REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 JUNE 2023 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 ACRONYMS DRDIP II Development Response to Displacement Impacts in the Horn of Africa – Phase II IDA International Development Association DJF Djiboutian Franc HoA Horn of Africa IESBA International Ethics Standards Board for Accountants IGAD Intergovernmental Authority on Development IGADD Intergovernmental Authority on Drought and Development ISA International Standards on Auditing PFS Project Financial Statements REC Regional Economic Community USD United States Dollar 2 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 TABLE OF CONTENTS 1.0 INTRODUCTION ..................................................................................................................................... 4 1.1 Background of the project .................................................................................................................. 4 1.2 Terms of reference ............................................................................................................................. 5 2.0 STATEMENT OF PROJECT MANAGEMENT’S RESPONSIBILITIES .............................................. 6 3.0 INDEPENDENT AUDITORS’ REPORT ............................................................................................ 7 3.1 Report on project financial statements ............................................................................................... 7 3.2 Project financial statements for the year ended 31 December 2022 ................................................ 10 3.3 Notes to the project financial statements ......................................................................................... 11 Annex I: Statement of activity ................................................................................................................. 13 Annex II: - A reconciliation of the receipts from the IDA....................................................................... 15 Annex III: - Summary of SOE withdrawal schedule, listing individual withdrawal applications ........... 16 Annex IV: - Fixed Assets Register of the project .................................................................................... 17 3 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 1.0 INTRODUCTION 1.1 Background of the project Intergovernmental Authority on Development (IGAD) Intergovernmental Authority on Development (IGAD) was created in 1996 to supersede the Intergovernmental Authority on Drought and Development (IGADD), which was founded in 1986. The IGAD Member States are Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, South Sudan and Uganda. The mandate of IGAD is to coordinate the efforts of Member States to advance their development goals in the priority areas of economic cooperation, political and humanitarian affairs and food security and environment protection. IGAD’s vision is to be the premier Regional Economic Community (REC) for achieving peace and sustainable development in the region. The mission is to promote regional cooperation and integration to add value to Member States’ efforts in achieving peace, security and prosperity. Background of the Development Response to Displacement Impacts Project in the Horn of Africa- Phase II (DRDIP II) project. Development Response to Displacement Impacts Project in the Horn of Africa – Phase Two (DRDIP II) is a project financed by International Development Association (IDA) and implemented by IGAD. The objective of the project is to improve access to basic social services, expand economic opportunities and enhance management for communities hosting refugees in the targeted areas. The participating country is the Republic of Kenya for Phase II. The financing agreement was signed on 23 May 2017. The overall project budget is USD 3,000,000 financed fully by IDA. The budget for the year ended 31 December 2022 was USD 1,498,958 as per the annual budgets approved by IDA. The project closing date is 31 December 2023 as per an extension was granted via an amendment dated 17 April 2023. Budget The project budget is as detailed below; S/NO Budget Heading Year 2022 Overall Budget Budget (USD) (USD) Enhanced research, coordination, knowledge 82,681 - sharing and learning across project countries Outcome 1 Strengthen existing coordination mechanisms at 651,664 498,930 both federal and regional level. Outcome 2 Policy development and legal frameworks to 137,340 118,200 promote durable solutions Outcome 3 Strengthening Information System for Durable 313,481 140,371 Solution to the Forced Displacement Outcome 4 Specific Technical Assistance 410,023 285,643 Outcome 5 Enhanced and Effective Monitoring, Evaluation and 306,690 128,750 Learning System Outcome 6 Project management and institutional support 1,098,120 327,064 ___________ _________ GRAND TOTAL USES OF FUNDS BY OUTCOMES 3,000,000 1,498,958 ========= ======= 4 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 1.0 INTRODUCTION (continued) 1.1 Background (continued) 1.2 Terms of reference Objective of the external audit