TE .PHONE OFFICE OF THE AUDITOR GENEIA APOLLO KAGVA ROAD, I 331 So 6 ( 000T2 , torna +256 -41 7336004 Sec. PLOT 2C P.O. Box 7083, lIfo oag.go.ug KAMPALA. Webite: www'e'cag egug T CE UGANDA FOR /Y 'CORRESPONDENCE ON IS MATTIER PLEASE QUOTE NO: .....CG.151/35,2/01/23 30th October, 2023 The Accounting Officer / Managing Director National Water & Sewerage Corporation KAMPALA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER & SEWERAGE CORPORATION - NWSC FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2023 I am enclosing herewith a report which I have already sent to the Rt. Hon. Speaker of Parliament in a ordance with Article 163 (4) of the Constitution of Uganda 1995 (as amended). John F.S. Muwanga AUDITOR GENERAL Copy to: The Hon. Minister of Ethics and Integrity "x The Permanent Secretary/Secretary to the Treasury Ministry of Finance, Planning and Economic Development The Permanent Secretary, Ministry of Water & Environment The International Development Agency - IDA The Corporation Secretary, NWSC The Director, Planning and Capital Development The Managing Partner, Price & King, CPA, Kampala x,dgvei-0 enence for botter s erv i e e " THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) FOR THE YEAR ENDED 30TH JUNE 2023 OFFICE OF THE AUDITOR GENERAL UGANDA Table of Contents Page L ist o f A -,ro n y m s .................................................................................................. . . . .. . . ................. 3 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS..................................4 O p in io n ....................................................... -........ -.. -..... ----..... --.-...... -....... -... --.. .......................................4 Basis of Opinion ...............................................inion...-......-..........-...4. -...............................................4 K e y A u d t M a tte rs ........................................................--.-.....................-- .........- - - - ..........................................4 Other In form ation ......................................................-.......................-- -- -- -- -- ...................................................4 Responsibilities of Management and those charged with Governance for the Financial Statemests5.................................................................................................................... Auditor General's Responsibilities for the audit of the Financial Statem ents...............................5 Other Reporting Responsibilitie ......................................................................................................... 2 List of Acronyms IESBA International Ethics Standards Board for Accountants INTOSAI International Organization of Supreme Audit Institutions IPSAS International Public Sector Accounting Standards ISSAIs International Standards of Supreme Audit Institutions MoFPED Ministry of Finance, Planning and Economic Development MWE Ministry of Water and Environment NWSC National Water and Sewerage Corporation UGX Uganda Shillings USD United States Dollar IWMDP Integrated Water Management and Development Project 3 REPORT OF THE AUDITO1 GENERAL ON THE FINANCIAL STATEM 7NTS OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION FOR THE YEAR ENDED 30TH JUNE 2023 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the accompanying Project Financial Statements of the Integrated Water Management and Development Project (No. P163782) implemented by National Water and Sewerage Corporation for the year ended 30th June 2023. The financial statements comprise the Statement of Financial Position as at 30th June 2023, the Statement of Comprehensive Income and the Statement of Cash flows for the year then ended and notes to the financial statements including a summary of significant accounting policies as set out on pages 22 to 27. In my opinion, the financial statements present, in all material respects, the financial position of the Integrated Water Management and Development Project as at 30th June 2023, its financial performance for the period then ended, in accordance with the terms of the agreements and in conformity with the basis of accounting described in section 8.4.1 (a) of the financial statements. Basis of Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the Financial Statements section of my report. I am independent of the Project in accordance with the Constitution of the Republic of Uganda, 1995 (as amended), the National Audit Act, 2008, the International Organization of Supreme Audit Institutions (INTOSAI) Code of Ethics, the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants (Parts A and B), and other independence requirements applicable to performing audits of Financial Statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical requirements applicable to performing audits in Uganda. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. I have determined that there are no key audit matters to communicate in my report. Other Information Management of the project is responsible for the other information. The other information comprises information included in the director's report, but does not include the financial statements and my auditor's report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. 4 In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or in my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. Responsibilities of Management and those charged with Governance for the Financial Statements The management of the Project is responsible for the preparation and fair presentation of the financial statements in accordance the terms of the agreements and in conformity with the basis of accounting described in section 8.4.1 (a) of the financial statements and for such internal control as management determines is necessary to enable the preparation of special purpose project financial statements that are free from material misstatement, whether due to fraud or error. Auditor General's Responsibilities for the audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 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 ISSAIs, I exercise professional judgement and maintain professional scepticism throughout the audit. I also: - * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain 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, 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the project to cease to continue as a going concern. 5 * 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 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. From the matters communicated with those charged with governance, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe tiese matters in my auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, 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. Other Reporting Responsibilities In accordance with Section 19 (1) of the National Audit Act, 2008, I report to you, based on my work described on the audit of Financial Statements, that; Except for the matters raised in compliance with Terms of the Agreement section below, and whose effect has been considered in forming my opinion on financial statements, the activities, financial transactions and information reflected in the finarcial statements that have come to my notice during the audit, are in all material respects, in compliance with the authorities which govern them. Report on the Audit of Compliance with Terms of the Agreement a) Internal controls Management of the project is responsible for establishing and maintaining internal controls. I did not find out any material weaknesses in the internal control system of project management. b) Compliance with terms of the agreement Management of the project is responsible for ensuring compliance with the terms of the agreement. * Absorption of funds I reviewed management aspects in terms of project approvals, work plans, budget formulations, monitoring and evaluation of project objectives, and periodic progress reporting against planned objectives and work plans. It was observed that, the grant agreement was signed on 29th June 2019 for an implementation period of 6 years. As of 30 June 2023, the project had completed 4 years and thus remaining with 2 years to its closure. By this period, the project had so far received 6 funding to the tune of USD 33250,086 (36%) out of the total expected fLnding of USD 92.5 million which means USD 59.3 million (64%) is yet to be received. No funds had been received from KfW and the GoU as per tie agreement. Consequently, delays in funding empacts on the implementation of activities. Given the current trend, it is unlikely that the pro-ject will absorb the remainin~g funds in the remaining period. In response the Accounting Officer explained that, NVSC and the World 3ank agreed to do regular technical discussions whenever submissions were made requiring the Bank's clearance which has resulted in increased speed to secure Bank clearances. He further explained that, the project outputs would not be fully achieved in the remaining timeframe mainly due to Government restrictions during COVID pandemic. In vew of this, NWSC and MWE intend to request MoFPED to apply for a time extension of at least one and a half years to allow for completion of the outstanding project activities. The time extension request will be made before close of the year. I advised the Accounting Officer to explore approaches of fast tracking the implementation of - project activities with an option of engaging the Development Partners for project extension timeframe. 