THE FEDERAL GOVERNMENT OF SOMALIA PROJECT NAME SHOCK: RESPONSIVE SAFETY NET FOR HUMAN CAPITAL PROJECT PROJECT (BAXNAANO) IMPLEMENTING ENTITY : MINISTRY OF LABOUR AND SOCIAL AFFAIRS PROJECT GRANT / CREDIT NUMBER: P171346 REPORTS AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 PREPARED IN ACCORDANCE WITH THE CASH BASIS OF ACCOUNTING IN INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) 2019 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 Table of Contents 1. PROJECT INFORMATION AND OVERALL PERFORMANCE ..................................................... 4 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ............................................ 18 3. REPORT OF AUDITOR GENERAL ......................................................................................... 20 4. STATEMENT OF RECEIPTS AND PAYMENTS ....................................................................... 24 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 DECEMBER 2022......................................... 25 6. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 ....................... 26 7. STATEMENT OF BUDGET COMPARISON AND ACTUAL AMOUNTS .................................... 27 8. STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS............................ 28 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS................................................. 29 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ................................................... 35 2 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 ACRONYMS AND ABBREVIATIONS C1 - Component 1 C2 - Component 2 C3 - Component 3 EAFS - External Assitance Fiduciary Section FY - Financial Year GBP - Great British Pound GRM - Grievance Redress Mechanism IESBA - International Ethics Standards Board for Accountants IPSAS - International Public Sector Accounting Standards ISA - International Standards of Auditing MoF - Ministry of Finance MoLSA - Ministry of Labour and Social Affairs PFM - Public Financial Management PIU - Project Implementation Unit SCALED - UP - Somalia Capacity Advancement, Livelihoods, and Entrepreneurship through Digital Uplift SCOPE - WFP’s beneficiary information and transfer management platform SDR - Special Drawing Rights SFMIS - Somali Financial Management Information System SNLRP - Shock Responsive Safety Net for Locust Response SOS - Somali Shilling UNICEF - United Nations Children’s Fund USD - United States of America Dollars WFP - World Food Programme 3 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name The Project’s official name is Shock Responsive Safety Net for Human Capital Project (Baxnaano). Objective The key objective of the project is to provide cash transfers to targeted poor and vulnerable households and establish the key building blocks of a national shock-responsive safety net system. Shock responsiveness is defined and measured by the establishment of a social registry, which would support the scale up of future safety net programs during shocks. Address Ministry of Labour and Social Affairs (MoLSA) EX Jubba Hotel - Shangani District Mogadishu, Somalia. The Project also has offices / branches in Villa Somalia Contacts Telephone: (252) 612900436 E-mail: dowsaahmed79@gmail.com Website: www.molgov.so 1.2 Project Information Project Start Date The Project start date is 17 September 2019 Project End Date The Project end date is 31 December 2024 Project Manager Fardosa Ahmed Abdullahi Project Sponsor The Project is funded by International Development Association 4 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview Ministry / The Project is under the supervision of MoLSA. Department Project number P171346 Strategic goals The strategic goals of the Project are as follows: of the Project a) To provide cash transfers to targeted poor and vulnerable households and establish the key building blocks of a national shock-responsive safety net system. b) To be defined and measured by the establishment of a social registry, which would support the scale up of future safety net programs during shocks. Achievement of The Project Management aims to achieve the goals through the strategic goals following means: a) This Project will focus on rural districts which have been most often hit by climatic shocks over the past years and which are recurrently affected by malnutrition, and where therefore chronic vulnerability is the highest. The Shock Responsive Safety Net for Human Capital Project (SNLRP) is expected to target 200,000 poor and vulnerable households (approximately 1.2 million individuals) in the six states of Somalia and provide them with nutrition-linked cash transfer. Targeting of beneficiaries will be conducted in three stages: (i) selection of districts, (ii) selection of communities in the targeted districts, (iii) community-based targeting of households in selected communities based on the household eligibility criteria. Further details on the targeting methodology for Component 1 is presented below. Districts from each of the six states of Somalia would be selected that meet the following selection criteria: predominantly rural districts with high distress rating, which will take into account vulnerability in terms of malnutrition, and past impact and/or risk of drought. Poverty rates will not be considered in the distress rating given that the number of poor people per district seem to be heavily contested. 5 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview (continued) Achievement of b) The cash transfers will extend primarily to rural areas, which strategic goals contain the high number of poor Somalis and which are generally (continued) underserved by basic social services. The Project is designed to complement the humanitarian assistance as a means of the 2019 drought response. Humanitarian agencies focus on districts classified as integrated phase classification levels 3 and 4, i.e. communities with the emergency and crisis levels of risk of famine. At the same time, districts classified as integrated phase classification 2, which cannot fully meet livelihood protection needs and are at risk of falling to level 3 and 4, if not protected, are often excluded from humanitarian assistance due to resource limitations. c) Several other considerations will affect the final choice of districts, including: security, local capacity constraints, presence of implementing partners, and ability of the payment agencies to disburse payments in those districts. Even with a limited set of districts, not all communities may be covered due to the limited budget. The final list of communities will be based on the rates and caseload of severe acute malnutrition and moderate acute malnutrition. These malnutrition data is available with World Food Programme (WFP) and United Nations Children’s Fund (UNICEF). The lowest level of disaggregation for this data is severe acute malnutrition and moderate acute malnutrition treatment facilities and the corresponding “catchment areas” with multiple catchment areas per district. Catchment areas with highest rates and caseloads will be chosen up to the point allowed by the budget allocated to the state. 