MSTY OF FINANM REPUBLIC OF GHANA GHANA ECONOMIC TRANSFORMATION PROJECT (GETP) AUDITED FINANCIAL STATEMENTS FOR, THE YEAR ENDED DECEMBER 31, 2021 #PEER I Professional I Ethical / Efficient I Responsive I Transforming Ghana Beyond Aid TABLE OF CONTENTS CONTENTS PAGE REFERENCE PROJECT BACKGROUND [NFORMATION 1-2 GENERAL INFORMATION 3-3 INDEPENDENT AUDITOR'S REPORT 4-6 STATEMENT OF FINANCIAL POSITION 7-7 SOURCES AND USES OF FUNDS 8-8 NOTES FORMING PART OF THE FINANCIAL STAEMENTS 9-18 GHANA ECONOMIC TRANSFORMATION PROJECT (GEPT) Introduction Ghana Economic Transformation Project referenced Credit Number 6465-GH is funded through Credit by the International Development Association fIDA) at an estimated cost of US$200 million. The Project was approved on July 2, 2019 and became effective on September 17, 2020. The Borrower is the Ministry of Finance on behalf of the Government of Ghana- The Implementing Agencies are the Ghana Investment Promotion Center, Ministry of Trade & Industry, Ministry of Business Development, Ghana Free zoncs Authority, National Board for Small Scale Industries (NBSSI) now Ghana Enterprise Agency (GEA). Chana Standard Authority (GSA), Registrar General's Department (RGD), Ghana National Accreditation Service (GhaNas), National Youth Entrepreneurship Planning and Venture Capital Trust Fund. The expected Project's closing date is November 30, 2025. Project Development Objectiveju) The objective of the Ghana Economic Transformation Project is to promote private investments and firm growth in non-resource-based sectors. Project's Components This project has four components. i) Component 1 - Enabling investments (US$35 million equivalent), will focus on improving the enabling business environment, investment attraction capacity and the quality infrastructure support system for companies that want to invest and grow their businesses in Ghana; ii) Component 2 - Crowding-in investments; Promoting spatial and industrial planning and development (US$79 million equivalent), will focus on enhancing the Government's programs in investment promotion and spatial development (including Special Economic Zones), thereby addressing the constraint to access quality industrial land in the country iii) Component 3 - Accelerating Entrepreneurship and MSME growth (US$80 million equivalent), will support entrepreneurship and MSME growth in 1 non-resource-based sectors, addressing specifically the limited development of the MSME and entrepreneurship support ecosystem, including early stage financing. iv) Component 4 - Project Management and Evaluation (US$6 million equivalent), will finance project management activities including fiduciary responsibilities, procurement, communication and dissemination, as well as monitoring and evaluation of project implementation and its impact. This will include capacity building for the Project Coordinating Unit (PCU), the Economic Transformation Unit and the Resource Mobilization and Economic Relations Division (RMERD) within the Ministry of Finance (MOF). 2 General Information Name Designation Project Coordinating Unit Yvonne Quansah, Director, ERMERD Franklin Ashiadey, Project Administrator Kofi Yeboah Ntow, Project Coordinator Paul K, Agbo, Senior Project Accountant Godwin Adapaura, Project Accountant Alhassan Abdul-Latif, Procurements Specialist. Louisa Amankwaa, Procurement Assistant. Address: Ministry of Finance Finance Drive, Accra. P. 0. Box M40, Accra - Ghana GA- 144-2024 info@mofep.gov,gh Tel: +233 302-747-197 Auditors Ghana Audit Service Post Office Box M96 Bankers Bank Of Ghana NIB Ghana Ltd 3 AUDIT SERVICE In e freplV the CGAD/GEN.ADM/21/146 R e ............ I .....M..96 NI. 96 P. 0 Box .......... 3. 0) 302 664920/28.20 Accra - f8 302 6751495 .- ................... , 5 July 22 THE CHIEF DIRECTOR MINISTRY OF FINANCE P. 0. Box M40 ACCRA Independent Auditor's REPORT ON THE FINANCIAL STATEMENTS OF THE GHANA ECONOMIC TRANSFORMATION PROJECT REFERENCED IDA CREDIT NUMBER 6465-FOR THE YEAR ENDED 31 DECEMBER 2021 We have audited the acconpanyirg financial statements of the Ghana Economic fransformation Project (GEPT) Referenced Credit Number 6465-CH under the International Development Association (IDA) which comprises the Statement of Financial Position as at 31 December 2021, Statement of Sources and Uses of Funds for the year ended 31 December 2021 as well as the Notes to the financial statements, including, list of material assets acquired to date with project funds and a summary of ;ignificant accounting policies as set out on page 7 of this report. Responsibility of Management and those charged with Governance for the Project's Financial Statements The Project Coordinating Unit is responsible for the preparation and fair presentation of the Financial Statements in accordance with International Public Sector Accounting Standards (IPSAS), and for such internal controls as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatements, whether due to fraud or error. Those charged with governance are responsible for overseeing the Ministry of Finance's financial reporting process. Auditors Responsibilities f or the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Project's Financial Statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists, Misstatements 4 can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISSAls, we exercise professional judg ent and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatements of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's (Mo's) internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. * Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation- We have communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We have also provided those charged with governance with a statement that the audit complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Basis for Opinion An audit involves