I MINISTRY OF AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT I SHIRE R IVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I I PROJECT ID NUMBERS Pl 1761 7 AND Pl 27866 I IDA GRANT No. H7750 IDA LOAN No.~ 1250 I GEF GRANT No.TF 12920 LDCF GRANT No. TF 1292 1 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31 5T MAY 2019 I \\'OR1 f' ~ ~JK RECr_ VL D 9 -09- 1 9 201 NATIONAL AUDIT OFFICE MALA WI COl ~TRY Ot-t-JCE P. 0. BOX 30045 LILONGWE I I I Table of Contents I CONTROLLING OFFICER'S REPORT ON THE IMPLEMENTATION OF SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT .......................................................................................................... 2 STATEMENT OF MANAGEMENT RESPONSIBILITIES ................................................................................................ 7 AUDITOR GENERAL'S REPORT......................................................................................................................................... 8 I STATEMENT OF FINANCIAL POSITION AS AT 315T MAY 2019 ............................................................................... 11 I STATEMENT OF RECEIPTS & PAYMENTS FOR THE II MONTHS PERIOD ENDED 31ST MAY 2019............... 12 SCHEDULE OF WITHDRAWALS APPLICATIONS FOR IDA H7750 AND IDA 51250 ............................................ 13 I SCHEDULE OF WITHDRAWAL APPLICATIONS FOR GEF TF 12920 AND LDCF TF 12921 ............................... 14 STATEMENT OF USES OF FUNDS BY COMPONENT .................................................................................................. 15 I RECEIPTS AND PAYMENTS - MALA WI GOVERNMENT ACCOUNTING .............................................................. 16 NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................. 18 I I I I I I I I 1 I I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY2019 I CONTROLLING OFFICER'S REPORT ON THE IMPLEMENTATION OF SIDRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I INTRODUCTION I The Shire River Basin Management Programme (Phas~ 1) Project was financed by a loan and grant from the International Development Association (IDA) to the combined total of USD 125 million and other grant financing from Global Environmental Facility (GEF)-USD5.078 million and Least I Developed Countries Fund (LCDF)-USD 1.5million. The Government of Mal~i made contribution in cash and kind amounting to USD 11.3 million in the Project. I The project addressed the interlinked challenges of poverty and a deteriorating natural resource base in the Shire Basin to reduce the process of environmental degradation and improve the productive potential of natural resources. The project promoted integrated &mate resilient investment planning in the basin, including institutional capacity building to plan and monitor changes in land use I patterns at a basin level. Project activities also suppo'd strategic planning and implementation of large-scale infrastructure investments; adoption of sustainable land, forest and water management practices to reduce land degradation in production and natural landscapes, to build resilience to I climate risk and to improve the productivity and incomes of smallholder farmers in priority catchments. The project also improved flood risk · management in the lower shire. Project I investments was designed to support tlfe Government's economic growth and development plans for the basin. / I The first phase of the program was for a period of 6.5 years spanning from the year 2012 to 31st January 2019 and became dfective on 7th September 2012. I The project was organized in three major components namely: / I 4 Component A - Shire Basin Planning Shire Basin Planning aimed at laying the foundation for more integrated investment planning and modernized system operations for the Shire River Basin whose major outputs are the Shire River Basin Management Plan, Shire River Basin Knowledge base and Shire River Basin Institution. I Component B - Catchment Management Catchment Management objective was to rehabilitate and manage target sub-catchment areas so as to reduce erosion and improve people's livelihoods. 2 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY 2019 I Component C - Water Related Infrastructure Water Related Infrastructure main objective was to support new investments that would enable improved regulation of the Shire flows and strengthen climate resilience. In this regard, the component supported the upgrading of the Kamuzu Barrage, community-level flood adaptation investments in Chikwawa and Nsanje and the preparation of new water infrastructure projects. The project was complex and of multi-sectoral nature, but centered around water and its different I roles, functions and uses. Therefore, the Department of Irrigation and Water Development under the Ministry of Agriculture, Irrigation Water Development and Irrigation (MoAIWD) was designated as lead implementing agency, and overall project coordination was housed in the Department of Irrigation and Water Development. In order to ensure broad Governrn..91t ownership, each