6 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview (continued) Achievement of d) Using the existing WFP 's beneficiary information and transfer strategic goals management platform (SCOPE) database, WFP will produce lists (continued) of households with women and children under five years of age corresponding to the selected communities. The list of households in each community has been derived from community-based targeting exercises conducted by WFP. All the households in the SCOPE database who meet the Project eligibility criteria will be eligible for nutrition-linked cash transfer under Component 1. However, the beneficiaries will be able to update their data (e.g. changes in household composition) using the standard case management and grievance procedures under SCOPE. Eligible households in the targeted communities, who may not be in the SCOPE registry, will be able to register. Community-Based targeting is guided by a detailed Community-Based Targeting Manual that specifies the parameters and procedures for identification of eligible households. The community-based targeting procedures ensure that household selection process is fair and transparent. WFP relies on partner institutions to conduct community-based targeting exercises. Partner institutions undergo vetting by WFP. Finally, the implementation of government-funded Projects through federal and local agencies would increase citizen-government trust, and perceptions of government reach, competence and accountability. Other The SNLRP Sector Unit of the World Bank Group is working with MoLSA important and the Ministry of Finance (MoF) of the Federal Government of background Somalia to provide a program of Shock Responsive for Human Capital, information of 2019-2024. the Project. a) Component 1: Nutrition-linked Unconditional Cash Transfers (USD 161 million equivalent) This component will provide unconditional cash transfers to households that are chronically poor and vulnerable to drought and malnutrition, and link them as required to complementary nutritional support programmes. 7 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview (continued) Other The objectives of the component are: (i) support households to important strengthen their resilience and avoid negative coping mechanisms background in the short-term; and (ii) promote human capital investment in information of the medium to long-term by linking beneficiary households to the Project complementary nutrition services and continuing to smooth (continued). consumption gaps even after the impacts of drought are no longer present. Implementation of component 1 will be supported by WFP which will be contracted by MoLSA under a service contract arrangement to deliver predictable cash transfers. The operational cycles for the cash transfer will include: communication, registration of potential beneficiaries, enrolment and issuance of program cards, payment delivery, grievance redress and monitoring and documenting of lessons learned. The component will finance cash transfers to beneficiaries, service fees to payment delivery agency and implementing partners to support field activities, goods related to Information Technology devices for supporting the Cash Transfers business processes, limited consultancy services of individuals and direct and indirect WFP cost for the delivery and monitoring of the component’s activities. b) Component 2: Delivery Systems and Institutional Capacity Building (USD 6 million equivalent) Component 2 will be implemented concurrently with component 1, and will establish the key building blocks of the National Cash Transfer Program delivery system and strengthen institutional capacity of relevant government ministries to gradually take on direct implementation of the National Cash Transfer Program and form the foundation for a more comprehensive social protection system in Somalia. The cash transfer delivery system established under the SNLRP will focus on cash transfer function but is expected to expand in capacity and function over time, to include system elements that are supportive of targeting and service delivery activities provided by other programmes. The component implementation will be carried out by MoLSA through technical assistance and implementation support from UNICEF, including policy support; technical assistance for the development of cash transfers delivery systems; capacity building activities, training and related support for the Project Implementation Unit (PIU). 8 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview (continued) Other Activities under this component will be closely coordinated with important the Donor Working Group’s Technical Assistance Facility background supported by donors to support the design of the parameters of a information of National Cash Transfer Program, including transfer values and the Project frequency, triggers for expansion and expansion modalities. The (continued). component will also coordinate with the Cash Working Group, as relevant. They will also benefit from several World Bank supported interventions such as the foundational identification initiative and the regulatory framework of the Information, Communication and Technology sector, under the Somalia Capacity Advancement, Livelihoods, and Entrepreneurship through Digital Uplift (SCALED- UP) Project, and will draw on the technical expertise of Government experts, mobile network operators, financial service providers, and technology service providers. The component will finance consultancy services of firms and individuals, training and workshops, and direct and indirect UNICEF cost for technical assistance, delivery and monitoring of the component’s activities. c) Component 3: Project Management, Monitoring and Evaluation, and Knowledge Management (USD 8 million equivalent). Component 3 will establish a national PIU to support day-to-day management and administration, monitoring and evaluation of the Project, strengthen MoLSA’s coordination arrangements and promote learning and knowledge management through robust Monitoring and Evaluation. Focus will also be given to strengthening MoLSA’s coordination arrangements with other Ministries and stakeholders at the federal level, and between the federal level and the member states at the local level. Knowledge management and learning activities supported by component 3 include documenting the lessons and experiences of implementation of the Project, which is expected to promote learning through performance doing and adjustments to Project design, as well as knowledge dissemination. The component will also support the design and preparation of a pilot Productive Safety Net Intervention targeting youth. 