f TRANSITIONAL 2017 ACCRUAL BASIS IPSAS FINANCIAL STATEMENTS 2018 FOR THE YEAR ENDED 31 DECEMBER, 2019 KADUNA STATE GOVERNMENT FEBRUARY 2020 2019 KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Table of Contents FOREWORD .................................................................................................................................................................................................................... 2 RESPONSIBILITY FOR FINANCIAL STATEMENTS ............................................................................................................................................................. 3 AUDIT CERTIFICATE ........................................................................................................................................................................................................ 4 STATEMENT OF FINANCIAL PERFORMANCE .................................................................................................................................................................. 6 STATEMENT OF FINANCIAL POSITION ........................................................................................................................................................................... 7 STATEMENT OF CHANGES IN EQUITY/NET ASSETS........................................................................................................................................................ 9 STATEMENT OF CASH FLOWS ...................................................................................................................................................................................... 10 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS (PREPARED ON CASH BASIS) .......................................................................... 12 NOTES TO THE FINANCIAL STATEMENTS ..................................................................................................................................................................... 14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .............................................................................................................................................. 14 SUB CLASSIFICATION OF BALANCES......................................................................................................................................................................... 34 ECONOMIC TRANSFORMATION PROGRAM-FOR-RESULTS (P4R) ................................................................................................................................ 66 1|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 FOREWORD As demand for effective service delivery, good infrastructure, and strong institutions continues to rise, it is vital that governments use scarce resources as efficiently and transparently as possible. Assessment of resource utilization requires qualitative and quantitative metrics of stewardship accounting that is true and fair. The need for global standardization particularly in the public sector financial reporting spurred the adoption of the International Public Sector Accounting Standards (IPSAS): a set of accounting standards issued by the International Public Sector Accounting Standards Board for use by public sector entities around the world in the preparation of financial statements. As a Government and since 2016, we have consistently prepared and published IPSAS compliant financial reports within the sixty-days time-window allowed by the law; this year is no exception. This is due, in part, to the quality processes, reporting infrastructure and the investment in automation prioritized by the Kaduna State Government. Citizens engagement and accountability of elected officials are directly and strongly correlated; this, among many other equally important imperatives, is why year 2019 annual reports have been made more robust with information that goes beyond just the financial reports. It contains the split between capital and recurrent ratio. It covers investment in key sectors of the State economy, covering but not limited to social, sports, youth, infrastructural, health and education. Another remarkable development of the year under review is the execution of KDSG Economic Transformation Program- for-Results Project. The project is aimed at improving the business enabling environment and strengthening fiscal management and accountability in Kaduna State. This operation is fully aligned wit h the World Bank Group’s Country Partnership Strategy (CPS). Program-for-Results (P4R) focuses on increasing the number of jobs in the modern private sector and boosting the productivity of traditional economic sectors. Another important and complementary focus of the P4R is to support Kaduna State to increase its fiscal space and enhance expenditure effectiveness to boost investments in human capital and physical assets sustainably. The future indeed holds more promise for Kaduna State citizens, individual and corporate, than any notable recent exploits. Alhaji Muhammad Bashir Saidu Hon. Commissioner of Finance 2|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 RESPONSIBILITY FOR FINANCIAL STATEMENTS The Financial Statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS) as issued by the International Public Sector Accounting Standards Board (IPSASB) and the Financial Reporting Council of Nigeria (FRCN). As indicated in the Notes to the Financial Statements, the year 2019 Financial Statements is one year beyond the three years transitional relief period of IPSAS 33 (First Time Adoption of Accrual Basis IPSAS) but due to the inconclusive valuation of legacy assets, certain transitional exemptions still apply. As the Accountant General, and the State’s Accounting Officer for receipts and payments of Government, I am saddled with the responsibility of general supervision of accounts and the preparation of Accrual Basis IPSAS Financial Statements. To fulfil these responsibilities, I am to ensure that proper accounting records are maintained; applicable International Public Sector Accounting Standards are applied; judgments and estimates made are reasonable and prudent; and internal control procedures are instituted to provide reasonable assurances that financial transactions are validly recorded to prevent fraud and irregularities with resources are safeguarded. Efforts were made to ensure that these Financial Statements reflect the true and fair view of the Financial Position of Kaduna State Government as at 31st December 2019 and its Operations for the year ended on that date. I accept responsibility for the integrity of these Financial Statements, the information contained therein, and hereby declare that they comply with IPSAS 33 and the Guidelines issued by the FAAC Technical Sub Committee on IPSAS Implementation. Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified FRC/2019/002/00000020054 Accountant General, Kaduna State 24th January, 2020 3|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 AUDIT CERTIFICATE The Financial Statements of the Government of Kaduna State of Nigeria for the year ended, December 31, 2019 have been audited in accordance with section 125 subsection 2 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and the Kaduna State Audit Law of 2018. The audit was conducted in accordance with International Standards on Auditing and INTOSAI Auditing Standards. In the course of the audit, I evaluated the overall adequacy of the information presented in the General-Purpose financial statements which were prepared in accordance with International Public Sector Accounting Standards (IPSAS) as described in Note 2.2. I have obtained information and explanation(s) that to the best of my knowledge, was relevant and necessary for the purposes of the audit. This audit has provided me with reasonable evidences and assurances which formed basis of my independent opinion. In my opinion, the Financial Statements which were in agreement with the books of accounts and records show a true and fair view of the Financial Position of the Government of Kaduna State for the year ended, December 31, 2019 and the transactions for the fiscal year ended on that date. Special Opinion: The State is eligible to receive financing from the Federal Government subject to performance against predefined criteria in the World. The expenditure framework [and receipts] are detailed in Note 40 in the attached General-purpose Financial Statements of Kaduna State Government. In my opinion, Note 40 presents fairly, in all material respects, the expenditures incurred [and funds received] against the P4R Program by the State for the year ended, December 31, 2019 [and 2018 as required] in accordance with IPSAS as described in Note 2.2. (BOSSAN TIMOTHY AVONG) Auditor-General, Kaduna State. 4|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Page intentionally left blank 5|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT No. 1 NOTES 31 DEC. 2019 31 DEC. 2018 Revenue ₦'000 ₦'000 Non Exchange Transactions 3 129,580,780 119,709,893 Exchange Transactions 4 33,047,540 11,013,090 Total Revenue 162,628,320 130,722,983 Expenses Consulting and professional services 5 1,439,982 1,935,792 Employee benefits 6 42,864,633 34,373,244 Fuel and lubricants 7 505,389 551,834 Grants and contributions 8 1,793,459 4,388,412 Insurance 9 79,601 739,479 Materials and supplies 10 9,883,948 4,988,962 General expenses 11 6,646,209 3,933,398 Other services 12 895,445 1,198,707 Repairs and maintenance 13 2,733,344 536,262 Security and safety 14 6,131,625 3,892,241 Social benefits 15 870,603 307,092 Training and human capital development 16 3,081,286 2,377,250 Travel and transport 17 1,994,017 1,501,323 Utilities 18 684,942 1,125,444 Waste Management and Disposal 19 1,278,474 2,406,164 Depreciation and amortisation 20 10,340,586 21,763,574 91,223,543 86,019,177 Excess of income over expenses before interest 71,404,777 44,703,806 Interest Expense 21 3,126,732 2,460,507 Surplus for the period 68,278,045 42,243,298 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified 6|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT OF FINANCIAL POSITION STATEMENT No. 2 DESCRIPTION NOTES 31 DEC. 2019 31 DEC. 2018 ASSETS N'000 N'000 CURRENT ASSETS Inventory 22 1,580,536 1,319,339 Receivables 23 42,678,092 23,768,574 Reimbursables from the Federal Government 24 17,830,000 7,218,345 Cash and cash equivalents 25 9,953,385 1,900,409 Prepayments 26 466,190 4,776,516 TOTAL CURRENT ASSETS 72,508,203 38,983,182 NON CURRENT ASSETS Property, Plant and Equipment 27 438,414,871 313,423,954 Investment Property 28 1,905,966 195,139 Biological Assets 29 16,984,518 16,973,669 Intangible Assets 30 672,238 385,390 Available for sale financial assets 31 7,360,400 7,326,212 TOTAL NON CURRENT ASSETS 465,337,993 338,304,364 TOTAL ASSETS 537,846,196 377,287,547 LIABILITIES CURRENT LIABILITIES Liabilities and Accruals 32 18,678,064 30,557,864 Provisions 33 2,820,645 347,587 Financial Liabilities 34 723,306 790,865 TOTAL CURRENT LIABILITIES 22,222,015 31,696,315 NON CURRENT LIABILITIES Financial Liabilities 34 200,888,700 142,136,315 Employee Benefits 35 131,546,976 87,763,691 TOTAL NON CURRENT LIABILITIES 332,435,674 229,900,007 TOTAL LIABILITIES 354,657,689 261,596,322 NET ASSETS/EQUITY 183,188,507 115,691,225 7|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 NET ASSETS/EQUITY Accumulated surplus 35 179,356,040 111,777,995 Available for sale reserves 36 3,832,467 3,913,230 NET ASSETS/EQUITY 183,188,507 115,691,225 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified 8|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT OF CHANGES IN EQUITY/NET ASSETS STATEMENT No. 3 AS AT 31 DECEMBER 2019 Accumulated Available for sale Surplus reserve Total N'000 N'000 N'000 Opening balance 111,777,995 3,913,230 115,691,225 Surplus for the period 68,278,045 - 68,278,045 Fair value change in Financial Assets 37 - (80,763) (80,763) Net increase in transitional adjustments 38 (700,000) - (700,000) Closing balance 179,356,040 3,832,467 183,188,507 AS AT 31 DECEMBER 2018 Accumulated Available for sale Surplus reserve Total N'000 N'000 N'000 Opening balance 77,118,402 2,662,612 79,781,014 Surplus for the period 42,243,298 - 42,243,298 Fair value change in Financial Assets 37 - 1,250,619 1,250,619 Net decrease in transitional adjustments 38 (7,583,706) - (7,583,706) Closing balance 111,777,994 3,913,231 115,691,225 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified 9|Page KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT OF CASH FLOWS STATEMENT No. 4 FOR THE PERIOD 31 DECEMBER 2019 31 DEC. 2019 31 DEC. 2018 N'000 N'000 Surplus/(Deficit) for the period 68,278,045 42,243,298 Add back: Depreciation and amortisation 10,340,586 21,763,574 Impairment - 378,130 Interest expense 3,126,732 2,460,507 Changes in working capital Inventories (261,198) (1,319,339) Increase in receivables (29,521,174) (5,848,481) Increase in prepayments 4,310,325 (411,285) Increase/(decrease) in liabilities and accruals (11,879,800) (5,390,173) (Decrease)/Increase in provisions 2,473,058 132,142 Increase in employee benefits 43,783,285 23,956,546 Cash generated from operations 90,649,859 77,964,920 Interest paid (3,126,732) (2,460,507) Net Cash Flow from Operating Activities 87,523,127 