KENYA NATIONAL AUDIT OFFICE REPORT

REPUBLIC OF KENYA

KENYA NATIONAL AUDIT OFFICE

REPORT ' '

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THE FINANCIAL STATEMENTS OF NATIONAL URBAN TRANSPORT

IMPROVEMENT (NUTRIP) PROJECT IDA CREDIT NO. 5140 - KE

FOR THE YEAR ENDED · 30 JUNE 2014

STATE DEPARTMENT OF INFRASTRUCTURE

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NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT (NUTRIP PROJECT)

STATE DEPARTMENT OF INFRASTRUCTURE

IDA 5140 -KE

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED JUNE 30, 2014

Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS)

- _ NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT

,ports and Financial Statements ~For the financial year ended June 30, 2014

CONTENTS PAGE

" 1. PROJECT INFORMATION AND OVERALL PERFORMANCE: ................................................................ i

2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ...... ...... ............. .. ................ ... ..... .... iv

3. REPORT OF THE INDEPENDENT AUDITORS ON THE xxxx PROJECT ... ............ ............................... v

STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2014 ......... . 1

). STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2014 ............ .. ...... .. ... . 2

7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS .......... ... .. ............................. .4

8. NOTES TO THE FINANCIAL STATEMENTS .................... .. ........................... ... ... ... .. , ....................... ......... 5

9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS ........... ........ .... .. ............. .. ...... .... 11

1

NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT

Reports and Financial Statements For the financial year ended June 30, 2014

1. PROJECT INFORMATION AND OVERALL PERFORMANCE

1.1 Name and registered office

Name: The project's official is PRINCIPAL SECRETARY FOR State Department oflnfrastructure.

'" Objective: The key objective of the project is to improve the efficiency of road transport along the Northern Corridor.

Address: The project offices are State Department oflnfrastructure, Nairobi, Kenya

Contacts: The following are the project contacts

Telephone: (02) 27230101 E-mail: [email protected] Website: www.roads.go.ke

1.2 Project Information

Project Start Date: 3rd August, 2013

Project End Date: 31 51 December, 2018

Project Manager: Chief Eng. Patrick M. Mwinzi

1.3 Project Overview

Line Ministry/State The project is under the supervision of State Department of Infrastructure. Department of the project

Project number P126321

Strategic goals of the The strategic goals of the project are as follows: project (i) Improve the Institutional capacity

(ii) Better arrangements in the Urban Transport Sub-Sector

Achievement of The project management aims to achieve the goals through the following strategic goals means:

(i) Training for staff across the State Departments Involved

(ii) Facilitate for effective Monitory and evaluation of the project

Current situation that The project was formed to intervene in the following areas: the project was (i) Build capacity for newly established National Construction Authority formed to intervene (NCA) as well as Engineers Board of Kenya (EBK)

(ii) Strengthen capacity of SDoI staff to carry out its responsibilities __

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effectively

1.4 Bankers

The following are the bankers for the current year:

Kenya Commercial Bank Capital Hill, Branch Nairobi, Kenya

1.5 Auditors

Auditor General Kenya National Audit Office Anniversary Towers, University Way P.O. Box 30084 GPO 00100 Nairobi , Kenya

1.6 Roles and Responsibilities

The project manager and the key stakeholders involved in the project are:-

Names Title designation Key qualification

Chief Eng. P. Mwinzi Project Team Leader Chief Engineer (roads) Eng. F. Gitau Deputy Team Leader Armstrong Kioli Project Accountant Bachelor's Degree

1. 7 Funding summary

Responsibilities

·-

·-

The Project is for duration of 6(six) years from 2012 to 2018 with an approved budget of US$M 3.6 equivalent to Kshs 307 Million in respect to State Department of Infrastructure as highlighted in the table below:

Below is the funding summary:

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....... T ......... o ....... t .... a ...... 1 ........ .. --............................................................................. , ..... 3 ...... ,' .. 6 ....... o ...... o ...... ' ... o ...... o ....... o .............. 306,~QO,OOO .... _!)J,~2§'.~?.. JQ'-QQQ'-QQQ },~?~'-?.QLD.. . ~??,2QQ,QQQ ..