performing procedures to obtain audit evidence about the amounts and disclosure in the financial statement. The procedure selected depends on the auditor's judgment, including the assessment of the risk of material misstatement of the .5 financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management as well as evaluating the overall presentation of the financial statements. Opinion In our opinion, the Project's Financial Statements present fairly, in all material respect the financial position of Ghana Economic Transformation Project as at 31 December 2021 and the results of its operations for the year ended in accordance with International Public Sector Accounting Standards (IPSAS) and provisions of the Financing Agreement referenced (IDA) Credit Number 6465-GH and the Accounting Policies set out in Note 1 of the Project's Financial Statements. BENJAMIN CODJOE DEPUTY AUDITOR GENERAL/CGAD for AUDITOR-GENERAL Date: 5 July 2022 6 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT CREDIT NUMBER 6465-GH STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 2021 200 NON-CURRENT ASSETS NOTES US$ US$ nvestment In Project 2 16,110,60844 760,31936 ICURRENT ASSETS - 7Bank Balances 3 716, 889,736 37 "Total __1____ 17,826,919.8S 1,560,055.69 FINANCED BY --- - IDA Designated Loan Account 4 17,S26,9a.a 2,6S0OSS.69 Signed: Mr Kofi Yeboah Ntow Mr- Paul Kwesi Agbo Project Coordinator Project Accountant Ministry of Finance Ministry of Finance Date: Date: 7 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH SOURCES & USES OF FUNDS FOR THE YEAR ENDED DECEMBER 2021 N ote 2021 2020 at 31 Dec, SOURCESOF WNUSU50 USDUD IDA Designated Dollar Account 4 16D174,997,09 1,650,Doo 17,224,997.og Net Interest earned S 1,867.07 55.69 1,922.76 Total Project reeiptsts 16,176,864.16 1,650?O055.69 17,826,919,85 USES OF FUNDS BY PROJECT COMPONENT - Component 1: Enabling Investments 1.1 irrprovin the Business Regulatory Environment 6 1,16,662.39 1.2 Capacity Building of GIPC staff and improving 100 95,662.39 GlPC's Systems and Tools 7 966,484.59 0.00 966,484 1.3 Investment Policy and Promotion 8 301,880-63 0.00 301r880.63 Component 2-Crowding-in investment i _380.0 2.1 institutional and planning capacity bui ding 9 51,818.96 1,2600 53,078.96 2.2 Viability Gap Fund for zone development 0.00 0.00 0,0 Component 3: Accelerating Entrepreneurship and 0_00 SME growth 3.1 Reform and Rationalization of Government - Entrepreneurship and SME Support Agencies 10 3,005,637.89 139,962.92 3,145,600,81 3.2 High-Growth5MEs and Entrepreneurship 11 4,94,579,10 0.00 4,294,57910 Erosystem Strengthening 3.3 Venture Financing for Early Stage Businesses and Strate1ic industries,2 3,087493.08 Component 4: Enhancing the capactyforfinancial sector policy, monitoring, supporting project implementation, 4.0 Project Manaement and Evaiuation 1 1 2,446,732.44 619t96.44 3,065,828.88 Total Expenditure 15,350,289.08 760,319.36 16,110,6094 Incom S 825,575+08 889,73633 1,716,311,41 8 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 1. Significant Accounting Policies The following are summary of the significant accounting policies adopted in the preparation of the Financial Statements: Basis of Accounting The Financial Statements have been prepared on IPSAS cash basis and under the historical cost convention. This means that revenue and expenditures are recognized in the FinanciaL Statements when they are received and paid for respectively. Under the historical cost convention, assets and liabilities are reflected or disclosed in the Financial Reports at the cost incurred or price paid at the time of transaction, Property, Plant and Equipment All Property, Plant and Equipment acquired or constructed under all sources of funding have been stated at the actual payments made during the year and shall not be depreciated- Revenue and Expenditure Revenue is recognised when funds are received from IDA and expenditures are accounted for in the year when goods and services are incurred and paid for. Presentational Currency The Financial Statement is denominated in the United States Dollar (US$}. MINISTRY Of FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 2. Investment in Project Investments are the total eliglble expenditures Incurred on the Project as at the date of reporting, They are recognized in the statement of financial position as assets of the Project at the total value of all eligible expenditures, DescriptionOpening Bal Additions Closing Bal 31 Jan. 2021 US$ clrn 01 Dec. 2021 US$ US$ Component 1: Enabling Investments 0.00 2,464,02761 2,464,027,61 Component 2-Crowding-in Investment 1,260.00 51,818,96 53,078.96 Component 3: Accelerating 1 Entrepreneurship and SME growth 139,962.92 10 387,710 07 10,527,672,99 Component 4: Enhancing the capacity for financial sector policy, monitoring, 61909644 2,446,732.44 3,065,828.88 supporting project implementation Total 760,319.36 15,350289.08 16,110,608.4" 3. Bank Balances This represents the Bank balance of funds in the Project's USD Designated Account with, National Investment Bank, Bank of Ghana and bank balances of funds advanced to Technical Implementation Agencies (TIAs) as follows: S/N Description US$ 1 Project Designated Account A -BoG 3,445.09 2 Project-Designated Account B -NIS 741,318.13 Closing Bank Balances of Advances to TIAs 3 Ghana Enterprise Agency-NIB 1,808,493.41 4 Venture Capital Trsut Fund -NIB 260,153.56 5 Ghana Investment Promotion- NIB 50,000,00 6 Ghana Free Zone Authority-NIB 50,000.00 7 GhaNas Ghana -NIB 50,000.00 10 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS S/N DescriptionUS$ 8 Business Regulatory Reform-NIB 118,962,49 9 Special Economic Zone & Industrial Park-NIB 0.00 10 National Youth Employment Programme-NIB 0.00 11 Ghana Standard Authority-NIB 88,93447 12 Register General Department-BOG 73,10g,23 Total 3,244,415.38 Less Un presented Cheques -TiAs (1,528,103.97) sin Bn_k_nces 1,716,311.41 4. Funds from International Development Association (IDA) This represents deposit of portions of the Project funds into the Designated Accounts to finance eligible expenditures as they are incurred and for which supporting documents are expected to be provided at a later date. S. Net Interest Earned This represent interest earned on the portions of the Project funds deposited into the Project's USD Designated Account at National Investment Bank net of bank charges. 