75,504,413 10 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Cash flow from investing activities Land - (393,390) Building (37,179,925) (23,759,054) Furniture and fittings (1,101,414) (1,142,832) Road infrastructure (75,436,255) (40,484,296) Water infrastructure (3,602,326) (9,196,635) Vehicle (5,152,185) (3,520,697) Equipment (9,611,200) (4,998,325) Plant (3,175,197) (5,127,259) Purchase of Biological Assets (10,849) - Purchase of Intangible Assets (310,978) (107,144) Investment property (1,759,699) (195,139) Equity contribution for KADPMC take-off (114,950) Net Cash Flow from Investing Activities (137,454,978) (88,924,771) Financing activities Principal loan repayment (2,847,673) (4,311,327) Long term borrowings 60,832,500 11,322,979 Net Cash Flow from Financing Activities 57,984,827 7,011,652 Opening balance of cash and cash equiv 1,900,409 8,309,115 Net changes in cash and cash equiv 8,052,976 (6,408,706) Closing balance of cash and cash equiv 9,953,385 1,900,409 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified 11 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS (PREPARED ON CASH BASIS) FOR THE PERIOD ENDED 31 DECEMBER 2019 STATEMENT No. 5 2019 Budget 2019 Actual Variance ₦'000 ₦'000 ₦'000 Revenue from Non Exchange Transactions Statutory Allocation 52,000,000 49,293,687 2,706,313 Value Added Tax Allocation 14,400,000 16,866,419 (2,466,419) Aids and Grants 14,101,857 13,495,192 606,665 Direct Taxes 20,345,447 25,931,251 (5,585,804) Licenses 1,741,171 439,066 1,302,105 Sub Total (A) 102,588,475 106,025,615 (3,437,140) Revenue from Exchange Transactions Sales 10,405,943 3,398,124 7,007,819 Fees 5,651,260 3,416,339 2,234,921 Rent of Government Property 2,554,253 1,325,802 1,228,451 Investment Income 1,017,000 9,451,250 (8,434,250) Sub Total (B) 19,628,456 17,591,515 2,036,941 Total Revenue (A + B) = C 122,216,931 123,617,130 (1,400,199) Less: Expenditure budgeted by nature of cost Personnel Cost 38,063,109 34,243,164 3,819,945 Government Contribution to Pension 9,008,296 8,621,470 386,826 Overhead Charges 39,724,123 38,018,323 1,705,800 Interest on Internal Loans - 3,124,946 (3,124,946) Sub total (D) 86,795,528 84,007,903 2,787,625 12 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Less: Capital Expenditure by Sectors Sub-sector: Economic Agriculture 420,810 410,413 10,397 Business Innovation and Technology 3,207,027 3,127,788 79,239 Housing and Urban Development 3,460,388 3,374,890 85,498 Public Works and Infrastructure 62,952,360 61,396,955 1,555,405 Total for Sub-sector: Economic 70,040,585 68,310,046 1,730,539 Sub-sector: Social Education 45,875,593 44,742,114 1,133,479 Health 11,435,260 11,152,721 282,539 Social Development 543,990 530,549 13,441 Total for Sub-sector: Social 57,854,843 56,425,385 1,429,458 Sub-sector: Regional Environment and Natural Resources 2,089,455 2,037,830 51,625 Water 1,134,582 1,106,549 28,033 Total for Sub-sector: Regional 3,224,037 3,144,379 79,658 Sub-sector: General Administration Executive 17,390,352 16,960,677 429,675 Governance 2,230,148 2,175,047 55,101 Law and Justice 1,342,332 1,309,166 33,166 Legislature 253,622 247,355 6,267 Total for Sub-sector: General Admin 21,216,453 20,692,245 524,208 Totals 152,335,918 148,572,055 3,763,863 Shizzer Bada B.Sc. (Hons.), MBA, CPA(Ireland), CNA, FSCA, ACIT, MNIM, ACCA IPSAS Certified 13 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 NOTES TO THE FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. General information The State financial statements for the year ended 31 December 2019 were authorized for issue by the Accountant General on 24th January, 2020. Kaduna State Government's (KDSG’s) principal activities are the provision of social, infrastructure, educational, housing, justice, transport, agricultural and health services, waste management and emergency services. The State’s registered office is located at Independence Way, Kaduna North, Nigeria. 2.1 Statement of compliance with IPSAS and transitional explanations The Federal Executive Council of Nigeria approved the adoption of International Public Sector Accounting Standards (IPSAS) in July 2010. Public Sector Entities were required to adopt, prepare and present 2016 Financial Statements using Accrual Basis IPSAS and Kaduna State was in compliance with Accrual Basis IPSAS from that date. IPSAS therefore became the National Standards in the Public Sector from 2016 and all references to National Standards, if any, refers to the International Public Sector Accounting Standards (IPSAS). The financial statements have been prepared in accordance with accrual basis International Public Sector Accounting Standards (IPSASs). IPSAS 33 (First Time Adoption of Accrual Basis IPSAS) allows KDSG a period of up to three years to recognize and/or measure certain assets and/or liabilities. The Government views the exercise of identifying and measuring legacy assets as very strategic. Hence KDSG has chosen to be diligent in its approach and consequently require more time to fully accomplish the exercise. Based on the progress made so far, it is expected that the exercise would be concluded soon. In its transition to accrual basis IPSASs, KDSG took advantage of this transitional exemption for its yet-to-be-valued and yet-to-be-recognized assets and liabilities. Coordinated efforts are currently being made to establish fair value assessment of all immovable assets controlled by the State. This is to be achieved, in part, through the constitution of a technical committee of relevant and experienced professionals from the Ministry of Works and other Infrastructure related MDAs. As a result of the foregoing, KDSG is unable to make an explicit and unreserved statement of compliance with accrual basis IPSASs in preparing its transitional IPSAS financial statements for this reporting period. The State financial statements are presented in Nigerian Naira, which is the functional and reporting currency and all values are rounded to the nearest thousand except where the thousand sign (N’000) is not indicated. The accounting policies have been consistently applied to all the years presented. The State financial statements are prepared on an accrual basis, except for the Statement of Cash flows and the Statement of Budget comparison with actual amount. 14 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 2.2 Summary of significant accounting policies a) Consolidation Controlled entities The controlled entities are all those entities over which KDSG has the power to govern their financial and operating policies. The entities are Kaduna State Property Development Company, Kaduna Investment and Finance Company Limited, Kaduna State Market Development and Management Company Limited, Kaduna State Transport Authority. These controlled entities are fully consolidated from the date in which control is attained by KDSG. They are de-consolidated from the date that control ceases. Inter-entity transactions, balances and unrealized gains and losses on transactions between members of the State are eliminated in full. The accounting policies of the controlled entities are consistent with the policies adopted by KDSG. b) Interest in joint venture and associates Where the State has an interest in a joint venture which is a Joint Arrangement, whereby the venturers have a binding arrangement that establishes joint control over the economic activities of the entity, the State recognizes its interest in the joint venture using the equity method of consolidation. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognized at cost and the carrying amount is increased or decreased to recognize the investor’s share of the surplus or deficit of the investee after the date of acquisition. The investor’s share of the investee’s surplus or deficit is recognized in the investor’s surplus or deficit. Distributions r eceived from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor’s proportionate interest in the investee arising from changes in the investee’s equity that have not been recognized in the investee’s surplus or deficit. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The investor’s share of those changes is recognized in net assets/equity of the investor. KDSG has neither associates nor joint ventures as at 31st December, 2019. c) Current versus non-current classification KDSG presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: • Expected to be realized or intended to be sold or consumed in the normal operating cycle • Held primarily for the purpose of trading • Expected to be realized within twelve months after the reporting period, or 15 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: • It is expected to be settled in the normal operating cycle • It is held primarily for the purpose of trading • It is due to be settled within twelve months after the reporting period, or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The State classifies all other liabilities as non-current. d) Revenue recognition Revenue from non-exchange transactions Fees, taxes and fines The State recognizes revenues from fees, taxes and fines when the event occurs and the asset recognition criteria are met. To the extent that there is a related condition attached that would give rise to a liability to repay the amount, deferred income is recognized instead of revenue. Other non-exchange revenues are recognized when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the fair value of the asset can be measured reliably. Transfers from other government entities Revenues from non-exchange transactions with other government entities are measured at fair value and recognized on obtaining control of the asset (cash, goods, services and property) if the transfer is free from conditions and it is probable that the economic benefits or service potential related to the asset will flow to the State and can be measured reliably. 16 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Revenue from exchange transactions Rendering of services The State recognizes revenue from rendering of services by reference to the stage of completion when the outcome of the transaction can be estimated reliably. The stage of completion is measured by reference to labor hours or cost incurred to date as a percentage of total estimated labor hours or total cost. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are recoverable. Sale of goods Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, usually on delivery of the goods and when the amount of revenue can be measured reliably and it is probable that the economic benefits or service potential associated with the transaction will flow to the State. Interest income Interest income is accrued using the effective yield method. The effective yield discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. The method applies this yield to the principal outstanding to determine interest income each period. Dividends Dividends or similar distributions are recognized when the shareholder’s or the State’s right to receive payments is established. Rental income Rental income arising from operating leases on investment properties (from irrigations and other properties) is accounted for on a straight-line basis over the lease terms and included in revenue. e) Investment property Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the replacement cost of components of an existing investment property at the time the cost is incurred if the recognition criteria are met and excludes the costs of day- to-day maintenance of an investment property. Investment properties primary comprise irrigation assets and other rental yielding buildings. Investment property acquired through a non-exchange transaction is measured at its fair value at the date of acquisition. Subsequent to initial recognition, investment properties are measured using the cost model and are depreciated over a 40-year period. 17 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Investment properties are derecognized either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit or service potential is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the surplus or deficit in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. f) Property, plant and equipment All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. When significant parts of property, plant and equipment are required to be replaced at intervals, the State recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhaul is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in surplus or deficit as incurred. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration the asset is initially measured at its fair value. Depreciation on assets is charged on a straight-line basis over the useful life of the asset. Depreciation is charged at rates calculated to allocate the cost or valuation of the asset less any estimated residual value over its remaining useful life: Buildings 45 - 55 years Infrastructure assets water 20 - 22 years Infrastructure assets – others 20 – 22 years Plant & Machinery 5 - 12 years Furniture & Fittings 5 - 7 years Vehicles 5 – 7 years Office & Other Equipment 4 – 5 years The assets’ residual values and useful lives are reviewed, and adjusted prospectively, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount, or recoverable service amount, if the asset’s carrying amount is greater than its estimated recoverable amount or recoverable service amount. The State derecognizes items of property, plant and equipment and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognized. 