Office of the Auditor General of Rwanda OAG www.oag.goVrw LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC) AUDIT REPORTS For the period ended 31 January 2022 OAG Core Values integrity inpbi neetInnovation Objectivity Professionalism LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC) Audit Report on Financial Statements For the period ended 31 January 2022 Office of the Auditor General of State Finances 1 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 TABLE OF CONTENTS 1. IN T R O D U C T IO N ..............................................................................................................2 2. STATEMENT OF MANAGEMENT RESPONSIBILITIES ............................................ 8 3. REPORT OF THE AUDITOR GENERAL........................................................................9 4. FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022.........11 Office of the Auditor General of State Finances 2 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 1. INTRODUCTION 1.1. Project background Landscape Approach to Forest Restoration and Conservation (LAFREC Project) is a project under the supervision of Rwanda Environment Management Authority (REMA). The global environmental objective is to demonstrate landscape management for enhanced environmental services and climate resilience in one priority landscape. The project will result in a major advance in the restoration of the highly degraded Gishwati- Mukura landscape, enhancing both productive and environmental values. The project works concurrently in the three major elements of the landscape - rehabilitating forests and biodiversity within the Gishwati and Mukura Forest Reserves, enhancing sustainable land management in the agricultural lands between them and introducing silvo-pastoral approaches in the rangelands of the central former Gishwati Reserve. These interventions are synergistic, enhancing biological connectivity at the landscape level in a fashion that offers strong potential for global recognition as a UNESCO Biosphere Reserve and longer-term re-orientation of the local economy towards nature-based tourism. They are also complemented by livelihoods diversification and the establishment of flood warning and response systems that further enhance climate resilience within one of the most disaster-prone areas of Rwanda. 1.2. Project objective The project objective is to demonstrate landscape management for enhanced environmental services and climate resilience in priority landscape through Forest-friendly and Climate- Resilient Restoration of Gishwati-Mukura landscape 1.3. Duration and funding summary Project was initially for five (5) years from December 2014 to December 2019, It was later extended to 31 December 2020. Finally, another extension to 30 September 2021 was granted with last disbursement extended to 31 January 2022 1.4. Basic information of the project The description of the project,is summarised in the table below: Project Name Landscape Approach to Forest Restoration and Conservation Project (LAFREC Project) Project Number LDCF Grant Number TF 017782 and GEF Grant Number TF 017783 Line Ministry of the Ministry of Environment (MoE) project Office of the Auditor General of State Finances 2 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 Funding sources The project's total funding over the project lifetime is as below Source of funds Amount Amount in in USD Frw Grant Least Developed Countries Fund (LDCE) 4,045,000 3,465,268,513 Global Environment Facility (GEF) . 5,487 000 4,700,600,328 Total 9,532,000 8,165,868,841 Project Start Date: i) The project approval date is 1 October 2014; ii) The project agreement signature date is 1 October 2014; iii) The project effectiveness date is 15 December 2014; Project End Date: i) Project completion date was initially 31 December 2019. ii) It was later extended to 31 December 2020. iii) Finally, another extension to 30 September 2021. iv) Project last disbursement extended to 31 January 2022 Project Manager The Project Manager is Ms AMARIZA Vivine Project Sponsor/ Least Developed Countries Fund (LDCF) and Global Funder Environment Facility (GEF) through International Bank for Reconstruction and Development (World Bank). The project objective The project objective is to demonstrate landscape management for enhanced environmental services and climate resilience in priority landscape through Forest-friendly and Climate-Resilient Restoration of Gishwati-Mukura landscape Strategic goals of the Development Objective: to demonstrate landscape management Project for enhanced environmental services and climate resilient livelihoods. Environmental Objective: to restore the degraded Gishwati- Mukura landscape, increasing tree cover in the production landscape, restoring indigenous woodland in deforested areas and enhancing the biodiversity of the remaining degraded forest reserves, providing global environmental benefits. Project components The project key components! activities are outlined below: and activities Component 1: Forest-friendly and climate-resilient restoration of Gishwati-Mukura landscape: This component supports the application of the landscape approach to forest restoration and conservation for the improvement of ecosystem functions and services in the Gishwati-Mukura landscape, and possibly adjacent parts of the Nile-Congo Crest. It aims to arrest and eventually reverse the ongoing land conversion in the area through forest restoration (to the extent feasible) and agro-forestry approaches in a manner. Component 2: Sub-Component 2.a.: Applied research and impact monitoring: The project aims to demonstrate the potential and inform future implementation of forest friendly land rehabilitation approaches to leverage the much larger land husbandry investment