6. Component 1.1: Enabling Investments p F Cumnulativeas Ref. Sub component description 2021 2020 CmtDec. -- - - 2021 1 Support for Business Regulatory Reforms and Governance 1,195,662.39 0.00 1,195,662.39 1.1.2 Operationalization of Office of the 0 0.00 0.00 Registrar of Companies 0.00 000 0.0 Total 1,195,662.39 0.00 119S,662.3 11 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 7. Component 1.2 -Capacity Building of GIPC staff and improving G1PC's Systems and Tools Rof. Sub component description 1200 Cumulative as -uu- -e2021 1 Capacity Building of GFPC staff and -- -_ - i mproving GlPC's Systems and Tools 0.00 0.00 000 1.2.2 Support for Investment Promotion - Campaign and Roadshows 16 487.27 0.00 16,487.27 .2.3 Upgrade ICT and Office infrastructure 949,997-32 0.00 949.997.32 Total 966,484,S9 0.00 966,484.59 8. Component 1.3- Investment Policy and Promotion [Ref, 5 ub component description 2021 2020 Cumulative as US$ US$ at 31 Dec. 2021 1.31 Capacity Buiding of GSA and related a1e3.ie 0,00 0.00 0.00 1.3.2 Support th e development of Q1 2 68 services nfrastructure 288,60868 0.00 288,608.68 1.33 Support to Institutional reforms 13,271.95 0.00 13,27195 Total ______T__301880.63 0.00 301,880.63 9. Component 2.1- Institutional and planning capacity building Ref. Sub component description 2021 US$ 2020 US$ tve as at Dec. 2021 2.1.1 Funding for training and studies 51 818,96 1,260.00 53,078.96 2.1.2 DLI related to Regulatory and Institutional reforms 0.0 0 00. DLI related to Implementation 2 1.3 capacity upgraded in spatial 0.00 0 000.00 development DLI related to the licensing 2.1.4 mechanism for private zone 0 00 D 00 ___developers eTotal _5 1,260.00 $3,078.9 12 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 10. Component 3.1- Reform and Rationalization of Government Entrepreneurship and SME Support Agenties 2021 2020 Cumulative Ref. Su oponent descriptionasi31Dc .Tsui, cUS$ US,$ as at 31 Dec. - ! _ US$2021 3.1.1 NBSSJ Institutional Reforms and 108,714,45 2021 Capacity Building 31.2 NEIP Capacity Building 144,940.12 0.00 144,940,12 3.13 VCTF Strategic Review, Reforms, and Capacity Building 482,176.52 31,248.47 513,424,99 F3.4 Establishment of Enterprise Ghana Agency 2,087,759.85 0.00 2,087,759,85 Total I-3,005,637.89 139,962.92 3,145,600.81 11. Component 3.2- High-Growth SMEs and Entrepreneurship Ecosystem Strengthening Curnulative as 2021 2020 at 32 Dec. Ref. Sub component description usLaP3SDc US$ US$ - - J. 2021 Management of Market Connect and 3.2-1 1,1,4.60.0 398364 Entrepreneurship Programs 3,918346.46 0.00 3,918,34646 [3.2.2 Market Connect type Program 0 0.0 000 3.23Entrepreneurship Ecosystem 3.2.3 Development 376,232.64 0.00 376,23264 Total 4,294,579.10 0.00 4,294,579.10 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 12. Component 3.3 - Venture Financing for Early Stage Businesses and Strategfc Industries. Ref. Sub component description 2021 2020 umulative as US$ US$ at 31 Dec. 5tartup Catalyst Fund --Capital for- 2021 3 3.1 Seed(Anges, Accelerators, Seed C 00 0.00 000 Funds) L 3.Strategic industry Fund - Co-- 332 investment 000 0.00 0.00 TA for fund manager training, investor - training, and fund TA expenses 3,087493.08 0 00 3 087,493.08 Total 3,087,493.08 0.00 3087,49308 13. Component 4.0 Project Management and Evaluation 2 021 202 0 Cumulative as Ref. Sub component description 210 202uat1 eas -7 2021 4i Expenses on procurement activites.- - -advert, evaluation, priing, etc. 229,600.82 148,54744 378,148.26 KIL Communication and dssemination 24,722.15 0.00 24,722.15 43 Monitoring and evaluation of project implementation and its impact 1,507,452.21 470,549.00 1,978,001.21 4.4 Capacity building for the PCU and RMERD Staff 0[0 ta 686,12198 686,;2298 __L-Total ___ _ _ 24 Ii98.16 619096.44 3,066,994.60 14 MINISTRY OF FINANCE EXTERNAL RESOURCE MOBILIZATION AND ECONOMIC RELATIONS DIVISION GHANA ECONOMIC TRANSFORMATION PROJECT IDA CREDIT NUMBER 6465-GH NOTES TO THE FINANCIAL STATEMENTS 14. Fixed Assets Register DATE OF REF. DESCRIPTION DURCHASED CURRENT LOC CO$T (GHC) COST YEARS IN CURRENT (USD) USE CONDITION NATIONAL IT MARKET ENTREPRENEURSHIP 10 EPSON PROJECTORS 24/05/2021 AND INNOVATION 304,590,D4 52,972-18 1YR VERY GOOD PROGRAMME (NEIP) NATIONAL 2 .T MARKRET ENTREPRENEURSHIP 10 PROJECTORS SCREEN 24/05/2021 AND INNOVATION 304 590 04 52,972.18 IYR VERY GOOD PROGRAMME (NEIP) IT MARKET 10 HP ALL IN NATIONAL 3 ONE COMPUTER 171NCH 24/05/2021 ENTREPRENEURSHIP 304 2918 lYR VERY GOO 1668 1TB AND INNOVATION PROGRAMME (NEIP) 15 NATIONAL 4 LT MARKET CANON 24/0/202 ENTREPRENEURSHIP MEAVY DUTY PHOTOCOPJER AND INNOVATION 304,59004 52,972.18 1YR VERY GOOD PROGRAMME (NEIP) NATIONAL IT MARKET 24 ENTREPRENEURSHIP PHOTOCOPIER DADF /05/2021 AND INNOVATION 5297218 1YR VERY GOOD PROGRAMME (NEIP) I.T MARKET CANON NATIONAL 6 PHOTOCOPIER INNER 24/05/2021 ENTREPRENFURSHIP 304,590-04 52,972.18 IYR FINISHER AND INNOVATION VERY GOOD PROGRAMME (NEIP) NATFONAL 7 IT MARKET CANON ENTREPRENEURSHIP PHOTOCOPIER PEDESTAL 24/05/2021 AND INNOVATION 304,509.04 52,972.18 1YR VERY GOOD PROGRAMME (NEIP) NATIONAL IT MARKET CANON 24/05/20 ENTREPRENEURSHIP PHOTOCOPIER TONER AND INNOVATION 304,509.04 52,972.18 1YR VERY GOOD PROGRAMME (NEIP) 16 .T MARK FT NATIONAL 9 10 HP LAFTOP COMPUTER 24/05/2021 ENTREPRENEUR5HIP 304,509.04 VE71 1 17 16GB 1TB AND INNOVAION VERYCGOOD PROGRAMME (NEIP) LT MARKET NATIONAL 10 14 HP LASERJET PRINTER 24/0S/2021 ENTREPRENEURSHIP 30004 52,972.18 IYR 479FDW AND INNOVATION VERY GOOD PROGRAMME (NEIP) MOLE PROJECTS AND MACHINERY LIMITED.. 