component, sub component and activity was implemented through the relevant Ministries and I Departments. PROJECT OBJECTIVES AND OUTPUTS / The overall program development objective was to increase sustainable social, economic and I environmental benefits by effectively and collaborativ~y planning, developing and managing the Shire River Basin's natural resources. /, I The first phase was designed to develop a strategic planning and development framework for the Shire River Basin so as to improve land and water resources management for ecosystem and livelihood benefits in the targeted areas_ys'pecifically, the proj ect was to: I a) Strengthen the insufutional capacities and mechanisms for Shire Basin monitoring, I b) planning, management and decision support systems; Invest in water related infrastructure that sustainably improves water resources management and development; I c) Reduce erosion in priority catchments and sedimentation and flooding downstream, while enhancing environmental services, agricultural productivity and improving I d) livelihoods; Improve flood management in the Lower Shire and provide community level adaptation and mitigation support; and I e) Protect and enhance ecological services infrastructure in the Basin. I 3 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY 2019 PROJECT KEY ACHIEVEMENTS DURING THE PROJECT The following are the key achievements that the Project registered during the implementation period; I a. The development process for the Shire Basin Plan was fully concluded and the Plan was formally adopted by the GoM. This signifies attainment of a key precursor aspect that embodied the Project's PDO, namely: development of the Shire Basin I Planning Framework. The adopted Basin Plans were subsequently printed and distributed to all participating District Councils with a view to facilitating their I incorporation into and/or synchronization with the District Development Plans (DDPs); / b. The development of an integrated Shire Basin Knowledge base with various I products including the State of the Shire Basin report; the updated Shire Basin Atlas; various analytical tools that were subsequently used to model and compile the I various elements of the Shire Basin Plan; 17 th'.?11atic and sectoral reports; and the biodiversity specific knowledge products such as forest cover and habitat maps, biodiversity atlas, amongst others; c. The construction and supervision a p~se-built Shire River Basin Agency office building in Blantyre was successfully,tompleted; d. The rehabilitation of eight government buildings for some participating departments I which included the following:' i) Department of Land Resources Conservation Offices in Lilongwe; ii) )he Water Resources Office block at Ngabu; iii) the I Southern Region Water/Laboratory in Blantyre; iv) the Department of Surveys and Department of Cl,ate Change and Meteorological Services Archive building in Blantyre; v) the Department of Irrigation Conference Room and ablution block; vi) I the Neno EP } Office; vii) the Zomba Land Resources Training Centre; and viii) the Mangochi District Forestry Office; I e. The modernization of Hydrological and Meteorogical Monitoring Networks through pro..9urement and installation of 88 stations, comprising 23 Hydrological near-real- tiihe stations and 65 Meteorological near-real-time stations which has modernized I the collation and transmission of hydrometric data from the installed stations to the centrally installed base stations at Tikwere House and DCCMS office in Blantyre; I f. The successful development, deployment and operationalization of the Operational Decision Support System (ODSS) through the enhanced Hydrological and meteorological monitoring with inherent analysis and visualization platforms as well I as automatic transmission of processed information for decision making by targeted stakeholders and the general public; I g. The project also completed Hydrogeological and Water Quality Mapping in the Shire River Basin which included the following activities: (i) mapping out I 4 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY 2019 groundwater aquifers, including yields, and water quality parameters; (ii) Assessing the groundwater resources including aquifer characteristics, determination of sustainable yields; (iii) improving the existing hydrogeological and water quality I database; (iv) producing hydrogeological and water quality maps, and (v) building capacity in groundwater and water quality aspects. I h. The project managed to develop National Integrated Catchment Management and Rural Infrastructure Development Guidelines which are already being put to use by District Councils and other stakeholders; I 1. The project managed to subject a total of 25,212 hectares of land to sustainable land and water management (SLWM) practices through various interventions, surpassing I the project end-of-project target of 24,460 hectares. At this level, the Project involved about 77 percent of targeted households; / J. The Project completed development of all planned catchment management plans