18 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 g) Leases State as a lessee Finance leases are leases that transfer substantially all of the risks and benefits incidental to ownership of the leased item to the State. Assets held under a finance lease are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the future minimum lease payments. The State also recognizes the associated lease liability at the inception of the lease. The liability recognized is measured as the present value of the future minimum lease payments at initial recognition. Subsequent to initial recognition, lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in surplus or deficit. An asset held under a finance lease is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the State will obtain ownership of the asset by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased item to the State. Operating lease payments are recognized as an operating expense in surplus or deficit on a straight-line basis over the lease term. State as a lessor Leases in which the State does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term. Rent received from an operating lease is recognized as income on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned. h) Intangible assets Intangible assets acquired separately are initially recognized at cost. The cost of intangible assets acquired in a non-exchange transaction is their fair value at the date of the exchange. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in surplus or deficit in the period in which the expenditure is incurred. The useful life of the intangible assets is assessed as either finite or indefinite. 19 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Intangible assets with a finite life are amortized over its useful life: Software 10 - 15 years Intangible assets with a finite useful life are assessed for impairment whenever there is an indication that the asset may be impaired. Intangible assets with indefinite useful life are tested for impairment at least once year regardless of impairment indicators. The amortization period and the amortization method, for an intangible asset with a finite useful life, are reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on an intangible asset with a finite life is recognized in surplus or deficit as the expense category that is consistent with the nature of the intangible asset. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the surplus or deficit when the asset is derecognized. Research and development costs The State expenses research costs as incurred. Development costs on an individual project are recognized as intangible assets when the State can demonstrate: • The technical feasibility of completing the asset so that the asset will be available for use or sale • Its intention to complete and its ability to use or sell the asset • How the asset will generate future economic benefits or service potential • The availability of resources to complete the asset • The ability to measure reliably the expenditure during development Following initial recognition of an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. During the period of development, the asset is tested for impairment annually with any impairment losses recognized immediately in surplus or deficit. 20 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 i) Impairment of non-financial assets Impairment of cash-generating assets At each reporting date, the State assesses whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the State estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset or the cash-generating unit (CGU) exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations are recognized in the statement of financial performance in those expense categories consistent with the nature of the impaired asset. Impairment of non-cash-generating assets The State assesses at each reporting date whether there is an indication that a non-cash-generating asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the State estimates the asset’s recoverable service amount. An asset’s recover able service amount is the higher of the non-cash-generating asset’s fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable service amount, the asset is considered impaired and is written down to its recoverable service amount. In assessing value in use, the State has adopted the depreciation replacement cost approach. Under this approach, the present value of the remaining service potential of an asset is determined as the depreciated replacement cost of the asset. The depreciated replacement cost is measured as the reproduction or replacement cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect the already consumed or expired service potential of the asset. In determining fair value less costs to sell, the price of the assets in a binding agreement in an arm's length transaction, adjusted for incremental costs that would be directly attributed to the disposal of the asset is used. If there is no binding agreement, but the asset is traded on an active market, fair value less cost to sell is the asset's market price less cost of disposal. If there is no binding sale agreement or active market for an asset, the State determines fair value less cost to sell based on the best available information. 21 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 For each asset, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the State estimates the asset's recoverable service amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable service amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable service amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in surplus or deficit. j) Financial instruments Financial assets Initial recognition and measurement Financial assets within the scope of IPSAS 29 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through surplus or deficit, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. The State determines the classification of its financial assets at initial recognition. The State's financial assets include: cash and short-term deposits; trade and other receivables; loans and other receivables; quoted and unquoted financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets at fair value through surplus or deficit Financial assets at fair value through surplus or deficit include financial assets held for trading and financial assets designated upon initial recognition at fair value through surplus and deficit. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through surplus or deficit are carried in the statement of financial position at fair value with changes in fair value recognized in surplus or deficit. KDSG does not have any ‘financial assets at fair value through surplus or deficit’ as at 31 December 2019. Loans and receivables 22 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Losses arising from impairment are recognized in the surplus or deficit. KDSG does not have any ‘loans and receivables’ as at 31 December 2019. Held-to-maturity Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the State has the positive intention and ability to hold it to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The losses arising from impairment are recognized in surplus or deficit. KDSG does not have any ‘held to maturity’ as at 31 December 2019. Available-for-sale financial assets The State classifies available-for-sale financial assets as non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity or financial assets at fair value through surplus or deficit. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with gains or losses recognized directly in net assets through the statement of changes in net assets until the financial asset is derecognized, at which time the cumulative gain or loss is recognized in surplus or deficit. Derecognition The State derecognizes a financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets when: • The rights to receive cash flows from the asset have expired or is waived • The State has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party; and either: (a) the State has transferred substantially all the risks and rewards of the asset; or (b) the State has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 23 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Impairment of financial assets The State assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event ha s an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include the following indicators: • The debtors or a group of debtors are experiencing significant financial difficulty • Default or delinquency in interest or principal payments • The probability that debtors will enter bankruptcy or other financial reorganization • Observable data indicates a measurable decrease in estimated future cash flows (e.g. changes in arrears or economic conditions that correlate with defaults) Financial assets carried at amortized cost For financial assets carried at amortized cost, the State first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the State determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in surplus or deficit. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or transferred to the State. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in surplus or deficit. 24 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Available-for-sale financial assets For available-for-sale financial assets, the State assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of financial assets classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ agai nst the period in which the fair value was below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the surplus or deficit – is removed from the reserve in net assets and recognized in surplus or deficit. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in surplus or deficit. Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IPSAS 29 are classified as financial liabilities at fair value through surplus or deficit or loans and borrowings, as appropriate. The State determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, plus directly attributable transaction costs. The State’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts. Subsequent measurement The measurement of financial liabilities depends on their classification. Financial liabilities at fair value through surplus or deficit Financial liabilities at fair value through surplus or deficit include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through surplus or deficit. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the State that are not designated as hedging instruments in hedge relationships as defined by IPSAS 29. Gains or losses on liabilities held for trading are recognized in surplus or deficit. 25 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Loans and borrowing After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in surplus or deficit when the liabilities are derecognized as well as through the effective interest method amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Derecognition A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in surplus or deficit. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the State statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. k) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. For the purpose of the State’s statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts. 26 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 l) Inventories Inventory is measured at cost upon initial recognition. To the extent that inventory was received through non-exchange transactions (for no cost or for a nominal cost), the cost of the inventory is its fair value at the date of acquisition. Costs incurred in bringing each product to its present location and condition are accounted for, as follows: • Raw materials: purchase cost • Finished goods and work in progress: cost of direct materials and labor and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs After initial recognition, inventory is measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of operations, less the estimated costs of completion and the estimated costs necessary to make the sale, exchange, or distribution. Inventories are recognized as an expense when deployed for utilization or consumption in the ordinary course of operations of the State. m) Provisions Provisions are recognized when the State has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the State expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of financial performance net of any reimbursement. The provisions primarily arise from ongoing litigations and from long-term environmental obligations for which there is present obligations, outflow is probable and reliable estimates could be made. 27 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Restoration / Decommissioning liability Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of that particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the restoration/decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the statement of financial performance as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset. Contingent liabilities The State 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. Contingent assets The State does not recognize a contingent asset, but discloses details of a probable asset whose existence is contingent on the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the State in the notes to the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs. n) Changes in accounting policies and estimates The State recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical. The State recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit. o) Employee benefits Retirement benefit plans The State provides retirement benefits for its employees and political officer holders. 