THE FEDERAL GOVERNMENT OF SOMALIA Project Name: Capacity Injection Project Implementing Entity (MDA) Office of the Prime Minister PROJECT GRANT/CREDIT NUMBER TF0 A0415, TF0 5472 TB0 0692 Report and financial statements for the financial year ended 31 December 2021 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS), 2017. Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 Table of Contents ACRONYMS AND ABBREVIATIONS ................................................................................................................. 3 1. PROJECT INFORMATION AND OVERALL PERFORMANCE ................................................................ 5 2 STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ...................................................... 13 3 REPORT OF AUDITOR GENERAL ............................................................................................................ 14 4 STATEMENT OF RECEIPTS AND PAYMENTS ...................................................................................... 17 5 STATEMENT OF FINANCIAL ASSETS .................................................................................................... 18 6 STATEMENT OF CASHFLOWS ................................................................................................................. 19 7 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2021 ............................................................................................................................................. 20 8 STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS / PROGRAMS .......... 21 9 GENERAL INFORMATION AND ACCOUNTING POLICIES ................................................................ 22 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ............................................................ 27 ANNEX 1 - ANALYSIS OF THIRD-PARTY PAYMENTS (DIRECT PAYMENTS) AT THE END OF THE FINANCIAL YEAR 2021 ...................................................................................................................................... 35 ANNEX 2 – SUMMARY OF THE PROJECT ASSET (NON – CURRENT ASSETS) REGISTER................... 36 ANNEX 3 – RECEIPTS PER ENTITY VERSUS THE CONFIRMATION AT THE END OF THE FINANCIAL YEAR 2021 ............................................................................................................................................................. 37 ANNEX 4 – RECONCILIATION BETWEEN APPLICATION FOR WITHDRAWALS AND RECEIPTS FROM THE WORLD BANK AT THE END OF THE FINANCIAL YEAR 2021 .............................................. 38 2 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ACRONYMS AND ABBREVIATIONS CoA - Chart of Accounts CBS - Central bank of Somalia CIM - Capacity Injection Mechanism CIP - Capacity Injection Project CS - Civil Servants DA - Designated Account DG - Director General EAFS - External Assistance Fiduciary Section Eur - Euros FGS - Federal Government of Somalia FMS - Federal Members State GBP - British Pounds GFS - Government Finance Statistics HR - Human Resources HRMIS - Human Resources Management Information System ICT - Information & Communications Technology IESBA - International Ethics Standards Board for Accountants’ Code of Ethics IPSAS - International Public Sector Accounting Standards IPSASB - International Public Sector Accounting Standards Board ISAs - International Standards on Auditing KSG - Kenya School of Government M&E - Monitoring and Evaluation MDA - Ministries, Departments and Agencies MoLSA - Ministry of Labor and Social Affairs MoPIED - Ministry of Planning, Investment and Economic Development MOPW - Ministry of Public Works NCSC - National Civil Service Commission 3 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ACRONYMS AND ABBREVIATIONS (Continued) NDP - National Development Plan OPM - Office of the Prime Minister PCU - Project Coordination Unit PDO - Project Development Objective PIU - Project Implementation Unit SFMIS - Somali Financial Management Information System SMPA - School of Management and Public Administration SNU - Somali National University SOS - Somali Shilling UNDP - United Nations Development Programme USD - United States Dollars 4 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project’s official name is Somalia Capacity Injection Project. Objective: The Project Development Objective (PDO) is to strengthen the staffing and institutional capacity of selected line ministries and central agencies to perform core government functions. Address: The project headquarters office is at Office of Prime minister, Villa Somalia, Mogadishu, Somalia. Contacts: The following are the project contacts Telephone: (252) 6128470236 E-mail: hassan.d@opm.gov.so Website: https://cip.gov.so/ 1.2 Project information Project start date The project start date is 13 October 2015 Project end date The project end date is 31 December 2022 Project coordinator: Hassan A. Dirie Project sponsor: The project sponsor is Multi-Partner Fund 1.3 Project overview Line Ministry/Department The project is under the supervision of the Office of Prime minister