The objective of the audit of the Project Financial Statements (PFSs) is to enable the auditor to express a professional opinion(s) on the fund balance of the project at the end of each fiscal year, and on funds received and expenditures incurred for the relevant accounting period. The project books of accounts provide the basis for preparation of the PFSs by the project implementing agency and are established to reflect the financial transactions in respect of the project. The implementing agency maintains adequate internal controls and supporting documentation for transactions. Scope of work The audit covers the project financial statements prepared by IGAD regarding the funds provided by International Development Association for the implementation period 1 January 2022 to 31 December 2022. 5 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 2.0 STATEMENT OF PROJECT MANAGEMENT’S RESPONSIBILITIES Project Management (Management) of IGAD is responsible for the preparation and presentation of the project financial statements of the DRDIP II project funded by the International Development Association comprising of income and expenditure statements, and notes to the project financial statements, which include a summary of significant accounting policies and other explanatory notes on the basis of accounting policies described in Note 3.3.1. The project management of the DRDIP II project accepts responsibility for the preparation and presentation of the project financial statements in accordance with the accounting policies set out in Note 3.3.1. The management of IGAD office also accepts responsibility for: • designing, implementing and maintaining such internal control as they determine necessary to enable the presentation of the DRDIP II project financial statements that are free from material misstatement, whether due to fraud or error: • selecting suitable accounting policies and applying them consistently; and • making accounting estimates and judgements that are reasonable in the circumstances. Management’s responsibility includes: determining that the basis of accounting described in Note 3.3.1 is an acceptable basis for preparing and presenting the project financial statements in the circumstances, preparation and presenting of project financial statements in accordance with the conditions of the Agreement, accounting policies of the Project and for such internal control as management determines is necessary to enable the preparation of project financial statements that are free from material misstatements, whether due to fraud or error. Management accepts responsibility for the project financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with the accounting policies and requirements of the Agreement. The management of IGAD acknowledges that the independent audit of the project financial statements does not relieve them of their responsibilities. Approved by management on June 25, 2023 and signed on their behalf by; _______________________________ ________________________________ Executive Secretary Director of Administration and Finance 6 Deloitte & Touche LLP Certified Public Accountants (Kenya) Deloitte Place Waiyaki Way, Muthangari P.O. Box 40092 - GPO 00100 Nairobi Kenya Tel: (+254 20) 423 0000 Cell: (+254 20) 0719 039 000 Dropping Zone No. 92 Email: admin@deloitte.co.ke www.deloitte.com Director of Administration and Finance, Intergovernmental Authority on Development, Avenue Georges Clemenceau, P.O Box 2653, Djibouti Republic of Djibouti 3.0 INDEPENDENT AUDITORS’ REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION FOR THE YEAR ENDED 31 DECEMBER 2022 3.1 Report on project financial statements Opinion We have audited the statements of project financial statements of the Development Response to Displacement Impacts Project in the Horn of Africa – Phase II (DRDIP II) implemented by the Intergovernmental Authority on Development (IGAD) and funded by the International Development Association (IDA) for the year ended 31 December 2022, including a summary of significant accounting policies. In our opinion, the accompanying project financial statements for the year ended 31 December 2022 are prepared in all material respects, in accordance with the basis of accounting described at Note 3.3.1 to the project financial statements. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the audit of the project financial statements section of our report. We are independent of IGAD 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 our audit of the project financial statements in Kenya and have fulfilled our other ethical responsibilities in accordance with these requirements and IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 7 3.0 INDEPENDENT AUDITORS’ REPORT (CONTINUED) 3.1 Report on project financial statements (Continued) Emphasis of matter – Basis of accounting and Restriction on Distribution and Use We draw attention to Note 3.3.1 to the project financial statements, which describes the basis of accounting. The project financial statement is prepared to assist IGAD in complying with the provisions of the