1.8 Summary of Overall Project Performance:

n Budget performance against actual amounts for current year and for cumulative to-date.

There has been delays due to delay in government procurement procedures.

1.9 Summary of Project Compliance:

We have not had any cases of non-compliance with applicable laws and regulations in the year. The projects has complied with the financing agreements with World bank.

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2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES

The Principal Secretary for the State Department of Infrastructure and the Project Team Leader for NUTRIP project 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 enqed on June 30, 2014. 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 State Department of Infrastructure and the Project Team Leader for NUTRIP project 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 State Department of Infrastructure and the Project Team Leader for ·NUTRIP project 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, 2014, and of the Project's financial position as at that date. The Principal Secretary for the State Department of Infrastructure and the Project Team Leader for NUTRIP project 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 State Department of Infrastructure and the Project Team Leader for NUTRIP project 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 State Department of Infrastructure and the Project Team Leader for NUTRIP project on ___________ _ 2 14 and signed by th m.

ENG. OHN K. MOSONIK PRINCIPAL SECRETARY

IV

ENG,kK M. MWJNZI PROJECT TEAM LEADER



3. REPORT OF THE INDEPENDENT AUDITORS ON THE NUTRIP PROJECT

REPORT ON FINANCIAL STATEMENTS

We have audited the accompanying financial statements of NUTRIP project, set out on pages 1 to14 which comprise the statement of receipts and payments for the financial year ended June 30, 2014, and a summary of significant accounting policies and other explanatory notes.

Responsibility for the Financial Statements

The Principal Secretary for the State Department of Infrastructure and the Project Team Leader for NUTRIP project are responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (IPSAS). This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express an independent opinion on these financial statements ,based on our audit. We conducted our audit · in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depended on our professional judgement, including the assessment of the · risks of material misstatement of the financial statel11ents, whether due to fraud or error. In making those risk assessments, we considered the internal cont!ols relevant to the company ' s preparation and fair presentation of the financial statements in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the company's internal controls. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion the accompanying financial statements give a true and fair view of the state of financial affairs of the NUTRIP project for the financial year ended June 30, 2014 in accordance with International Public Sector Accounting Standards (IPSAS).

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REPUBLIC OF KENYA

r .'elephone: +254-20-342330 P.O. Box 30084-00 100

NAIROBI Fax : +254-20-311482 E-Mail: [email protected] Website: www.kenao.go.ke

KENYA NATIONAL AUDIT OFFICE

REPORT OF THE AUDITOR-GENERAL ON NATIONAL URBAN TRANSPORT IMPROVEMENT (NUTRIP) PROJECT IDA CREDIT NO. 5140 - KE FOR THE YEAR ENDED 30 JUNE 2014-STATE DEPARTMENT OF INFRASTRUCTURE

REPORT ON THE FINANCIAL STATEMENTS

I have audited the accompanying financial statements of National Urban Transport Improvement Project set out on pages 1 to 8, which comprise the statement of financial assets and liabilities as at 30 June 2014, the statement of receipts and payments, statement of cash flows, the statement of comparative budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with provisions of Article 229 of the Constitution of Kenya and Section 8 of the Public Audit Act, 2003 and the Credit Agreements No. 5140-KE signed on 26 September 2012 between the International Development Association (IDA) and the Republic of Kenya (GOK). 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.

Management's Responsibility for the Financial Statements

The Principal Secretary of the State Department of Infrastructure and the Project Team Leader for NUTRIP are responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 7 of the Public Audit Act, 2003.