9 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.3 Project Overview (continued) Other This component will finance PIU staff salaries; equipment and important operating costs for the PIU and directly linked to the daily background management of the project (office space, utilities and supplies, bank information of charges, communications, translation, transportation, maintenance the Project and insurance, building and equipment maintenance costs, and (continued). travel and supervision costs); regular internal audits and annual external audits (as per Bank legal requirements audits of financial and procurement aspects, as well as through the Office of the Auditor General); third-party monitoring of Component 1 and undertaking of evaluations. Current The project was formed to provide cash transfers to targeted poor and situation that vulnerable households and establish the key building blocks of a national the Project was shock-responsive safety net system across a selected Districts and formed to Federal States in Somalia. These include Jubaland, Southwest State, intervene Galmudug, Hirshabelle, Puntland and Somaliland. Project The Project started on 17 September 2019 and is expected to run until duration 31 December 2024. 1.4 Bankers The Central Bank of Somalia is the sole banker of the Project. 1.5 Auditors The Project is audited by the Office of the Auditor General, Federal Government of Somalia. 10 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.6 Roles and Responsibilities Names Title designation Responsibilities Fardosa Ahmed Abdullahi Project Manager and Social Protection PIU Hassan Ahmed Hassan Financial Management Specialist PIU Abdinasir Sheikh Mire GRM Specialist PIU Hussein Bashir Mohamud Procurement Specialist PIU Iman Mohamed Jama Communication Specialist PIU Abdikani Hassan Ismail M and E Specialist PIU Abdiweli Hassan Mohamed Project Operations Officer PIU Ali Ibrahim Ali Labour GRM PIU Abdullahi Mohamud Warsame Puntland Liaison Officer PIU Dahir Ahmed Hassan Hirshabelle Liaison Officer PIU Abdirahman Moulid Hassan South West Liaison Officer PIU Abdi Ali Mohamed Bayle Jubaland Liaison Officer PIU Asma Said Ali Gulmudug Liaison Officer PIU Fatuha Abdullahi Isse Administrative Assistant PIU Abdihakim Mohamed Nor GRM Phone Operator PIU Abdullahi Mohamed Ali GRM Phone Operator PIU Abdirahman Isak Hussein GRM Phone Operator PIU Idriss Hashi Aden GRM Phone Operator PIU Mohamed Farah Management Information System PIU Mohamed Haji Adan Knowledge Management PIU Liban Abdullahi Mohamed System Developer PIU Zamzam Mohamed Ahmed System Database Administrator PIU Daud Hassan Mohamud Network and Infrastructure administrator PIU Omar Hassan Osman Coordinator PIU Abdullahi Mohamed Ali Director General MoLSA Authorising Officer 11 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.6 Roles and Responsibilities (continued) Names Title designation Responsibilities Fatuma Osman Farah Accountant General Chief Accounting Office/Fiduciary Oversight Saleiman S. Umar Director General Ministry of Finance Authorised Signatory Anab Sabriye EAFS Consultant Office of the Accountant General Mohamud Abdulkadir Arale EAFS Director Office of the Accountant General Ali Sheikh EAFS Head of Accountant Office of the Accountant General Mawlid Mohamed Ali EAFS Accountants Office of the Accountant General 1.7 Funding summary The Project is for a duration of Five years from 2019 to 2024 with an approved budget of USD 65,000,000 or Special Drawing Rights (SDR) 46,800,000 for Grant D5100, USD 110,000,000 or SDR 76,700,000 for Grant D8560 and USD 143,000,000 or SDR 106,400,000 for Grant E0770 as highlighted in the table below: Below is the funding summary: Source Donor Commitment Amount received to date – 31 Undrawn balance to date 31 of funds December 2022 December 2022 SDR USD SDR USD SDR USD (A) (A) (B) (B) (A)-(B) (A)-(B) Grant D5100 46,800,000.00 65,000,000.00 42,760,639.92 59,970,444.30 4,039,360.08 5,029,555.70 D8560 76,700,000.00 110,000,000.00 73,564,856.91 98,077,141.73 3,135,143.09 11,922,858.27 E0770 106,400,000.00 143,000,000.00 - - 106,400,000.00 143,000,000.00 229,900,000.00 318,000,000.00 116,325,496.83 158,047,586.03 113,574,487.98 159,952,413.97 12 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance: Chart 1.0 Budget performance The overall utilisation of recurrent expenditure budget which is a combination of compensation of employees and, use of good and services is 60.03% and the total social benefit transfer to WFP who are implementing the cash transfer component is 63.36% as per Quarter 4 for the financial period of 2022 of the Project. Furthermore, total Capital expenditure is 84.93%. This high percentage of capital expenditure is because the Project disbursed USD 2,193,398 to UNICEF which is implementing component 2 of the Project to support the government with Unified Social Registry and capacity building. Last but not least, the overall total expenditure for all components of the Project is 63.70%. This percentage is assessing the overall expense including the recurrent expenditure, social cash transfer and capital expenditure, and this shows that the Project has been progressing well during the financial year 2022 as the Project has expensed/disbursed over 60% of the budget forecast value for the Financial Year 2022. 