0Slow Implementation of he work Ian I reviewed the work plan as shown in appendix 1 for the year under audit against the actual amount spent. In the year of audit, NWSC spent USD 10,974,648(36%) of the total planned expenditure leaving USD 17,812,692 (64%) unspent. This means a number of planned actvities according to work plan were not implemented. Delay in the implementation of activities may result into non-completion of the project within the agreed period. The delays were mainly occasioned by externalities where clearances were required. For example, it was anticipated that works contract for Mbale and Adjumani water supply and sanitation systems would be signed by the 4th quarter of the financial year for Advance payments to be effected which did not materialize. I advised the Accounting Officer to explore strategies to fast track the implementation of project activities. John F.S. Muwanga AUDITOR GENERAL 3rd October 2023 7 Appendix 1: Work plan for the y2ar INTEGRATED WATER MANAGEMENT AND DEVELC PMENT PROJECT-WORKi)LAN Component 2.1 &2.2 _NWSC TOTAL US3 Inputs 202.2/2023 Activity Description Deliverable Q1 Q2 Q3 Q4 Final design review Mbale water report, Final supply and tender sanitation documents, system - Water Bid study and evaluation design review. report 216,289 43,258 259,547 contract Gulu Full scale source 4progress oslac rotection re orts 76,216 101,622 50,811 25,405 254,054 contract 635405,054 contract Adjumannl- Pekele Water Supply and Sanitation Project- Final tender Feasibility study documents, and detailed DraftCoslac_ design Contract 31,551 31,551 7,0 contract Adjumani II - Pakele Water Supply and Sanitation Project- ESIA 2progressCoslac &RAP. reports 49,3 9,730 conutacy Gulu - Karuma Water Supply 4progresswok Project - works reports 3,907,955 3,907,955 3,907,955 3,907,955 15,631,821 contract Mbale water supply and sanitation 1progressWok syste -woks rport7,000,000 7,000,000 contract Adjumani II - Pakele Water Supply and Sanitation 1progressWok Projct- ork. reort3,443,835 3,443,835 contract 8 Mbale water supply and sanitation system - works construction 1progress Su ervision. re ort 392,359 Consultancy 392359392,359 'Contract Adjumani II - Pakele Water Supply and Sanitation Project- Works 1progress Supervision. report Consultancy S ri r282,000 282,000 Contract Arua Full scale source 4progress Consultancy Protection re orts 77,027 102,703 51,351 25,676 256,757 Contract Mbale full scale source 4progress rotection re orts 65 189 86 919 43 459 21 730 217 297 Contract Bushenyi full scale source 2progress Consultancy rotection reports 45,405 11,351 56,757 Contract TOTAL COMPONENT 2 4,374,227 4,323,737 4,098,982 15,110,312 27,907,258 9 FINANCIAL STATEMENTS 10 INDEPENDENT AUDITOR'S REPORT ON THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 FOR YEAR ENDED 30 JUNE 2023 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 GLOSSARY OF ABBREVIATION NWSC National Water and Sewerage Corporation BOU Bank of Uganda GoU Government of Uganda IDA International Development Agency IPSAS International Public Sector Accounting Standard NSSF National Social Security Fund PAYE Pay As You Earn UGX Uganda Shillings USD $ United States Dollar SOE Statement of Expenditure SDR Special Drawing Rights MWE Ministry of Water and Energy IWMDP Integrated Water Management and Development Project PAPs Project Affected Persons RAP Resettlement Action Plan URA Uganda Revenue Authority URC Uganda Railway Corporation RGC Rural Growth Centre WHT Withholding Tax AWE Air Water Earth Limited NDP National Development Plan PDO Project Development Objective SDG Sustainable Development Goal SDR Special Drawing Right IWRM Integrated Water Resources Management WSS Water Supply and Sanitation RWSSD Rural Water Supply and Sanitation Department UWSSD Urban Water Supply and Sanitation Department WESLD Water & Environment Sector Liaison Department WMDP Water Management and Development Project WMZ Water Management Zone RAP Resettlement Action Plan DED Detailed Engineering Design ESIA Environmental and Social Impact Assessment SPP Source Protection Plan ToR Terms of Reference MWE Ministry of Water and Environment MoFPED Ministry of Finance Planning and Economic Development IA Implementing Agency NDPII National Development Plan II THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 TABLE OF CONTENTS Page 1.0 Project Information 1 2.0 Members of IWMDP Management Team 2 3.0 Project Management Report 3 3.1 Project Background 3 3.2 Project Objectives 3 3.3 Project Components 3-4 3.4 Project Implementation Arrangement 4 3.5 Project Implementation Status 4-10 4.0 Statement of Project Management Responsibilities 11 5.0 Audit Objectives, Scope, Audit Approach and Results 12 5.1 Audit Objectives 12 5.2 Audit Scope 12 5.3 Audit Methodology 13-14 5.4 Results of the Audit 14-17 5.5 Follow up on Prior year Audit Issues 17 6.0 Independent Auditor's Report on the Financial Statements 18 - 20 7.0 Independent Auditor's Report on the IDA Special Account Statement 21 8.0 Financial Statements 8.1 Statement of Financial Position 22 8.2 Statement of Comprehensive Income 23 8.3 Statement of Cash Flows 24 8.4 Notes to the Financial Statements 25-27 9.0 Compliance with Internal Control Structure 9.1 Independent Auditor's Report on Internal Control 28 10.0 Compliance with Funding Terms, Applicable Laws and Regulations 10.1 Independent Auditor's Report on Compliance 29 10.2 Findings and recommendations on Compliance 30-31 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 1.0 PROJECT INFORMATION Project Title Integrated Water Management and Development Project (IWMDP) Project No. P163782 Donors International Development Association 1818 H Street, N.W Washington, DC 20433 United States of America Implementing Agency National Water and Sewerage Corporation (NWSC) Office and Place of Business Plot 3, Nakasero Road P.O. Box 7053 Kampala, Uganda Website: www.nwsc.co.ug Bankers Bank of Uganda P.O. Box 7120 Kampala, Uganda Auditors: (For and on behalf of the Auditor General) Price & King Certified Public Accountants Member Firm of Prime Global Tirupati Mazima Mall 3rd Floor Office No. 278 & 279 Plot 2530, Ggaba Road. P.O. Box 34110 Kampala, Uganda. E-mail: priceandking@outlook.com Website: www.priceandking.co.ug 1 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 2.0 Members of the IWMDP Management Team 1. Paddy Twesigye Senior Director Planning & Capital Development 2. Charles Kayondo Manager Infrastructure 3. Denis Ojok Principal Engineer 4. Mujuni Herbert Manager Infrastructure Project Supervision 5. Ritah Nalumansi Senior Engineer 6. Grace Nayebare Principal Engineer 7. Kennedy Geria Principal Engineer 8. Orwiny Martin Project Engineer 9. Sharon Kalungi Manager-Social and Environmental Safeguards 10. Victoria Komukyeya Principal Sociologist 11. Nancy Atimango Principal Sociologist 12. Veit Owomugisha Sociologist 13. Innocent Twesigye Senior Environmental Engineer 14. Atukunda Agrace Principal Accountant 15. Sarah Rukundo Principal Accountant 16. Juliet Nakate Accountant 17. Ankunda Caesar Accountant 18. Kica Peace Grievance Officer 19. Auma Peace Grievance Officer 20. Adong Florence Grievance Officer 21. Elwa Isaac Newton RAP Assistant 22. Abang Jane RAP Assistant 23. Ocen Ambrose Oloya RAP Assistant 24. Kilama Ronald RAP Assistant 2 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 3.0 PROJECT MANAGEMENT REPORT The Management of Integrated Water Management and Development Project (IWMDP), National Water and Sewerage Corporation (NWSC) presents its Annual Report and Audited financial statements for the year ended 30 June 2023. 3.1 Project Background The Integrated Water Management and Development Project (IWMDP) is a Six (6) year project with total financing amounting to USD 313 million effective 27 June 2019. Of this, USD 280 million is from World Bank, USD 25 million from KfW and USD 8 million from GoU. The Project will support GoU through the Ministry of Water and Environment (MWE) and National Water and Sewerage Corporation (NWSC) in achieving the United Nation's Sustainable Development Goals (SDGs), especially SDG #6, 'Ensure availability and sustainable management of water and sanitation for all.' It is aligned with Vision 2040, which aims at transforming Uganda into a modern and prosperous country. In addition, it will support the fulfilment of the Second National Development Plan (NDP1l) goals and priority actions. The design of the Project was mainly informed by lessons learned from the implementation of World Bank funded Water Management and Development Project (WMDP) which ended in December 2018. The IWMDP focuses on three strategic areas: (i) delivering necessary Water Supply and Sanitation infrastructure and catchment management measures in targeted areas; (ii) Supporting water-related institutions (MWE, local government, and service providers) establish and consolidate operational efficiency and service quality in small towns and rural areas. (iii) Strengthening national and regional capacity to improve Integrated Water Resources Management (IWRM). 