1TWO(2) TOYOTA LAND 2/3/2021 GETP PCU OFFICE 2,550,00.oo 154,379-23 1YR VERY GOOD CRUISE PRADO MOLE PROJECTS AND 12 MACHINERY LIMITED... 26/3/2021 GETP PCJ OFFICE 560,066.42 100,851.12 1YR VERY GOOD TWO(2) TOYOTA CAMRY OMEGA COMPU-SYSTEMS ENGINEERING LIMITED 13 (1) AUTOMATIC VOLTAGE 24/06f2i2 GIPC47 5E REGULATOR, 411650A9 73,996 51 1YR VERY GOOD (1)UNINTERRUPTED POWER SUPPLY 17 MOLE PROJECTS & 14 MACHINERY LIMITED. 14/10/2021 NEIR (2) and GEA (1) 808,398.24 142,049.50 TOYOTA HILUX 13) MOLE PROJECTS & 15 MACHINERY LIMITED. 14/10/2021 NEP (2) and GEA (1) 448,912.60 78,881.68 TOYOTA HILUX (3) LT MARKET LIMIT[D. (1) TELEVISION SCREEN 40", (1) 16 TELEVISION SCREEN 42", (5) 20/9/2021 GIPC 1,112,43732 189,835.72 TELFVISION SCREEN 65", CONFERENCE EQUIPMENTS MOLE PROJECTS& 23 MACHINERY LIMITED. 14/10/2021 NEIP (2) and GEA (1) 448,91260 76,606.25 VERY GOOD TOYOTA HILUX (3) TOTAL. J9,385,954.07 IL,346,32181 18 :1y VICE CGAD/GEN.ADM/21/145 .. M. 96 I~ i. ~~4''i fy 0l j 1 Acc ra * : ¼f 1 it-ilVrg 5 July 22 THE CHIEF DIRECTOR MINISTRY OF FINANCE ACCRA MANAGEMENT LETTER ON THE AUDIT OF THE GHANA ECONOMIC TRANSFORMATION PROJECT FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2Q21 Introduction We have in accordance with our mandate under Article 187(2) of the 1992 Constitution and Section 11(1) of the Audit Service Act, 2000 (Act 584). audited the accounts and other related records of the Ghana Economic Transformation Project (GETP) referenced International Development Association (IDA) CREDIT NUMBER 6465-G1-1 for the period 1 January to 31 December 2021. The audit was carried out by Messrs. Evans Agyin Kobina, Russell Owusu Asante, Charles Brown Ahlijah and Abdul Rahman Kaleem, 2. We wish to bring to your attention the following observations and recommendations made during the audit. We have discussed these matters with the key personnel whose comments and responses have been incorporated in this report. 3. We shall be grateful to receive your formal response within 30 days after the receipt of this letter as required by Section 29(1) of the Audit Service Act, 2000 (Act 584). Audit objectives 4- The audit objectives were a. Express an opinion as to whether the Project's Financial Statements present fairly in all material respects the financial position of the Ghana Economic Transformation Project as at 31 December 2021 GETP f0ancgenient Letter 2021 and the results of its operations for the period in accordance with the provisions of the Financing Agreement referenced Credit Number 6465-GH and the International Public Sector Accounting Standards (IPSAS); b. Evaluate the system of internal controls related to the Ministry of Finance, assess control risk, and identify significant deficiencies, including material weaknesses; and c. Perform tests to determine whether the Ministry of Finan e complied, in all material respects, with the Financing Agreement, Project Appraisal Document referenced Report No: PCBASICOT45161, World Bank Procurement Regulations for [PF Borrowers of July 2016, revised in November 2017 and August 2018, Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulations, 2019 (LI 2378), Public Procurement Amendment Act, 2016 (Act 914) and Income lax ct, 2015 (Act 896). Audit scope and methodology We audited transactions undertaken by the Ministry of Finance (MoF) or the period 1 January to 31 December, 2021. We carried out the audit to obtain a reasonable assurance that the Project's Financial Statements were free of material misstatements, in accordance with International Public Sector Accounting Standards (IPSAS), the Public Financial Management Framework and relevant provisions of other public legal frameworks and the enabling terms and conditions set out in the Project Financing Agreement. 6. As part of the audit, we examined on a test basis, evidence supporting the amounts and disclosures in the Financial Statements, assessed accounting principles used, and evaluated the overall Financial Statements presented, Among the key areas covered in our audit are project governance, project delivery, procurements, contract management, budgetary controls, and Monitoring & Evaluation activities and followed up on previous audit report. Auditing Standards U. The audit was carried out in accordance with the International Standards of Supreme Auditing Institutions (ISSAls). The Standards require GETP Monagernent Letrer 2021 that we plan and conduct the audit to obtain reasonable assurance that the Financial Statements are free from material misstatements. Statement of responsibility 8. It should be noted that the implementation and maintenance of systerms of accounting and internal control are primarily the responsibility of Management. 9. Our responsibility is to plan and perform the audit work such that there is a reasonable expectation of detecting material irregularities and control weaknesses. As a result, the report should not be regarded as a complete list of internal control weaknesses. Status of Internal Control System 10. In general, the control environment continues to be reliable, although we encourage Management to address the issues raised. Key personnel 11. The following key officers were in charge of the financial and administrative duties of GETP during the period under review: No. Name Designation 1. Madam Yvonne Quansah Director ERMERD 2. Mr. Kofi Yeboah Ntow Project Coordinator 3. Mr. Franklin Ashiadey Project Administrator 4. Mr. Paul Kwesi Agbo Senior Project Accountant 5. Mr. Godwin Adapaura Project Accountant 6. Mr. Alhassan Latif Head, Procurement Summary of significant findings and recommendations 12. We noted that though the Start-up Catalyst Fund and Strategic Industry Fund have been established, registered as legal