grant agreement between the International Development Association and IGAD (the Agreement) signed on 23 May 2017 as a result the project financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Other information Management is responsible for the other information, which comprise the statement of project management’s responsibilities, background and the annexes. The other information does not include the project financial statements and our auditor’s report thereon. Our opinion on the project 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 project financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the project financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, 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. Other matter The project financial statements for the Development Response to Displacement Impacts Project in the Horn of Africa – Phase II (DRDIP II) implemented by the Intergovernmental Authority on Development (IGAD) and funded by the International Development Association (IDA) for the year ended 31 December 2021, were audited by another auditor who expressed an unmodified opinion on those financial statements on 30 June 2022. Responsibilities of management and those charged with governance for the project financial statements. The management of IGAD is responsible for the preparation of the project financial statements in accordance with the grant agreement between the International Development Association and IGAD signed on 23 May 2017, and for such internal controls as management determine are necessary to enable the preparation of the project financial statements that is free from material misstatement, whether due to fraud or error. In preparing the project financial statements, the management of IGAD is responsible for assessing the 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 management either intends to liquidate the project or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the project’s project financial statements process. 8 3.0 INDEPENDENT AUDITORS’ REPORT (CONTINUED) 3.1 Report on project financial statements (Continued) Auditor's responsibility for the audit of the project financial statements Our objectives are to obtain reasonable assurance about whether the project 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 ISA’s 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 this project financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the project 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. • 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 organization's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management and those charged with governance. • Evaluate the overall presentation, structure and content of the project financial statements, including the disclosures and whether the project financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. The engagement partner responsible for the audit resulting in this independent auditor’s report is CPA Patricia Seroney, Practising certificate No. 2434. For and on behalf of Deloitte & Touche LLP Certified Public Accountants (Kenya) Nairobi 30 June 2023 9 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 3.2 Project financial statements for the year ended 31 December 2022 Note 31 December 2022 Opening balance 3.3.5 57,974 Revenue Project account and direct transfer 3.3.6 876,384 Total revenue 934,358 Less: Payments / expenditure (as per project components) Outcome 1: Strengthen existing coordination mechanisms at both federal and regional level 116,114 Outcome 2: Policy development and legal frameworks to promote durable solutions 26,400 Outcome 3: Strengthening information system for durable solution to the forced displacement 139,078 Outcome 4: Specific technical assistance 263,938 Outcome 5: Enhanced and effective monitoring, evaluation and learning system 9,400 Outcome 6: Project management and institutional support 272,832 Total expenditure 827,762 Excess of revenues over expenditures (income less expenditures) 106,596 Represented by: Closing balance represented by: Cash at bank local account 3.3.7 111,243 Account receivables 3.3.8 1,330 Account payables 3.3.9 (5,977) Closing balance 106,596 The project financial statements and notes to the project financial statements were approved and authorized for issue by the management on June 25, 2023 and signed on their behalf by: _______________________________ ________________________________ Executive Secretary Director of Administration and Finance 10 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 3.3 Notes to the project financial statements 3.3.1 Financial and accounting policies The project financial statements are prepared on a cash receipts and disbursement basis modified to accrue for outstanding payables and receivables at period end. 3.3.2 Revenue recognition Grant income represents amounts received for the year ended 31 December 2022 from the International Development Association. Revenue is received in USD and recognised on receipt. 