3.2 Project Objective The project development objective (PDO) is to improve access to water supply and sanitation services, capacity for integrated water resources management and the operational performance of service providers in Project areas. 3.3 Project Components The IWMDP has comprised four (4) components, namely: (1) WSS in Small Towns and RGCs and Support to Districts Hosting Refugees; (2) WSS in Large Towns and Support to a District Hosting Refugees; (3) Water Resources Management and; (4) Project Implementation and Sector Support. According to the Finance Agreement, component two of the project is to be implemented by the NWSC. As such, the Government of Uganda entered into a Subsidiary Agreement with NWSC for the purpose of channelling the portion of the loan and credit earmarked for implementation of that component of the project. The core focus of the component is to improve water supply and sanitation, activities to consist of: (i) construction and rehabilitation of water supply and sanitation infrastructure in the municipality of Mbale, (ii) construction of water supply facilities for the municipality of Gulu; (iii) undertaking construction supervision 3 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 activities and engineering and environmental studies, including the Augmented Water Supply Study; (iv) strengthening the capacity of the NWSC in the areas of operational and financial management to support improved performance in the Project supported areas; and (v) carrying out of environmental and social management activities to protect water sources and sensitize communities. The component also undertakes activities to improve water supply and sanitation in Adjumani District, consisting of: (i) constructing and rehabilitating water supply and sanitation facilities, as well as providing associated services, including engineering, environmental and social studies and supervision of construction activities; (ii) preparation and implementation of sanitation plans; and (iii) carrying out of environmental and social management activities to protect water sources and sensitize communities. 3.4 Project Implementation Arrangements The Project implementation is being undertaken by two Implementing Agencies (lAs); i.e., the Ministry of Water & Environment (MWE), and the National Water & Sewerage Corporation (NWSC). The oversight role for the two agencies is provided by the Water & Environment Sector Working Group and NWSC Board of Directors and supported by existing decentralized and de-concentrated regional structures and entities (including Local Governments, Water Management Zones, Umbrella Organizations, NWSC town offices,) and their partners to deliver desired results. To facilitate smooth implementation, Memoranda of Understanding (MoUs) outlining joint responsibilities have been signed between the lAs and specific local governments that are responsible for specific activities under the project e.g., land acquisition and compensation. In line with the GoU Sector Wide Approach (SWAP) policy, the Project's institutional and implementation arrangements are aligned with the existing MWE and NWSC organisational and governance structures. Each project Component/ Sub-component is implemented by the relevant departments in MWE and NWSC as summarized below: A. Component 1: The component is divided into two sub-components; sub component 1.1 Small Towns implemented by the Urban Water Supply and Sanitation Department (UWSSD), and Rural Growth Centres implemented by the Rural Water Supply and Sanitation Department (RWSSD). Sub component 1.2: offers support to districts hosting refugees and is also being implemented by the RWSSD. B. Component 2: Support to large towns and refugee hosting district of Adjumani is implemented and coordinated by Planning and Capital Development Division of NWSC. C. Component 3: This is implemented by the Directorate of Water Resources Management in collaboration with the respective regional Water Management Zones (WMZs). D. Component 4: The overall coordination of the IWMDP is by the Water and Environment Sector Liaison Department (WESLD) of MWE. 3.5 Project Implementation Status 4 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Component 2: Water Supply and Sanitation in Large Towns and District Hosting Refugees (NWSC) The component will improve water supply services and sanitation/sewerage services in the cities of Gulu and Mbale, and town councils of Adjumani/Pakele and surrounding areas including services provision to refugees and host communities in selected areas in Adjumani district. The project will also ensure the long-term availability and improved quality of water supply through enhanced source protection (e.g., supporting water resources management activities and other measures to protect catchment areas to ensure long term sustainability of yields). The details on the scope and status of project implementation in each of the project towns is as indicated in sections 2.2.1 - 2.2.4 below. Mbale City Water Supply and Sanitation System Introduction The Mbale Water Supply and Sanitation Project is being implemented by NWSC for Mbale city, and by the UWSD/MWE in the cluster towns of Butaleja-Busolwe, Budaka- Kadama-Tirinyi-Kibuku. The detailed design, tender documents, ESIA and RAP for Mbale Water Supply and Sanitation Project were developed under the previous Water Management & Development Project (WMDP) which ended in 2018. However, due to financial constraints, the works were not implemented, and were packaged to be for implementation under the IWMDP. During preparation of IWMDP, it was agreed (in the financing agreement) that the adequacy of the proposed water sources for Mbale and the cluster towns be confirmed through an augmentation study, before the design review and tendering of the works. NWSC carried out procurement of the design review consultant (including the augmentation study), management of the design review process, augmentation study and update of the safeguard instruments. The tendering and implementation of the works contract for Mbale City is managed by NWSC, while the tendering and implementation in the cluster towns is being managed by UWSD/MWE. The supervision of both works contracts will be carried out by a consultant (already engaged) who has already completed the design review and bidding documents. Scope of Work Mbale Water Supply and Sanitation Project entails construction of new water supply infrastructure as well as the rehabilitation and upgrading of existing water treatment plant, storage and distribution systems, rehabilitation and upgrading of the existing sewerage system in Mbale town and extension of the waste water reticulation system to un-sewered areas of Mbale City. The project will also transfer water (from Mbale) to the small towns of Butaleja-Busolwe, Budaka- Kadama-Tirinyi-Kibuku. The detailed scope is indicated below; a) Mbale City WSS; i. Construction of the Namatala Raw water transmission main which will include; Inlet structure with weir in the Namatala River, Grit chamber next to the River, approximately 12.2 km of DN 500 Ductile Iron Transmission Main with Air Valve and Wash-out Chambers and approximately 200 m of DN 600 Concrete Pressure Pipe. 5 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 ii. Upgrade and Extension of the Bungokho Water Treatment Works. The existing water treatment system will be upgraded to achieve a capacity of 9,450 m3 of treated water per day. A second treatment line shall be introduced to increase the treatment capacity by another 9,450 m3 per day. iii. Upgrade of the Manafwa Water Treatment Works. iv. Rehabilitation of the Nabijjo and Namatala Intakes. v. Construction of the Mbale transmission main (between the Bungokho Water treatment Works and the town centre). The total length of the transmission main is approximately 3.850km. vi. Construction of reservoirs within the Mbale network. These will include a pressure break tank of volume 10Om3, Rehabilitation works at the Bungokho reservoir, 150m3 reservoir in Mooni and booster station, and a 2000m3 Busoba reservoir. vii. Rehabilitation of the Namatala waste treatment ponds. viii. Rehabilitation of the Doko waste treatment ponds. ix. Construction of the sewerage connection in the northern cluster which includes a gravity network of about 10,950 m of OD 200, OD 250 and OD 315 mm uPVC sewer pipelines 3 waste treatment ponds. x. (2 anaerobic ponds and one facultative ponds), lifting station, and sludge drying beds. Provision shall also be made for about 300 connections at locations suitable for the terrain of the existing properties. xi. Sewerage Connection Senior Quarters. The Senior Quarters of Mbale shall be connected to the existing Sewerage Network of the Namatala Treatment Ponds Catchment Area. A Sewerage Lifting Station shall be constructed close to the Nabijo River for that purpose. The network before the lifting station shall be a gravity network consisting of 8600 m of OD 200 mm sewer pipeline. xii. Rehabilitation of the existing sewerage network. xiii. Construction of public toilets (5 public toilets are to be built in the Informal Settlements of Mbale, of which all of them shall