entities and cleared in the 2020-2021 Annual Work plan & Budget, the External Resource Mobilization and Economic Relation Directorate has not released moneys to the Venture 03F'rF,'v!ar1qemnemit tetter 2021 capital Fund to implement activities under the Fund. We recommended that External Resource Mobilization and Economic Relation Division should liaise with relevant agencies including the Venture Capital Fund to address all challenges to pave way for the release of the funds for disbursements to qualified SMEs and Start Ups. 13. We noted from the 2021 Annual Work Plan & Budget that the time lines for the establishment of the Viability Gap Fund was between the first and third quarters of 2021. F lowever as at May 10, 2022, the Ministry of Trade and Industries (MOTI) has not established the Fund, We urged the Technical Committee and Project Oversight Committee to provide the requisite support to the Project and address all implementation challenges hampering the establishment of the Viability Gap Fund. 14. An amount of GH344,999.99 was transferred to the Venture Capital Fund on payment voucher number G1TP/21/OCT/025 for the launching of Start-Up Catalyst and Strategic Industry Funds to make the Funds operational for the benefits of the Private Sector Players, however since the transfer in October 2021, the Funds have not been launched because the amount has been utilised on another component. We advised Management of the Venture Capital Fund to desist from the practice of using dedicated funds for other activities. We also recommended that the Venture Capital Fund should source fiinding from the Project to launch the Start-Up Catalyst and Strategic Industry Funds. 15. We noted that Component two of the Project involves the construction of Craft Park at Bonkra, Kumasi in the Ashanti Region. In this regard the Project in 2020 had engagement with the affected persons as part of the environmental and social impact assessment (ESTA) for prioritized individual Special Economic Zones (SEZ) projects, to identify any social and environmental issues and prepare a site-specific environmental and social management plan (ESMP) to provide mitigation measures such as compensation payment, relocation for implementation. However as at May 2022, the Project has not published the Report of the ESIA. We urged the Prolect Oversight and Technical Committee to address all challenges affecting the Stakeholder Consultation and other Engagement process to enable the report on the ESIA to be published. fl> Tnooemqnt Letter 202, 16. We noted that the Project's Annual Work Plan & Budget (2020) contains budget for the purchase of ten vehicles (7 Cross Country Vehicles, 2pick ups and a saloon car) under four components of the Project and time lines for the commencement of procurements and delivery of the vehicles. However, as at May 2022 the vehicles have not been procured to aid monitoring and administrative activities. We recommended that the Director of the External Resources Mobilization and Economic Relations Division should liaise with beneficiary implementing Agencies to resolve all challenges affecting the procurement to pave way for the delivery of the vehicles to aide project activties. DETAILS OF FINDINGS AND RECOMMENDATIONS Non-release of startup catalyst and strategic industry funds - $45 million 17. Schedule 1 part 3 paragraph 3.3 of the Financing Agreement referenced Credit Number 6465-Gi- requires: a) Establishment, Capitalization and operation of a legal and financial mechanism, namely a Startup Catalyst Fund (SCF), designed to leverage both public and private sources of funding, using Early- Stage Investment Vehicles to make debt, equity and quasi-equity investments in selected start-ups and SMEs. b) Subject to the outcome of the feasibility study carried out under Part 3.1(iv) of the Project and the Associations approval, establishment, capitalization and operation of a legal and financial mechanism, namely a Strategic Industries Fund (SIF), to make debt, equity and quiasi-equity investments, either directly or through Investment Vehicles in selected SMEs operating in industries that are deemed as strategic for the transformation of the recipient's economy, R18 In pursuant of this, a total of USS90M has been earmarked as follows: GETP Management etter 2021 No. Description Amount US$ million Vnturc Financing for LarIY-5tage businesses and strategic industries 45 Startup catalyst fund- capital for seed or early-stage financing activities (Angels, accelerators, seed 20 fUn_ds) strategic Industry Fund- co-investment for qualified 3 investment funds that make investment in strategic industries ($500k-$3m of co-investment for 10-15 20 i nvestment), Technical Assistance (TA) for fund manager 4. training, investor training, and fund TA expenses ($5m pool) 19. We noted that though the Start-up Catalyst Fund and Strategic Industry Fund have been established, registered as legal entities and cleared in the 2020-2021 Annual Workplan & Budget, the External Resource Mobilization and Economic Relation Directorate has not released funds to the Venture Capital Fund to implement activities under the Fund. 20, We also noted that Sub-component 3.3 seeks to provide seed and venture capital to Small and Medium Scale Enterprises (SMEs) through the establishment of funds for co-investments in SMEs and strategic industries, thus the delay in the release of funds to the Venture Capital Fund for subsequent disbursements to qualified SMEs and Start-ups could impact negatively on this category of businesses, 21. We recommended that External Resource Mobilization and Economic Re]4ation Division should liaise with relevant agencies including the Venture Capital Fund to address all challenges to pave way for the release of the funds for disbursements to qualified SMEs and Start-ups. Management response 22. Management indicated