programs being led by the agriculture sector, as well as any potential future investment programs in the water resources or forestry sectors that may also be interested in _ adopting the approach. To this end, support for applied research Office of the Auditor General of State Finances 3 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 and systematic impact evaluation that goes beyond the immediate needs of the project is a sound investment. Sub-Component 2.b: Project management: Project management expenditure covers routine administrative overheads, such as coordination between project implementing partners, work-planning, procurement and contract management, accounting and audit costs, field supervision, maintaining an internal project M&E system, and reporting. The internal M&E system incorporates information on project outcomes generated through the field-based impact monitoring described above, but it will also maintain financial and output data for project-specific monitoring and management purposes. Physical address Rwanda Environment Management Authority (REMA)/Landscape Approach to Forest Restoration and Conservation Project (LAFREC Project) P. 0. Box 7436 Kacyiru - KIGALI Implementing agency Rwanda Environment Management Authority (REMA)/ 1.5. Project achievements Project Meas Target Achie Comments Devolvement ure vemen Objectives (PDO) t level Results Indicators 1. Area of protected Ha 3,428 3,428 Assessment provided a METT forests (Gishwati- (Management Effectiveness Tracking Mukura Reserves / Tool) score of 89 which exceeding the National Park) under target of 50, which means that the enhanced management of the Gishwati-Mukura biodiversity National Park is good. While this score protection has a degree of subjectivity, this represents a major improvement in the management of protected areas. 2a. Land area where Ha 3,000 3,215 In total, sustainable land management sustainable land practices were adopted over an area of management 3,215 ha, compared to a target of 3000 practices have been ha. This total comes from sustainable adopted as a result of land management within corridor the project communities covering 2,100 ha, silvo- 2b. Of which, new Ha 1,200 1,314 pastoralism in the Gishwati rangelands areas outside covering 434 ha, by supporting farmers protected areas to manage the natural regeneration of managed as pasturelands, and physical demarcation biodiversity- friendly of the reserves was carried out on 681 ha. Furthermore, new areas outside the protected areas, covering 1,314 ha, are Office of the Auditor General of State Finances 4 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 Project Meas Target Achie Comments Devolvement ure vemen Objectives (PDO) t level Results Indicators now managed in a biodiversity-friendly manner. 3. Households in the Num 90 90 Out of 22 Hydrometeo stations, 14 (4 project area with ber automatic weather stations and 10 access to advanced hydrometeorology stations) have been warning of installed to support the National Early individual major Warning Platform rainfall or flood events A National Early Warning Platform (NEWP) and Flood Early Warning System (FEWS) have been developed, staff from different stakeholder institutions were trained in operationalization of NEWP and training of 312 community members including 90 who will get alert message were trained. 8 Air quality monitors were supplied and installed. 4a. Project Nurn 12,000 40,482 Communities were also supported to beneficiaries ber access markets to generate incomes. 4b. Of which female % 50 53 Where 40,482 people, of whom 53 (beneficiaries) percent were female. 5. UNESCO Repor 1 1 Gishwati Mukura National Park was Biosphere Reserve t approved as a biosphere reserve by proposal submitted UNESCO on 28 October 2020; 6. Area restored or Ha 2,500 2,675 Out of 2500 Ha of target 2675 Ha was re/afforested. done through Silvopastoralism in Gishwati rangelands on 434 Ha Physical demarcation of the reserves on 668 Ha and Restoration of degraded natural habitats on 583 Ha 7. Land users Num 10,000 18,46 Out of 1000 Ha of target 18,464 was adopting sustainable ber 4 achieved through sustainable land land management management with corridor communities practices as a result of the project. Office of the A uditor General of State Finances 5 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 Project Meas Target Achie Comments Devolvement ure vemen Objectives (PDO) t level Results Indicators 8. Subprojects Perce 70 81 Further 2,849 households were generating profits nt supported from livelihood from new or improvements interventions in two enhanced categories: livelihoods. I. Individual support 791 cows,104 pigs, 720 goats and 3,011 sheep 30 Households were supported with solar energy system in Ngororero District 9. Flood risk Sebey 1 1 FEWS for Sebeya catchment: mapping and a The flood hazard maps for Sebeya were hydrological model catch developed and validated. developed for at least ment Flood Forecasting model for Sebeya has 1 target basin. been completed and is now operational. 10. Im pact Repor 1 Im pact m onitoring report on monitoring study on t land rehabilitation techniques was land rehabilitation produced techniques produced 11. Number of. Num 12 24 Management Plans 3 knowledge products ber Masters Research projects 16 on landscape Community education manuals 2 management Newsletters 1 disseminated to Biodiversity survey 2 target audience *The above achievements relate to validated data asperproject implementation completion and results report. The project also financed the construction of basic infrastructure in Gishwati-Mukura Park including a park headquarters, base camps, and two patrol posts, which were subsequently handed over to the RDB, the body responsible for the management of national parks. 