28 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund), and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The contributions to fund obligations for the payment of retirement benefits are charged against income in the year in which they become payable. Defined benefit plans are post-employment benefit plans other than defined-contribution plans. The defined-benefit funds are actuarially valued based on the projected unit credit method basis. Deficits identified are recovered through lump sum payments or increased future contributions on proportional basis. The contributions and lump sum payments reduce the post-employment benefit obligation. Short and long-term employee benefits The cost of all short-term employee benefits, such as leave pay, is recognized during the period in which the employee renders the related service. The State recognizes the expected cost of performance bonuses only when the State has a present legal or constructive obligation to make such payment, and a reliable estimate can be made. The State provides long-term incentives to eligible employees, payable on completion of years of employment. The State’s liability is based on an actuarial valuation. The projected unit credit method has been used to value the obligation. Actuarial gains and losses on the long-term incentives are fully accounted for in the statement of financial performance. p) Foreign currency transactions Transactions in foreign currencies are initially accounted for at the ruling rate of exchange on the date of the transaction. Payables and receivables denominated in foreign currency are reported at the statement of financial position reporting date by applying the exchange rate on that date. Exchange differences arising from the settlement of creditors, or from the reporting of creditors at rates different from those at which they were initially recorded during the period, are recognized as income or expenses in the period in which they arise. q) Borrowing costs Borrowing costs are capitalized against qualifying assets as part of property, plant and equipment. 29 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Such borrowing costs are capitalized over the period during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization ceases when construction of the asset is complete. Further borrowing costs are charged to the statement of financial performance. r) Related parties The State 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 the State, or vice versa. Members of key management are regarded as related parties and comprise the State Executive Committee Members and Heads of Ministries, Departments and Agencies. s) Service concession arrangements The State analyses all aspects of service concession arrangements that it enters into in determining the appropriate accounting treatment and disclosure requirements. In particular, where a private party contributes an asset to the arrangement, the State recognizes that asset when, and only when, it controls or regulates the services the operator must provide together with the asset, to whom it must provide them, and at what price. In the case of assets other than ’whole-of-life’ assets, it controls, through ownership, beneficial entitlement or otherwise – any significant residual interest in the asset at the end of the arrangement. Any assets so recognized are measured at their fair value. To the extent that an asset has been recognized, the State also recognizes a corresponding liability, adjusted by a cash consideration paid or received. t) Budget information The State intends to prepare accrual basis budget in the nearest future when all planned costs and income are presented in a single statement to determine the needs of the State. As a result of the adoption of the accrual basis for budgeting purposes, there would be no basis, timing or entity differences that would require reconciliation between the actual comparable amounts and the amounts presented as a separate additional financial statement in the statement of comparison of budget and actual amounts. Pending the transition to accrual basis budgeting however, the State would prepare statements of budget comparison on cash basis. u) Significant judgments and sources of estimation uncertainty The preparation of the State's financial statements in conformity with IPSAS requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgments In the process of applying the State’s accounting policies, management has made judgments, which have the most significant effect on the amounts recognized in the State financial statements. 30 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Operating lease commitments – State as lessor The State has entered into property leases of certain of its properties. The State has determined, based on an evaluation of the terms and conditions of the arrangements, (such as the lease term not constituting a substantial portion of the economic life of the commercial property) that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Estimates and assumptions In accordance with IPSAS 1 P. 140, the key assumptions concerning the future and other key sources of estimating uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The State based its assumptions and estimates on parameters available when the State financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the State. Such changes are reflected in the assumptions when they occur. Useful lives and residual values The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal: • The condition of the asset based on the assessment of experts employed by the State • The nature of the asset, its susceptibility and adaptability to changes in technology and processes • The nature of the processes in which the asset is deployed • Availability of funding to replace the asset • Changes in the market in relation to the asset Impairment of non-financial assets – cash-generating assets The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change, which may then impact management’s estimations and require a material adjustment to the carrying value of tangible assets. The State reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Cash-generating assets are stated at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates of expected future cash flows are prepared for each group of assets. Expected future cash flows used to determine the value in use of tangible assets are inherently uncertain and could materially change over time. 31 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Impairment of non-financial assets – cash generating assets The State reviews and tests the carrying value of non-cash-generating assets when events or changes in circumstances suggest that there may be a reduction in the future service potential that can reasonably be expected to be derived from the asset. Where indicators of possible impairment are present, the State undertakes impairment tests, which require the determination of the fair value of the asset and its recoverable service amount. The estimation of these inputs into the calculation relies on the use of estimates and assumptions. Any subsequent changes to the factors supporting these estimates and assumptions may have an impact on the reported carrying amount of the related asset. Fair value estimation – financial instruments Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, judgment is required in establishing fair values. Judgment includes the consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Provisions Provisions were raised and management determined an estimate based on the information available. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Provision is made for the estimated cost to be incurred on the long-term environmental obligations, comprising expenditure on pollution control and closure over the estimated life of the landfill. The provision is based on the advice and judgment of qualified engineers. The increase in the restoration provision due to passage of time is recognized as finance cost in the statement of financial performance. The cost of ongoing programs to prevent and control pollution and rehabilitate the environment is recognized as an expense when incurred. 32 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Held-to-maturity investments and loans and receivables The State assesses its loans and receivables and its held-to-maturity investments at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the State evaluates the indicators present in the market to determine if those indicators are indicative of impairment in its loans and receivables or held-to-maturity investments. Where specific impairments have not been identified the impairment for receivables, held-to-maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. 33 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 SUB CLASSIFICATION OF BALANCES 31 Dec. 2019 31 Dec. 2018 Revenue from non-exchange transactions N'000 N'000 Gross Allocation from Federation Accounts 54,233,605 55,777,102 Non-Oil Revenue (Excess Revenue - Share of Solid Minerals) 69,881 - Share of Good and Value Consideration 562,245 - Excess Petroleum Profit Tax - - Share of forex equalization 425,700 1,306,146 Excess bank charges 128,277 77,492 Excess crude 459,931 401,604 Value added tax 16,866,419 15,610,827 Exchange Gain Differences 91,791 363,024 Paris Club Refund to State 12,252,928 Aids and Grants 13,495,192 405,784 Share of additional fund from NNPC 80,321 96,385 Other capital receipts - Direct taxes - KADIRS 42,728,352 30,126,405 Land use charge - Ministry of Finance 121,255 Income from stabilization augmentation - 2,750,596 Licenses - Internal Revenue Services - 258,453 License - Ministry of Health & Human Services 5,602 Fines - High Court of Justice 6,059 - Fines - Customary Court of Appeal 5,370 - Fines - Sharia Court of Appeal 9,920 - Fines - Kaduna State Environmental Protection Agency 55 2,088 Fines - KASTELEA - 203,376 Fines - Ministry of Agriculture 2,697 - Penalty, Revocation and Re-issuance of C of O - KADGIS 4,820 18,670 Penalty - Kaduna State Traffic Law Enforcement Authority 168,491 - Registration - Ministry of finance - 3,905 Kaduna State Public Procurement Authority 109,427 55,106 Stamp duty - Alhuda-Huda College, Zaria 89 - Stamp duty - Kaduna Capital School 234 - 34 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Stamp duty - Government Secondary School Fadan Kaje 21 - Stamp duty - Government Secondary School Ikara 24 - Stamp duty - Science Secondary School, Kufena, Zaria 4 - Stamp duty - Sardauna Memorial College 41 - Stamp duty - Ministry of Education, Science and Technology 1,805 - Stamp duty - KADIRS 3,056 - Stamp duty - Rimi College, Kaduna 42 - Stamp duty - GSS Birnin Gwari 18 - Stamp duty - Government College Kagoro 36 - - Total Non - Exchange Revenue 129,580,780 119,709,893 31 Dec. 2019 31 Dec. 2018 Revenue from exchange transactions N'000 N'000 Fees -Muslim Pilgrims Welfare Board 7,074 9,865 Fees -Christian Pilgrims Welfare Board 10 - Fees -Office of the Auditor General (State) 145 235 Fees -Kaduna State Independent Electoral Commission 420 41,628 Fees -Office of the Auditor General (Local Government) - - Fees -Ministry of Agriculture 5,975 17,762 Fees -Ministry of Finance 109,427 105,835 Fees -KADIRS 213,695 304,607 Fees -Ministry of Business Innovation and Technology 7,948 14,140 Fees -KASUPDA 423,297 143,244 Fees -Ministry of Works and Transport 91,207 10,971 Fees -Ministry of Water Resources 72 2,397 Fees -Ministry of Lands and Survey - - Fees -Ministry of Justice 1,287 Fees -High Court of Justice 10,901 12,806 Fees -Customary Court of Appeal 5,053 10,121 Fees -Sharia Court of Appeal 8,420 9,694 35 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Fees -Ministry of Sports 2,495 3,097 Fees -Ministry of Education 130,926 229,895 Fees -Library Board 41 47 Fees -Agency for Mass Literacy - 323 Fees -Nuhu Bamalli Polytechnic Zaria 731,354 684,027 Fees -College of Education Gidan Waya 223,796 204,506 Fees -Capital School Kaduna 23,259 30,482 Fees -Barewa College Zaria 13,875 14,671 Fees -Al Hudda College Zaria 3,924 3,451 Fees -Sardauna Memorial College Kaduna 579 660 Fees -Government College Kaduna 2,301 1,874 Fees -Queen Amina College 16,002 21,500 Fees -Government Secondary School Kagoro 729 1,158 Fees -Government Secondary School Fada Kaje 2,889 3,932 Fees -Rimi College 673 715 Fees -Government Girls College Zonkwa 2,730 3,922 Fees -Kaduna State University 548,758 789,973 Fees -Government