Federal of the project Government of Somalia. Project number P149971 Strategic goals of the project The Project Development Objective (PDO) is to strengthen the staffing and institutional capacity of selected line ministries and central agencies to perform core government functions Achievement of strategic The project management aims to achieve the Project Development through goals the following means: Component 1: Developing capacity for key cross-cutting Government functions • Establishment of merit-based recruitment guidelines and tools. Recruitments of Capacity Injection Mechanism (CIM) staff to perform key cross-cutting government functions • Procurement and supplies of office fixed asset to the beneficiary institution • The Project Coordination Unit (PCU) had procured office furniture to the beneficiary Institutions including Ministry of Labor and Social Affairs (MoLSA), National Civil Service Commission (NCSC), Office of the Prime Minister (OPM), Ministry of Planning, Investment and Economic Development (MoPIED), Ministry of Public Works (MoPW). The PCU also procured Information & Communications Technology (ICT) equipment and delivered to School of Management and Public Administration / Somali National University (SMPA/SNU). 5 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.3 Project overview (Continued) Achievement of strategic • Establishment of civil service training institute. goals • Provisions of short-term specialized training to the government civil servants at Federal Government of Somalia (FGS). • Developing and implementation of training programs for the civil service of the government. • Supporting employee biometric attendance systems and strengthening the records & archives management system of the targeted Ministries, Departments and Agencies (MDAs). Component 2: Strengthening the policies and procedures for civil service management • Completion of organizational re-structuring of 48 MDAs at FGS. Procured and delivered 6 vehicles for supporting the functions of planning, coordination, monitoring and performance of the government (2 vehicles to MoPIED and 3 vehicles to OPM and 1 vehicles NCSC). • Completion of the development of basic HR/civil service management policies at FGS • Completion of Human Resource (HR) Audit and new biometric registration of civil servants at FGS. • Completion of development of civil service code of conduct for strengthening the ethical foundations of the Civil Servants (CSs). • Supporting the development of Pay & Grade Policy and Structure for the civil service. • Supporting the development of Administrative Regulations and Procedures for the implementation of Civil Service Law Bill (civil service law no. 11). • Supporting the consolidation of the HR policies for the civil service management: i) Pension policy & pension bill, ii) A proposal for the implementation of past service liability and pension fund scheme establishment and implementation plan, iii) Supporting the draft of a Public Service Policy and Public Service Bill, iv) The review and amendment of Civil Service Commission Law no. 10; • Supporting the establishment of credible personnel data management system (Human Resources Management Information System (HRMIS). • Supporting the consolidation implementation of change management plans for the re-structured MDAs. Component 3: Strengthening policy management, coordination and monitoring capabilities at the center of Government. • The establishment of policy planning, Monitoring and evaluation (M&E) and Statistics units at targeted institutions with staffing both at FGS. • Supporting to strengthening the M&E and planning functions and capabilities of MoPIED to track the implementation of the National Development Plan (NDP-9). • Supporting the policy and strategy development, performance and delivery at the center of government and business such as: i) the cabinet business for public policy management, ii) performance & delivery system, iii) strategic plans of targeted MDAs. 6 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.3 Project overview (Continued) Achievement of strategic • Facilitation high-level review or retreat sessions at top-level of the goals government to build trust and consensus on priority reforms, strengthen a focus on results and resolve issues between agencies across government. Component 4: Project Management and Coordination • The project coordination unit had organized and coordinated Joint FGS/World Bank/Development Partners, World Bank and Government teams for both FGS and Puntland. • The Project Coordination Unit (PCU) has also organized the coordination of the Project meeting. • The project coordination unit in consultation with the Bank’s Task Team, supported the project’s operational logistics such as office stationery supplies, fuel and basic maintenances of the project vehicles through Bank’s quarterly approved budget. • Facilitations of all meetings of government technical reform committee by the MOLSA. • The project coordination unit submits the project’s quarterly financial and narrative reports as well as capacity Injection