3.3.3 Expenditure Expenditure represents costs incurred for the project. Budget line Budget Actual (USD) (USD) Strengthen existing coordination mechanisms at both federal 498,930 116,114 and regional level Policy development and legal frameworks to promote durable 118,200 26,400 solutions Strengthening information systems for the durable solution to 140,371 139,078 the forced displacement Specific technical assistance 285,643 263,938 Enhanced and effective monitoring, evaluation and learning 128,750 9,400 system Operational costs 327,064 272,832 Total 1,498,958 827,762 3.3.4 Currency and exchange rate The project financial statement is presented in USD. Funds are received in USD and transactions are denominated in USD. 3.3.5 Opening balance The opening balance was USD 57,974 was agreed to the prior year signed audit report and is represented by: Description USD Cash at bank : USD account 71,425 Cash at bank : DJF account 449 Accounts Payable (13,900) _______ Total 57,974 ====== 11 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 3.3 Notes to the project financial statements (Continued) 3.3.6 Funds received Amounts disbursed by IDA in the year are as below: Date received AMOUNT USD 22 January 2022 229,337 17 May 2022 176,163 03 August 2022 208,024 02 November 2022 262,780 Income received 876,304 Amount confirmed 876,384 _______ Variance ** 80 ====== * Variance relates to bank charges incurred on receipt of funds in the project account. 3.3.7 Bank balances This represents bank balances as of 31 December 2022 as detailed below. Bank Account Name Description Amounts Exim Bank Djibouti IGAD DRDIP II USD Account 117,174 Less: Outstanding checks (5,931) Cashbook balance 111,243 3.3.8 Accounts receivables This represents receivables to the project as at 31 December 2022. Description Amount (USD) Staff mission advance 1,330 Total 1,330 3.3.9 Account payables This represents payables owed by the project as at 31 December 2022. Description Amount (USD) Audit fee 4,118 Accrued ticket fee 1,859 Total 5,977 12 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 Annex I: Statement of activity a) Statement of activity in the designated bank account for the year ended 31 December 2022 Account number 0010004272 Account name IGAD DRDIP II USD Account Bank Exim Bank Djibouti Amount (USD) Opening balance as at 1 January 2022 71,425 Transfers from IDA directly to IGAD during the year ended 31 December 2022 876,304 Total 947,729 Less: Payments out of designated bank account (836,486)* Add: Payments out of designated bank account but not withdrawn from the bank 5,931 as at 31 December 2022 Closing balance as at 31 December 2022 117,174 The reconciliation between the payments out of the designated bank account and the payments reported is as below: Amount (USD) Payables opening balance 13,900 Expenses reported for the year ended 31 December 2022 827,762 Less: Expenses reported under DJF account (449) Add: Staff receivables 1,330 Less: Accounts payable (5,977) Less: Bank charges during fund receipt (80) 836,486 13 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 b) Statement of activity in the Djiboutian Franc (DJF) bank account for the year ended 31 December 2022 Account number 0010006452 Account name DRDIP DJF Account Bank Exim Bank Djibouti Amount (DJF) Amount (USD) Opening balance as at 1 January 2022 79,821 449 Internal transfers from USD account during the year ended 31 - - December 2022 Total 79,821 449 Less: Payments out of the bank account (79,821) (449) Closing balance as at 31 December 2022 - - 14 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 Annex II: - A reconciliation of the receipts from the IDA Amount (USD) Amount received by IGAD (through the special account) 876,304 Amount disbursed by the bank 876,384 Variance 80 * Variance relates to bank charges incurred on receipt of funds in the project account. 15 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 Annex III: - Summary of SOE withdrawal schedule, listing individual withdrawal applications Date of application Date received Withdrawal application Amount (USD) 16 January 2022 22 January 2022 IGAD DRDIP II WA 18 229,357 26 April 2022 17 May 2022 IGAD DRDIP II WA 19 176,183 30 July 2022 03 August 2022 IGAD DRDIP II WA 20 208,044 27 October 2022 02 November 2022 IGAD DRDIP II WA 21 262,800 Total 876,384 16 REPORT ON THE DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA – PHASE II (DRDIP II) IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FOR THE YEAR ENDED 31 DECEMBER 2022 Annex IV: - Fixed Assets Register of the project Asset number Asset description Asset amount (USD) Purchase date IGAD/DRDIP II/ IT /1 HP Elite Book 820 1,523 1 February 2018 IGAD/DRDIP II/ IT /2 HP Elite Book 820 1,523 1 February 2018 IGAD/DRDIP II/ IT /3 HP Elite Book 820 1,523 1 February 2018 IGAD/DRDIP II/ IT /4 Ultra slim Docking station 228 1 February 2018 IGAD/DRDIP II/ IT /5 Ultra slim Docking station 228 1 February 2018 IGAD/DRDIP II/ IT /6 LED Backlit LCD Monitor 168 1 February 2018 IGAD/DRDIP II/ IT /7 23-Inch LED Backlit monitor 299 1 February 2018 IGAD/DRDIP II/ IT /8 Photocopying machine 2,056 12 September 2019 IGAD/DRDIP II/ IT /9 Printer 1,070 12 September 2019 17