Science Secondary School Kufena 7,103 7,308 Fees -Government Science Secondary School Soba 8,430 10,249 Fees -Government Secondary School Kwoi 15,239 18,644 Fees -Government Science Secondary School Ikara 3,767 5,822 Fees -Science Secondary School Birnin Gwari 2,744 4,591 Fees -Government College Kagoro 6,204 7,052 Fees -Private Schools Board 26,351 Fees -Ministry of Health 101,109 342,388 Fees -College of Nursing Kafanchan 30,668 27,949 Fees -Shehu Idris School of Health Technology Makarfi 43,906 227,448 Fees -State Emergency Management Agency 52,255 40,582 Fees -Kaduna State Environmental Protection Agency 38,670 4,246 Fees -Kaduna State Public Works Agency (KAPWA) - 595 Fees -Ministry of Rural and Community Development 3,556 2,962 Fees - Kaduna State Road Agency 1,620 - Fees - Kaduna State Schools Quality Assurance Authority 112,059 - Ministry of Business Innovation and Technology 10,493 - 36 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Fees -Ruwassa 3,610 5,055 College of Midwifery Kaduna 26,121 31,209 Min of Environment & N/Resources - - Science and Tech. School Management Board - 9,118 Local Government Service Comm. 620 - KADGIS 755,046 3,595,054 Kaduna Market Development & Mgt Co. Ltd - 101,170 Fees - sub total 3,811,195 7,146,617 Revenue from exchange transactions 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Sales - Muslim Pilgrims Welfare Board 1,769 1,638 Sales - Christian Pilgrims Welfare Board 110 130 Sales - Kaduna State Media Corporation - KSMC 102,020 169,054 Sales - Government Printing Press 16,526 20,442 Sales - Ministry of Agriculture 3,077 12,618 Sales - Kaduna State Forest Management Project - 3,000 Sales - Ministry of Finance 2,930,443 1,183,775 Sales - Kad. State Internal Revenue Service 22,929 12,038 Sales - Ministry of Commerce - - Sales - College of Education Gidan Waya 28,741 13,512 Sales - Ministry of Health 35,454 52,475 Sales - Barau Dikko Teaching Hospital, Kaduna 256,134 205,059 Sales - School of Health Technology Makarfi 3,575 38,617 Sales - Kaduna State Agric. Dev Agency - Irrigation proceeds - 100 Sales - Ministry of Youth and Sports 675 - Sales - Nuhu Bamalli Polytechnic 6,614 19,000 Sales - Ministry of Environment - - Sales - State Environmental Protection Agency - KEPA 746 24,930 Sales - Kaduna State University 2,044 1,045 Sales - Kaduna State Management Project (FMP) 2,482 37 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Kaduna Market Development & Mgt Co. Ltd - 3,649 Kaduna Water Corporation 7,248,835 521,473 513001001 - Min. of Youths, Sports & Culture - 10,194 Sales - sub total 10,662,174 2,292,747 Revenue from exchange transactions 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Rent of Gov. Property - Muslim Pilgrims Welfare Board 189 535 Rent of Gov. Property - Kad State Forest Management Project - 124 Rent of Gov. Property - Ministry of Finance 3,115 5,746 Rent of Gov. Property - Ministry of Works and Transport - - Rent of Gov. Property - KASUPDA - 65,897 Rent of Gov. Property - Kaduna State University 5,598 14,178 Rent of Gov. Property - College of Nursing Kafanchan 175 185 Rent of Gov. Property - Kad. State Environmental Protection Agency 330 408 Rent - Ministry of Business Innovation and Technology 5,056 - Rent - Ministry of Sport Development 18,792 - Rent - School of Midwifery 310 - Rent - Sales - Kaduna State Management Project (FMP) 122 - Local Government Service Comm. - 105 Kaduna Market Development & Mgt Co. Ltd - 123,432 Min. of Commerce & Industries - 6,882 KADGIS - Rent 9,067,357 983,875 Rent on Gov. Building - Ministry of Environment - - Min. of Agriculture & Forestry 21,553 8,936 Library Board 141 100 Scholarship Board 130 360 Capital School Kaduna 55 49 College of Education G/Waya - 598 9,122,922 1,211,410 38 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Revenue from exchange transactions 31 Dec. 2019 31 Dec. 2018 Dividend and other investment Income N'000 N'000 Ministry of Finance 9,374,033 287,245 Kaduna State Muslim Pilgrims Welfare Board 77,216 - Kaduna State Muslim Pilgrims Welfare Board 75,071 9,451,250 362,316 Total Exchange Revenue 33,047,540 11,013,090 Total Revenue 162,628,320 130,722,983 31 Dec. 2019 31 Dec. 2018 4A REVENUE SPLIT BETWEEN ALLOCATION AND IGR N'000 N'000 Cash Internally Generated Revenue 43,961,832 24,316,376 Accrued Internally Generated Revenue (See Note 4B) 32,253,127 17,364,718 Subtotal of Internally Generated Revenue 76,214,958 41,681,094 Cash FAAC Allocation (See Note 4C) 66,160,106 67,689,814 Accrued FAAC Allocation (See Note 4C) 6,758,064 5,942,767 Paris Club Refund - 12,252,928 Subtotal of Allocation 72,918,170 85,885,509 Grants 13,495,192 3,156,380 GRAND TOTAL OF REVENUE 162,628,320 130,722,983 - 39 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 31 Dec. 2019 31 Dec. 2018 4B MDA / CLASS OF REVENUE N'000 N'000 KADGIS 7,797,121 2,513,585 KASUPDA Fees 148,283 - Kaduna State Water Corporation 7,248,835 521,473 Nuhu Bamali Polytechnic, Zaria 203,967 271,392 Shehu Idris College Health Science & Tech, Makarfi - 45,243 Kaduna State Media Corporation 7,266 36,015 Kaduna State Market Development Co. Limited - (24,196) Kaduna State Quality Assurance Authority - 25,016 Ministry of Business Innovation and Technology 7,948 5,320 State Emergency Management Agency (SEMA) 42,606 30,231 Kaduna State Scholarship Board - 150 Reimbursement of PAYE, VAT & WHT from FG 16,797,101 13,940,491 32,253,127 17,364,718 SCHEDULE OF JANUARY – DECEMBER 2019 FAAC ALLOCATION 4C NON-OIL SHARE OF REVENUE SHARE OF EXCESS EXCHANGE SHARE OF GOOD EXCESS ADDITIONAL GROSS EXCESS FOREX BANK GAINS &VALUE CRUDE FUND FROM VAT Month FAAC REVENUE EQUALIZATION CHARGES DIFFERENCES CONSIDERATION REVENUE NNPC ALLOCATION TOTAL ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 January 4,079,576 - - 74,992 5,372 - - - 1,487,860 5,647,800 February 3,873,788 - - 37,083 6,955 - 354,828 - 1,325,711 5,598,365 March 3,652,136 - - - 5,307 441,764 105,103 80,321 1,292,208 5,576,839 April 4,199,994 - - - 6,459 - - - 1,323,202 5,529,655 May 4,700,946 - - - 9,474 - - - 1,473,995 6,184,414 June 5,140,218 - - - 8,513 - - - 1,505,308 6,654,038 July 5,008,118 - - - 8,299 - - - 1,361,565 6,377,982 August 5,042,238 - - 16,202 8,448 - - - 1,199,410 6,266,297 September 4,906,788 - - - 7,742 - - - 1,278,487 6,193,017 October 4,839,105 69,881 - - 9,116 - - - 1,444,169 6,362,271 November 4,035,052 - 425,700 - 6,412 - - - 1,302,263 5,769,427 December 4,755,646 - - - 9,694 120,481 - - 1,872,242 6,758,064 TOTAL 54,233,605 69,881 425,700 128,277 91,791 562,245 459,931 80,321 16,866,419 72,918,170 40 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 5 Consulting and professional services 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Revenue collection expenses 275,555 256,816 Budgeting expenses 220,464 208,181 Other services 943,963 1,470,795 Total 1,439,982 1,935,792 This is the expenditure made by Government in procuring professional services from specialists in the advancement of government programmes. Revenue collection expenses represents performance-based incentives awarded revenue collection agencies for meeting and surpassing targets. Budget expenses are extra expenditure and incentives for budget preparation. Other services were expenses incurred in procuring expert services across various disciplines. 6 Employee benefits 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Basic salary 28,562,399 14,617,290 Entertainment Allowance 70,532 136,914 Furniture Allowance 137,631 - Hazard Allowance 100,872 256,225 Housing Allowance 992,151 1,809,377 Leave Allowance 666,044 32,742 Legislative Allowance 76,019 4,883 Meal Allowance 173,220 300,845 Medical Allowance 309,077 302,056 Responsibility Allowance 7,852 43,759 Robe Allowance 110,904 59,903 Shift Allowance 90,239 148,722 Teaching Allowance 348,530 283,264 41 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Transport Allowance 790,575 1,110,709 TSS Allowance 679,850 838,481 Utility Allowance 224,357 381,466 Vehicle Maintenance Allowance 50,240 44,015 Wages 34,630 64,226 Post-Employment Benefits 8,621,470 13,115,169 CRFC Salaries/Allowances 223,629 177,419 Other Allowances 594,413 645,780 42,864,633 34,373,244 Employee benefits are establishment cost for direct and indirect employees, including political office holders. In Kaduna State, all employee benefits are consolidated. Basic salary is a base salary from which other allowances are determined. Entertainment allowance is aimed at catering for work related entertainment of internal and external customers. Furniture allowance is meant to augment the cost of furnishing official residences of government appointees, customarily paid once in four years subject to approval. Hazard allowance is a special allowance paid to employees who work in hazardous environment, for example, hospitals, laboratories, fire services etc. Housing allowance is given to employees to augment rental charges for employees that do not enjoy government quarters. Leave allowance is paid to employees to defray cost of travelling to leave destinations. Legislative allowance is a special allowance paid to staff working with legislators. Meal allowance is meal subsidy paid to all employees. Medical allowance is aimed at subsidizing cost of medication and hospital services. Responsibility allowance is to confidential secretaries of Management staff and in certain instances, the Management staff. Robe allowance is paid to Judges and Solicitors that appear in courts and in official capacities. Shift allowance is paid to staff that run shifts involving evening and night duties. Teaching allowance is a special allowance for classroom teachers. Transport allowance is aimed at augmenting transportation cost of staff that do not qualify for official vehicles. TSS allowance is an awarded salary for all professional teachers. Utility allowance is aimed at defraying cost of utilities (water, electricity etc.). Vehicle maintenance allowance is paid to appointees to maintain official vehicles. Wages are paid to non-scheduled temporary staff. Post-employment benefits include pension and gratuities. CRFC Salaries/Allowance applies to certain employees of scheduled Commissions and Boards as first line charges. Other allowances cover such benefits as domestic staff allowance, exams supervision allowance etc. The Government took the decision to merge Rent allowance, Utility allowance, Meal subsidy, Transport allowance and Entertainment allowances into consolidated salary earning in addition with the implementation of the minimum wage. This, in part, explains the significant increase in 2019 Basic salaries compared with similar figure for the comparative period. 42 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 7 Fuel and lubricants 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Cooking Gas/Fuel Cost 1,084 495 Motor Vehicle Fuel Cost 253,593 276,011 Other Transport Equipment Fuel Cost 25,191 14,261 Plant/Generator Fuel Cost 225,521 261,066 505,389 551,834 Fuel and lubricants relate to the expenses incurred in running official vehicles, plant and equipment as distinct from cost of maintenance. 8 Grants and contributions 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Cultural and Religious Expenses 338,458 437,220 Grants and Donations 1,136,831 3,564,101 Parastatals Overheads 283,704 171,477 Recurrent Counterpart Contribution 34,466 215,614 1,793,459 4,388,412 Grants and contribution relate to the Government intervention for the operations and proper functioning of quasi-government organizations and other entities that are self-accounting. Cultural and religious expenses are government expenditure to promote activities of traditional councils including seminars and workshop for the council. Grants and donations are funding support for research or special services. Parastatals overheads expenditure relate to quasi government organization for specific purposes. Recurrent counterpart contributions are condition precedent to receiving health related grants from external donors. 43 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 9 Insurance 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Group Personal Accident 37,443 596,069 Kaduna Health Insurance Scheme - 27,805 Motor Vehicle comprehensive insurance 42,158 115,604 79,601 739,479 Insurance expenditure provides covers against identified insurable risk. Group personal accident insurance is aimed at providing group compensation to employees of government in case of death. Kaduna Health Insurance Scheme (KHIS) is a contribution towards providing medical bills cover for public servants. Motor vehicle insurance is a comprehensive cover for government vehicles. 