that the Project Implementation Manual prescribes the key protocols and milestones expected to be achieved before such funds are released to Technical Implementing Agencies. In order for such funds to be released, Venture Capital Trust Fund (VCTF) is required to have its Board in place and set up an Investment Committee to okay the start- GEP Manaemenr Letter 2021 up fund for the investment of the fund. The Investment committee must also have a member of the board included in its membership. VCTF is also expected to make formal request to the Bank through the Project Coordinating Unit for the release of the funds, However, there was a delay in getting the VCTF Board in place. Currently, all is set for the disbursement of the funds to VCTF pending the submission of a request from VCTF. Infrastructure investments for special economic zone development-US$63m 23. Paragraph 40 of the Project Appraisal Document and Sub-Component 2.2 of the Project Component requires the establishment of a Viability Gap Fund (VCF) to be managed by a Special Purpose Vehicle (SPV), which will invest in off-site and on-site infrastructure in zones identified as priority. Until this VGF is properly set-up, this activity will be implemented either through the hiring of a specialized firm to run the fund on behalf of the Government or through the hiring of specialized and dedicated staff for the Project Coordinating Unit. 24. Activities to be funded under the VGF include: construction, paving or upgrading of access roads to the Special Economic Zone (SFZ) site; cxtension or upgrading of the electric power network to the SEZ site; extension or upgrading of the water network to the SFZ site, including pipeline construction or upgrading; provision of infrastructure and services to surrounding communities like schools, clinics and hospitals, water, electric power, waste treatment and solid waste removal. 25. We noted from the 2021 Annual Workplan & Budget that the timelines for the establishment of the Viability Gap Fund was between the first and third quarters of 2021. However as at May 10, 2022, the Ministry of racde and Industries (MOTI) had not established the Fund. 26. The delay in the establishing the Fund would also delay the appointment of the Special Purpose Vehicle to manage the Fund and their administrative setups. This will eventually delay qualified companies access to fund for eligible activities such as construction, paving or upgrading of access roads to the SEZ site; extension or upgrading of the electric power network to the SEZ site; extension or upgrading of the water network to the SEZ site, including pipeline construction or upgrading; provision of F ' Monogernent Letter 2021 infrastructure and services to surrounding schools, clinics and hospitals, water, electric power, waste treatment and solid waste removal. 27. We recommended that the Technical Committee and Project Oversight COmMittee should provide the requisite support to the Project and address all implementation challenges hampering the establishment of the Viability Gap Fund. Management response 28 Management indicated that the Project initially conceived this as last mile infrastructure; thus, investors must have been wooed into areas earmarked as SEZs prior to the delivery of these infrastructures. The Project however, noted that this infrastructure should rather herald efforts geared ilowards bringing in investors into these SEZs. 29. Management added that this suggests that the funds were only to be utilized during the 4Uh and 5th year of the project. To avoid the payment of interest on drawdowns it was not key for the funds to be drawn down when they were not needed- The Hon. Minister of Finance has granted the project approval to restructure which is ongoing The restructuring is expected to address some of the challenges identified in the course of implementation and will ensure that the project dwells on the existing VGF under the earlier PPP project and not the creation of another VGF under this project. Misapplication of fund - GHC345,000.00 30- Section 7(1) of Public Financial Management Act, 2016 stipulates that a Principal Spending Officer of a covered entity shall ensure the regularity and proper use of money appropriated in a covered entity. 31, We noted that an amount of CH344,999,99 was transferred to the Venture Capital Fund with payment voucher number GFTP/21,/OCT/025 for the launching of Start-up Catalyst and Strategic Industry Funds to make the Funds operational for the benefits of the private sector players. 32. We also noted that since the transfer of the money in October 2021, the Start-up Catalyst and Strategic Industry Funds have not been launched but an amount of G1 (C255,184.14 of the Gf1iC344,999.99 was misapplied on the Fund GETP Monogeme)t Letter 2021 Development Programmes, a sub-component of the Ghana Economic Transformation Project, 33 The misapplication of the money and the non-launching of the Start-up Catalyst and Strategic Industry Funds stalled the operationalizatian of the Funds. 34. We recommended that Management of the Venture Capital Fund should desist from the practice of using dedicated funds for other activities- We also recommended that the Venture Capital Fund should source for funding from the Project to launch the Start-up Catalyst and Strategi Industry Funds. Management response 35. Management stated that this anomaly was due to delay in the release of funds for the Fund Manager Development Programme. IHowever, the Trust Fund has been reimbursed and funds are available for the launch of the two funds. 