at I all levels including the four catchment-wide plans, 17 sub-catchment-wide plans, / and 305 Village Level Management Plan. These plans outlines the specific I interventions that communities will continu~ implementing with a view to addressing the identified environmental and/or catchment management issues; k. The project successfully established and trained 366 Common Interest Groups I (CIGs) through which a total amou~ MK620.5 million livelihood investment start-up grants was disbursed surpassing the end-of-Project revised targets of 306 I l. CIGs and MK220 million livelihoods investment grants; The Project completed construction works for four targeted rural feeder roads, covering a combined dist~ce of about 80 kms; I m. The Project completed' upgrading works for 13 market centres. The Project completed ChingJle, Chinseu, Masaula, Msosa, Senzani, Manjawira, Doviko, Tsangano Turn-Off, Chawe and Kundembo markets. The Project also substantially I n. completed, ~bale and Ligowe Markets; The Project completed the construction of rural bridges and culverts at all 11 (eleven) I targeted sites, and all these sites were certified by GoM Engineers from the Deyartment of Roads; o. The Project managed to complete design and construction of two sets of Ranger I Camps and the Conference Centre at Lengwe National Park, representing a momentous attainment of the key result objectives of the GEF financed component I of the Project that was aimed at enhancing financial sustainability of the two targeted national parks; p. The project supported promotion of the community participatory forest co- I management approach in five forest reserves of Neno Eastern Escarpment, Mangochi, Liwonde, Zomba/Malosa and Matandwe through establishment of co- I management structures including 27 Co-Management Plans and Agreements; 5 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY 2019 I q. The project completed the core works relating to the upgrading of the Kamuzu Barrage works which included the core concrete works involving construction a new bridge and ancillary energy dissipaters; the mechanical works involving procuring I and installation of all 14 automated gates and their ancillary components; as well as the installation of the Jib Crane and the Weed Boom for management of the weeds; I r. The project completed construction of nine flood protection structures in the Lower Shire, including dykes at Gooke, Masenjere, Nafafa, and Tengani as well as the safe crossing/bridge at Mafale II, Monica river diversion structures, Livunzu storm water I management structures, Nchalo bridge upgrading works and another Tengani causeway crossing; I s. The project completed the development of the first and second generation Guidelines on Community Flood Management, which have since been adopted by government; t. The Project procured and distributed flood warning equipment to 45 targeted CPCs I constituting 59 Mega phones with sirens, 100 mobile phones, 45 solar powered / inverter chargers, and 60 Solar Lamps with a view to enhancing the efficacy of I community response in times of imminent flood 9'5ks; u. The Project completed the development of the Budgeted Management Plan for the Elephant Marsh, representing delivery of a key Project Result Indicator under the I GEF funded improved wetland manag~~nt interventions for the Marsh; v. The Project successfully facilitated the designation of the Elephant Marsh as a site of I World ecological importance under the RAMSAR convention through successful / conclusion of the climate resilience studies whose outcomes were used to prepare the RAMSAR nomination fi} and I w. The Project successfully carried out two preparation studies for water-related infrastructure nam2y; (1). Water availability Study, Aquatic Weeds Management at Kamuzu Barrage; (2). Feasibility Study for the Rehabilitation of Mpira-Balaka Dam I for Gravity-_;:,ed Rural Water Supply Scheme. I / I Gray S.V.K. Nyandule-Phiri I SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT I I I 6 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE ELEVEN (11) MONTH PERIOD ENDING 31ST MAY 2019 I STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE 11 MONTH PERIOD ENDING 31ST MAY 2019 I The management of Shire River Basin Management Program (Phase I) Project is required to prepare financial statements for each financial period which give a true and fair view of the I state of affairs of the project as at the end of the financial year/period and of the operating results for that year. I The management is also required to ensure that the project keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the project and enable them to ensure that the financial statements comply with the financial agreements and I statutes. I In preparing the financial statements the management accepts responsibility for the following: "-i Maintenance of proper accounting records; . I 4 Selection of suitable accounting policies and ~piying them consistently; "'5 Making judgment and estimates that are reasonable and prudent; "- Compliance with applicable accounting,standards when