10 Materials and supplies 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Books 56,299 448,395 Consumables 1,992,051 979,883 Drugs and medical supplies 1,522,285 1,552,520 Health related programmes 20,500 74,645 Scholarship 2,431,746 323,336 Education Expenses and Examination fees 657,365 203,823 Newspapers and periodicals 57,629 52,537 Printing and stationery 477,067 329,383 School feeding 2,027,854 846,853 Water infrastructure chemicals 641,154 177,587 9,883,948 4,988,962 Materials and supplies are consumables procured and used by government organizations in the course of service delivery. Books are educational supplies covering text books and exercise books; they are expensed upon distribution. Consumables are materials used in the course of providing services by government covering uniforms, office stationery, computer consumables. Drugs and medical supplies are health products, public health emergencies etc. Health related programmes include foreign medical treatment programmes geared towards achieving good health for the residents. Scholarship are special education support scheme for students. Education Expenses and Examination fees are education related expenses and other expenditure paid to external examination bodies. Newspapers and periodicals are magazines procured for departments and management staff for information currency. Printing and stationery are cost of producing documents and materials for documentation and communication. School feeding is a special programme of government to provide food and nutrition for pupils. Water treatment chemicals are inputs for public water purification. 44 | P a g e Certain expenses were reclassified from General office expense category (Note 11) to Materials and supplies category in order to more accurately reflect their substance. These include Education and examination expenses, Health related programmes and Scholarship. KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 11 General office expenses 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Catering expenses 100,752 261,346 Cleaning and fumigation 836,052 480,436 Court settlement/provisions (see note 33) 2,042,308 132,142 Entertainment 1,448,954 1,444,275 Honorarium and sitting allowance 60,514 54,451 Hotel accommodation - 10,709 Mass awareness 1,598,246 1,186,558 Promotion and recruitment expenses 114,786 30,504 Rent 11,078 12,174 Sporting and recreation expenses 180,695 195,969 Subscription 252,825 124,832 6,646,209 3,933,398 General office expenses are other office expenditure of a general nature separately from stationery materials and supplies. Catering expenses are expenditure on food items for inhouse facilities for Ministries, Departments and Agencies. Cleaning and fumigation are expenditure incurred on work/office environment. Court settlement are payment and/or provisions for judgement debt. Entertainment are hospitality related expenditure in the course of service delivery. Honorarium and sitting allowance are expenses of conducting meetings and per-diem paid to non-scheduled staff. Hotel accommodation are expenses for government visitors. Mass awareness are campaigns for sensitization and awareness about government policies and programmes. Promotion and recruitment expenses are direct cost of job interviews. Rent expenses are rentals for office accommodation. Sporting and recreation expenses are youth and hospitality oriented programmes to engender youth empowerment and leisure. Subscription expenses are software renewal charges, internet access, subscription to professional bodies etc. Certain expenses were reclassified to Materials and supplies category (Note 10) in order to more accurately reflect their substance. These include Education and examination expenses, Health related programmes and Scholarship. 45 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 12 Other services 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Seedling expenses 657,129 - Agricultural immunization 54,135 - Weeding and fire tracing 31,959 - Agricultural Processing Productivity Enhancement and Livelihood Support Project (APPEALS) - 48,000 Vodacom Solutions and Small Holder Farmer Registration - 258,968 Agric subsidy - 31,039 Restoration of River Kaduna Biodiversity Programme 25,900 9,875 Pre planting and post planting activities 26,993 8,728 Land clearance for Agricultural activities 30,030 807,447 Brushing, coppice reduction 69,300 34,650 895,445 1,198,707 Seedling expenses is the cost of raising seedlings to the point of transplanting. Agricultural immunization is the protection of livestock against diseases and pests. Weeding and fire tracing are cost of maintaining tree plantations against fire outbreaks; it involves weeding of grass and brush around the perimeter of the forest. Restoration of River Kaduna Biodiversity programme involves de-silting of the river channels and streams running into the river to keep it clean and reduce sludge. Pre planting are activities undertaken before transplanting of seedlings. Post planting are the immediate activities including weeding, manuring etc. to ensure survival of the transplanted seedlings. Land clearance for agricultural activities include ploughing, harrowing and ridging preparatory to planting crops. Brushing, coppice reduction are maintenance activities to ensure that new shots from stumps are reduced to manageable numbers. 46 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 13 Repairs and maintenance 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Repairs and Maintenance - Building 2,216,871 45,222 Repairs and Maintenance - Furniture and fittings 43,093 40,185 Repairs and Maintenance - Vehicle 214,430 214,333 Repairs and Maintenance - Equipment 93,722 118,700 Repairs and Maintenance - Plant 101,446 81,349 Repairs and Maintenance - Roads 802 2,804 Repairs and Maintenance - Others 62,980 33,669 2,733,344 536,262 Repairs and maintenance expenses were incurred to maintain the proper functioning of the property, plant and equipment. Included in "repairs and maintenance - others is the maintenance cost of dumpsites. 14 Security and safety 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Fire Fighting Materials 19,956 25,649 Printing of Security Documents 27,178 34,831 Protocol Support Services 344,498 233,909 Security Personnel Allowances 87,209 58,578 Security Services 2,020,077 897,119 Security Vote (Including Operations) 1,026,045 414,149 Security Vote (Preventive & Supportive Measure) 2,606,662 2,228,005 6,131,625 3,892,241 Security and safety expenses relate to the protection of lives and property and in the maintenance of laws and order. Fire-fighting materials expenses included materials, reagents and chemicals used in fire prevention and control. Printing of security documents expense were spent producing sensitive and controlled documents which includes stamps, receipts, vouchers etc. Security personnel allowances are paid to the security details of designated government officials. Security services are expenses in the course of providing security that may include security related supplies. Security votes are expenses related to the maintenance of the security architecture across the state. 47 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 15 Social benefits 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Welfare Packages 303,244 279,627 Social investments 567,358 10,681 Empowerment of persons with disability - 16,783 870,603 307,092 Social benefits are all humanity related expenditure geared towards improving their lives and living conditions. Welfare packages are authorized expenditure to cater for welfare needs especially during festivities and to engender family and social relationships. Social investments and Empowerment of persons with disability are targeted investments aimed at improving the lives of youth and vulnerable persons in the society. 16 Training and human capital development 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Conferences and events 2,318,075 1,596,630 Formal training and capacity building - local 702,864 726,057 Formal training and capacity building - international 60,346 54,564 3,081,286 2,377,250 Training and human development is investment in human capacity that is job and career related. 17 Travel and transport 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Local travel and transport 1,204,330 678,697 International travel and transport 789,688 822,626 1,994,017 1,501,323 Travel and transport are out of station job related travels. 48 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 18 Utilities 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Electricity 562,781 859,856 Postages and Telephone 19,981 18,260 Water Rates 102,180 247,328 684,942 1,125,444 Utility expenses are payment to providers of electricity, telephone and water rates. 19 Waste Management and Disposal 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Refuse evacuation programme 1,278,474 2,406,164 1,278,474 2,406,164 Waste management and disposal are expenditure on waste collection, transportation and disposal of both domestic and industrial waste. 20 Depreciation and amortization 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Irrigation 48,871 - Building 1,352,743 3,232,009 Furniture & Fittings 802,948 2,188,562 Road Infrastructure 3,781,891 7,573,861 Water Infrastructure 454,957 1,184,755 Motor Vehicle 930,790 1,761,933 Office & Other Equipment 1,582,368 2,344,304 Plant & Machinery 1,361,888 3,450,624 Intangible assets amortization 24,130 27,528 10,340,586 21,763,574 49 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Depreciation expense is the systematic allocation of the depreciable amount of an item of property, plant and equipment over its useful life. Depreciable amount is determined after deducting the residual value. For the purpose of computing depreciation, residual value is deemed to be zero. Depreciation begins when the property, plant and equipment is available for use. The useful life of each asset is reassessed at the end of every reporting period and where expectation differs from previous projections, the change is accounted for as a change in accounting estimates and treated prospectively. Depreciation is charged in the year of construction or acquisition and none is charged in the year of disposal or asset retirement. 21 Finance and other bank charges 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Interest on local loans 2,571,903 1,871,840 Interest on foreign loans 553,043 580,639 Other administrative bank charges 1,786 8,028 3,126,732 2,460,507 Finance charges are credit and bank related expenses. Interest on local loans is determined using the effective interest method. Effective interest method is a method of calculating the amortized cost of financial liabilities and of allocating the interest expense over the loan tenor. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the net carrying amount of the financial liability. Determination of effective interest rate on foreign loans is daunting due to the complications in obtaining verifiable repayment schedules on foreign borrowings, many of which predate the establishment of debt management office (DMO). In additions, the DMO hardly provides detailed amortizations, limiting the source of information to that provided by Federation Accounts Allocation Committee (FAAC). Other bank charges are bank administrative charges not related to credits. 50 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 22 Inventories 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Water treatment chemicals 98,937 590,946 Books 353,563 61,727 Agric supplies 128,036 657,129 Molds - 9,537 Buildings 1,000,000 - 1,580,536 1,319,339 Inventories are assets in the form of materials or supplies to be consumed in the production process; In the form of materials or supplies to be consumed or distributed in the rendering of services; Held for sale or distribution in the ordinary course of operations; or in the process of production for sale or distribution. Water treatment chemicals are alum for water purification; this balance represents the inventory of unused chemicals at year end; the sum of N590.946m was expensed in 2019 under the heading Water Infrastructure Chemicals in Note 10. Books are multi-year usage reference books, other than student text and exercise books that are written off as incurred. Agric supplies are inventories of farm inputs such as fertilizer and seedlings; the sum of N657.129m was expensed in 2019 under the heading Seedling expenses in Note 12. Molds are the inventories of unused containers necessary for raising tree seedlings; the sum of N9.537m was expensed in 2019 under the heading Pre and Post Planting Activities in Note 12. Buildings represent investments in a Public Private Partnership between Kaduna State Mortgage and Foreclosure Agency and other private sector partners to construct residential houses for sale. The buildings were under construction as at 31 December, 2019 51 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 31 Dec. 2019 31 Dec. 2018 23 Receivables N'000 N'000 Kaduna Geographic Information Service (KADGIS) 7,797,121 2,513,585 KASUPDA 148,283 - Kaduna State Water Corporation 7,248,835 521,473 State Emergency Management Agency (SEMA) 42,606 30,231 Federal Account Allocation 6,758,064 5,942,767 Direct taxes and other related taxes refund from FG 20,095,996 13,940,491 Nuhu Bamali Polytechnic, Zaria 203,967 271,392 Shehu Idris College Health Science & Tech, Makarfi - 45,243 Kaduna State Media Corporation 7,266 36,015 Kaduna State Market Development Co. Limited - (24,196) Kaduna State Quality Assurance Authority - 25,016 Ministry of Business Innovation and Technology 7,948 5,320 Kaduna State Scholarship Board - 150 Loans and advances 368,007 378,130 Contractor's refund - 82,959 42,678,092 23,768,574 These are earned revenues, demand notices and staff related advances not yet collected at year end. 31 Dec. 2019 31 Dec. 2018 23A Receivables N'000 N'000 Exchange 15,824,033 3,885,316 Non-Exchange 26,854,060 19,883,258 42,678,092 23,768,574 52 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 31 Dec. 2019 31 Dec. 2018 24 Reimbursables from the Federal Government N'000 N'000 Refund on account of Operation Sharan Daji at Kamuku/Kuyambana Forest 600,000 600,000 Primary School Feeding Programme Refund - 3,867,749 Augmentation of Statutory Revenue from Stabilization Account - 2,750,596 Zaria Water Supply Expansion Project 17,230,000 - 17,830,000 7,218,345 Refund for the renovation of Kaduna Airport, refund on account of Operation Sharan Daji at Kamuku/Kuyambana Forest and Primary School Feeding Programme Refund represent capital expenditure incurred on behalf of FGN. Augmentation of Statutory Revenue from Stabilization Account is a grant aimed at mitigating the impact of security challenges confronting the State. 