1.9 Financial Statements discussion and analysis a) Statement of Receipts and Payments This statement describes the cash received during the reporting period and the expenses made during this period, the expenses is recorded in a category-wise whereby the details are provided under the notes section. The below categories has been recorded based on the charts of accounts of the Federal Government of Somalia: 13 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.9 Financial Statements discussion and analysis (continued) a) Statement of Receipts and Payments (continued) Details Amount USD Compensation of employees 7,500.00 Use of goods and services 896,228.00 Capital expenditure 2,292,997.78 Social benefits 96,941,343.00 Surplus (As per Bank Statement) 134,294.33 Statement of Receipts and Payments Surplus (As per Bank Statement) Capital Expenditure Use of Good and Services Compensation of employees Compensation of employees Use of Good and Service Capital Expenditure Social Benefits Surplus (As per Bank Statement) Social Benefits Chart 2.0 describes how the payments were made towards the different categories The Pie-Chart above shows that a large chunk of the Project funds is used towards Social Benefits. During this financial year, the Project has disbursed USD 96,941,343.00 to WFP for Cash Transfers. The capital expenditure for this year ended 31 December 2022 is USD 2,292,998.00. The bank balance as per this year is USD 134,294.33. Lastly, compensation of employees is USD 7,500.00, whereas goods and services is USD 896,228.00. 14 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.9 Financial Statements discussion and analysis (continued) a) Statement of Receipts and Payments (continued) Receipts and payments 100,300,000.00 100,270,539.51 100,250,000.00 Total USD 100,200,000.00 100,150,000.00 100,138,068.85 100,100,000.00 100,050,000.00 Income Expense Category Chart 3.0 Project’s Receipts and Payments The Project has received an amount of USD 100,270,539.51.This amount is directly paid by the World Bank via client connection and is recorded as a receipt before it is paid at the Somali Financial Management Information System (SFMIS) or paid as direct payment. The expenditure used from that cash receipts is USD 100,138,068.85. Above is a chart on the Project’s income and expenses during the reporting period, 31 December 2022. b) Statement of Financial Assets The Project provided details on the Project current assets and liabilities under the Statement of Financial Assets. In this reporting year, the Project did not have liabilities as shown in the below table and chart. Details Amount USD Financial Assets 134,294.33 Financial Liabilities 0.00 15 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.9 Financial Statements discussion and analysis (continued) b) Statement of Financial Assets Assets and Liabilities 140,000.00 134,294.33 120,000.00 100,000.00 Value USD 80,000.00 60,000.00 40,000.00 20,000.00 0.00 0.00 Assets Liabilities Chart 4.0 Project Financial Assets and Liabilities 16 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 1.9 Financial Statements discussion and analysis (continued) c) Expenditure per component The Project has disbursed funds against numerous components that are defined at the Grant Agreement and the Project Appraisal document. The Project has the following components: Component 1: Nutrition - linked Unconditional Cash Transfers. Component 2: Delivery Systems and Institutional Capacity Building. Component 3: Project Management, Monitoring and Evaluation, and Knowledge Management. The chart below shows the disbursed funds for each of the components as at 31 December 2022. Expenditure by components 96,941,343.00 100,000,000.00 80,000,000.00 60,000,000.00 Total 40,000,000.00 20,000,000.00 2,193,398.00 1,003,328.00 0.00 WFP (C1) UNICEF (C2) MoLSA (C3) Components Chart 5.0 the expenditure per components: d) Summary of Project compliance: There have been no instances of non compliance with terms and conditions with regard to loan or grant agreements or guarantees which have resulted in cancellation of the assistance or has given rise to an obligation to return the assistance previously given. 17 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP 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 as at the end of the financial year ended on 31 December 2022. This responsibility includes: a) Maintaining adequate financial management arrangements and ensuring that these continue to be effective throughout the reporting year; b) Maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial transactions of the Project; c) Designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the Financial Statements, and ensuring that they are free from material misstatements, whether due to error or fraud; d) Safeguarding the assets of the Project; e) Selecting and applying appropriate accounting policies; and f) Making accounting estimates that are reasonable in the circumstances. The Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP accept responsibility for the Project’s Financial Statements, which have been prepared in accordance with Cash basis of accounting in International Public Sector Accounting Standards (IPSAS) 2019 as required by the Accountant General. The Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP 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 31 December 2022, and of the Project’s financial position as at that date. The Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project’s Financial Statements as well as the adequacy of the systems of internal financial control. 18 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES (CONTINUED) The Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP confirm that the Project has complied fully with applicable laws, Regulations, procedures and the terms of external financing covenants and that the Project’s funds received during the 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 Accountant General, the Director General (Authorizing Officer) for MoLSA and the Project Coordinator for SNLRP on 2024 and signed by them as here below: Fardosa Abdullahi Abdullahi Mohamed Fatuma Osma Project Coordinator Director General Accountant General 19 3. REPORT OF AUDITOR GENERAL INDEPENDENT AUDITOR’S REPORT TO THE PROJECT IMPLEMENTATION UNIT FOR SHOCK RESPONSIVE SAFETY NET FOR HUMAN CAPITAL PROJECT (BAXNAANO) NUMBER P171346 Unmodified opinion We have audited the accompanying Financial Statements of Shock Responsive Safety Net for Human Capital Project, Project Number P171346 funded by International Development Association, which comprise the Statement of Receipts and Payments, Statement of Financial Assets as at 31 December 2022, Statement of Cash Flows, Statement of Comparison of Budget and Actual amounts for the year then ended and notes to the Financial Statements as set out on pages 23 to 43. The Financial Statements have been prepared by the Project Management in accordance