Project (CIP) quarterly bulletin. Other important background In reference to the Somali Compact in 2013, the FGS had requested World information of the project Bank and UNDP to re-build the government institutions in the areas of public sector capacity developments. Under this Somali Compact, World Bank and United Nations Development Programme (UNDP) in collaboration with the FGS have developed an initiative to address the dare needs of institutional capacity development for the FGS. The initiative is called Somali Capacity Injection Project (CIP) and was officially launched in October 2013. The higher-level objectives of the project, responds to the strategic objective of the New Deal Compact “to strengthen basic sectoral and core government functions in support of the establishment of a responsive, inclusive and accountable public sector’ at the federal level. The Project has four components. These are: • Developing capacity for key cross-cutting government functions; • Strengthening the policies and procedures for civil service management; • Strengthening policy management, coordination and capabilities at the centre of Government; and • Project management. Each of these components has sub-components. The project components aim at: (i) rendering support to the recruitment and placement of a small number of highly qualified advisors and civil servants; (ii) strengthening the government’s framework for civil servants; and (iii) developing management capacities at the Centre of government to strengthen policy coordination and development, and monitoring. 7 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.3 Project overview (Continued) Current situation that the The project was formed to intervene in the following areas: project was formed to Component 1: Developing the capacity for cross cutting government intervene institutional functions; Component 2: Strengthening the policies and procedures for civil service management; Component 3: Strengthening policy management, coordination and monitoring capabilities at the centre of Government; Component 4: Project management and coordination. The primary beneficiaries are the institutions of the Federal Government performing core government functions. For this initial stage, the project will directly benefit the following ten Federal Government Institutions: • Office of the President • Office of the Prime Minister • National Civil Service Commission • Ministry of Planning and International Cooperation • Ministry of Finance • Ministry of Labor and Social Affairs • Ministry of Agriculture • Ministry of Energy and Water Resources • Ministry of Public Works and Reconstruction • Central Bank of Somalia Project duration The project’s initial period was 5 years form July 2015 to 30 June 2020. But the closure date of the project had been extended until 31 December 2022. 1.4 Bankers The following are the bankers for the current year: (i) Central Bank of Somalia 1.5 Auditors The project is audited by the Office of the Auditor General Somalia. 1.6 Roles and responsibilities Names Title designation Role / responsibilities Hassan A. Dirie Project Coordinator Project Coordinator Ahmednur Mohamed Abdi Permanent Secretary Accounting Officer / Authorizing Officer Fatuma Osman Farah Accountant General Finance Management/Fiduciary Oversight Abdinasir Ahmed Head of EAFS Consultants Financial Consulting Suleiman S Umar Director General- Ministry of Finance Management Finance Ahmed Abdi Adan (Iraad) Director of Budget Department Budgeting Tasks 8 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.6 Roles and responsibilities Names Title designation Role/Responsibilities Mohamud Abdulkadir Arale Director of External Assistance Finance Management and payments Fiduciary Section (EAFS) responsibility Mohamed Harun Project Financial Specialist Finance Management Mohamed Gulled Procurement Specialist Procurement Tasks Mowliid Mohamed Ali Head of EAFS Accounts Section Accountant 1.7 Funding summary The Project is for a duration of 7 years from 2015 to 2022 with an approved budget of USD 17,417,000.00 as highlighted in the table below: Below is the funding summary: Source of funds Donor Commitment- Amount received Undrawn balance as at 13 October 2015 to from 13 October 31 December 2021 31 December 2021 2015 to 31 December 2021 USD USD USD (A) (B) (A)-(B) (i) Grant Somalia Multi Partner Fund 17,417,000.00 12,389,485.45 5,027,514.55 Total 17,417,000.00 12,389,485.44 5,027,514.55 1.8 Summary of overall project performance Summary of physical progress. The Somalia Capacity Injection Project (CIP) became effective from its launching date on 2nd September 2015. The subsequent years from its inception, the project has contributed a lot to the Federal Government of Somalia particularly to the intended direct beneficiary institutions of the government. Particularly, in this reporting period of 2021, the project has made progress and tangible achievements based on its annual work plan of 2021. Among the major achievements and progress made in 2021 include the following activities under each component: Component 1: Develop the capacity for cross cutting government institutional functions: § Conducting rapid assessment on HRMIS system requirement and identification of HRMIS system specifications for FGS. § Progressing the development of training programming, curriculum materials for the civil service employees. § Completion of Training of Trainers for the FGS civil service employees to support the School of Management and Public Administration. 