31 Dec. 2019 31 Dec. 2018 25 Cash and cash equivalents N'000 N'000 Treasury Single Accounts (TSA) 2,178,883 140,268 Operations Accounts 7,774,502 1,760,142 9,953,385 1,900,409 Cash represents demand deposits. Cash equivalents are highly liquid investments that are convertible to known amount of cash and with insignificant risk of change in value and that has short maturity period usually 90days from date of origination. There were no cash equivalents at year end. 31 Dec. 2019 31 Dec. 2018 26 Prepayments N'000 N'000 Contractors prepayment 466,190 3,576,516 Light rail upfront payments - 1,200,000 466,190 4,776,516 Prepayments are advance payment and mobilization to contractors and supplies of services. Contractors prepayment are duly backed by Advance Payment Guarantees (APGs) issued by reputable financial institutions. 53 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 FURNITURE & ROAD WATER LAND BUILDING FITTINGS INFRASTRUCTURE INFRASTRUCTURE VECHICLE EQUIPMENT PLANT TOTAL 27 COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 2019 Opening balance 3,007,614 145,440,398 10,942,808 151,477,218 23,695,099 8,809,665 9,377,215 17,253,118 370,003,135 Addition - 37,179,925 1,101,414 75,436,255 3,602,326 5,152,185 9,611,200 3,175,197 135,258,502 Reclassification - Retirement - 2019 Closing balance 3,007,614 182,620,323 12,044,222 226,913,473 27,297,425 13,961,850 18,988,415 20,428,316 505,261,637 ACCUMULATED DEPRECIATION 2019 Opening balance - (10,237,149) (7,455,431) (20,909,109) (2,524,978) (4,000,990) (4,416,867) (7,034,656) (56,579,181) Charge for the year - (1,352,743) (802,948) (3,781,891) (454,957) (930,790) (1,582,368) (1,361,888) (10,267,585) Reclassification Retirement 2019 Closing balance - (11,589,892) (8,258,379) (24,691,000) (2,979,935) (4,931,780) (5,999,235) (8,396,544) (66,846,766) 2019 Carrying Amount 3,007,614 171,030,430 3,785,843 202,222,473 24,317,489 9,030,070 12,989,180 12,031,772 438,414,871 54 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 FURNITURE & ROAD WATER LAND BUILDING FITTINGS INFRASTRUCTURE INFRASTRUCTURE VECHICLE EQUIPMENT PLANT TOTAL 27 COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 2018 Opening balance 2,614,224 121,681,344 9,799,976 110,992,923 14,498,463 5,288,967 4,378,889 12,125,860 281,380,646 Addition 393,390 23,759,054 1,142,832 40,484,296 9,196,635 3,520,697 4,998,325 5,127,259 88,622,489 Reclassification - Retirement - 2018 Closing balance 3,007,614 145,440,398 10,942,808 151,477,218 23,695,099 8,809,665 9,377,215 17,253,118 370,003,135 ACCUMULATED DEPRECIATION 2018 Opening balance - (7,005,140) (5,266,870) (13,335,248) (1,340,223) (2,239,057) (2,072,564) (3,584,033) (34,843,134) Charge for the year - (3,232,009) (2,188,562) (7,573,861) (1,184,755) (1,761,933) (2,344,304) (3,450,624) (21,736,047) Reclassification Retirement 2018 Closing balance - (10,237,149) (7,455,431) (20,909,109) (2,524,978.02) (4,000,990) (4,416,867) (7,034,656) (56,579,181) 2018 Carrying Amount 3,007,614 135,203,249 3,487,377 130,568,110 21,170,120.52 4,808,675 4,960,347 10,218,462 313,423,954 55 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Property, plant and equipment and tangible assets held for use in the production or delivery of goods and services, for rental to other and for administrative purposes and that are expected to be used for more than one financial period. Included in land are parcels of land purchased for right of way road construction and building of schools. Building are structures used for administrative purposes, teaching facilities, housing facilities and market and commercial purposes. Furniture and fittings include furnishings, desks, chairs, tables etc. Road infrastructure are roads constructed and rehabilitated including street lights, roads signs and other related infrastructure to facilitate mobility of human, goods and services. Water infrastructure are water related constructions including dams, canals, boreholes, storage tanks etc. Vehicles include motor and tricycles, trucks, vans, ambulances used for conveyance of persons and goods in the course of government operations. Equipment consists office equipment, electrical and mechanical appliances used in government operations. Plant includes immovable power plant and other heavy-duty installations. Land are not depreciated except in quarry and land fill. Building are depreciated over its useful life usually within 50years. Furniture and fittings are depreciated over its useful life and within the range of 5years. Road infrastructure is depreciation over its useful life usually within 20years. Water infrastructure is depreciated over its useful life and within 20years. Vehicles are depreciated over its useful life, usually 5years. Equipment has a useful life of 4years whilst Plant is depreciated over 5years. These depreciation periods are in line with the policy contained in section 2.2(f) of the accounting policy. The residual value and the useful life of an asset are reviewed at least at each annual reporting date and, if expectations differ from previous estimates, the change(s) are accounted for as a change in an accounting estimate in accordance with IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors. The State is yet to measure and recognize legacy assets. Logistics are in place to bring them into the books as soon as practicable. 31 Dec. 2019 31 Dec. 2018 28 Investment property N'000 N'000 Land irrigation - Opening balance 195,139 - Addition in the year 1,759,699 195,139 Gross carrying amount 1,954,837 195,139 Accumulated Depreciation Opening balance - - Charge for the year (48,871) - Closing balance (48,871) - Carrying amount 1,905,966 195,139 56 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 Investment property is land or a building (or part of a building – or both) held to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes; or sale in the ordinary course of operations. Land irrigation are plots of land rented out to farmers for dry season farming. It is currently being written off over 40years. 31 Dec. 2019 31 Dec. 2018 29 Biological Assets N'000 N'000 Plantation assets 16,962,726 16,955,751 Ranch assets 9,013 5,138 Wildlife assets 12,780 12,780 16,984,518 16,973,669 Biological assets are living plants and animals. Plantation assets are living trees to be used as pulp woods, fuel woods, timber; they are also used for construction, scaffolding and building. Ranch assets are living animals bred for resale. Wildlife assets are living animals kept in the zoo for exhibition. IPSAS 27 requires Biological assets to be measured at fair value less cost of disposal at initial recognition and at each reporting date, except where the fair value cannot be determined reliably. The State cannot reliably determine fair values less cost to sell. 57 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 30 Intangible Assets 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Opening balance 412,918 305,775 Addition 310,978 107,144 Gross carrying amount 723,896 412,918 Amortization Opening balance (27,528) - Charge for the year (24,130) (27,528) Accumulated amortization (51,658) (27,528) Carrying amount 672,238 385,390 Intangible assets are identifiable non-monetary assets without physical substance. Addition to Intangible asset includes license rights with carrying amount N26.888m (2018: Nil), other acquired Operational software with carrying amount N284.090m (2018: N107.144m). Intangible assets are amortized over the period of agreement or if shorter, over its useful life. The amortization expense is recognized in the Statement of Financial Performance under the heading 'Depreciation and amortization' 58 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 31 Financial Assets 31 Dec. 2019 31 Dec. 2018 N'000 N'000 N.N.D.C. Limited 200,939 200,939 Flour Mills of Nigeria Limited 6,131 11,908 Cement Company of Northern Nigeria Ltd 252,000 233,400 Kaduna Industrial and Finance Company 7,000 67,000 Niger Delta Holding 27,812 13,906 Nigeria Sovereign Investment Authority 6,696,066 6,727,900 DAAR Communication 36 400 First City Monument Bank 1,312 2,196 Unity Bank Plc. 44,098 58,757 First Bank Plc. 10,056 9,807 Take off grants - KADPMC 114,950 - 7,360,400 7,326,212 Financial assets are investments and instruments that entitle the government to receive cash or the equity instruments of other entities. IPSAS 29 requires Financial assets to be designated subsequent to initial recognition at Held to maturity, Available for sale, Loans and receivables and Fair value through surplus or deficit. The investments listed above are designated at "Available for sale" and are recognized at fair value and with fair value changes recognized in net assets/equity in accordance with IPSAS 29 p. 64b 31 Dec. 2019 31 Dec. 2018 32 Liabilities and accruals N'000 N'000 Liabilities on capital projects 16,409,100 29,534,880 Local Government share of IGR 2,268,963 1,022,985 18,678,064 30,557,864 Liabilities are accruals consist of unpaid bills to third parties. Liabilities on capital projects represent indebtedness to contractors on projects on which certificate of values (CVs) have been raised. The CVs are raised on projects covering road infrastructure, water infrastructure, buildings etc. Utility accruals are unpaid bills on water, electricity and other utilities. Local governments share of IGR represents local government share of internal generated 59 | P a g e revenue collected by a central state agency to be remitted to the respective local governments. KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 31 Dec. 2019 31 Dec. 2018 33 Provisions N'000 N'000 Opening balance: Ongoing legal cases with 'probable' outflow 347,587 215,444 Additional provision/(reversal) on legal cases (see note 11) 2,042,308 132,142 2.5% Provision on Zaria Water Supply and Expansion Project 430,750 - 2,820,645 347,587 The State has various legal cases in court; many of which are possible obligation as a result of past event, the outcome of which could result in outflow of resources or service potential. The Zaria Water provision is in respect of facilitation fee due on the receivable from the project. 34 FINANCIAL LIABILITIES 31 Dec. 2019 31 Dec. 2018 Non-Current N'000 N'000 Zenith Bank - - FG/Zenith Bank 12,423,878 12,849,528 Access Bank 8,688,027 8,985,684 Federal Government (BSF) 17,530,179 16,869,000 Development Partners 162,246,615 103,432,104 200,888,700 142,136,315 Current Zenith Bank - 122,839 FG/Zenith Bank 425,649 393,118 Access Bank 297,657 274,907 723,306 790,865 201,612,006 142,927,180 60 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 34A FINANCIAL LIABILITIES - MOVEMENT 31 Dec. 2019 31 Dec. 2018 N'000 N'000 34B Zenith Bank Opening balance 122,839 454,144 Interest accretion based on effective interest rate 4,179 49,750 Repayment (127,018) (381,055) Closing balance 0.00 122,839 34C FG/Zenith Bank Opening balance 13,242,646 13,605,718 Interest accretion based on effective interest rate 1,042,213 1,072,259 Repayment (1,435,331) (1,435,331) Closing balance 12,849,528 13,242,646 34D Access Bank Opening balance 9,260,591 9,514,488 Interest accretion based on effective interest rate 728,821 749,831 Repayment (1,003,728) (1,003,728) Closing balance 8,985,684 9,260,591 34E Federal Government Budget Support Opening balance 16,869,000 16,069,000 Adjustment to beginning balance (Note 38) 700,000 800,000 Additional receipt - - Interest accretion 796,690 - Repayment (835,510) - Closing balance 17,530,179 16,869,000 61 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 34F Foreign loans - IDA, BADE, AfDB, Indian EXIM Opening balance 103,432,104 72,675,122 Adjustment to beginning balance (Note 38) - 22,797,056 Additional receipt 60,832,500 11,322,979 Interest 553,043 580,639 Repayment (2,571,031) (3,943,692) Closing balance 162,246,615 103,432,104 201,612,006 142,927,180 Financial liabilities above are measured at initial recognition at fair value, which is the net amount received after deducting any directly related transaction cost. They are measured and carried subsequently at amortized cost with the exception of foreign loans. Determination of contractual repayment cash flows are daunting for foreign loans, hence are carried at provisional amounts. 