with the accounting policies described in Note 9.1 to the Financial Statements. In our opinion, the accompanying Financial Statements present fairly the cash and receipts and payments of the Project during the year ended 31 December 2022 in accordance with cash basis of accounting in International Public Sector Accounting Standards 2019 and in accordance with the accounting policies described in Note 9.1 to the Financial Statements and comply with the related Financing Agreements. Basis for Opinion We conducted the audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s responsibilities for Audit of the Financial Statements section of our Report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA) Code, together with the ethical requirements that are relevant to the audit of the Financial Statements, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 20 3. REPORT OF AUDITOR GENERAL (CONTINUED) Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use Without modifying our opinion, we draw your attention to Note 9.1 of the Financial Statements which describes the basis for accounting. The Financial Statements are prepared to assist Federal Government of Somalia comply with specific financial reporting requirements of the International Development Association. As a result, the Financial Statements may not be suitable for any other purpose. Our Report is intended solely for the information, distribution and use by the International Development Association and the Federal Government of Somalia. Other Information The Management of the Project is responsible for the other information. The other information comprises Project information and overall performance included in the report but does not include the Financial Statements and our Auditor’s Report thereon. Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this Auditor’s Report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Financial Statements The Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as Management determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the financial reporting process. 21 3. REPORT OF AUDITOR GENERAL (CONTINUED) Auditor’s Responsibilities for the Audit of the Financial Statements Our objective was 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 our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably 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 International Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: a) Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. d) 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. 22 3. REPORT OF AUDITOR GENERAL (CONTINUED) Auditor’s Responsibilities for the Audit of the Financial Statements (Continued) We communicated with Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit. ________________________________________ H.E. Avv. Ahmed Isse Gutale Auditor General Federal Republic of Somalia Mogadishu, Somalia 29 March, 2024 The matters raised in this report are only those, which came to our attention during the course of our audit and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. You should assess recommendations for improvements for their full impact before they are implemented. This report has been prepared solely for your use as project management and should not be quoted in whole or in part without our prior written consent. No responsibility to any third party is accepted as the report has not been prepared, and is not intended, for any other purpose. 23 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 4. STATEMENT OF RECEIPTS AND PAYMENTS Notes 31 December 31 December Cumulative Cumulative 2022 2021 Project Balances Project Balances 31 December 31 December 2022 2021 A B C=A+D D USD USD USD USD Receipts External Assistance Grants 10.2 100,270,539.51 7,153,206.73 158,047,586.03 57,777,046.52 Transfer from SNLRP Project 10.2 - 238,304.00 238,304.00 238,304.00 Total 100,270,539.51 7,391,510.73 158,285,890.03 58,015,350.52 Payments Compensation of employees 10.3 7,500.00 13,200.00 20,700.00 13,200.00 Use of goods and services 10.4 896,228.07 1,396,385.50 3,213,607.92 2,317,379.85 Capital expenditure 10.5 2,292,997.78 120,745.00 4,975,944.78 2,682,947.00 Social benefits 10.6 96,941,343.00 6,149,166.00 149,941,343.00 53,000,000.00 Total payments 100,138,068.85 7,679,496.50 158,151,595.70 58,013,526.85 Surplus / (deficit) for the year 10.8 132,470.66 (287,985.77) 134,294.33 1,823.67 24 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 DECEMBER 2022 31 December 31 December Notes 2022 2021 USD USD Financial assets Cash and cash equivalents 10.7 134,294.33 1,823.67 Total financial assets 134,294.33 1,823.67 Represented by: Accumulated Surplus from the previous year 10.8 1,823.67 289,809.44 Net Surplus / (deficit) for current year 10.8 132,470.66 (287,985.77) Fund balance 10.8 134,294.33 1,823.67 The Financial Statements were approved by the Project Management on _______________2024 and signed on its behalf by: Abdullahi Mohamed Fardosa Abdullahi Hassan Ahmed Authorizing Officer Project Manager Project Accountant The accounting policies and explanatory notes to these Financial Statements on pages 29 to 42 form an integral part of the Financial Statements. 25 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 6. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 Notes 31 December 31 December 2022 2021 USD USD Cash flow from operating activities Receipts External Assistance Grants 10.2 100,270,539.51 7,391,510.73 Total Receipts 100,270,539.51 7,391,510.73 Payments Compensation of employees 10.3 7,500.00 13,200.00 Use of goods and services 10.4 896,228.07 1,396,385.50 Social Benefits 10.6 96,941,343.00 6,149,166.00 Total payments 97,845,071.07 7,558,751.50 Net cash flows from operating activities 2,425,468.44 (167,240.77) Cash flows from Investing Activities Acquisition of Property and Equipment 10.5 (2,292,997.78) (120,745.00) Net cash flows from Investing Activities (2,292,997.78) (120,745.00) Cash flow from Financing Activities - - Net cash flow from financing activities - - Net increase / (decrease) in cash and cash 132,470.66 (287,985.77) equivalents Cash and cash equivalents at beginning of year 10.7 1,823.67 289,809.44 Cash and cash equivalents at end of year 10.7 134,294.33 1,823.67 26 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 7. STATEMENT OF BUDGET COMPARISON AND ACTUAL AMOUNTS Notes Original Revisions Final Actual Budget Percentage budget budget outturn variance variance Receipts USD USD USD USD USD % External assistance 10.2 157,205,500.00 - 157,205,500.00 