be ablution blocks with one shower unit and toilets). Design Review, Tender Documentation & Works Tender Process The Design review contract was signed on 7th August 2021 to enable confirmation of water sources (through an Augmentation Study), and update of detailed design, tender documents, ESIA and RAP. The consultancy contract commenced on 19t October 2020, and was initially scheduled to be completed by 17th August 2021. However, due to delays in acquisition of relevant data and the impact of COVID 19 lock-down (March-July 2020) both in Uganda and globally, the contract period was extended up to 17t May 2022. The contract was extended again to January 6th, 2023 to allow the consultant complete all outstanding activities. In the financing agreement for IWMDP, funding for Mbale works was on condition that the Augmented Water Supply Study is done. The key finding from the study was that there is sufficient water resource to supply Mbale project with R. Manafwa, R. Namatala, R. Nabijo and R. Nabuyonga having combined safe 6 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 yield of 0.867m3s in the wet season, and 0.823m3/s in the dry season. The 2040 water demand for the project area was initially computed as 0.456 m3/s, but was revised to 0.385 m3/s following validation of the per capita consumption in the design review report. The 'Augmentation Water Supply Study Report' was updated with input from the validation exercise and the relevant data was included in the revised DED and tender documents. The Consultant delivered the final outputs for the design review contract i.e., Inception Report (23rd November 2020), Augmented Water Supply Study Report (24t February 2021) and Design Review Report (31st August 2021). Following inputs from stakeholders including the World Bank, a No Objection to the tender documents (together with design review report, updated ESIA, Augmented water supply study, and Re-scoping proposal) was given by World Bank on August 8, 2022. The works' tender (SPN) was advertised on August 15, 2022. Bids were received on 7th November 2022, and opening of the technical proposals was done on the same day. The technical evaluation exercise was completed on December 20, 2022, and Contracts Committee approval for the Technical Evaluation Report (TER) was obtained on January 5, 2023. The TER was submitted to the World Bank for review, and comments received on January 26, 2023. The comments were addressed and a revised report submitted to the Bank on March 31, 2023. The Bank gave a conditional no objection on April 25, 2023. However, the TER was revised following complaints from bidders on the outcome of the technical evaluation. A revised no objection was received on May 19, 2023. The financial bids were opened on May 23, 2023, evaluation and preparation of the Combined Technical and Financial Evaluation Report (CT&FER) was completed on June 22, 2023. The CT&FER, was approved by the Contracts Committee on June 30, 2023, and thereafter was submitted to the Bank for review, and issuance of a no objection on the same date. Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) The Draft ESIA update was received on 9 December, 2021, the draft report together with the final augmented water supply study report were shared with the Bank on 10 December 2021 for review. After a series of revisions following comments from stakeholders, the World Bank gave a No Objection to the ESIA report on August 8, 2022. Next steps Key milestones expected to be achieved in the subsequent months are the following; (i) No-objection to combined evaluation report - July 2023 (ii) Contract Negotiations - August 2023 (iii) Contract Signature - September 2023 (iv) Contract commencement - October 2023 7 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Adjumani II - Pakele Water Supply and Sanitation Project Scope The scope for Adjumani Water Supply and Sanitation Project includes development of sustainable raw water source/s, construction of a new water treatment, transmission and distribution infrastructure, provision of potable water to the project towns' urban poor and refugee's/host communities and public sanitation services. Feasibility Study, Detailed Design, and Works Tendering Contract for feasibility study (FS) and detailed design (DD) was signed on January 4, 2021, the consultant commenced studies on March 04, 2021. The contract was extended from August 30th 2022 to February 28th 2022 to enable the consultant complete all the deliverables. As of 30th June 2022, the Consultant delivered all the key outputs i.e., Inception Report (23rd November 2020), Feasibility Study Report (10th August 2021), Final Design report (May 18, 2022) and tender documents (May 31st 2022). A no-objection to the tender documents was given by World Bank on September 20, 2022 and the tender for the works was advertised on September 28, 2022. Bids were received on 240 November 2022, and the technical parts were opened on the same day. The technical evaluation exercise was completed on December 20, 2022, and Contracts Committee approval for the Technical Evaluation Report (TER) obtained on January 5, 2023. The TER was submitted to the World Bank for review and comments were received on January 26, 2023. The comments were addressed and revised report submitted to the Bank on April 11, 2023. The second set of comments from the Bank were received on April 14, 2023. The comments were addressed and revised report submitted to the Bank on April 29, 2023.The Bank issued a no objection on May 5, 2023. The financial bids were opened on May 26, 2023, and the evaluation and preparation of the Combined Technical and Financial Evaluation Report (CT&FER) was completed on June 30, 2023. The CT&FER, was approved by the NWSC Contracts Committee on July 7, 2023, and was thereafter submitted to the Bank for no objection on July 10, 2023. Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) The draft contract was approved by the Solicitor General on 21/10/2021, and the contract was signed on 5/11/2021. Subsequently, a commencement meeting was held on November 16, 2021. The draft ESIA and RAP were received in April 2022 and reviewed by both NWSC and MWE. The revised ESIA was submitted to the World Bank on June 20, 2022 and a no-objection/approval was given on September 20, 2022. The report was submitted to NEMA for approval on December 10th, 2022. Next steps (i) No-objection Date to combined evaluation - July 2023 (ii) Contract Negotiations - August 2023 (iii) Contract Signature - September 2023 (iv) Contract commencement - October 2023 8 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Karuma-Gulu Water Supply & Sanitation Work Scope and Implementation Status Karuma-Gulu Water Supply & Sanitation Project is being implemented under two packages; Package 1 involves construction of a water intake at R. Nile (capacity of 30,00Om3/day), water treatment plant (capacity 10,000m3/day) at Karuma, construction of reservoir in Gulu and water supply in towns en- route from Karuma to Gulu. This package is funded by KfW. The contract for Package 1 was signed on January 17, 2022. A ground breaking ceremony was held on March 2022 and the contract commenced on August 1, 2022. Construction of all structures at the Water Treatment Plant, reservoir in Gulu and the en-route towns is in progress. The overall progress of the works is estimated at 29%. Package 2 involves laying of transmission pipeline from Karuma to Gulu, and is funded by the World Bank under the IWMDP. Contract for Package 2 (involving the Karuma-Gulu transmission mains, funded by WB) was signed on August 2, 2022. The advance payment was made on October 11th, 2022. The contractor took possession of site, the DAAB has been constituted and contract implementation commenced on 01st November 2022. The site camp has been established, and trial pits to identify below surface existing infrastructure within the pipeline corridor were completed. Laying of the pipeline commenced in June 2023. Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) The necessary approvals for ESIA and RAP were secured together with Package 1. Permission for laying pipes along the road reserves and crossing roads and the railway line has been secured from the Uganda National Roads Authority (UNRA) and Uganda Railways Corporation (URC) respectively. Compensations for the pipeline route way leave has been completed. Implementation of Full-Scale Source Protection Measures in Arua, Gulu and Mbale Source protection plans for Arua, Gulu and Mbale were prepared under the WMDP which ended in 2016. Due to budget limitations, priority source protection measures were implemented in Arua in 2018. No interventions were implemented in Gulu, Mbale and Bushenyi. Full scale source protection measures in Bushenyi, Arua, Gulu and Mbale will be financed and implemented under the IWMDP. Source protection will be done by firms supervised by consultants. Contracts for supervising consultants were signed on June 2, 2022. Inception reports, updated source protection plans and draft work packages have all been received by NWSC. The Bank has provided comments on the work packages, these are currently being addressed. Tender documents for the measures are under review. Procurement of 'contractors' to implement the source protection measures will commence after the work packages are cleared by the Bank, and tender documents finalized. 