34F (i) Subsequent to the authorization and publication of the 2019 Financial Statements however, a reconciliation exercise of foreign loan stock was undertaken with the Debt Management Office (DMO). The exercise threw-up certain differences in the carrying amounts of the foreign loan stock, resulting in a difference of about N6.9billion between the DMO reconciled foreign loan stocks and the carrying amount in the 2019 Accrual Basis IPSAS Financial Statements. The aforementioned difference shall be adjusted for in the opening balance of accumulated surplus of 2020 Financial Statements (Statement of Changes in Equity/Net Assets). The schedule below shows the DMO reconciled foreign loan stocks as at 31st December, 2019. STOCK @ S/N CREDITOR PURPOSE CURRENCY AMOUNT 31/12/2019 $'000 $'000 1 IDB Kaduna State- Zaria Water Supply and Expansion Project IDB 6,500 57,982 2 AFDF Kaduna State - Health Service Rehabilitation Project CHF 824 585 3 AFDF Kaduna State - Health Service Rehabilitation Project EUR 1,195 926 4 AFDF Kaduna State - Health Service Rehabilitation Project EUR 77 59 5 AFDF Kaduna State - Health Service Rehabilitation Project USD 6,040 4,351 6 AFDF Kaduna State - Health Service Rehabilitation Project EUR 5,083 3,938 7 AFDF Kaduna State Health System Dev. IV EUR 2,149 2,722 8 AFDF Kaduna State Health System Dev. IV USD 1,097 1,020 9 BADE Kaduna State- Small Earth Dam (Construction & Rehab) USD 1,500 340 62 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 10 IDA Kaduna State-Multi State Water- IDA (50%) XDR 35,131 18,217 11 IDA Kaduna State-HIV/AIDS Programme XDR 3,350 2,857 12 IDA Kaduna State- Health Systems Development XDR 1,085 908 13 IDA Kaduna State- Universal Basic Education USD 5,000 1,451 14 IDA Kaduna State -National Fadama II-IDA XDR 4,872 5,881 15 IDA Kaduna State-Nat. Urban Water Sector Reform-IDA XDR 34,359 39,270 16 IDA Kaduna State- State Governance and Capacity Building XDR 3,641 4,589 17 IDA Kaduna State- State Education Sector XDR 12,431 16,366 18 IDA Kaduna State-Rural Access & Mobility Project XDR 37,800 48,301 19 IDA Kaduna State-Third National Fadama Dev Project XDR 2,723 3,648 20 IDA Kaduna State-Commercial Agricultural Development Project XDR 17,670 21,264 21 IDA Kaduna State- Nat Urban Water Sector Reform Project XDR 24,366 33,694 22 IDA Kaduna State- Public Sector Governance Reform & Dev XDR 4,600 6,244 23 IDA Kaduna State Economic Transformation Program (Portion A) XDR 97,600 61,548 24 IDA Kaduna State Economic Transformation Program (Portion B) XDR 157,800 114,897 25 ADF Kaduna State-Community Based Agric and Rural Development EUR 2,400 3,078 26 IDA Kaduna State- Save One Million Lives Project XDR - 2,500 Kaduna State Agro-Processing, Production, Enhancement & Livelihood IDA 27 Improvement Support Project XDR 5,000 8,000 28 IDA Kaduna State- Exim Bank of India Line of Credit USD 29,850 13,679 29 ADF Kaduna State- Zaria Water Supply and Expansion Project FUA 63,920 76,468 30 IDA Kaduna State Accelerating Nutrition in Nigeria Project XDR 156,500 - 31 IDB Kaduna State- Construction of Four Science Secondary School USD 17,320 - 32 IDA Kaduna State - Community and Social Development Project USD 4,000 - 33 IDA Kaduna State-Youth Employment and Social Support Operation Project USD 18,000 - SUB TOTAL IN USD 554,782 ₦'000 NAIRA EQUIVALENTS @ 1USD: ₦305 169,208,480 Amount reflected in 2019 IPSAS Financial Reports 162,246,615 Difference to be adjusted for in 2020 Financial Reports 6,961,865 63 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 35 Employee benefits 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Gratuity -A 63,063,320 39,889,061 Pension (defined benefits) - B 52,652,273 47,434,480 Pension (defined contributions) 17,229,058 939,038 Pension liability held in trust for workers without RSA Number 1,176,722 217,118 Severance benefits of political office holders 2,500,000 2,097,428 Payment of gratuity and death benefits - C (1,924,566) (724,566) Investments domiciled in the Central Bank of Nigeria D (3,149,830) (2,088,868) 131,546,976 87,763,691 The 2018 closing balances of Gratuity and Defined Benefits Pension Obligation consist of the 2016 Actuarial obligations based on the reports of HR Nigeria Limited (A firm of professionally qualified Actuaries) and the estimates made to account for additional gratuity and pension obligations for the period to 31 Dec. 2019. 35A Employee benefits 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Gratuity A + C 61,138,754 39,164,495 Pension (defined benefits) B + D 49,502,443 45,345,612 Pension (defined contributions) 17,229,058 939,038 Pension liability held in trust for workers without RSA Number 1,176,722 217,118 Severance benefits of political office holders 2,500,000 2,097,428 131,546,976 87,763,691 64 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 36 Accumulated Surplus 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Beginning balance 111,777,995 77,118,402 Surplus for the period 68,278,046 42,243,298 Net transitional adjustments (see Note 38) (700,000) (7,583,706) Closing balance 179,356,040 111,777,995 37 Available for Sale Reserve 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Beginning balance 3,913,230 2,662,612 Fair value movement (80,763) 1,250,618 Closing balance 3,832,467 3,913,230 IPSAS 29 p. 64b requires that financial assets designated at Available for sale be measured at fair value and with fair value changes recognized in net assets/equity. 38 Transitional adjustments 31 Dec. 2019 31 Dec. 2018 N'000 N'000 Political Class Loans and advances - 378,130 Biological assets - 15,635,220 Federal Government Budget Support (Note 34E) (700,000) (800,000) Foreign Loans (Note 34F) - (22,797,056) (700,000) (7,583,706) In accordance with IPSAS 33 p. 146, certain historical assets were recognized in 2018 Financial Statements and with the transitional adjustments recognized in accumulated surplus. 65 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 ECONOMIC TRANSFORMATION PROGRAM-FOR-RESULTS (P4R) 39. The P4R is an initiative that is aligned to the Kaduna State Development Plan (SDP) 2016 – 2020 and consistent with the Economic Development and Governance Pillars of the plan. The PforR focuses on the following two key results areas; Results Area 1: Improving the Business-enabling Environment; Results Area 2: Strengthening Fiscal Management and Accountability. Overall, the Programme supports the efforts of Kaduna State to improve its business-enabling environment with the view to becoming a leading investment destination in Nigeria. On one hand, the Programme supports the efforts of Kaduna State to significantly increase private investments for job creation and revenue generation. On the other hand, the Programme supports Kaduna State to strengthen fiscal management and accountability to ensure that increasing - but still limited - revenues are spent as efficiently as possible to increase the state’s capacity to invest in human capital and physical assets and to catalyze private investments. Accountability underlies this strategy by building public (including investors’) trust in government and ensuring that its actions and decisions are subject to public scrutiny and citizens engagement. The schedule below depicts actual programme execution vis-à-vis the plan of action, prepared exclusively on cash basis. 66 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 40. KADUNA STATE GOVERNMENT PROGRAM FOR RESULTS (P 4 R) DETAILED EXPENDITURE FRAMEWORK PER MDA 2018 PERSONNEL OVERHEADS CAPITAL USD TOTAL Cross Cutting P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R ACTUAL Government House 279,975 563,376 2,676,496 8,308,838 2,956,471 8,872,214 Office of the Secretary to the State Government 1,606,550 2,289,168 5,361,196 10,372,689 6,967,746 12,661,857 Bureau Public Service Reform - - 33,387 30,443 207,791 14,528,277 241,178 14,558,720 Office of the Head of Service 579,116 346,684 2,325,292 758,285 2,904,408 1,104,969 Civil Service Commission 162,227 134,250 57,570 83,127 219,797 217,376 Ministry of Finance 996,706 481,202 3,428,847 293,262 2,625,582 9,298,097 7,051,135 10,072,562 Ministry of Budget and Planning 699,811 194,887 650,699 679,522 6,027,495 16,852,801 7,378,005 17,727,210 Ofice of the Accountant General 4,260,221 553,610 71,249,685 49,053,291 75,509,906 49,606,901 Kaduna State Bureau of Statistics 337,223 321,777 64,097 29,374 2,316,679 8,716,966 2,717,999 9,068,118 Ministry of Agriculture and Forestry 1,997,150 1,110,487 95,078 81,028 2,092,228 1,191,515 Results Area 1: Improving the business enabling environment - - - - - KADGIS 366,720 412,266 126,610 60,129 12,867,065 9,733,945 13,360,395 10,206,340 KADIPA 292,924 - 219,909 417,686 390,164 16,562,236 902,997 16,979,922 Ministry of Commerce, Industry and Tourism (Effective 2019: Business Innovation) 586,679 457,975 318,847 326,513 905,526 784,488 Ministry of Environment and Natural Resources 209,558 239,890 122,945 68,157 332,503 308,047 Ministry of Rural and Community Development 212,704 167,777 440,678 64,425 653,382 232,202 Ministry of Women and Social Dev (Effective 2019: Human Services and Social Development) 245,661 100,496 71,825 41,318 1,442,754 10,169,794 1,760,240 10,311,608 Kaduna State Environmental Protection Authority (KEPA) 262,274 186,678 43,192 92,671 1,007,435 7,577,125 1,312,901 7,856,474 Results Area 2: Strengthening fiscal management and accountability - - - - - Kaduna State Pubilc Procurement Authority 92,642 125,357 29,493 135,113 783,209 8,716,966 905,344 8,977,437 Office of the State Auditor General 347,154 238,730 102,581 100,462 449,735 339,192 Office of the Auditor General - LG 327,232 281,480 97,083 92,330 424,315 373,810 KADIRS 2,056,018 1,083,347 940,029 965,395 183,607 11,622,621 3,179,654 13,671,364 Ministry of Local Government 281,239 183,473 1,460,887 1,325,653 1,742,126 1,509,126 Ministry of Works, Housing and Transport (Effective 2010: Public Works and Infrastructure) 894,885 329,791 529,439 103,426 1,424,324 433,217 Ministry of Water Resources 177,528 187,367 47,750 40,820 225,278 228,187 Ministry of Education, Science and Technology 2,710,740 21,064,053 375,246 1,113,197 3,085,986 22,177,251 Ministry of Health and Human Services 1,728,097 16,502,159 140,643 119,171 1,868,740 16,621,330 Total 21,711,034 47,556,280 91,009,504 74,756,327 27,851,781 113,778,828 140,572,319 236,091,436 67 | P a g e KADUNA STATE GOVERNMENT TRANSITIONAL IPSAS FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2019 2019 PERSONNEL OVERHEADS CAPITAL USD TOTAL Cross Cutting P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R - USD ACTUAL - USD P4R ACTUAL Government House 220,027 466,855 6,408,670 11,713,731 6,628,697 12,180,586 Office of the Secretary to the State Government 1,767,205 2,066,068 7,449,132 9,432,073 9,216,337 11,498,140 Bureau Public Service Reform - - 36,289 17,716 169,131 22,173,525 205,420 22,191,241 Office of the Head of Service 4,246,852 444,044 2,358,103 732,164 6,604,955 1,176,208 Civil Service Commission 146,956 186,698 32,883 161,270 179,839 347,968 Ministry of Finance 1,096,376 982,048 5,103,459 702,769 12,028,938 14,191,056 18,228,773 15,875,873 Ministry of Budget and Planning 1,031,864 336,890 508,282 616,534 6,520,446 25,721,289 8,060,592 26,674,713 Ofice of the Accountant General 1,981,326 540,089 33,466,329 48,532,058 35,447,655 49,072,148 Kaduna State Bureau of Statistics 370,945 376,999 67,131 20,352 2,182,141 13,304,115 2,620,217 13,701,465 Ministry of Agriculture and Forestry 1,776,062 1,640,362 322,631 78,539 2,098,693 1,718,901 Results Area 1: Improving the business enabling environment - - - - - - KADGIS 421,054 569,322 133,229 68,180 2,100,656 14,856,262 2,654,939 15,493,764 KADIPA 322,216 1,128 669,340 189,203 393,443 25,277,818 1,384,999 25,468,149 Ministry of Commerce, Industry and Tourism (Effective 2019: Business Innovation) 645,347 569,297 228,591 264,913 873,938 834,210 Ministry of Environment and Natural Resources 230,514 228,446 202,441 36,211 432,955 264,657 Ministry of Rural and Community Development 233,974 173,233 152,667 19,078 386,641 192,311 Ministry of Women and Social Development (Effective 2019: Human Services and Social Development) 270,227 199,413 82,626 76,817 1,475,410 15,521,467 1,828,263 15,797,698 Kaduna State Environmental Protection Authority (KEPA) 288,501 239,154 62,387 138,771 1,023,336 6,681,408 1,374,224 7,059,333 Results Area 2: Strengthening fiscal management and accountability - - - - - - Kaduna State Pubilc Procurement Authority 97,678 170,505 44,450 341,726 1,038,457 13,304,115 1,180,585 13,816,346 Office of the State Auditor General 361,727 285,853 108,419 80,559 470,146 366,413 Office of the Auditor General - LG 343,593 330,630 108,038 65,428 451,631 396,058 KADIRS 2,261,620 1,462,769 1,769,762 1,231,141 839,344 17,738,820 4,870,726 20,432,730 Ministry of Local Government 309,363 185,621 1,528,133 1,146,907 1,837,496 1,332,528 Ministry of Works, Housing and Transport (Effective 2010: Public Works and Infrastructure) 1,524,480 411,219 884,305 336,543 2,408,785 747,762 Ministry of Water Resources 195,280 723,079 66,203 13,764 261,483 736,843 Ministry of Education, Science and Technology 3,208,052 29,249,039 477,094 1,273,658 3,685,146 30,522,698 Ministry of Health and Human Services 1,900,907 18,137,702 172,101 266,577 2,073,008 18,404,279 Total 25,252,146 59,976,465 62,442,695 77,556,681 27,771,302 168,769,876 115,466,143 306,303,022 SUMMARY USD NAIRA @ N305 P 4 R Target $ 489,835,169 ₦ 149,399,726,545 Actual Achieved To Date $ 542,394,458 ₦ 165,430,309,644 Excess $ 52,559,289 ₦ 16,030,583,099 68 | P a g e