Auditor-General's Responsibility

My responsibility is to express an opinion on these financial statements based on the audit and report in accordance with the provisions of Section 9 of the Public Audit Act, 2003. The audit was conducted in accordance with International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Promoting Accountability in the Public Sector

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements , whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion , the financial statements present fairly , in all material respects, the financial performance of the Project for the year ended 30 June 2014, in accordance with International Public Sector Accounting Standards (Cash Basis) and the expenditure conforms with the Credit Agreement No. 5140 - KE signed on 26 September 2012.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

As required by the International Development Association, I report based on my audit that:-

i) All International Development Association funds have been used in accordance with the conditions of the Credit Agreement, with due attention ' to economy, and efficiency and only for the purpose for which the funds were provided ;

ii) Counterpart funds have been provided and used in accordance with the conditions of the Agreement, with due attention to economy and efficiency and only for the purpose for which they were provided ;

iii) Goods and Services financed have been procured in accordance with the conditions of the agreement and in compliance with the Development partner's rules and procedures;

iv) Necessary supporting documents, records and accounts have been kept in respect of all project activities;

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v) Adequate internal controls to monitor expenditure and other financial transactions exist; and

vi) The fixed assets register for the Projects' assets was maintained during the year.

Edward R.0. Ouko, CBS AUDITOR-GENERAL

Nairobi

19 December 2014

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4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE 2014

RECEIPTS

Loan from external development partners

Total receipts

PAYMENTS

Purchase of goods and services

TOTAL PAYMENTS

SURPLUS/DEFICIT FOR THE YEAR

Note 2014 Kshs

8.2 10,000,000

10,000,000

8.3 3,076,936

3,076,936

6,923,064

2013 Kshs

Cumulative to-date Kshs

10,000,000

10,000,000

3,076,936

3,076,936

6,923,064

The accounting policies and explanatory notes to these financial statements are an integral part of the financial statements.

Date

OHN K. MOSONIK IP AL SECRETARY

1

ENG. P£ M. MWINZI PROJECT'°TEAM LEADER

Date



5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2014

Note 2014 2013 Kshs Kshs

FINANCIAL ASSETS RECIEV ABLES 1,232,354 Cash and Cash Equivalents Bank Balances 8.4 A 5,690,710

TOT AL FINANCIAL ASSETS 6,923,064

n REPRESENTED BY:

Surplus for the year 6,923,064

NET FINANCIAL POSITION 6,923,064

The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 2014 and signed by:

ENG. OHN K. MOSONIK PRINC PAL SECRETARY

Date

2

ENG. PA~K M. MWINZI PROJECT TEAM LEADER

Date


(\ Reports and Financial Statements For the financial year ended June 30, 2014

6. STATEMENT OF CASHFLOW FOR THE YEAR 30TH JUNE 2014 Payments for operating expenses Compensation of employees Purchase of goods and services

Net cash flow from operating activities

CASHFLOW FROM BORROWING ACTIVITIES Proceeds from Foreign Borrowings Net cash flow from financing activities

NET INCREASE IN CASH AND CASH EQUIVALENT Cash and cash equivalent at BEGINNING of the year Cash and cash equivalent at END of the year

(3,076,936)

(3,076,936)

10,000,000 10,000,000

6,923,064

6,923,064

The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The entity financial statements were approved on 2014 and signed by:

ENG. OHN K. MOSONIK PRINC PAL SECRETARY

a.>i•dmff Date

3

ENG. P~K M. MWINZJ PROJECT TEAM LEADER

;}..0 " r ?1rl t.f. Date



7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS

Receipts/Payments Item ~

Receipts

Proceeds from borrowings

Miscellaneous receipts

Total Receipts

Payments " ".ompensation of employees

A urchase of goods and services

Total Payments

ENG. OHN K. MOSONIK PRIN IP AL SECRETARY

db( tit{ ~4 Date

Ad ju Original stme Budget nts

a B

10,000,000 -

10,000,000 -

7,500,000 -

7,500,000 -

4

Actual on Final Com para

Budget hie Basis Variance

c=atb d e=d-c

10,000,000 10,000,000 -

10,000,000 10,000,000 -

7,500,000 3,076,936 (3 ,727,064)

7,500,000 3,076,936 (3 ,727,064)

ENG. PA~ M. MWINZI ~

PROJECT TEAM LEADER

;l.~ If { ?-1rf 4-Date

O/o

of Vari ance f=e/ c o/o

0%

0%

50%

50%



~. NOTES TO THE FINANCIAL STATEMENTS

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 and all values are rounded to the nearest one Shilling. 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.