9 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Implementation of Full-scale source protection measures for Bushenyi Source protection plans for Bushenyi were prepared as part of the WMDP which ended in 2016. However, due to budget limitations, only minor priority source protection measures were implemented in Arua, with major activities postponed to the subsequent phase of World Bank funding. Tender for implementation consultant for Bushenyi was delayed due to community concerns about the approach towards livelihood restoration. NWSC is continuously engaging the affected community over acceptable livelihood restoration approach that will be adopted. A livelihood restoration report was completed and outputs informed the Terms of Reference for selection of implementation consultant. The TOR for the assignment were approved by the Bank in STEP on May 11, 2022. Expressions of Interest were received by NWSC and evaluation the report was approved by NWSC Contracts Committee. The RFP was sent to the shortlisted bidders on September 22, 2022 and the financial and technical proposal received on October 31st 2022. Evaluation of technical and financial proposals was completed on 24th November 2022, and Contracts Committee approval obtained on 18th December 2022. Contract negotiations were successfully completed on 17th February 2023, and contract award approved by Contracts Committee on 2nd March 2023. The consultancy contract was signed on 8th June 2023 after securing Solicitor General's approval. The Consultant will commence services in July 2023. naging Director National Water and Sewerage Corporation Kampala Date... .... 4 ....... 2023 10 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 4.0 STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES The World Bank guidelines require that project management prepares its financial statements for each accounting period which give a true and fair view of the state of affairs of the Project and of its operating results for the year. The management of the Integrated Water Management and Development Project, NWSC are responsible for preparing the financial statements for each financial year which gives a true and fair view of the state of affairs of the project as at the end of the financial year. The Project management is required to ensure the project keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the project. They are also responsible for safeguarding the assets of the project. The management is ultimately responsible for the internal controls. National Water and Sewerage Corporation delegate responsibility for internal control to project management. Standards and systems of internal control are designed and implemented by management to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard, verify and maintain accountability of the project's assets. Appropriate accounting policies supported by reasonable and prudent judgements and estimates, are applied on a consistent basis. These systems and controls include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties. The management of the Project accepts responsibility for the statement of comprehensive income, statement of financial position and special account activity statement which has been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates. The management of the project is of the opinion that the statement of comprehensive income, statement of financial position and special account activity statement give a true and fair view of the state of the financial affairs of the project and of the results of its activities. The management of the project further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of the fin ncial statement of the project, as well as adequate systems of internal financial control. ................................ p c T r- W anaging Dir ct r,NWSC Date Director, Planning and Capital Development, NWSC Date 11 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 5.0 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS The Auditors, Messrs Price & King were appointed by the Auditor General to carry out the audit of the Integrated Water Management and Development Project, Project Number P163782 for the year ended 30 June 2023. 5.1 Audit Objectives were to: * Express an opinion on whether the project's financial statements present fairly, in all material respects, revenues received, costs incurred, and commodities and technical assistance directly procured by IDA for the period audited is in conformity with the terms of the agreement and generally accepted accounting principles or other comprehensive basis of accounting (including the cash receipts and disbursements basis and modifications of the cash basis). * Evaluate and obtain a sufficient understanding of the recipient's internal control related to IDA funded project, assess the soundness and adequacy of the project's procedures, and whether those procedures are consistently applied by the project in the normal course of operations. * Perform tests to determine whether the recipient complied, in all material respects, with agreement terms (including cost-sharing, if applicable) and applicable laws and regulations related to IDA -funded projects. All material instances of non-compliance and all illegal acts that have occurred or are likely to have occurred should be identified. Such tests should include the compliance requirements related to required costs-sharing contributions, if applicable. * To establish whether all external funds have been used in accordance with conditions of the relevant legal agreements, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; * To establish whether counterpart funds have been provided and used only for the purposes for which they were provided and in accordance with the relevant financing agreements, with due attention to economy and efficiency; * Establish whether goods, works, and services financed have been procured in accordance with relevant financing agreements; * To establish whether proper books of accounts were duly kept in accordance with the generally accepted accounting principles. 5.2 Audit Scope The audit scope required us to design and carry out sufficient audit steps and procedures in accordance with International Standards on Auditing to ensure that the audit objectives were met for the year ended 30 June 2023. The scope of the assignment covered the grant advanced by IDA through the Government of Uganda to NWSC for the implementation of the Integrated Water Management and Development Project (Project Number P163782). Geographical coverage of the assignment The coverage of the assignment was as follows: - Country office Plot 3 Nakasero Road, P.O. Box 7053, Kampala, Uganda- location for all accounting records of the project where the audit was conducted from. A visit to Gulu project area was also undertaken to verify the execution of project activities. 12 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS (continued) 5.3 Audit Approach (Methodology) We designed our audit approach in accordance with International Standards on Auditing in order to achieve the audit objectives. The following audit procedures were undertaken during the course of the audit: * We held initial entrance meeting with management of the Project on Tuesday 25 July 2023. * The meeting was to agree on a detailed plan about how the audit was to be conducted; * Performed audit procedures to ensure that the financial statements provided to us by the management reflected the operations relating to the conduct of the project's activities; * Performed audit procedures on transactions relating to the project's activities to ensure that they were eligible expenditure and that they were properly authorized and adequately supported; * Performed audit procedures to check the validity of the funds received from IDA processes of reflecting these in the bank account, and cash and bank balances existing as at the date of audit. * Requests for confirmations were sent to confirm bank balances and the amounts received from the donor (IDA); * Reviewed the internal control structure of the project and the extent to which financial management and reporting was adhered to by all parties; * Requested minutes of project management meetings, progress reports, contract agreements and other important correspondences. * Examined the bank statements and cash books to determine that the funds were properly controlled and accounted for; investigated any unusual reconciling items in the bank reconciliations reviewed and in the cash book * Carried out a detailed review of procurement transactions to ensure adherence to control procedures required by the donor. * Assessed completeness of records and inquired from project management any changes during the year. * Reviewed and assessed compliance with applicable laws, regulations and procedures. * We carried out verification of the expenditure incurred during the period and obtained an understanding of the project accounting system, assessed its adequacy as a basis for the preparation of the project financial statements and established whether adequate records were maintained. * We