1.6. Project Management The project management who held the office during the period ended 31 January 2022 and to the date of this report were as follows: Name Designation KA RA Director General/REMA (Chief Budget Manager) Mr. Alex MUGABO SPIU-Coordinator Mr. Joseph MTGAB0 Finance Manager/DAF-SPIU Ms. Vivine AMARIZA Project Manager from 03 April 2020 to date Mr. MUGWANEZA Jean Bosco Monitoring & Evaluation Specialist Mr. Guido SIBORUREMA Accountant Specialist Office of the Auditor General of State Finances 6 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 1.7. Funding summary Source of: Donor Cumulative Cumulative Undrawn Undrawn funds commitm amount amount balance to 31 balance as at ent received to 31 received to 31 January 2022 30 June 2022 January 2022 January 2022 (in USD) (in USD) (in Frw) (in USD) (in Frw) (A) (B) (A)-(B) Grant World 9,532,000 9,532,000 8,165,868,841 00 Bank Office of the Auditor General of State Finances 7 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 2. STATEMENT OF MANAGEMENT RESPONSIBILITIES Article 66 of the Organic Law No 12/2013/OL of 12/09/2013 on State Finances and Property qe pblic entities to submit annual Financial Statements to the Ministry of Finance and I ling with 2 months following the end of the fiscal year and submit their annual uc staments to the Auditor General of State Finances not later than 30"' September of S lkowimg fiscal year- Article 19 of the Organic Law N' 12/2013 further stipulates that the ChiefBudget Manager is responsible for maintaining accounts and records of the public entity, preparing reports on budget execution, managing the financial resources for the public entity effectively, efficiently and transparently, ensuring sound internal control systems in the public entity and safeguarding the public property held by the public entity. As Chief Budget Manager, l accept responsibility for the financial statements, which have been prepared using appropriate accounting standards applicable to Public Entities as defined by Article 99 of the Ministerial Order No001/16/10/TC of 26/01/2016 relating to financial regulations. These financial statements have been extracted from the accounting records of LAFREC Project and the information provided is accurate and complete in all material respects. The financial statements also form part of the consolidated financial statements of the Government of Rwanda. In my opinion, the financial statements give a true and fair view of the state of the financial affairs of LAFREC Project. I further confirm that LAFREC Project maintained proper accounting records that may be relied upon in the preparation of financial statements. I also confirm that adequate systems of internal control were maintained and operated effectively during the financial year to safeguard the assets of LAFREC - Pomect. Signature.. Nome: Juliet KABERA Director General of REMA D a te . ....... . ... ... . . ...... ......... Office of the A aditor General of State Finances 8 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 3. REPORT OF THE AUDITOR GENERAL REPORT ON THE FINANCIAL STATEMENTS Juliet KABERA Director General of REMA 3.1. Opinion As required by Article 165 of the Constitution of the Republic of Rwanda of 2003 revised in 2015, and Articles 6 and 14 of Law No 79/2013 of 11/09/2013 determining the mission, organization and functioning of the Office of the Auditor General of State Finances (OAG), I have audited the financial statements Landscape Approach To Forest Restoration And Conservation Project for the year ended 31 January 2022 These financial statements comprise the statement of financial position as at 31 January 2022, and the statement of financial performance, the statement of cash flows, the statement of changes in net assets and the statement of budget execution for the year then ended, and a summary of significant accounting policies and other explanatory notes. These financial statements are set out on pages 11 to 25. In my opinion, the accompanying financial statements give a true and fair view of the financial position of Landscape Approach To Forest Restoration And Conservation Project as at 31 January 2022 and of its financial performance and its cash flows for the year then ended in accordance with the guidelines provided by Ministerial Order N' 001/16/10/TC of 26/01/2016 relating to financial regulations and Organic Law No 12/2013/OL of 12/09/2013 on State Finances and Property. 3.2. Basis for opinion I am independent of Landscape Approach to Forest Restoration and Conservation Project and have fulfilled my ethical responsibilities in accordance with the ethical requirements that are relevant to my audit of financial statements of public entities as determined by the Code of ethics for International Organisation of Supreme Audit Institutions (INTOSAI). I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 3.3. Responsibilities of management for the Financial Statements According to Organic Law N' 12/2013/OL of 12/09/2013 on State Finances and Property, management of LAFREC Project is responsible for keeping accounting records and books of account, and preparation of financial statements in accordance with the financial regulations prescribed by the Minister in Ministerial order N' 001/16/10/TC of 26/01/2016 relating to financial regulations. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the LAFREC Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Government either intends to discontinue operations of the LAFREC Project. Office of the Auditor General of State Finances 9 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 3.4. Auditor General's responsibilities for the audit of the financial statements My objective when conducting an audit is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Misstatements can arise from fraud or error and are considered material if individually or in aggregate, they could reasonably be expected to influence economic decisions of users taken on the basis of these financial statements. An audit conducted in accordance with ISSAls requires an auditor to exercise professional judgment and maintain professional skepticism throughout the audit and involves: * The identification and assessment of the risks of material misstatement of the financial statements, whether due to fraud or error; design and perform procedures responsive to those risks and to obtain sufficient and appropriate audit evidence to provide a basis for the auditor's 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 controls. * Obtaining 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 purposes of expressing an opinion on the effectiveness of internal control. * Evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management. * Concluding 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 LAFREC Project's ability to continue delivering on its objectives within the remaining project durations. * Evaluation of the overall presentation, structure and content of the financial statements, including disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieved fair presentation. KAMUHIRE Alexis AUDITOR GENERAL KIGALI Office.... of ..... t A ireroSaFn2022 Office of the Auditor General of State Finances 10 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4. FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.1.STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD ENDED 31 JANUARY 2022 Description Notes 7Months to 12 Months to 31 January 2022 30 June 2021 Frw Frw Revenue Grants 2 396,523,151 1,364,389,818 Total revenue 396,523,151 1,364,389,818 Expenses Compensation of employees 3 105,525,982 Goods and services 4 150,396,945 419,513,841 Grants and other transfers 5 197,971,479 251,398,624 Capital expenditure 6 461,972,447 515,944,008 Total expenses 810,340,871 1,292,382,455 Other gains Exchange gains 7 7,671,967 18,710,744 Surplus for the year (406,145,753) 90,718,107 The notes on pages 16 to 25 form an integral part of these financial statements. Office of the Auditor General of State Finances 11 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.2.STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 2022 Description Notes Balance as at Balance as at 31 January 2022 30 June 2021 Frw Frw Assets Cash and cash equivalents 8 12,180 474,070,107 Advance payments 9 - 7,983,331 Total current assets 12,180 482,053,438 Non-current assets Total assets (A) 12,180 482,053,438 Equity and liabilities Current liabilities Accounts payable 12 (75,895,505) Current liabilities (B) (75,895,505) Net assets (C = A-B) 12,180 406,157,933 Equity Accumulated opening balance 13 125,571,992 125,571,992 Accumulated surplus (125,559,812) 280,585,941 Total equity 12,180 406,157,933 The notes on pages 16 to 25 form an integral part of these financial statements. Office of the Auditor General of State Finances 12 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.3.STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 31 JANUARY 2022 Description 7 Months to 12 Months to 31 January 2022 30 June 2021 Frw Frw Cash flows from operating activities Grants 396,523,151 1,364,389,818 Other revenue 7,671,967 18,710,744 Payments for operating expenses Compensation of employees (105,525,982) Goods and services (150,396,945) (419,513,841) Transfers to reporting entities (197,971,479) (251,398,624) Adjusted for: Changes in receivables 7,983,331 (579,795) Changes in payables (75,895,505) 75,895,505 Adjustments during the year Net cash flow from operating expenses -12,085,480 681,977,825 Cash flows from investing activities Capital expenditure (461,972,447) (515,944,008) Net cash flows from investing activities (461,972,447) (515,944,008) Net increase in cash and cash equivalents (474,057,927) 166,033,817 Cash and cash equivalents at the beginning of the year 474,070,107 308,036,290 Cash and cash equivalents at the end of the period 12,180 474,070,107 The notes on pages 16 to 25 form an integral part of these financial statements. Office of the Auditor General of State Finances 13 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.4.STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED 31 JANUARY 2022 Description Accumulated Movement Total surplus during the 2020/2021 2019/2020 year 2020/2021 Frw Frw Frw Changes in net assets items 315,439,826 90,718,107 406,157,933 Accumulated opening balance 125,571,992 0 125,571,992 Accumulated surplus from previous 189,867,834 90,718,107 280,585,941 Accumulated Movement Total as at 31 surplus during the January 2022 2020/2021 __ eriod Changes in net assets items 406,157,933 (406,145,753) 12,180 Accumulated opening balance 125,571,992 125,571,992 Accumulated surplus from previous 280,585,941 (406,145,753) 125,559,812 The notes on pages 16 to 25 form an integral part of these financial statements. Office of the Auditor General of State Finances 14 1ANDSCAPF APPROAC1I TO FOREST RESTORATION AND CONSIRVATION PROJECT (LAFREC PROJECT) AUDIT RIPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.5.STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS Budg~ (i n activity Revised budget Actual revenie/ Variance Perforimance expenditure (A) (B) C=(A-B) D= BAY*100 Resýources G nt - 396,523,151 (39,523.151) Foecign exchange 10,737,119 (1 0737,119) Total resources 396,523, 151 (39.523,151) Gned< mn service 2)7.5 ) 153 150.396.945 5 7J12.208 72.5 Forem ixchainge 1 365 152 W65. i 'Ia1 nd oh 900) 9Tl492,.22 990 trnsfer pa-nymn-ts Capit54 998 46 i97.2,447 56 25I 89 Expenditure Total payments 92 9 53 813.406.)23 6 7 4 2 9 Thc noecs en pacs 16 to 25 form an integral part o t ihese financial