9 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.8 Summary of overall project performance: (Continued) Summary of physical progress (Continued) Component 2: Strengthening the policies and procedures for civil service management § The completion and endorsement of the HR Administrative Regulations for the management of civil service employees. § Conducting assessment and review of FGS civil service employees pay and developing comprehensive Pay & Grading structures and pay policy options which are now at final stage of completion. § The consolidation of the drafted organisation structures of the FGS MDAs and developing organizational ordinance with establishment control and staff ceiling plan guidelines, change management plans which are also at final stage. § An establishment of temporary department for FGS Pension Fund with qualified team composed of MoF, NCSC and MoLSA. Component 3: Strengthening policy management, coordination and monitoring capabilities at the Centre of Government § The completion of digital performance and delivery system application for the OPM with the provision of the necessary system required accessories. § The development of cabinet businesses process (Cabinet Manual or Cabinet Handbook) and public policy formulation guidelines for improving cabinet policy management & performances capabilities which has been completed successfully. Component 4: Project management and coordination § The project coordination unit managed the project’s overall management responsibilities by delivering and submission of the project’s reports both quarterly narrative reports and financial IFRs as well as monthly and quarterly news bulletins to the World bank and other stakeholders. Note: The full details of the project’s annual and quarterly narrative reports are prepared separately and are available. Financial statements discussion and analysis i) Statement of receipts and payments This statement describes the cash received during the reporting period and the expenses made during this period. Expenses are recorded in a categorized manner and the details are provided under the notes section. The below categories have been recorded based on the charts of accounts (CoA) of the Federal Government of Somalia. 10 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.8 Summary of overall project performance: (Continued) Financial statements discussion and analysis (Continued) i) Statement of receipts and payments - Chart 1.1 Describes how the payments made in the different categories. Expenditure by Catogoires 302,000.00 205,180.00 1,247,078.28 Compensation of employees Use of goods and services Capital expenditure ii) Statement of financial assets and liabilities The Project provided details on the project current assets and liabilities under the statement of financial assets and liabilities. In this reporting period, the project did not have liabilities as shown in the below chart. Chart 2.0 Project financial assets and liabilities FINANCIAL POSSITION 350,000.00 300,000.00 250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 0.00 Total financial assets Total liabilities FINANCIAL POSSITION 11 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 1 PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.8 Summary of overall project performance: (Continued) Financial statements discussion and analysis (Continued) iii) Expenditure per component The Project has disbursed funds against four components that are defined in the Grant Agreement and the Project Appraisal document. The Project has the following components: 1. Developing capacity for key cross-cutting government functions. 2. Strengthening the policies and procedures for civil service management. 3. Strengthening policy management, coordination and capabilities at the centre of Government. 4. Project management. During the reporting period the project has disbursed funds as below: Chart 3: The expenditure per component Expenditure by Component 1,200,000.00 1,000,000.00 800,000.00 600,000.00 400,000.00 200,000.00 0.00 Dev. capacity for Est. Mgt Est. Mgt Project key cross-cutting Frameworks, Frameworks, Management gov. functions Struct. to Supp. Struct. to Supp. Capacity Dev Capacity Dev Expenditure by Component 1.9 Summary of project compliance There have been no instances of noncompliance with terms and conditions with regard to loan or grant agreements or guarantees which have resulted in cancellation of the assistance or has given rise to an obligation to return the assistance previously given. 