100,270,539.51 (56,934,960.49) (36.22%) 157,205,500.00 157,205,500.00 100,270,539.51 (56,934,960.49) (36.22%) Recurrent expenses Compensation of 10.3 7,500.00 - 7,500.00 7,500.00 - - employees Use of goods and 10.4 998,000.00 500,000.00 1,498,000.00 896,228.07 (601,772.93) (40.17%) services Social Benefits 10.6 153,000,000.00 - 153,000,000.00 96,941,343.00 (56,058,657.00) (36.64%) 154,005,500.00 500,000.00 154,505,500.00 97,845,071.07 (56,660,429.93) (36.67%) Capital expenditure Capital expenditure 10.5 3,200,000.00 (500,000.00) 2,700,000.00 2,292,997.78 (407,002.22) (15.07%) 3,200,000.00 (500,000.00) 2,700,000.00 2,292,997.78 (407,002.22) (15.07%) Total expenditure 157,205,500.00 - 157,205,500.00 100,138,068.85 57,067,431.15) (36.30%) Surplus - - - 132,470.66 132,470.66 - 27 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 8. STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS Previous Years FY 2022 - FY 2022 FY 2022 Cumulative Up to Previous Current Cumulative Inception 2021 quarters reporting 31 December to date quarter 2022 USD USD USD USD USD Sources of Funds A B C D=B+C E=A+D Somalia Pre-Arrears Grant 57,777,046.52 32,581,752.57 67,688,786.94 100,270,539.51 158,047,586.03 Total receipts 57,777,046.52 32,581,752.57 67,688,786.94 100,270,539.51 158,047,586.03 Expenditure Component 1- WFP (53,000,000.00) (29,872,618.00) (67,068,725.00) (96,941,343.00) (149,941,343.00) Component 2- UNICEF (2,425,135.00) (2,193,397.78) (0.00) (2,193,397.78) (4,618,532.78) Component 3- MoLSA (2,588,391.83) (369,528.27) (633,799.80) (1,003,328.07) (3,591,719.90) Total payments (58,013,526.83) (32,435,544.05) (67,702,524.80) (100,138,068.85) (158,151,595.68) Surplus (deficit) for the year (236,480.31) 146,208.52 (13,737.86) 132,470.66 (104,009.65) 28 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS 9.1 Significant Accounting Policies These are the specific principles, bases, conventions, rules and practices adopted by the Project in preparing and presenting the Financial Statements. The principal accounting policies adopted in the preparation of these Financial Statements are set out below. These policies have been consistently applied to all transactions unless otherwise stated. The specific policies applied are described in the ntes below: 9.1.1 Statement of Compliance and Basis of preparation of the accounts The Financial Statements have been prepared in accordance with Public Financial Management Act (2019), Public Financial Management Regulations (2020) and related legal framework and Cash Basis of accounting in IPSAS 2019. Pursuant to Paragraph (1) and in accordance with Article (43) (2) of the Public Financial Management Act and Article 94 (1), (2) and (a) and (h) of the Public Financial Management Regulations (2020), the Financial Statements have been prepared using IPSAS, financial reporting under the Cash Basis of accounting in IPSAS 2019 as issued by the IPSAS Board of the International Federation of Accountants and as set out in the accounting policy note below. The Cash Basis of accounting has been supplemented with appropriate disclosures as required under Article 103 (2) of the Public Financial Management Regulations (2020). The Accounting policies adopted have been applied consistently throughout. 9.1.2 Reporting entity These Financial Statements are for SNLRP under the Federal Government of Somalia and encompass the reporting entity as specified in the Public Financial Management Act, 2019 and Appropriation Act, 2020. 9.1.3 Reporting currency The functional currency of the Federal Government of Somalia is the USD because: a) Government revenues and expenditures are transacted in that currency; b) The majority of financing is provided in that currency; and c) Bank transactions and balances are principally in USD. 29 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.4 Reporting year The SNLRP reporting year is for the year ended 31 December 2022 for financial year that runs from 1 January to 31 December, the calendar year. These Financial Statements are therefore for the year 1 January 2022 to 31 December 2022. The comparative figures reflect the 12 months ended 31 December 2021. 9.1.5 Payments by third parties The SNLRP may also benefit from goods and services purchased on its behalf as a result of cash payments made to third parties during the year. Requests for third party payments are processed through the use of country systems and at the request of the entity, the donor makes payment directly to a third party (e.g. supplier, contractor and consultant) for eligible expenditures. An example is the direct payments processed by the World Bank upon requests from the Federal Government of Somalia which are formally advised and verified by the Government and are included in the Financial Statements. On the other hand and through Direct Execution, third parties including donors may make payments to external suppliers outside the country systems and provide goods and services including in-kind donations e.g. food aid, big contract of works, vehicles, equipment, technical assistance or personnel services. The payments made by the third parties outside the country systems do not constitute cash receipts or payments managed by the Recurrent SNLRP even though the entity does benefit from such payments. Such payments are therefore not included in the Statement of Receipts and Payments but are reported and disclosed accordingly where the financial value of the goods and services received can be reliably verified and determined by SNLRP. During the reporting period, there were no third party payments. 9.1.6 Recognition of receipts The Project recognises all receipts from the various sources when the event occurs and the related cash has actually been received by the Government. a) Transfers from the Treasury and Other General Government Units / Entities Where transfers are received from the Treasury and / or other General Government Units / Entities, these are recognized in the Project books of account when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity (Project). 30 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.6 Recognition of receipts (continued) b) Other receipts These include receipts such as proceeds from disposal of assets and refunds. These are recognised in the Financial Statements the time associated cash is received. c) External Assistance External assistance is received through grants and loans from multilateral and bilateral development partners. Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity (Project) or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowing Includes external loans acquired by the Project and is treated on cash basis and recognized as a receipt during the year they were received. Undrawn external assistance These are loans and grants at reporting date as specified in a binding agreement and relate to funding for the Project currently under development where conditions have been satisfied or their ongoing satisfaction is highly likely and the Project is anticipated to continue to completion. An analysis of the Project’s undrawn external assistance is shown in the funding summary and in note 10.2 under Section 10 of these Financial Statements. 31 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.6 Recognition of receipts (continued) d) Other Assistance Relates to resources received from Non - Governmental Organistations and other assistance that is voluntarily provided by, for example, individuals , private entities and charitable and other organizations. 9.1.7 Recognition of payments Payments represent outlays of cash made by the entity or other agencies for and on behalf of the Project. All payments are recognised and included in the Financial Statements when cash is paid out. a) Compensation of employees Salaries and Wages, Allowances, Statutory Contribution for employees are recognized in the period when the compensation is paid. b) Use of Goods and Services Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they are included in the Statement of Financial Assets (Balance sheet) as financial liabilities with supporting schedules. 9.1.8 Property, Plant and Equipment and other non-current assets Non-current assets comprises land, buildings, plant, vehicles, equipment, and any other capital assets controlled by the SNLRP. Purchases of property, plant , equipment and other non-current assets have been expensed fully in the year of purchase. However, these assets are recorded in Asset Registers at historical cost as a memorandum record. 32 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.9 In-kind donations for goods and services received In - kind contributions are donations that are made to the Project in the form of actual goods and / or services rather than in money or cash terms. These donations may include food aid, vehicles, equipment or personnel services. Where the financial value received for in - kind contributions can be reliably determined, an appropriate disclosure note is included in the Financial Statements. 9.1.10 Comparative figures for previous year Comparative figures are disclosed for all numerical information disclosed in these Financial Statements as required under IPSAS. 9.1.11 Foreign currency transactions and foreign operations Foreign currency transactions denominated in foreign currencies are recorded into USD and incorporated in the Statement of Receipts and Payments at the exchange rate ruling on the date of the transaction. Cash balances denominated in foreign currency at the year - end would be translated at the closing rate of exchange with the resulting exchange gains / (losses) dealt with as a reconciling item between the opening and closing cash balances for the financial year. 9.1.12 Cash and cash equivalents Cash and cash equivalents comprise cash and bank. Bank account balances include amounts held at Central Bank of Somalia at the end of the financial year. 9.1.13 Refunds of previous year receipts and expenditure Receipts refunded from the previous years are recorded as expenditures in the current year. Expenditures refunded from previous years are recorded as receipts in the current year. 33 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.14 Employee benefits Employee benefits include salaries, allowances and other related employment costs and these have been recognized in the Financial Statements only when actual payments are made. 9.1.15 Contingencies Contingent liabilities are recorded and disclosed when the contingency becomes evident. Contingent assets are neither recognized nor disclosed. 9.1.16 Original and final approved budget and comparison of actual and budget amounts The approved budget is developed on the same accounting basis (cash basis), same classification basis (Government Finance Statistics, 2014 economic classification), and for the same year (1 January 2022 to 31 December 2022) as for the Financial Statements. The original budget of USD 157,205,500.00 was approved by Parliament on (25 June 2022). The original budget objectives and policies, the subsequent revisions and the material differences between the budget and actual amounts, are explained more fully in Section we of these Financial Statements. A commitment control system is in place and is implemented through the SFMIS with adequate system controls to ensure that no expenditure can be incurred in excess of the approved budget as may be revised. 9.1.17 Authorization Date The Financial Statements of the SNLRP were authorized for publication on __________________by the Accountant General of the Federal Government of Somalia. 34 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS 10.1 Exchange rates All monetary amounts in the Financial Statements are expressed in United States Dollars, the transaction and Project reporting currency. The USD closing rates for major currencies were: Actual Actual 31 December 2022 31 December 2021 Somali Shilling (SOS / USD) 26,000 22,500 Great British Pound (GBP / USD) 0.641584 0.641584 Euro (Euro / USD) 0.825748 0.825748 10.2 External assistance External assistance was received in the form of grants from multilateral donor agencies under agreements specifying the purposes for which the assistance will be utilized. The amounts in the Statement of Receipts and Payments are only recognized when received by and are under the control of the Federal Government of Somalia. The amount of external assistance received so far in 2022 consists of the following: 35 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.2 External assistance (continued) Current FY Current FY 2022 - 2022 - Current Cumulative balances (Project-to- Year balances Previous Reporting date) Quarter 3 (A) Quarter 4 (B) 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C= A+B D E=C+F F USD USD USD USD USD USD Grants received during the year: Multilateral Agencies 32,581,752.57 67,688,786.94 100,270,539.51 7,153,206.73 158,047,586.03 57,777,046.52 Total grants received 32,581,752.57 67,688,786.94 100,270,539.51 7,153,206.73 158,047,586.03 57,777,046.52 Transfer from SNLRP Project - - - 238,304.00 