36. Management added that the fund was expected to be lunched on 290h April 2022. However, the Ministry kept it on hold to allow it to participate in the 2022 Spring Meoting. VCTF is currently in touch with the \Miit ry : schedule a new date for the lunch. Non-disclosure of environmental safeguard report 37- Paragraph 6.9.1 of the Project Implementation Manual and the World Bank safeguards policies require that environmental reports/Environmental and Social Impact Assessments (ESIA) for projects are made available to project affected groups, local NGOs and the public at large. Public disclosure of ESIA documents or environmental reports is also a requirement of the Ghana ESIA procedures. 38. Also, Public notice in the media should be done through at least two widely circulated national newspapers or radio announcement or both, containing a brief description of the Project; list of venues where the Environmental and Social Management Plan (ESMP) report is on display and GFTP Monagerrenr Lettrer 2021 available for viewing; duration of the display period, and contact information for comments, 39. We noted that Component 2 of the Project involves the construction of Craft Park at Boankra, Kumasi in the Ashanti Region In this regard the Profjc t in 2020 engaged the affected person as part of the ESIA for prioritized individual SEZ projects to identify any social and environmental issues and prepare a site specific Environmental and Social Management Plan to provide mitigation measures such as compensation payment, relocation for implementation, etc. 40. We observed that though the Environmental and Social Impact Assessments was conducted in 2020, the Project has since not published the Report of the ESIA, 41. The Project Implementation Unit explained that the Report of the Environmental and Social Impact Assessments for the Craft Park had not been published because Stakeholder Consultations were on-going. 42 The delay in the publication of the Report is likely to affect the time lines for compensation payments, relocations and project take off. 43. We recommended that the Project Oversight and Technical Committees should address all challenges affecting the Stakeholder Consultation and other Engagement process to enable the report on the ESIA to be published. Management response 44. Management indicated that the Ghana Economic Transformation Project completed the procurement processes and engaged Consultants fo- the preparation of Environmental and Social Impact Assessment for the Greater Kumasi Industrial City Project and Environmental and Social Management Plan for the Tena Export Processing Zone in January 2022. These Consultants ar currently in the process of submitting their Draft Reports for review by stakeholders including the World Bank and EPA. It is upon the receipt of the Draft ESIA Report and Final ESMP that public disclosures are carried out in the newspapers. GFTP Mcngoement Letter 2021 45. "However, as part of the process in accordance with the World Bank Safeguard Policies OP/ 1P 4.01 and OP/ BP 4.01 which are triggered under the project and the Ghana Environmental Assessment Regulations LI 1652, ESIA Scoping and Resettlement Action Plan (RAP) Public Notices which are now due are slated to be published in the May 19, 2022 edition of Daily Graphic and Chanaian Times Newspapers. Delay in the purchase of Project's Vehicles 46. The Ghana Economic Transformation Project is nationwide Project and involves extensive monitoring and evaluation of Project results achieved in the field across the country. The infrastructure component of the Project also requires that the Environmental and Social Safeguards Specialist undertake extensive field trips to monitor and ensure that the Project complies with the World Bank safeguards standards. These require logistics including vehicles to be able to perform these activities. 47. We noted that the Project's Annual Work Plan & Budget (2020) contains budget for the purchase of ten vehicles (7 cross country vehicles, 2 pick-ups and a saloon car) under four components of the Project and time lines for the commencement of procurements and delivery of the vehicles. However, as at May 2022 the vehicles have not been procured to aid monitoring and administrative activities. Details of the vehicles and the planned timelines are shown below: Description of vehicle Denficiary Qty Start Date Planned Contract contract execution date 4-Whecl Drive Cross Venture Capital Trust 2 Dec. 2020 Jan. 2021 March 2021 C unlry Vehicles Fund Saloon Car Ver1ture Capital Trust 1 Dec. 2020 Jan.2021 Feb. 2021 Funds 4-Wheel Drive Cross Prcject Coordination 2 May 2021 June 2021 Aug. 2021 Count y Vehicles Unit (GETFPCU) 1-Aheel Drive Cross Economic 1 Dec. 2020 Jan.2021 March 2021 Country Vehicles Transformation Unit (MoF) GEYP To0riOgemenLeter 2021 4x4 Pickup Vehicle Project Coo rdination April 2021 Jari2021 July 2021 Unit (GETP) 4x4 Pickup Vehicle Ministry of Trade and D Jan. 2021 March 2021 Induistries 4WelDrive Cross Ghana Free Zone 2 July 2021 SepL. 2021 iNov, 2021 1Country Vehicles. AuthorTity Total 10 48-. The delay in procuring the vehicles will affect monitoring, evaluation and administrative activities which are critical for the identification of inplementation challenges and the achievement of the Project Development Objectives, The delay will also affect the budget amount for the vehicles amidst inflation. 