slatements The rimncial satemenfo thie t evec montb per lod (o 32 Januaer 202 wr pr\ ed b the Projec managemend and signed en is behalf bv: Prupared SIBORIRI I Guido b: Accotnmtant_Specialist _______ Signanu reDtie ReviewN ed MLUGABO Joswphi a: tlead of Finance Chiecked AI1ARIZA\ Vis ine by: Ag. Project Coordi nator Approved Juliet K kBERA b: Chief Budget jManager s n.D-I O,ice ohe . uditor General of Stwc Finances LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 4.6. NOTES TO THE FINANCIAL STATEMENTS 1. Notes to the financial statements 1.1. Statement of compliance The financial statements have been prepared in accordance with the Organic Law No 12/2013 of 12/09/2013 on State Finances and Property and related legal framework. These financial statements have been authorized for issue by the Chief Budget Manager on 31 July 2021. The accounting policies used to prepare financial statements have been applied consistently throughout the period. The presentation and classification of items in the financial statements are consistent from one period to the next and takes into consideration of progressive improvements as contained in the Government of Rwanda roadmap to migrate to accrual IPSAS. Reporting project The Financial Statements have been prepared by Landscape Approach to Forest Restoration and Conservation Project (LAFREC Project) pursuant to Articles 19 and 66 of the Organic Law on State Finances and Property No 12/2013 of 12/09/2013 that empowers the Chief Budget Manager to prepare the financial statements. 1.2. Basis of preparation The financial statements have been prepared on the basis of historical costs unless otherwise stated. The cash flow statement is prepared using the direct method. In this context, modified accrual basis of accounting means that financial transactions and events shall generally be recognized in the books of account when they occur and not only when cash or its equivalent is received or paid, except in the following circumstances when transactions will be treated on a cash basis; (i) Public debt (principal and interest) - involving Treasury bills, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Ministry or any other debt the State may take on will be treated on cash basis and recognized as revenue during the year of receipt and as expenditure in the year of repayment. However, loans acquired directly by a public entity and any associated interest shall be treated on an accrual basis and recognized as liabilities. (ii) Inventories - these are assets: a. in form of materials and supplies to be consumed in the production process, b. in form of materials to be consumed in the rendering of services, c. held for sale or distribution in the ordinary course of operations, d. In process of production for sale or distribution. Inventories include assets such as consumable stores, maintenance materials, and strategic stock piles e.g. fuel reserves. These will be treated on cash basis and recorded as expenditure during the year of acquisition and treated as revenue in the year of disposal. (iii) Non-exchange transactions: - These arise where an entity receives value from another entity without giving approximately equal value in exchange. These include taxes, fines and penalties, transfers, gifts and donations and shall be recognised when cash is received. Office of the Auditor General of State Finances 16 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 (iv) Non-current assets (tangible and intangible assets): - such as vehicles, furniture, equipment, finance leases, Plant and tools and investment property will be treated on cash basis and recorded as capital expenditure during the year of acquisition and revenue in the year of disposal. The financial statements are presented in Rwanda Francs (Frw). Reporting period The Government of Rwanda fiscal year runs from l July to 30th June. These financial statements cover the period from 1st July 2020 to 3 1st January 2022. The comparative figures reflect the 12 months ended 30th June 2021. Key assumptions and judgements These financial statements, as a component of the Government consolidated financial statements, reflect the Government's financial position as at 31 January 2022, and the financial results of operations and cash flows for the year ended on that date. Included in these financial statements are a number ofjudgements, estimations and assumptions. The assumptions are based on information available at the time of the preparation of the financial statements. It should therefore be noted that actual results may differ from the assumptions stated and thus have a material impact on the financial statements. The key assumptions are discussed below: a. Presentation Currency The functional currency of the Government of Rwanda is the Rwandan Franc. For reporting purposes, the financial statements are translated into Rwandan Francs. The rates used to translate foreign currency balances is the average rate applicable by National Bank of Rwanda as at 31 January 2022. b. Areas of significant estimation These financial statements do not have significant estimates so far. For the non-current asset and inventory balances disclosures, the acquisition cost before depreciation has been used. c. Adoption of new and revised standards The government is in the process of transitioning to IPSAS through a phased approach that involves a six-year implementation plan. Fair presentation and compliance with accrual basis IPSASs during the period of transition IPSAS 33, First-Time-Adoption-of-Accrual-Basis-IPSASs, stipulates that where a first-time adopter has not recognized assets and/or liabilities under its previous basis of accounting, it is not required to recognize and/or measure the following assets and/or liabilities for reporting periods