preparing the consolidated financial statements, subject to any material departures being disclosed and explained in the consolidated financial statements . ./ I The management also accepts .responsibility for taking such steps as are reasonably open to them to safeguard the asseG of the project and to maintain adequate systems of internal I controls to prevent an~etect fraud and other irregularities. I The management is of the opinion that the financial statements give a true and fair view of the financial aff;s of the project and of its operating results. I The financial statements have been approved by the Ministry of Agriculture, Irrigation and Water Development and are signed on its behalf by: I ·--~-- Gray S.V.K. Nyandule- Phiri Sydney L. Kamtukule I SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT PROJECT COORDINATOR I 7 I I TelephoneNo.: +265770700 National Audit Office Fax: +265 01 773071/ P. 0. Box 30045 I 01 776125/01 774138 Capital City Lilongwe3 Malawi I I AUDITOR GENERAL'S REPORT I TO THE SECRETARY FOR AGRICULTURE, IRRIGATION AND WATER DEVELOPMENT ON THE FINANCIAL STATEMENTS OF SHIRE RIVER BASIN MANAGEMENT PROGRAM - IDA GRANT NO. H775, IDA LOAN N0.51250, GEF GRANT NO. TF 12920 AND LDCF GRANT NO. TF 12921 I FOR THE ELEVEN (11) MONTH PERIOD ENDING 315T MAY 2019 Opinion I I have audited the Financial Statements comprising the Statement of Financial Position, Statement of Receipts and Payments and Designated Account Activity Statement of the Shire River Basin Management Program for the eleven ( 11) month ended 31st May, 2018 and the related notes to the I accounts for the period then ended as set out on pages 11 to 23. In my opinion, the financial statements present fairly, in all material respects, the financial position of I the Shire River Basin Management Program for the eleven ( 11) month period ended 31st May, 2019 in accordance with the International Public Sector Accounting Standards (IPSAS). I 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 I Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Shire River Basin Management Program and the Ministry of Agriculture, Irrigation and Water Development in accordance with the International Standards of Supreme Audit Institutions - Code of I ethics (ISSAI 30) as promulgated by the International Organisation of Supreme Audit Institutions (INTOSAI), and I have fulfilled my other ethical responsibilities in accordance with these I requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. I Emphasis of Matter I draw attention to note 8.0 to the financial statements which describes the project's failure to settle all claims due to contractors who worked on the Kamuzu Barrage amounting to USD5,346,835 I equivalent to K3.9 billion. The amount was owed to Conduril Engenharia SA (USD4,222,440) and CMC di Ravenna (USDl ,124,395). My opinion is not qualified in respect of this matter. I Key Audit Matters I 8 I I 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 I have determined that there is no need to communicate key audit matters in my report due the nature of the audited entity. I Responsibilities of Management for the Project's Financial Statements The Shire River Basin Management Program Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSAS) Financial Reporting under the Cash Basis of Accounting, Donor terms of agreement and financial provisions, and for such internal control as they determine is necessary to I enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of the financial statements that are free from material I misstatements, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Project's Financial Statements I 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 I that an audit conducted in accordance with International Standards of Supreme Audit Institutions (ISSAis) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably I be expected to influence the economic decisions of users taken on the basis of these Project's Financial Statements. I As part of an audit in accordance with ISSAis, I exercise professional judgment and maintain professional scepticism throughout the audit. I also: I • 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 I audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, I • 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 I • opinion on the effectiveness of the internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. I • 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. I 9 I I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. I also provide those charged with governance 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. I From the matters communicated with those charged with governance, I determine those matters that I were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. I The engagement auditor on the audit resulting in this independent Auditor General's report is: l I l· I • I Signature: ..... . .v. BOX 3c I WA Lll ONG\.l! • ACTING AUDIT"' ·:-£"·ENERA:C 111 NATIONAL AUD11,..,QFEICE ~ I LILONGWE MALAWI I lb-m~~ Date:. J.. . ..... 