238,304.00 238,304.00 32,581,752.57 67,688,786.94 100,270,539.51 7,391,510.73 158,285,890.03 58,015,350.52 36 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.2 External assistance (continued) Analysis of the purpose for which the external assistance was received is as follows: Current FY Current FY 2022 2022 – Current Cumulative balances (Project-to- - Previous Year balances Reporting date) Quarter 3 Quarter 4 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C= A+B D E=C+F F USD USD USD USD USD USD Grants received during the year: Development Assistance 32,581,752.57 67,688,786.94 100,270,539.51 7,391,510.73 158,285,890.03 58,015,350.52 32,581,752.57 67,688,786.94 100,270,539.51 7,391,510.73 158,285,890.03 58,015,350.52 37 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.2 External assistance (continued) Non – compliance with significant terms and conditions There have been no instances of non compliance with terms and conditions with regard to the Grant Agreements or guarantees which have resulted in cancellation of the assistance or has given rise to an obligation to return the assistance previously given. Rescheduled and cancelled external assistance debt There have been no rescheduled and cancelled external assistance debt for the year ended 31 December 2022. Undrawn external assistance - grants The undrawn grant facilities available to fund future operations under binding agreements and where the terms and conditions are to be met, consist of: 31 December 31 December 2022 2021 USD USD World Bank - Somalia D5100 5,446,955.89 7,974,800.85 World Bank - Somalia D8560 4,227,646.40 - World Bank- Somalia E0770 143,477,208.00 - 153,151,810.29 7,974,800.85 Undrawn grant facilities of USD 153,151,810.29 from World Bank - Somalia Arrears Grant is stipulated for use for social infrastructure development and in accordance with the financing agreement that provides criteria for eligible expenditures. The Project has disbursed the total grant agreement to WFP for the Unconditional Cash Transfer. 38 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.3 Compensation of employees Current FY 2022 – Current FY 2022 - Cumulative balances (Project- Current Reporting Year balances Previous Quarters to-date) Quarter 4 31 31 31 December 31 December December December 2022 2021 2022 2021 A B C= A+B D E=C+F F USD USD USD USD USD USD Wages and salaries 4,500.00 3,000.00 7,500.00 13,200.00 20,700.00 13,200.00 4,500.00 3,000.00 7,500.00 13,200.00 20,700.00 13,200.00 39 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.4 Use of goods and services These are mainly: Current FY 2022 – Current FY 2022 - Cumulative balances (Project- Current Reporting Year balances Previous Quarters to-date) Quarter 4 31 31 31 December 31 December December December 2022 2021 2022 2021 A B C= A+B D E = C+F F USD USD USD USD USD USD Bank Commission - 8,622.00 8,622.00 14,869.00 43,345.20 34,723.20 Communication - 3,430.00 3,430.00 - 3,430.00 - Fuel & Lubricants - 3,883.00 3,883.00 5,088.00 10,697.50 6,814.50 Office materials and other - 3,000.00 3,000.00 36,809.00 59,635.50 56,635.50 Other General Expenses - - - 41,214.00 55,014.00 55,014.00 Professional fees 365,028.27 504,910.80 869,939.07 1,178,031.50 2,831,442.70 1,961,503.63 Rent - - - 27,300.00 39,300.00 39,300.00 Repairs & Maintenance - 1,564.00 1,564.00 9,156.00 20,647.00 19,083.00 Training Expenses - 5,790.00 5,790.00 20,400.00 36,880.00 31,090.00 Travel Expenses - - - 29,944.00 77,762.00 77,762.00 Utilies - - - 33,574.00 35,454.00 35,454.00 365,028.27 531,199.80 896,228.07 1,396,385.50 3,213,607.90 2,317,379.83 40 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.5 Capital expenditure – consumption of non current assets As explained in the accounting policies, all non current assets purchased during the reporting period are expensed during the year of purchase. The value of capital expenditure acquired during the financial year and expensed comprise : Current FY Current FY 2022 – 2022 - Cumulative balances (Project- Current Year balances Previous to-date) Reporting Quarters Quarter 4 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C= A+B D E = C+F F USD USD USD USD USD USD Information, Communication Technology 2,193,397.78 - 2,193,397.78 - 4,618,532.78 2,425,135.00 Machinery, Furniture and Equipment - 99,600.00 99,600.00 120,745.00 357,412.00 257,812.00 2,193,397.78 99,600.00 2,292,997.78 120,745.00 4,975,944.78 2,682,947.00 This capital expenditure relates to component 2 which is Delivery Systems and Institutional Capacity Building implemented by UNICEF who are designing the Unified Social Registry system in which the Federal Government of Somalia will have full ownership. The expenditure report for this cost is captured in other support documentation because the responsibility in reporting this expenditure lies with the United Nations Agencies who must report back directly to the Financial Management Specialist. 41 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.6 Social benefits Social benefits paid during the reporting period comprise: Current FY 2022 Current FY 2022 - – Current Year balances Cumulative balances (Project-to-date) Previous Quarters Reporting Quarter 4 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C= A+B D E = C+F F USD USD USD USD USD USD Social security benefits 29,872,618.00 67,068,725.00 96,941,343.00 6,149,166.00 149,941,343.00 53,000,000.00 29,872,618.00 67,068,725.00 96,941,343.00 6,149,166.00 149,941,343.00 53,000,000.00 42 Federal Government of Somalia Shock Responsive Safety Net for Human Capital Project (Baxnaano) Reports and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.7 Cash and Cash equivalents Comprise cash and bank balances of all bank accounts operated by the Project. It also includes petty cash balances held by the Project at the end of the financial year. 31December 31December 2022 2021 USD USD Shock Responsive Safety Net for Human Capital - (2117- 134,294.33 1,823.69 1420) 134,294.33 1,823.69 The cash and cash equivalents for the year ended 31 December 2022 is USD 134,294.33. There is a difference of USD 0.02 which has been reported to the treasury department at the Office of Accountant General for rectification. This has not been adjusted. 10.8 Accumulated Funds (Fund Balance/Surplus) The accumulated surplus (deficit) as at the year end was as follows: 31 December 31 2022 December USD 2021 USD At beginning of the year, 1 January 2022 1,823.67 - Surplus for the year 132,470.66 1,823.67 At end of the year, 31 December 2022 134,294.33 1,823.67 43