beginning on a date within three years following the date of adoption of IPSASs. Office of the Auditor General of State Finances 17 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 The IPSAS implementation roadmap as per blue print provides a six-year road map for implementing IPSAS accrual. The implementation is a process up to the six year. The government preferred incremental change instead of big bang. Basing on the exemption relating to fair presentation and compliance provided by IPSAS 33, paragraph 33 to 62, the categories of assets and liabilities listed below have not been recognised but disclosed. Disclosing them is a first step in identification of assets and liabilities that have not been recognised in balance sheet. In addition, this is the second year of implementation, the identification is not yet completed and hence the disclosures might not be comprehensive. Further, though the approximate value is allocated to the non-current assets, the accuracy is not yet confirmed The main ones include; a) Inventories (see IPSAS 12, Inventories); b) Investment property (see IPSAS 16, Investment Property); c) Property, plant and equipment (see IPSAS 17, Property, Plant and Equipment); d) Defined benefit plans and other long-term employee benefits (see IPSAS 25, Employee Benefits); e) Biological assets and agricultural produce (see IPSAS 27, Agriculture); f) Intangible assets (see IPSAS 31, Intangible Assets); g) Service concession assets and the related liabilities, either under the financial liability model or the grant of a right to the operator model (see IPSAS 32, Service Concession Arrangements: Grantor); h) Public debts; and i) Government investments in public and private enterprises. 1.3. Significant accounting policies The accounting policies set out in this section have been consistently applied by all consolidated entities and for all the years presented. I. Revenue a) Revenue from non-exchange transactions * Grants In the context of this Project, grants are transfers received from World Bank. Grants are recognized in the books of account when cash is received. II. Expenditure All expenditure is recognised on accrual basis. However, the point of recognition may be different according to their categories. a) Compensation of employees Compensation of employees is the total remuneration, in cash or in kind, payable to an individual in an employer-employee relationship in return for work performed by the latter during the reporting period. Office of the Auditor General of State Finances 18 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 a) Goods and services Goods and services consists of the value of goods and services used for the production of market and nonmarket goods and services. The value of goods or services is recorded when the goods or services are actually used rather than when they were acquired or paid for. In practice, these events often coincide for inputs of services but not for goods, which may be acquired some time in advance of their use. The value of goods purchased and held for resale is recorded as goods and services when they are sold. b) Acquisition of fixed assets The expenditure on acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of these items are treated as expenditure and income items respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as revenue and as acquisition of Fixed Assets, otherwise it not recorded rather a fixed asset register which contains details of assets is maintained by each public entity. III. Assets and liabilities a) Cash and cash equivalents Cash comprises cash and cash equivalents comprise balances with banks and cash at hand. Bank account balances include amounts held at the National Bank of Rwanda. b) Inventories Inventories are expensed in the period in which they are acquired by the Government and its entities. c) Receivables These are receivables from the exchange transactions and include prepayments. d) Payables These mainly relate to invoices for goods and services which were outstanding on the date of the closure of the fiscal year. These are recognized as liabilities for that specific fiscal year. All goods received notes are recognised as liabilities if not yet paid as at the end of the period. IV. Other relevant information a) Foreign currency transactions Transactions denominated in foreign currencies are initially translated to the Rwandan Franc at the foreign exchange rate at the date of transaction. The National Bank of Rwanda provides exchange rates for major foreign currencies on a daily basis. These are presented for selling rate (rate the bank will sell foreign currency to its clients); buying rate (rate the bank will buy foreign currency from its clients); and average rate (average between the selling and buying rate). Office of the Auditor General of State Finances 19 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 During the year, revenue items are translated using the selling rate (this equals the Buying rate presented at BNR website) of the transaction day whereas the Expense items should be translated using the buying rate (this equals the Selling rate presented at BNR website) of the transaction day. The associated exchange losses are recorded as other expenditure while exchange gains should be recorded as other revenue. At the end of the year, book balances, Assets (such as bank and cash and accounts receivable) and liability (such as accounts payable), denominated in foreign currencies are converted into the Rwanda Franc at the average rate of exchange ruling on that closing date, as issued by the National Bank of Rwanda. The associated exchange losses/gains are recorded as expenditure/income in the books. b) Comparative figures Adjustments have been made on the opening balances of the current