6~................. ':20{ 1 I I I I 10 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHAS'E I) PROJECT (IDA) H7750 I 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 STATEMENT OF FINANCIAL POSITION AS AT 31 ST MAY 2019 NOTES Period 2019 Period 2018 MK USO MK USO ASSETS Non-Current Assets 3 26,625,858,514 43,125,881 22,229,14 1,863 37,062,484 C urrent Assets Bank & Cash Balances 4 94,863,501 13 1,667 8,436,797,034 11,602,590 TOT AL ASSETS 26,720,722.016 43.257.548 30.665.938.897 48,665.074 FINANCED BY I JOA Q7630- MAI 177, 125,629 1,136,869 177,125,629 1, 136,869 I IDA 51250-Loan JOA H7750-Grant 58,2 18,979,904 12,064,538,961 84,709,295 29,449,938 54,719,605,333 12,064,538,961 79,925,461 29,449,938 I GEF TFl 2920-Grant LDCF TFl 2921- Grant 3,192,742,836 919,471,391 5,078,000 1,500,000 3,007,858,906 873,213,789 4,825,520 1,435,669 I Total Loans and Grants 5 74,572.858. 721 121,874. 101 70.842,342.6 18 11 6,773,457 Other Income 6 144,004,885 255,843 132,402,585 239,982 Cumulative Costs 7 (47,996,141,590) (78,872,396) (40,308,806,305) (68,348,366) TOT AL FINANCES 26,720.722.016 43,257,548 30.665.938,898 48,665.074 ~~ I :~~:~·········· s,,.......~......... Project Coordinator Cbisomo E. Nayeja Financial Management Specialist Signed ............................... .... . Gray S.V.K. Nyand ule-Phiri Secretary for Agric ul ture, Irrigation & Water Development I 11.A '1 t J °' Date•...•••.. .. ..•...•...•..• \'L--('1/l~ Date•..........•........•.... ('l-- /'t / t '1 Date.•.................•..... I 11 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE f) PROJECT (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 STATEMENT OF RECEIPTS & PAYMENTS FOR THE II MONTHS PERIOD ENDED 31ST MAY 2019 Notes Period 2019 Period 2018 MWK USD MWK USO Opening Balances 4 8,436,797,034 11 ,602,590 12,911,695,346 17,760,930 Receipts IDA 5 1250 5 3,499,374,571 4,783,834 16,776,598,661 23,020,2 17 GEF T F 12920 5 184,883,930 252,480 526,149,244 7 19,522 LDCF TF 1292 1 5 46,257,602 64,331 49,220,207 67,298 I Total Other income 6 I J,602JOO 15,861 23,258,789 34,590 receipts 3,742,118,403 5,116,506 17.375,226.90 I 23,841,627 I Total Funds Available 12,1 78,9 15,438 16,719,095 33,135,176,1 72 30.286,922,247 I Less Uses of funds by disbursement categories Goods, works, const, training & I Operating costs (loan) Grants to sub 9,061,744, 183 24,462,704 17,809,360,603 24,462,704 2 groups Kamuzu 3 Barrage 2,92 1,896,064 4,004,900 4,040,764,6 10 5,537,264 GOM - Project 4 closure activities 100,411,690 137,550 Q Q I Total Expenditure 12 1084105 J,937 16,587.429 21.850, 125,213 29,999,968 I Surplus Funds 4 94,863,501 131 ,667 8.436,797,034 J! 1602.590 I I 12 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 SCHEDULE OF WITHORA WALS APPLICATIONS FOR IDA H7750 AND IDA 51250 Period 2019 Period 2018 Available resources USO USO USO Sources of Funds IDA Credit no 51250 93,750,000 93,750,000 83,971,602 IDA Grant no H7750 31.250.000 3 1,250,000 30,586,807 Total Funds Available 125,000,000 125,000,000 114,558,409 Drawings I Drawing on SRBM F/Y 2012 1,336,869 1,336,869 1,336,869 Drawing on SRBM F/Y 2013 4,261,837 4,261,837 4,261,837 I Drawing on SRBM F/Y 20 14 14,386,9 18 14,386,918 14,386,918 I Drawing on SRBM F/Y 20 15 Drawing on SRBM F/Y 20 16 22,869,3 80 15,739,493 22,869,380 15,739,493 22,869,380 15,739,493 I Drawing on SRBM F/Y 20 17 Drawing on SR.BM F/Y 2018 28,897,554 23,020,217 28,897,554 23,020,217 28,897,554 23,020,2 17 I Drawing on SRBM F/Y 2019 Total Drawings 4,783,834 115,296,102 110.512.268 4,783,834 115,296,102 Funds Available less drawings 9.703.898 14,437.732 9 I Undisbursed Balance IDA Credit no 51250 9,040,705 13,774,539 0 I IDA Grant no H7750 Total Balance 663,193 663, 193 Q 9.703.898 14,437.732 9 Note: The project incurred losses amounting lo USD9, 703,898 as of3f' May 2019 due toXDR/USD fluctuations so the available resources have been reduced by this amount. I 13 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 SCHEDULE OF WITHDRAWAL APPLICATIONS FOR GEF TF 12920 AND LDCF TF 12921 GEF TF 12920 LDCF TF 12921 TOTAL USO USO USO Sources of Funds 5,078,000 1,500,000 6.~78.000 Total Funds Available 5,078,000 1,soo,000 6,578,000 Drawings Drawing on SRBM F/Y 2012 I Drawing on SRBM F/Y 2013 297,454 99,152 396,606 Drawing on SRBM F/Y 20 14 773, 107 257,782 1,030,888 I Drawing on SRBM F/Y 2015 767,716 255,867 1,023,583 Drawing on SRBM F/Y 2016 860,042 286,648 1, 146,690 I Drawing on SRBM F/Y 2017 1,407,679 468,922 1,876,601 Drawing on SRBM F/Y 2018 7 19,522 67,298 786,820 Drawing on SRBM F/Y 2019 252,480 64,331 3 16,811 I Total Drawings Funds Available less drawings 5,078,000 1,soo,000 6,578,000 ,!} ,!} ,!} Undisbursed Balance ,!} ,!} ,!} I I I 14 I I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 I STATEMENT OF USES OF FUNDS BY COMPONENT Revised Budget (as per project Period 2019 Period 2018 Cumulative closing date) Project Sub-Component USO USO USO USO I A. Shire Basin Planning A I Develop Shire Basin Plan 1,559, 137 3,665,061 10,560,034 10,560,034 A2 Build Institutional Capacity for Coordinated I Basin Mgt A3 Improve Water Resources Information Systems 726,640 1,445,845 1,515,510 2,159,336 10,194,484 10,673,220 10, 194,484 10,673,220 A4 Program Management, Motoring and Evaluation 700,078 1,698,453 I 0, 192,676 10,192,676 PPA 788,244 788 244 Subtotal 4,431,670 9,038,360 42.408,658 42,408.658 I B. Catchment Management B 1 Build Institutional Capacity for Sub catchment Planning /monit. 