also visited one of the project implementation area in Gulu to physically verify the activities undertaken. We paid particular attention to establish whether; * All bank funds have been used in accordance with the conditions of the grant agreement, with due attention to economy and efficiency and only for the purposes for which the funds were provided; * Counterpart funds have been provided and used in accordance with the conditions of the grant agreement, with due attention to economy and efficiency and only for the purposes for which they were provided; 13 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS (continued) * Goods, works and services financed have been procured in accordance with the grant agreement and in accordance with the Bank's rules and procedures; and have been properly accounted for; * Appropriate supporting documents, records and books of accounts relating to all project activities have been kept. Clear linkages should exist between the books of accounts and the financial statements presented to the bank; In particular, the accuracy and propriety of expenditures withdrawn under SOE procedures were reviewed to provide assurance that the Project had maintained adequate supporting documentation to support claims for reimbursement of expenditures incurred. * Special accounts have been maintained in accordance with the provisions of the grant agreement and in accordance with the Bank's disbursement rules and procedures * The financial statements have been prepared by project management in accordance with applicable accounting standards mentioned above and give a true and fair view of the financial position of the Project as at the year end and of its receipts and expenditures for the period ended on that date; * Comprehensive assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures and other financial transactions and ensure safe custody of project-financed assets and that they are being used for the intended purposes; * Project's fixed assets are real and properly evaluated and project property rights or related beneficiaries' rights are established in accordance with loan conditions; and * Ineligible expenditures identified during the audit will be reflected in a separate paragraph of the audit report and if material, the point should be reflected in the auditor's opinion 5.4 Results of the Audit 5.4.1 Summary of audit results (i) Financial statements a) Statement of Comprehensive Income Below is a summary of funds disbursed to Integrated Water Management and Development Project, NWSC and expenditure incurred during the year ended 30th June 2023. 14 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 STATEMENT OF RECEIPTS AND PAYMENTS YEAR ENDED 30 JUNE 2023 ASSETS AND CUMULATIVE 2023 2023 2022 2022 EXPENDITURE Note USD UGX USD UGX Opening Balance 7,411,813 27,826,541,120 8,052,385 28,578,477,642 Difference in opening balance - (231) - Funds transferred to Designated Account in 2022 8.4.6 25,776,100 96,335,624,821 - - ADD: FUNDS RECEIVED BY SOURCE NWSC FUNDS 8.4.6 0105 239,250,800 12,456 46,108,000 Total Funds for the Project 33,250,086 124,397,951,710 8,064,841 28,624,585,642 LESS EXPENDITURE BY CATEGORIES Cat.2,3 & 5: Goods, Non consulting services, Consulting services, training and operational costs for Parts 10,094,566 38,178,790,736 640,572 2,275,724,654 2(a)(i)(ii)(iii)(iv)(v),2(b) 8.4.7 Compensations, RAP office expenditure & 0 239,250,800 12,456 46,,00 Fees 8.4.7 Total Expenditure 10,156,739 38,414,576,736 63028 2,321,832,654 Balance before foreign exchange adjustment 23,093,347 85,983,374,974 7,411,813 26,302,752,988 Foreign Exchange Gain/ (loss) - (1,412,536,821) - 1,523,788,132 Balance c/f 84570,838,153 7,41,13 27,826541,120 15 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS (continued) b) Statement of Financial Position as at 30 June 2023 2023 2023 2022 2022 Note USD UGX USD UGX ASSETS AND CUMULATIVE EXPENDITURE CASH AT HAND & BANK World Bank Designated Account 8.4.3 23,093,346 84,570,838,153 7,411,813 27,826,541,120 Cumulative project Expenditure 8.4.7 10,157,672 38,418,041,534 653,028 2,321,832,654 Foreign exchange (gain)/ loss - 1,412,536,821 - 1 523,788,132) TOTAL ASSETS AND CUMULATIVE EXPENDITURE 33251018 124,401.416508 8,04,841 28,624,585,642 SOURCES OF FUNDS World Bank funds b/f 7,411,813 27,826,540,887 8,052,385 28,578,477,642 World Bank transfer 8.4.6 25,776,100 96,335,624,821 - - NWSC 8.4.6 239,250,800 12,4L 46,108,000 TOTAL FUNDS 01 124.401416,508 8141 28,624585,642 c) Results on revenue and costs i) Reach an opinion as to the validity of the statement of comprehensive income, statement of financial position and Special Account (SA) activity statement The statement of comprehensive income, statement of financial position and special account (SA) activity statement as at 30 June 2023 are fairly stated. (ii) We have set out issues identified during the course of our normal audit work and have not attempted to indicate all possible improvements which a special review might develop. Ranking The issues have been ranked as high, medium or low using the criteria described below: High: This indicates an issue we consider high risk and is critical. The project management should pay particular attention to this area to ensure that the issue is given high priority to be addressed and resolved. Medium: This indicates a medium level of risk, where we felt there is some scope of a material misstatement in this area and therefore the responsible manager should review it carefully. Low: Any issues in this area are regarded as having a low level of risk. Whilst not critical, the responsible manager should be aware of this issue and monitor it to ensure it does not become medium or high risk. 16 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS (continued) (iii)a) Identify, evaluate and report on the grantee's internal control structure. NWSC has established a functional system of internal controls. There were no internal control weaknesses identified and discussed in detail under section 9.0 of this report. b) Reach an opinion as to whether or not the audit complied in all material respects with agreement terms and applicable laws and regulations. NWSC complied in all material respects with applicable laws and regulations except for the effects of the issues raised in sections 10.1 of this report in details and now summarised below: Ref Summary of the issues/weaknesses Priority 10. 1d1 10.1.1 Compliance to statutory deductions Medium 10.1.2 bsorption of funds High 10.1.3 Underspending according to the work plan High 5.5 Follow up on Prior Year Audit Issues The auditors made a follow up review of prior audit findings to establish the extent of implementation as shown in the table below: Summary of the Recommendation in FY 2022 Status issues/weaknesses raised in FY 2022 1. No Internal Audit reports As required by the Project Implementation Manual, the Implemented Internal Audit Department should conduct quarterly audits and report to the Bank. Its role should be independent of the day-to-day management activities. All issues raised by internal audit should be discussed and implemented by management. 2. No work done by the Internal The management should allow the project to be audited Implemented Audit Team by the internal audit team from Ministry of water and Environment as per the Project implementation Manual uidelines. 17 Pages 18 - 21 intentionally omitted THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 8.1 STATEMENT OF FINANCIAL POSITION 2023 2023 2022 2022 Note USD UGX USD UGX ASSETS AND CUMULATIVE EXPENDITURE CASH AT HAND & BANK World Bank Designated Account 8.4.3 23,093,346 84,570,838,153 7,411,813 27,826,541,120 Cumulative project expenditure 8.4.7 10,157,672 38,418,041,534 653,028 2,321,832,654 Foreign exchange loss - 1,412,536,821 - (1,523,788,132) TOTAL ASSETS AND CUMULATIVE 33251018 124.401416,508 28624,585,642 EXPENDITURE SOURCES OF FUNDS World Bank funds b/f 7,411,813 27,826,540,887 8,052,385 28,578,477,642 World Bank transfer 8.4.6 25,776,100 96,335,624,821 - . NWSC 8.4.6 63,10 239,250,800 1456 46,108,000 TOTAL FUNDS 33251018 124.401.416-508 8,04841 28.624.585,642 The financial statements were approved by Project Management on. .?'. 2023 and were signed on its behalf by Managing Director Director, Planning and Capital Development 22 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 8.2 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME ASSETS AND CUMULATIVE EXPENDITURE Note 2023 2023 2022 2022 USD UGX USD UGX Opening Balance 7,411,813 27,826,541,120 8,052,385 28,578,477,642 Difference in opening balance 7,1,1 27,26,5,10 80235 2,7,7,4 Funds transferred to Designated Account 8.4.6 25,776,100 96,335,624,821 - ADD: FUNDS RECEIVED BY SOURCE NWSC funds 8.4.6 Q5 239,250,800 1.A56 46,J08,000 Total Funds for the Project 33,251,018 124,401,416,510 8.064,841 28,624,585,642 LESS EXPENDITURE BY CATEGORIES Cat.2,3 & 5: Goods, Non consulting services, Consulting services, training and Operational costs for Parts 2(a)(i)(ii)(iii)(iv)(v), 2(b). 