financial period with respect to adjustments made by individual entities relating to the comparative periods. c) Subsequent events There have been no events subsequent to the financial year end with a significant impact on the financial statements for the year period 31 January 2022. d) Changes in accounting policies and estimates When presentation or classification of items in the financial statements is amended or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so. e) Related parties The Government regards a related party as a person or an entity with the ability to exert control individually or jointly, or to exercise significant influence over it, or vice versa. Members of key management are regarded as related parties. f) Contingencies The Project does not recognize a contingent liability, but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. Project has no contingent assets. g) Notes to the statement of comparison of budget and actual amounts * The original budget for 2021/2022 was approved by the Parliament on 30 June 2021. Subsequent revisions or additional appropriations were made to the approved budget in accordance with specific approvals from the appropriate authorities. The additional appropriations are added to the original budget by the Government upon receiving the respective approvals in order to conclude the final budget. Accordingly, the Government recorded additional appropriations of budget in accordance with specific instructions of the Cabinet/Parliament. * Government's budget is prepared on a different basis to the actual income and expenditure disclosed in the financial statements. The financial statements are prepared on accrual basis using a classification based on the nature of expenses in the Statement of revenue and Office of the Auditor General of State Finances 20 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 expenditure, whereas the budget is prepared on a cash basis. The amounts in the financial statements were recasted from the accrual basis to the cash basis and reclassified by presentation to be on the same basis as the approved budget. A comparison of budget and actual amounts, prepared on a comparable basis to the approved budget, is then presented in the statement of comparison of budget and actual amounts. In addition to the Basis difference, adjustments to amounts in the financial statements are also made for differences in the formats and classification schemes adopted for the presentation of the financial statements and the approved budget. * Timing differences occur when the budget period differs from the reporting period reflected in the financial statements. There are no timing differences for Government. * Project differences occur when the budget omits program/activity or a project that is part of the project for which the financial statements are prepared. Explanatory notes 2. Grants During 7 months to 31 January 2022, LAFREC Project received grants from the Word Bank as detailed below: Date Description Amount in Exchange rate 7 Months to 31 12 Months to (Buying) January 2022 30 June 2021 USD Frw Frw Funds received from IDA- GEF and LDCF 1,364,389,818 09-07- Funds received 59,344.59 978.3270387 58,058,417 2021 from IDA GEF 09-07- Funds received 42,973.62 978.32802 42,042,297 2021 from IDA - LDCF 26-07- Funds received 58,304.59 979.833113 57,128,768 2021 from IDA GEF 26-07- Funds received 42,220.57 979.833113 41,369,113 2021 from IDA LDCF 08-09- Funds received 28,406.95 984.664722 27,971,322 2021 from IDA-GEF 08-09- Funds received 20,570.55 984.664722 20,255,095 2021 from IDA-LDCF 16-09- Funds received 46,424.22 985.555926 45,753,665 2021 from IDA-GEF 16-09- Funds received 33,617.55 985.555926 33,131,976 2021 from IDA-LDCF 21-09- Funds received 54,962.01 986.288661 54,208,407 2021 from IDA 28-09- Funds received 16,820.22 987.150652 16,604,091 2021 from IDA Total 403,644.87 396,523,151 1,364,389,818 Office of the Auditor General of State Finances 21 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 3. Compensation of employees During 7 months to 31 January 2022, there is no employee costs incurred by LAFREC Project incurred only cost of last year as detailed in the table below: ID Description 7 months to 12 Months to Account 31 January 2022 30 June 2021 211601 Project Staff remuneration Basic Salary 89,028,247 in Cash 213122 Government Contributions to Health 9,758,779 Insurance for Project Staff 213123 Government Contributions to Pension 6,271,152 for Project Staff 213124 Government Contributions to Maternity 467,804 Leave for Project Staff Total - 105,525,982 4. Goods and services During 7 months to 30 January 2022, LAFREC Project consumed goods and services as detailed in the table below: ID Description 7 months to 12 Months to Account 31 January 2022 30 June 2021 Frw Frw 221101 Stationery and Printing Consumables - 15,890,040 221102 Beverages, Tea, Coffee, etc 71,400 2,579,300 221401 Postage and Courier 12,000 2,000 221402 Fax and Telephone 0 5,355,000 221599 Other licenses 7,983,331 7,559,635 221601 Bank charges 20,995 39,029 221703 Adverts and Announcements 1,526,371 221704 Meetings and Special Assembly Costs 42,446,525 7,977,139 221706 Symposia, Seminars and sensitizations 0 12,416,861 221714 Flags, Banners and decoration costs 0 20,862,040 222199 Other professional services fees 61,004,829 226,589,570 223101 Transportation cost for domestic business 2,500,120 8,844,994 travel (airplane, bus, train, taxi) 223104 Domestic Per Diems 21,810,410 59,720,312 223108 Fuel and Lubricants 13,080,000 9,000,000 223109 Lump sum Allowance 0 17,175,572 224110 Maintenance and Repairs of Vehicles and 1,467,335 4,823,908 Motorbikes 224111 Maintenance and/or Repairs of Office 0 171,000 Equipment 227201 Uniforms 0 18,981,070 Total 150,396,945 419,513,841 