46,476 1,906,630 11 ,005,771 11 ,005,771 I B2 Rehabilitated targeted Sub catchment B3 Alternative Rural livelihood 151 ,981 157,349 2, 14 1,055 717,535 6,964,980 3,610,988 6,964,980 3,610,988 I B4 sustainable Management of the Shire Forest Subtotal 452 378 808,]85 875,364 5,640.583 4,339 010 25,1 ]2.565 4 339 O!O 25,J]2.565 I C. Water Related Infrastructure Cl Kamuzu Barrage Upgrade 9,793,072 12,3 12,855 45,274,687 45,274,687 C2 Flood Management 672,309 3,008,171 7,478,5 16 7,478,516 C3 New Water Investment 744,ill 791 491 791,491 I Subtotal J1,209.996 15.321,026 53.544.695 53,544.695 I D. Government Financed activities Subtotal 137 550 ]37.550 137 550 ]37,550 137 550 ]37.550 I TOTAL EXPENDITURE ]6,587,430 29,999.968 122.0] J.653 122.QJJ.653 I I 15 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT I (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY2019 RECEIPTSANDPAYMENTS-MALAWI GOVERNMENTACCOUNTING Period 2019 Period 2018 RECEIPTS MWK USD MWK USO Opening Balance 8,436,797,034 11,602,590 12,911 ,695,346 17,760,930 Total Receipts 3,730,516,103 5,100,645 17,351 ,968,112 23,807,037 Other Income 11 ,602,300 15,861 23,258,789 34,590 12,178.915,438 16.719.095 30,286,922,247 41 .602,557 I TOT AL INCOME PAYMENTS Personal Emoluments & Benefits 0 I Salaries-Permanent Staff Temporary Employment 8 !87,000 8,187,000 )2 142,660 12.142.660 I Internal Travel Hiring Costs 590,000 806 5,600,800 7,686 Hiring of Motor vehicle 435,000 595 1,766,000 2,417 Subsistence Allowances 376,987,519 520,509 716,547,817 983,196 Hotel Charges 55 007 147 ~ I 15 )30,225 !57 666 433,019.667 597.095 839,080,342 1.150,965 Foreign Travel Airfares and Fees 13,847,329 18,972 I External Travel Allowance !3 903 808 27,751.137 ~ ~ Public Utilities I Heating and Lighting Telephone & Internet 4,134,656 41 ,492,562 5,653 56,7 11 3,369,970 72,987,573 4,609 99,981 Water and Sanitation 3. 654 445 ~ 2,963,262 ~ I Office Supplies 49,281 .660 ~ 79.320,812 6,032,5 14 108.644 8,252 Computer Expenses 12, 106,853 16,553 I Consumables Postal Charges 16,72 1, 169 0 28,494 0 48,393 ,594 895,000 66,786 1,230 700,445 959 45,786,362 62,674 Printing Costs I Publications and Advertising Stationery 8,560,895 19,13 1,728 11,717 26,735 37,420,096 62,393 ,524 8,262,800 51,251 85,504 11,429 Uniform & Protective wear 3,257,740 4 ,459 I Freight Charges Hire of Security Services 1,045,049 0 1,430 0 1,290,093 1766 Hospitality Expenses 0 0 0 0 I 61.523.888 210.473.982 288,892 16 I I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 Rent Expenses Rent of Offices 28,777.4 13 ~ 41,663 12Q ~ 28,777,413 ~ 4],663,120 ~ Training Expenses I Internal Training External Training 0 Q Jl 0 Q Jl 7,821,240 Q 7,821,240 10,702 ~ _Q_ Acquisition of Technical Services Consultancy 6,354,203,529 8,686,786 l 0,599,966,302 14,581,116 183,953,778 25 1,328 301,707,784 413,192 I Prof. & Tech Services Reimbursables Non Consultancy Services 55,221,096 8 883,275 75,490 ,UJfil 3,114,190 52 626 673 ~ 4,267 6,602,262,378 2,025,771 10,257,4] 4,242 15,070,637 I Insurance of Vehicles Insurance of other Assets 2Q 145,86Q ~ 2 6Q4 326 ~ 20,145,860 ~ 2,604,326 ~ I Other Services Bank Charges 7,619,357 10,408 15,047,592 20,6 11 City Rates 224 4QQ 1Q1 765 SQQ ~ 7,843,757 ~ ]5,8]3,023 ~ M/Vehicle Expenses 284 3]] 647 321,743 5Q3 522 3Q8 62Q 2Q2 I Fuels & Lubricants Assets Maintenance 284,3 J1,647 321 ,743 503,522,308 620,202 110,937,664 152,174 174,301,992 238,827 I Vehicle maintenance Equipment maint. Buildings maintenance 3,858,582 544 Q2Q 5,275 744 3,748,722 74,122,222 5,130 !QI 822 I 1l 5,340,336 158,123 252,180,713 345,856 Grants to Subprojects I Grants to Subprojects 76 641 672 76,641,672 1Q4.8Q3 104,803 235 182 223 235,182,223 322,515 322,5]5 I TOTAL 7,687,335,286 10,524,031 J3, J84,242,475 8,665,175,738 ]8,125,308 11,874,660 Non-Current assets for Year 4,396,716,650 6,063,397 TOTAL EXPENDITURE 12,084,051,236 16,587,422 2] ,850,)25,213 22,222,268 BALANCES 94 863 502 ~ 8 436 1.21. 034 11602589 I 17 I I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 NOTES TO THE FINANCIAL STATEMENTS 1.0 NATURE OF THE PROGRAM I The Shire River Basin Management Program (Phase I) Project is designed to develop a strategic planning and development framework for the Shire River Basin so as to improve land and water resources management for ecosystem and livelihood benefits in the targeted areas. The Government of Malawi (GoM) and Word Bank signed Financing Agreements on 22"d August 2012 and the project became effective on 7 11' September, 2012. This is the sixth year of project implementation. I Financial Management and Accounting The Ministry of Agriculture, Irrigation and Water Development through the Secretariat coordinates, controls, accounts and monitors the utilization of project funds. · I The Secretariat