8.4.7 10,094,567 38,178,790,736 640,572 2,275,724,654 Compensations, RAP office expenditure & Fees 8.4.7 M 239,250,800 12A56 46,0,00 Total Expenditure 10,157672 38,418,041,536 6S3, 2,321,832,654 Balance before foreign exchange adjustment 23,093,346 85,983,374,974 7,411,813 26,302,752,988 Foreign Exchange gain/(loss) - (1,412,536,821) - 1,523788,132 Balance carried forward 2303346 84570.838,15 7411.81 27,826.541.120 Managing Director Director, Planning and Capital Development 23 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 8.3 STATEMENT OF CASH FLOWS Cash flows from operating activities Note 2023 2023 2022 2022 USD UGX USD UGX Surplus for the period 23,093,346 84,570,838,153 7,411,813 27,826,541,120 Change in Accounts Receivable 8.4.2 - Change in Accounts Payables 8.4.5 - - - Net increase in cash & cash equivalents 23,093,346 84,570,838,153 7,411,813 27,826,541,120 Cash & cash equivalents at beginning . _ of period Cash & cash equivalents at end of period 8.4.3 23,93346 84,570,838153 7A411.13 27,826,541,120 24 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 8.4 NOTES TO THE FINANCIAL STATEMENTS 8.4.1 ACCOUNTING POLICIES a) Basis of accounting The financial statements are prepared on a modified cash basis. The day today transactions are recorded on a cash basis. Adjustments are made at the end of the accounting period including outstanding accounts payable and receivable. b) Receipts and payments The receipts are recorded when physically received and payments recorded when actually paid. c) Fixed assets Fixed assets are expensed in full in the year of purchase. No depreciation is charged in the accounts. d) Reporting Currency Foreign currency transactions are prepared into functional currency using the exchange rates prevailing on the dates of the transactions. Assets and liabilities denominated in foreign currencies are re-translated at year end at exchange rates prevailing at that date. Exchange differences are realized in the Statement of Comprehensive Income in the year in which they arise. e) Reporting Currency The financial statements are prepared in Uganda Shillings, but also indicating the equivalent in US dollars. The IDA special Account is maintained in US dollars. f) Foreign currency rate Average rate 3,782.11 Closing rate 3,667.13 2023 2023 2022 2022 USD UGX USD UGX 8.4.2 RECEIVABLES Working advance 8.4.3 CASH AND BANK NWSC Designated Account 23,093346 84,570.838,153 7411813 27826,541,120 25 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 8.4.4 FUND BALANCE 2023 2023 2022 2022 USD UGX USD UGX Balance brought forward 7,411,813 27,826,541,120 8,052,385 28,578,477,642 Difference in opening balance - (231) Add: Funds transferred to NWSC designated account 25,776,100 96,335,624,821 - Exchange gain 1523,788,132 Other income-NWSC funds 63,105 239,250,800 12,456 46,108,000 Less: Expenses incurred during the period (10,157,672) (38,418,041,536) (653,028) (2,321,832,654) Exchange loss __ W_Ll 412536821 - Fund balance 23,93,346 84570.838,153 7A411-813 27,826.541,120 These relate to funds received less what has been spent for the period i.e., the unutilized balance of the grant. 8.4.5 PAYABLES Accrued expenses 8.4.6 FUNDING RECEIVED DURING THE YEAR These represent funds received from the donors during the year ended 30 June 2023. 2023 2023 2022 2022 USD UGX USD UGX Balance b/f 7,411,813 27,826,541,120 8,052,385 28,578,477,642 - (231) International Development Agency (IDA) 25,776,100 96,335,624,821 - . NWSC-Funding K10 239,250,800 12456 46108,000 3251018 124401416510 8,0.64841 28,624,585642 8.4.7 EXPENSES 2023 2023 2022 2022 USD UGX USD UGX Goods, Non consulting services, Consulting services, training and Operational costs Saman International 58,032 219,681,132 59,516 210,566,360 Air Water Earth Invoice no 12,977 49,126,240 14,022 49,608,851 SHAH Invoice 01 294,998 1,110,846,492 440,497 1,566,109,122 URA WHT on SHAH invoice 01 52,058 196,031,734 68,984 245,817,099 URA WHT ON Saman International 15,507 58,700,892 10,503 37,158,769 URA WHT on Air Water invoice . - 2,474 8,754,541 JBN Consult Invoice 157,744 591,136,215 41,664 147,405,778 URA WHT on JBN Consult invoice 10,069 37,732,077 2,659 9,408,830 Bank charges 428 1,607,011 252 895,304 Aid Environment Invoice 125,739 466,265,261 - . Aid Environment Invoice -URA WHT 8,026 29,761,611 - 26 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 2023 2023 2022 2022 USID UGX UISD UGX 8.4.7 EXPENSES (Continued) IUCN Invoice 157,567 586,967,835 - World Wide Fund for Nature 137,101 510,325,147 - GET LAB Invoice 149,855 554,904,675 - GET LAB Invoice-URA WHT 9,565 35,419,432 - DENYS Invoice 8,904,901 33,730,284,980 - - 10,094,567 38,178,790,736 M5 2,275,724654 Direct Payment-NWSC Audit fees 6,897 26,308,000 7,126 26,308,000 Turihamwe 2021 Conservation Association Ltd - - 2,763 10,200,000 Rent for RAP offices - 2,566 9,600,000 PAPS Compensation 212,942,800 - . 635 239,250,800 12A5 46,J08000 TOTAL 10,157,72 38.418.041.536 653028 2.321,832,654 27 Price & Kin Certified Public Accountants Tel: +256 752 008885 (Off. Dir.) Tirupati Mazima Mall Mob: +256 772 997418 Member Firm of Prime Global 3rd Floor, Office 278 and 279 +256 706 997418 PrimeGlobal Plot 2530, Ggaba Road E-mail: priceandking@outlook.com AnAssoaI P.O. Box 34110 Website: www.priceandking.com Kampala - Uganda 9.0 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL We have audited the financial statements of Integrated Water Management and Development Project-National Water and Seera e Corporation (NWSC) for the year ended 30 June 2023, and have issued our report on it dated ... . L. 2023. We con ucted our udit in accordance with Intemational Standards of Auditing. The standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement. The management of Integrated Water Management and Development Project-National Water and Sewerage Corporation (NWSC) is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by the management are required to assess the expected benefits and related costs of internal control policies and procedures. The objectives of internal control structure are to provide the management with reasonable, but not absolute, assurance that the assets are safeguarded against loss from unauthorized use or disposition; transactions are executed in accordance with management's authorization and in accordance with the terms of the agreements; and transactions are recorded properly to permit the preparation of the statement in conformity with the basis of accounting described in section 8.4.1 as notes to the statement. Because of inherent limitations in intemal control, errors or fraud may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and performing our audit of the financial statements of Integrated Water Management and Development Project-National Water and Sewerage Corporation (NWSC) for the year ended 30 June 2023, we obtained an understanding of intemal control. With respect to intemal control, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on internal control. Accordingly, we do not express such an opinion. We did not get any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the Intemational Standards on Auditing. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the recipient's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statement. A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control elements does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the financial statement may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control would not necessarily disclose all matters in internal control that might be reportable conditions and, accordingly would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. The results of our tests disclo ed no internal control issues which are re be conditions and are of material weakness. Price &King Partner- CPA Kasaija Robert Certified Public Accountants Kampala, Uganda Date (............. .. ..L0 . 2023 Date ............... . ....2023 28 Firm No. AF0035 The Finn is Licenced and Regulated by ICPAU Partners: Francis Onebe MBA (NU) FCCA (UK) CPA (U) Robert Kasaija MBA (UK) ACCA (UK) CPA (U) Bsc (Q.Econ) Moses Eriyau CPA (U) B (PLM) Price LK Certified Public Accountants Tel: +256 752 008885 (Off. Dir.) P e & King Tirupati Mazima Mall Mob: +256 772 997418 M Fir 3rd Floor, Office 278 and 279 +256 706 997418 Member Firm of Prime Global Plot 2530, Ggaba Road E-mail: priceandking@outlook.com PrimeGlobal P.O. Box 34110 Website: www.priceandking.com ,d,pnd-nAccongFinn. Kampala - Uganda 10.0 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE We have audited the financial statements of Integrated Water Management and Development Project-National Water and Sewer ge Corporation (NWSC) for the year ended 30 June 2023, and have issued our report on it dated . i .......2023. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial Statement is free of material misstatement resulting from violations of agreement terms and laws and regulations that have a direct and material effect on the determination of the Financial Statements amounts. Compliance with agreement terms and laws and regulations applicable to Integrated Water Management and Development Project-National Water and Sewerage Corporation (NWSC) is the responsibility of its management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of NWSC compliance with certain provisions of agreement terms, laws and regulations. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. Material instances of non-compliance are failures to follow requirements or violations of agreement terms and laws and regulations that cause us to conclude that the aggregation of misstatements resulting from those failures or violations is material to the financial statement. The results of our tests disclosed compliance issues as indicated in more details in section 10.1 of this report now summarised below; * Compliance to statutory deductions * Absorption of funds * Underspending according to the work plan We considered these material instance of non-compliance in forming our opinion on whether Integrated Water Management and Development Project-National Water and Sewerage Corporation (NWSC) financial statements are presented fairly, in all material respects, in accordance with the terms of the agreements and in conformity with the basis of accounting described in Note 8.4.1 to toe financial statement, and this report does not affect our report on the financial statements dated .........0G?./.. 2023. With respect to item not tested, nothing has come to our attention that caused us to believe that the Project manage nt had nol complied in all material respects with those provisions. Price & King .. . .. Certified Public Account nts Partner-CPA Robert Kasaija Kampala, Uganda Date .............. 2023 Date ............... .. .2023 29 Firm No. AF0035 The Firm is Licenced and Regulated by ICPAU Partners: Francis Onebe MBA (NU) FCCA (UK) CPA (U) Robert Kasaija MBA (UK) ACCA (UK) CPA (U) Bsc (Q.Econ) Moses Eriyau CPA (U) B (PLM) THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 10.1 FINDINGS AND RECOMMENDATIONS ON COMPLIANCE 10.1.1 Compliance to statutory deductions a) Payment of NSSF for the month of May 2023 Criteria NSSF deductions are supposed to be remitted to NSSF by 15th of the following month. Observation The audit team noticed that for the month of May 2023, the NSSF payment was remitted late for the 3 RAP Assistants and 3 Grievance Officers. However, all the other monthly NSSF payments were remitted on time. Risklimplication Late NSSF payments may attract fines and penalties thus loss of funds to the Corporation. Recommendation Management should always ensure compliance to NSSF requirements to avoid penalties. Management comments. The Corporation has been having challenges with all the creditors not just NSSF due to delayed payment of Water bills by the MDAs and delayed remittance of project funds by the Government. However, NSSF payments are now up to date. 10.1.2 Absorption of funds Criteria We reviewed management aspects in terms of project approvals, work plans, budget formulations, monitoring and evaluation of project objectives, and periodic progress reporting against planned objectives and work plans. Observation The grant agreement was signed on 29th June 2019 for an implementation period of 6 years. As of 30 June 2023, the project has completed 4 years and thus remains with 2 years of implementation. As of the same date the project has so far received funds amounting to USD 33,250,086 out of the total expected funding of USD 92.5 million which means USD 59.3 million (64%) is yet to be received. No funds have been received from KfW and the GoU as per the agreement. Risk/implications The delay in funding which consequently impact the implementation of activities is attributed to among other factors the COVID19 pandemic. Given the current trend it is unlikely that the project will absorb the remaining funds in the remaining period. Recommendation Management working with the Development Partners should explore approaches to fast track the implementation of project activities or even explore project extension possibilities. 30 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Management comments NWSC and the World Bank agreed to do regular technical discussions whenever submissions are made requiring the Bank's clearance. The approach has resulted in increased speed to secure Bank clearances on submissions. However, the project outputs cannot be fully achieved in the remaining period (over 1 year) mainly due to the long period (over 2 years) lost as a result of Government restrictions during COVID pandemic. In view of this NWSC and MWE intend to request MoFPED to apply for a time extension of at least one and a half years to allow for completion of the outstanding project activities. The time extension request will be made before close of this year. 10.1.3 Underspending according to the work plan Criteria We reviewed the work plan for the year under audit against the actual amount spent. Observation In the year of audit, they have spent 36% of the total planned and 64% of the total planned not spent. This means a number of planned activities according to work plan were not implemented. Risk/Implications The delay in the implementation of activities may result into non-completion of the project within the agreed period. Recommendation Management should explorer approaches to fast track the implementation of project activities or even explorer project extension possibilities. Management comments. The delay in implementation of project activities is mainly occasioned by externalities where clearances are required. In the work plan, it had been anticipated that works contract for Mbale and Adjumani would be signed by the 4th quarter of the financial year for Advance payments to be effected. However, this was not achieved and currently the contracts are yet to be signed. Additionally, NWSC has had several engagements with the relevant world Bank offices to resolve any emerging issues rather than too much documentation requirements, This way, several challenges have been addressed and the project is on track. 31 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Management comments. The Corporation has been having challenges with all the creditors not just NSSF due to delayed payment of Water bills by the MDAs and delayed remittance of project funds by the Government. However, NSSF payments are now up to date. 10.1.3 Absorption of funds Criteria We reviewed management aspects in terms of project approvals, work plans, budget formulations, monitoring and evaluation of project objectives, and periodic progress reporting against planned objectives and work plans. Observation The grant agreement was signed on 29th June 2019 for an implementation period of 6 years. As of 30 June 2023, the project has completed 4 years and thus remains with 2 years of implementation. As of the same date the project has so far received funds amounting to USD 33,250,086 out of the total expected funding of USD 92.5 million which means USD 59.3 million (64%) is yet to be received. No funds have been received from KfW and the GoU as per the agreement. Risk/Implications The delay in funding which consequently impact the implementation of activities is attributed to among other factors the COVID19 pandemic. Given the current trend it is unlikely that the project will absorb the remaining funds in the remaining period. Recommendation Management working with the Development Partners should explore approaches to fast track the implementation of project activities or even explore project extension possibilities. Management comments NWSC and the World Bank agreed to do regular technical discussions whenever submissions are made requiring the Bank's clearance. The approach has resulted in increased speed to secure Bank clearances on submissions. However, the project outputs cannot be fully achieved in the remaining period (over 1 year) mainly due to the long period (over 2 years) lost as a result of Government restrictions during COVID pandemic. In view of this, NWSC and MWE intend to request MoFPED to apply for a time extension of at least one and a half years to allow for completion of the outstanding project activities. The time extension request will be made before close of this year. 10.1.4 Underspending according to the work plan Criteria We reviewed the work plan for the year under audit against the actual amount spent. Observation In the year of audit, they have spent 36% of the total planned and 64% of the total planned not spent. This means a number of planned activities according to work plan were not implemented. 31 THE AUDIT OF THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT (IWMDP) IMPLEMENTED BY NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) PROJECT NUMBER P163782 YEAR ENDED 30 JUNE 2023 Risk/Implications The delay in the implementation of activities may result into non-completion of the project within the agreed period. Recommendation Management should explorer approaches to fast track the implementation of project activities or even explorer project extension possibilities. Management comments. The delay in implementation of project activities is mainly occasioned by externalities where clearances are required. In the work plan, it had been anticipated that works contract for Mbale and Adjumani would be signed by the 4th quarter of the financial year for Advance payments to be effected. However, this was not achieved and currently the contracts are yet to be signed. Additionally, NWSC has had several engagements with the relevant world Bank offices to resolve any emerging issues rather than too much documentation requirements. This way, several challenges have been addressed and the project is on track. 32