Office of the Auditor General of State Finances 22 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 5. Grants and other transfers During 7 months to 31 January 2022, LAFREC Project transferred fund to public reporting entities as detailed in the table below: ID Description 7 months to 12 Months to Account 31 January 2022 30 June 2021 Frw Frw 267206 Transfers to Central Government entities Strengthening Civil Society 5,000,000 0 Organizations Program 267105 Transfers to Districts Nyabihu 8,162,974 7,731,844 Rutsiro 139,933,213 216,575,507 Ngororero 44,875,292 27,091,273 Total 197,971,479 251,398,624 6. Capital expenditure During the 7 months to 31 January 2022, LAFREC Project incurred capital expenditure as detailed in the table below: ID Description 7 months to 12 Months to Account 31 January 2022 30 June 2021 Frw Frw 231202 Acquisition of capital asset - 515,944,008 341203 Water Infrastructure 43,995,082 341207 Other structures 9,241,481 343304 Other Specialized Equipment 365,631,600 341199 Other buildings 43,104,284 Total 461,972,447 515,944,008 7. Exchange gain During 7 months to 3 1 January 2022, LAFREC Project realized exchange gains as detailed below: ID Description 7 Months to 12 Months to Account 31 January 2022 30 June 2021 Frw Frw 145111 Exchange gain 10,737,119 18,710,744 221605 Loss on currency exchange and (3,065,152) 0 translations Net of exchange gain 7,671,967 18,710,744 Office of the Auditor General of State Finances 23 LANDSCAPE APPROACH TO FOREST RESTORATION AND CONSERVATION PROJECT (LAFREC PROJECT) AUDIT REPORT ON FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2022 8. Bank balances The bank amounts shown in the table below have been reconciled to the bank statements as at 31 January 2022 and as at 30 June 2021: ID Bank name Account Accou Amount Excha Balance as Balance as accou number nt in nge at 31 at 30 June nt curren foreign rate January 2021 cy currency 2022 USD Frw Frw Foreign currency bank accounts held in Rwanda 3114 REMA 1000028 USD 12 1015 12,180* 474,064,607 LAFREC PJT 297 *The bank account was later closed in March 2022 and remained balance after charging bank closure fee was transferred to treasury 9. Advance payments This refers to pre-paid insurance cover paid for project's assets. ID Debtor's name Balance as at Balance as at account 31 January 2022 30 June 2021 Frw Frw 312801 Radiant Insurance Company Ltd- 7,983,331 10. Accounts payable This refers to the payables from the normal course of the operations as detailed in the table below: ID Creditor's name Balance as at Balance as at account 31 January 2022 30 June 2021 Frw Frw 412109 Worldwide elearning campus Ltd 0 33,668,509 Eliab Muhawenimana 0 9,918,750 Classic Hotel Ltd 0 240,000 Jean Nduwamungu 0 31,177,871 RRA 0 890,375 Total 0 75,895,505 11. Accumulated opening balance ID Creditor's name Balance as at Balance as at account 31 January 2022 30 June 2021 511101 Bank and cash equivalent opening balance 125,611,992 125,611,992 511103 Payable opening balance (40,000) (40,000) Total 125,571,992 125,571,992 Office of the Auditor General of State Finances 24 Nг ^Гl о':о С�-' лсv �о;о о ;о о; ' ': N ' � i v � � и CQ О : � � ' сЧ:�'''р'�; и еа oci; Аг , ;+; с >,с +; �° :�-� C° ' CG ; � � � ; �i ; ; �' д : ра с ,-+ , � : 11 : � м ; � А: я ..,: о� h � ; _ ....... .......... , . а� леv �o oio io м: � �,N ;L W С� ; са � г°,� fs, ? Cj ; С i � � `+; д; �: : �у � 11 ; Сб : С м ; � , �Q ! � � � ч L ......... . :..............<......... � .� : ' ^: �...�...� сиС °': � U: й � и : _� ................................_;...........:. . Г� ., : ; д' r1' �+ с� ^ N;�--� N И i-. й : N N � �+ ` `�^'i F С.": �;� й � � V о '� s� с с � :.� ° О� � U � о а ,. �, ; � W:� ............._.�...............;...............:........._._i............. ' ` \О' \U' И 00 U г : : : : �3у; � г i и : � : in : �Гi ы � : оо ; й а� � �: �:Г.д:О:О � � ' о;о;м � � N о��;� � с rn: oo N о� и ❑ �;cv;oo ?с� сЧ д N ..�''.� : ; l� ! l� и �а ,� : оо : �о € �д ,.а о ^С ; с> ; с� ; и оо .... cV ; ^б: ; ; ` с F J,+ Q� г ; . V � , U ................................._._i........._;.... W д о с � >; �.,..о.,.....� ,..N. .,: 'Q и CeS д ' z :..............._____ о� =�[_ ; <. . гх д о; .-. �,�, г,, �о с ah м: �:�:�;� д о' ,... _. .. Z '" �о Г�, ... а1 а� _ :........ О_�'' о; �о:�о и а� �а�roo r Е" W '� ; о:о�о о �а Г�;"°', :� :� ; L1 р; г д� i'eF � > о: � с� :,-� !,.1 � с iд�i �т :l� � Z су ! •b . ;г�; и io� W и r-� : Q �о ; i и ;� W а� е� ; rn i и �о ZO � и: i ..... ....... ....:.. ... ... � ...... 1 М ь_�. ; о- �r � ' ;.. .......; �.% Гв С� � г ' � � и Ф .-И : i ��.�....�...� С4 м APW�, � �' �д �о: '�: и '�+' у,,, � "� cv :. Z W Я с� : ; д�; � �i ; Cj �°м � о а � а� : а д �о � i и s _; ....:.........:........:.......<......... Сиi � и ..�r ' � � �. , �__... ..... � � с, CJ .у; 3! O;t�� '00 ,� О Z �, � д с cvj �,:д€r,;�;.-• ос С F L и о о;�;�!оо и;rn м и W � � д "'� �у : ; мi : оо : � t� н� W� � с о �о ; о; о г� j� ai W и ' V� М и со;и ;О� 4"� : :�:NiN i0 ,N й д о i j °° ; г°v �° С W F '��„' ; ; `л _._ ............................_. _ . � i.... .. ; � гл о ................:...............s.......... � О ..7 ''-' _ и ' � Гт• д о� ' и ° °л '� у : и ; е� � ; � оV � � iо' � � й' о'�i Е'" � и ...i ; ,�, �., н ! : � : �ч �г � .''L�i д ,� С� и 1, и !�; р: 0� (� н й � � : ,� ; л -�;'�';� � д ' � : -� с с : а-: � � L�' `''' • � : пi i С� о `�' � ! , �. о Z � О +-+ ; • и: л'-' ; о � w �:+ � ; � s, с ; ., �"' О � � . �,'" ; � ; о с„ �. : о : � � ; 'С Р, � s-, ! ; й : �.. •i. ` � ; я` :� я.. ^ � а F '�' 3 й : ' ; .S-'ч : +.�+ � й U ` � � ' .i� � да о � ш: ! о; о с� � �;�;� �о �,, ,� Г� '; U ' [� � С1 и ; Е-� : � а� : Е-� с� aW, a �s д w � � :..............._._.__. ,.......... � w U с� � т. � `'� А � � ^� ' � о � о� Q А � О; м N р '"'N;�" � v;<r.:� � �1 д � ,.�:.� С� ; М; � U м; м; м О