49. We recommended that the Director of the External Resources Mobilization and Economic Relations Division should liaise with the beneficiary Implementing Agencies to resolve all challenges affecting the procurement to pave way for the delivery of the vehicles to aide Project activities, Management response 50. Management explained that the project initially provided an amount of GHIt3,754,500 for the procurement of 11 vehicles in the approved 2021 Work Plan. I lowever, when the process commenced, we noted that the estimates used in the Work Plan was far lower that than the market values. (e.g. the price for the one land cruiser was over US$71,000, more than the initial estimate) The project therefore needed to obtain a 'No Objection' from the Bank in order to revise the estimates. The Bank granted its 'No Objection' and the contract for the supply of the vehicles is currently drafted and pending signature. Follow-up on previous audit recommendations 51 Action taken on recommendations made in our previous report referenced CGAD/GEN.ADM/21/52 of 22 October 2021 is attached as an Appendix to the report. GETP Monagement Letter 2021 Acknowledgment 52, We are grateful for the assistance and support accorded the audit team by the Project Implementation Tearn and staff of the Project during the audit, BENJAMIN CO JOE DEPUTY AUDITOR-GENERAICGA) for: AUDITOR-GENERAL cc: The Director, ERMERD Ministry of Finance Accra The Coordinating Director, Operations Ministry of Finance Accra (7*! ~Monog et ter 2021 FOLLOW-Up ON PREVIOUS AUDIT APPENDIX Audit Findings Audit Recommendation Managernt's Response Action taken by Auditor's comments 1 Management and Audit on evidence gathered committee Absence of defined We recommended that the PCU Management responded that Done, The 2022 work plan I timelines in the annual should provide specific timelines for initial work plan and budget complied with this work plan & budget the execution of activities as well as focused mainly on activities observation 2022 GETP Annual the expected output before which could be completed after Work Plan and submission to the Oversight the effective date up to the end Budget document is Committee of 2021 available Failure by the project We recommended that the PCU Management agreed with the Done. Steering Committee steering comrnittee to should liaise with the POC and share recommendation and explained Meeting held in 2021 at hold meetings the planned activities to facilitate the that the PCU responsible for the Tang Pla Hotel along Report of the traini ng organization of review meetings daily administration of the Executive training is available and project and that the formation of participants list the PCU was delayed till September 2020 due to covid-19 pandemic hence the inability of unit to organise the POC meetings Failure to pay We recommended that the PCU Management agreed with Complied with. Evidence is available withholding taxes on should ensure timely remittance of recommendation and explained Withholding taxes are paid at the Project time taxes withheld to the GRA to help that the withholding tax on time. On monthly basis Accounts improve revenue generation and avert payments were delayed due to payment of penalties. excessive pressure on the Project Account Unit. GETP Managern Letter 2021 Page 14 Non-Appointment of We recommended that the project Management responded that Noted. The interim Independent Coordinating tearm should liaise with the Bank agreed with MoF to put arrangement is still in place Verification Agent the project task team leader to kick in place an interim arrangement and working No objection for the start the process for the recruitment for the verification of Du interim arrangement of the Independent Verification achieved. is available Agents Failure to organize We recommended that the PCU Management stated that the Annual stakeholder's All TIAs participated annual stakeholders' should provide budget line under the project became effective on forum is expected to be in the 2022 Annual forum project Implementation Support to August 31 2020 as a result the initiated when project Work Plan and enable the organization of the workshop could not be results become substantial Budget preparation workshop, organized considering the fact and tangible to allow in- session held from that the project was only four depth stakeholder October 13-16, 2021 months old and not much have discussions as envisaged. in Koforidua. Report been achieved to influence a rs available detailed discussion among In the interim, project stakeholders especially with the stakeholders, particularly impact of Covid-19 and related TlAs, have been actively issues. engaged in the annual GETP planning and budgeting p(ocess. All TiAs participated in the 2022 Annual Work Plan and Budget preparation session held from October 13-16, 2021 in Koforidua. Provisional 2022 Work Plan & Budget was submitted to the Bank on 15th Nov. 2021. Subsequently, the Work plan & budget was revised following a GETP Management Letter 2021 Page 15 technical stakeholder validation meeting held on 24th Nov. 2021 in Accra, Failure to create We recommended that the Project Managements agreed with our The Board for the QRC is Sensitisation Reports awareness on the office Oversight Committee should liaise recommendation now in place. The Board are available of Registrar of with the Registrar General to engage was sworn in on 250 April, Companies and Act 992 the Attorney General and Minister for 2022. The Board have had Justice for a speedy formation of the two meetings so far. The Registrar General Departments' Board New ORC will be launched to pave way for the awareness by the HE the President on creation and sensitization on the the 221uly, 2022. operation of Office of Registrar of Sensitization has been Companies. carried out across the country in all the 16 Regions of the country about the new Company's Act since it was assented to in August 2019. More sensitisation will be done with the operationalisation of the ORC Non documentation on We reconrnended that the PCU Management stated that the The embossment is on- The Distribution lst is distribution of office should liaise with the beneficiaries of distribution list was available but goi ng available equipment US the items to produce the laptops for was filed with the iCT Division $71,744.12 inspection provide a distribution list since they are responsible for and have the [aptops embossed. We installation and distribution. also urged the Project Oversight Committee to strengthen its oversight on the project. GETP Monagement Ltter 2021 Page 16