manages the Investment Partner's fiduciary policies and procedures. The Secretariat supports the implementation and maintenance of centralized financial management, internal controls, disbursements I and financial reporting procedures for the project. The accounting system operates within the general framework of the Government Financial Management system, which is governed by the Public Finance Management Act No. 7 enacted in 2003. The overall I direction for the GOM budget process is stipulated in Public Finance Management Act and is operationalized by Treasury Circulars and Instructions. The Acts and the Treasury Instructions and Circulars stipulate the accounting guidelines for the GoM and GoM managed projects. The project uses Tompro accounting package for processing and reporting on project transactions and activities. I 2.0 ACCOUNTING POLICIES Basis 2.1 I The accounts have been prepared using the historic cost convention and IPSAS cash basis. All receipts and expenses incurred in the period are reflected in the financial statements. 2.2 Foreign Currency Transactions I Local currency Receipts and Payments Account transactions are translated back to foreign currency using the exchange rate at the date of draw down, while payments in foreign currency are translated to local currency using actual exchange rate on the transaction date. I Expenditures in local currency are translated back to foreign currency using the exchange rate at which the draw down was converted. I Closing bank balances are translated back to fore ign currency using the rate of exchange on the last day of the accounting period. The closing rate at 31' 1 May 2019 was MK719 to $1.00 I 2.3 Receipts Receipts are stated at actual amounts withdrawn from the World Bank accounts I I I 18 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 3.0 Non -Current Assets Property and equipment is stated at historical cost. Assets are not depreciated. Historical cost includes expenditure that d irectly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. Opening Additions for the Closing Balance as Non-Current Assets Balance as at year at 31 51 May 2019 1st July 2018 Mwk Mwk Mwk Vehicles 900.574,893 Q 900,574,893 Sub Total 900,574,893 Q 900,574.893 Property, Plant and Equipment Equipment 2, 11 9,405,748 12,232,500 2, 131,638,248 Office Furniture 46,049,866 0 46,049,866 Software 86,629,275 86,629,275 I Sub Total 2,252,084.889 12.232.500 2,264.317,389 Construction of Buildings I Construction & Rehabilitation of Boreholes & Water Pumps Construction of Buildings and Fence 115,890,732 4,021 ,930, 156 1,258,914,555 115,890,732 5,280,844,7 11 I Construction & Rehabilitation of Roads and Bridges 2,076,986,565 203,673,532 2,280,660,097 Construction ofKamuzu Barrage, Install Gates & 12,861,674,629 2,921,896,064 15,783.570.693 Weed Boom Sub Total 19.076,482.082 4.384.484.150 23.460.966,232 Grand Total 22,229.141.864 4,396,7 J6,650 26,625,858,5 J4 I Opening Balance as at Additions for the Closing Balance asat3 1" I Non-Current Assets 1st. July 2018 USO year USO May 2019 USO Vehicles 2,319,697 - - 2.319.697 I Sub Total 2.319.697 - - 2,319.697 Property, Plant & Equipment I Equipment Office Furniture 3,259,322 112,795 16,722 3,676,615 11 2,795 Software 213,949 Q 213,949 Sub Total 3,579.982 16.722 4,003.359 19 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 5 1250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 Fl NANCIAL STATEMENTS FOR THE 11 MONTHS PERJOD ENDING 31ST MAY 2019 Construction and Rehabilitation of Buildings Construction & Rehabilitation of Boreholes & Water Pumps 168,609 0 168,609 Construction of Buildings & Fence 1,772,802 1,765,931 7,295,978 Construction & Rehabilitation of Roads and Bridges 675,810 275,843 3,128,497 Construction ofKamuzu Barrage, Install of Gates& Weedboom 22,204,840 4,004,900 26,209,740 Sub Total 30.756.150 6.046.675 36.802.825 Grand Total 37,062,484 6,063,397 43,125,881 4.0 Bank Balances I Period 2019 Period 2018 I IDA FCDA MWK 16,572,55 1 USO 22,778 MWK 7,950,913,965 USO 10,876,922 I GEFFCDA LDCFFCDA 0 0 0 0 116,436,136 67,739,555 159,284 92,667 Operating Account 78,290,950 108,889 267,064,401 406,577 Advances / Debtors 8 Q Q 34,642,977 67,140 TOTAL 94,863,501 131 ,667 8,436,797,034 11.602,590 I I I I 20 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) 8 7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FINANCIAL STATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31ST MAY 2019 5.0 Donor Funding I IDA Q7630- MAI IDA 51250 Loan IDA 87750 Grant GEF G ra nt TF 12920 LOC FGrant TF 12921 Total USO USO USO USO USO USO Opening Balance 1, 136,869 79,925,46 1 29,449,938 4,825,520 1,435,669 11 6,773,457 Additions Q 4,183.834 Q ill.lli ~ 5, 100,645 Closing Balance 1,136,869 84,709,295 29,449,938 5,078,000 1,500,000 121,874,102 IDA Q7630- IDA 51250 IDA 87750 G EF Grant LOC FGra nt Total MAI Loan Grant TF 12920 TF 1292 1 MWK MWK MWK MWK MWK MWK Opening I Balance Additions 177, 125,629 Q 54,7 19,605,333 3,499,374,57 1 12,064,538,96 1 - - 3,007,858,906 l 84,88J,9JO 873,2 13,789 46,257,602 70,842,342,6 18 DJ0.5 16, I OJ ~ I Balance 177,125,629 58,218,979,904 12,064,538,96 1 3,192,742,836 919,47 1,391 74,572,858,72 I I I 6.0 Other Income 2019 - MWK 2019- USO 20 18 - MWK 2018- USO Opening 132,402,585 239,982 109, 143,796 205,392 Balance I Interest Received Sale Tender of 11 ,602,300 Q 15,86 1 Q 23,258,789 Q 34,590 Q I Documents Total t he Year for 11,602,300 15,861 23,258,789 34,950 I TOTAL t 44,004,885 255,843 132,402,585 239,982 I 21 I SHIRE R IVER BASIN M ANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H77SO / Sl2SO ; (G EF) GRANT No. TF 12920; (LDCF) GRANT No. T F 12921 FINANC IAL STATEMENTS FOR THE 11 MONTHS PERI OD ENDING 3 1ST MAY 20 19 7.0 Cumulative Costs Per iod 20 19 Period 2018 MWK USO M WK USO Opening Balance 40,308,806,306 68,348,366 27, 123,856,831 50,223,058 Additions 7,687,335,284 10,524,03 1 13, 184,949,475 18,125,307 TOTAL 42,226,141,520 28,822,326 40,308,806,306 68,348,366 Cumulative costs comprises of Capital & Operational expenditures incurred since the project became effective. 8.0 Outstanding Obligations as at Closing date As at the closing date the project had outstanding payments to be made by Government to Kamuzu Barrage I contractors amounting to USDS,346,834.7S (Five Million three hundred and forty six thousand eight hundred and thirty five United States Dollars). Detailed as follows Item Contract Name of Contractor Amount to be pa id (USO) 8 01 Conduril Engenharia 4,222,440 SA 2 MO! CMC di Ravenna 1, 124,395 Total 5,346,835 I Dur ing the period under review, an amount of MWK2,030,634,868 (USO 2,829,483) inclusive of penalties amounting to MWK 913 ,423,638 was garnished by Malawi Revenue Authority on 6th November, 2018. This was in connection with taxes for Norplan AS, the Supervising Engineer for the Upgraded Kamuzu Barrage. I The Ministry of Finance committed to reimburse this amount to the project through the Ministry of Agriculture, Irrigation and Water Development in a · letter dated 12th April 2019 and Ref: No. I FIN/DAD/RM/5/2/2 as these funds were already committed to project activities. Since the grace period is now over, the Ministry of Finance will have to pay directly to the contractors. In accordance with the provisions in the Financing Agreement for the project, Government is also expected to I honour all remaining obligations to the contractors for all the works completed beyond the project closing date. I The budget for the works at the Upgraded Kamuzu Barrage was based on the consultant 's Engineers Cost Report. The consultant (Norplan AS) indicated that the costs would be USD 19,337, 109.00 and USD9,079,397.00 for civil works and mechanical works (Gates and Weed Boom) respectively. The Amicable Settlement Process (Articles 20.5 and 46.4 of the GCC of the BOI Contract and MO I Contract, respectively) led to the closing amounts on the contracts of USD23,576,577.24 (for civil works) and USD9, 130,266.04 making a total ofUSD32,706,843.28. I The following are the reasons that led to the increase in the projected costs : 22 I SHIRE RIVER BASIN MANAGEMENT PROGRAM (PHASE I) PROJECT (IDA) H7750 / 51250 ; (GEF) GRANT No. TF 12920; (LDCF) GRANT No. TF 12921 FlNANCIALSTATEMENTS FOR THE 11 MONTHS PERIOD ENDING 31STMAY 2019 a. The consultant's costs exclude some asphalt works and ancillary works instructed after 31st January 2019. The consultant's costs also exclude partial time related costs after 31st January 2019 compensated to the contractor as part of the amicable settlement. I b. The consultant's costs excludes ancillary works instructed under provisional sums after 3 1st January 201 9 c. The consultant's costs exclude variations covered after 3 1st January 2019. The amounts at 3 I st January 2019 were not I 00% confirmed between the contractor and consultant as the contractor was still to confirm on the pricing of some Variation Orders. d. The consultant's amounts includes for works dayworked as part of the commissioning and I e. ancillary works A settlement of USD700,000.00 was reached as part of the amicable settlement procedure. As part of the settlement further claims by the contractor and all further deductions of delayed damages were waived. f. The price adjustment ofMWK-1 3,000,000.00 and USD- l ,600,000.00 was the estimate of the Norplan AS but detaj led calculations had not been done by the consultant. The I contractor had calculated a price adjustment of USD877,247.00 as accrual to them. The contractor contested that during the project period there was no where that prices of the main materials had actually gone down. This was an item under dispute and was therefore waived as part oftbe amicable settlement. g. The Engineer had estimated the full liquidated damages i.e. 7 .5% of the Accepted Contract Amount. The contractor contested the full liquated damages. The Client managed to deduct I USD825,000.00 before the amicable settlement procedure. The deducted amounts largely went to support the extension of the consultant's supervision contract. This was an item under dispute. Further deductions of liquidated damages were waived as part of the I amicable settlement. I I I I I I 23 I