1. 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.

11. In-kind donations

In-kind donations are contributions made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment or personriel services. Where the financial value of in-kind donations can be reliably determined, the Project includes such value in the statement of receipts and payments both as revenue and as an expense in equal and opposite amounts; otherwise, the donation is not recorded.

111. 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.

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SIGNIFICANT ACCOUNTING POLICIES (Continued)

1v. Pending bills

Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. As pending bills do not involve the payment of cash in the , reporting period, they are simply disclosed as an Annex to the financial statements. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made.

v. 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.

vi. Exchange rate differences

The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments.

vu. 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.

vni. 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, 2014.

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8.2 LOAN FROM EXTERNAL DEVELOPMENT PARTNERS

During the 12 months to 30 June 2014 we received funding from development partners in form ofloans negotiated by the National Treasury donors as detailed in the table below:

( Donors International Or anisations

WORLD BANK (IDA) 117/2013 10,000,000 10,000,000

Total 10,000,000

8.3 PURCHASE OF GOODS AND SERVICES

Utilities, supplies and services Hospitality supplies and services Other operating expenses

8.3A RECIEV ABLES

2013/14 Kshs 197,500

2,864,486 14,950

3,076,936

2012/13 Cummulative Kshs

197,500 2,864,486

14,950

3,076,936

Some expenditure that was incurred was erroneously charged from this project instead ofK.T.S.S.P. This has since been moved to the correct project and the same recognised as receivable as follows:

En~. S. K. Ko~i 536,355.00 Setym International 531,000.00 Millicent N~are 165,000.00

1,232,355.00

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NOTES TO THE FINANCIAL STATEMENTS (Continued)

8.4 CASH AND CASH EQUIVALENTS C/FWD

Bank accounts (Note 8.4A) Outstanding Imprest at year end

8.4A Bank Accounts

Local Currency Accounts

Kenya Commercial Bank

Total local currency balances

Total bank account balances

8.4B Outstanding Imprests and Advances

Name of Officer or Institution

Enz. P. 0. Ondari Enz. Baja Boniface Enz. Martin Ontwoma ..

9. PENDING BILLS (Annex A)

Construction of buildings Construction of civil works Supply of goods Supply of services

Amount Taken

498,456 298,410 298,410

1,095,276

8

Due Date of

Surrender

July 2014 July 2014

2013/14 Kshs

4,595,434 1,095,276

5,690,710

4,595,434

4,595 ,434

4,595,434

Amount Balance Surrendered 2013114

nil nil nil nil

2013/14 Kshs

4,337,800

4,337,800

2012/13 Kshs

Balance 2014115

498,456 298,410 298,410

1,095,276

2012/13 Kshs

NATIONAL URBAN TRANSPORT U

Statement of Budget Performance For the year ended June 30, 2014

VEMENT PROJECT

10. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS

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The following is the summary of issues raised by the external auditor, and management comments that were provided to the auditor. We have nominated focal persons to resolve the various issues as shown below with the associated time frame within which we expect the issues to be resolved. ··

St t Timeframe:

a us· Focal Point person to R

1 ·d

/ (Put a date

; ( eso ve ! on the . . resolve the when you

Referen ce No.

· t 1 Issue I Observations from Auditor Management comments . (N Not t th ex erna issue ame R 1 d) expec e

d . d eso ve . t b au It an issue o e Report t1P~iom1tion) resolved)

NONE IN THE YEAR

i i i

ENG. JOHN K. MOSONIK PRINCIPAL SECRETARY

;).dll!~lf Date

~\ ENG. P~K M. MWINZI PROJECT TEAM LEADER

;,..dn (~4 Date

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Documents

KENYA NATIONAL AUDIT OFFICE REPORT