Cash and cash equivalents Cash and cash equivalents comprise cash balances on hand and at bank. Cash and cash equivalents are carried at face value. 20. LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 17 Significant accounting policies (continued) d) Employee benefits Short lern emp/oyee benefits Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the project has a present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably. For fixed contract employees an additional payment is payable after six months and at the end of the contract period and is accrued as a provision and settled at the end of the contract period. Contract period is for one year. ii) Defined contfibution plans Obligations for contributions to defined contribution plans are expensed as the related service is provided. The project contributes to National Pension Scheme Authority (NAPSA) for its eligible employees as provided by law. The project's contribution is charged to profit and loss in the year in which it arises. e) Expenditure Expenditure represents the total amount incurred on project activities under the Grant Agreement. f) Capital expenditure Items of a capital nature are expensed at the tirne of acquisition. g) Taxes The project is exempt from paying taxes in accordance with the provisions of the Income Tax Act. 21. APPENDIX I LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM STATEMENT OF THE SPECIAL ACCOUNT AFRICAN DEVELOPMENT BANK FOR THE YEAR ENDED 31 DECEMBER 2018 AFRICAN DEVELOPMENT 1. Advances for the period USD account Special Account Replenishment 811,260 Interest received 101 Total advance received 811.361 2. Balance in the special account 6,416 3. Eligible expenditure paid during the year From Special Account;* (428,284) 4. Total advances accounted for (3) (428.284) 5. Difference (1 - 4) 389,493 6. Add: exchange movement on cash balance in Kwacha Account (3,383) Analysed in cash and bank balance Cash and cash equivalent *Note: The eligible expenditure excludes direct payments 221 APPENDIX II LUSAKA WATER AND SEWERAGE COMPANY LIMITED - LUSAKA SANITATION PROGRAM AFRICAN DEVELOPMENT BANK - LOAN NO 2000130013680 WORLD BANK - IDA CREDIT NO 5646 -ZM STATEMENT OF THE SPECIAL ACCOUNT WORLD BANK FOR THE YEAR ENDED 31 DECEMBER 2018 WORLD BANK 1 Advances for the period USD account Disbursement to the Designated Account 12,863,175 Interest received 60,061 Transfer from Dollar Account Total Funds received 1223236 2 Balance in the Designated Account 4,660,725 3 Eligible expenditure paid during the period (Total expenditure less payables) 11109414 4 Total advances accounted for (3) 11109414 5 Difference (1 - 4) 6 Add: exchange movement cash balance in Kwacha Account 1,821 Analysed in cash and bank balance 6,476,368 Cash and cash equivalent i 1 i i _ о �л r r - .у. � .� � � =r о гг1 f� г� Г� -t 7 У rt гq гл и� сд с` г1 � ц'j �Л и м �1 UJ � гд � и и и П г1 г1 г1 г�J г� г^ ^ ,� м М г� м г'1 г� у N N N о о � � О О О � й z '_' `_' �- О О О О О О О О О О О О О О о �. 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