12 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project (CIP) Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 2 STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Accountant General, the Permanent Secretary (Authorizing Officer) in the Office of the Prime minister and the Project Coordinator for Somalia Capacity Injection Project are responsible for the preparation and presentation of the Project’s financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year (period) ended on 31 December 2021. This responsibility includes: (i) maintaining adequate financial management arrangements and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial transactions of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Accountant General, the Permanent Secretary for the Office of the Prime minister and the Project Coordinator for Somalia Capacity Injection Project accept responsibility for the Project’s financial statements, which have been prepared in accordance with article 45(2) of the PFM act 2019 and Financial Regulation 101(3) and in line with the Cash Basis International Public Sector Accounting Standards (IPSAS) 2017, as required by the Office of the Auditor General. The Accountant General, the Permanent Secretary for the Office of Prime minister and the Project Coordinator for Somalia Capacity Injection Project) are of the opinion that the Project’s financial statements give a true and fair view of the state of Project’s transactions during the financial year ended 31 December 2021, and of the Project’s financial position as at that date. The Accountant General, the Permanent Secretary for the Office of the Prime minister and the Project Coordinator for Somalia Capacity Injection Project) further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project’s financial statements as well as the adequacy of the systems of internal financial control. The Accountant General, the Permanent Secretary for the Office of Prime minister and the Project Coordinator for Somalia Capacity Injection Project confirm that the project has complied fully with applicable laws, Regulations, procedures and the terms of external financing covenants, and that the Project’s funds received during the year under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved and signed by the Accountant General, the Director General (Authorizing Officer) for the Ministry of Finance and the Project Coordinator for the Somalia Capacity Injection Project on 25 July 2022 and signed by them as here below: 13 Report and financial statements for the year ended 31 December 2021 3 REPORT OF AUDITOR GENERAL INDEPENDENT AUDITOR’S REPORT TO THE OFFICE OF THE AUDITOR GENERAL, FEDERAL GOVERNMENT OF SOMALIA FOR THE WORLD BANK FUNDED PROJECT – SOMALIA CAPACITY INJECTION PROJECT (CIP) REF: TF0 A0415, TF0 5472 TB0 0692 3.1 Report on the audit of financial statements Opinion We have audited the accompanying financial statements of the Somali Capacity Injection Project (CIP) set out on pages 17 to 34, which comprise the statement of financial assets as at 31 December 2021, and the statement of receipts and payments, statement of cash flows, and statement of comparison of budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory notes. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Somali Capacity Injection Project (CIP) as at 31 December 2021 and of its financial performance and cash flows for the year then ended in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Financing Agreements TF0 A0415, TF0 5472 TB0 0692. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for audit of the financial statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The management for the project are responsible for the other information. The other information comprises annexes and project information and overall performance included in the report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 14 Report and financial statements for the year ended 31 December 2021 3 REPORT OF AUDITOR GENERAL (Continued) INDEPENDENT AUDITOR’S REPORT TO THE OFFICE OF THE AUDITOR GENERAL, FEDERAL GOVERNMENT OF SOMALIA FOR THE WORLD BANK FUNDED PROJECT – SOMALIA CAPACITY INJECTION PROJECT (CIP) REF: TF0 A0415, TF0 5472 TB0 0692 (Continued) 3.1 Report on the audit of financial statements (Continued) Other information (Continued) In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project’s ability to continue sustaining services, disclosing, as applicable, matters related to sustainability of services and using the going concern basis of accounting unless the management either intends to terminate the Project, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could 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 ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. 15 Report and financial statements for the year ended 31 December 2021 3 REPORT OF AUDITOR GENERAL (Continued) INDEPENDENT AUDITOR’S REPORT TO THE OFFICE OF THE AUDITOR GENERAL, FEDERAL GOVERNMENT OF SOMALIA FOR THE WORLD BANK FUNDED PROJECT – SOMALIA CAPACITY INJECTION PROJECT (CIP) REF: TF0 A0415, TF0 5472 TB0 0692 (Continued) 3.1 Report on the audit of financial statements (Continued) Auditor’s responsibilities for the audit of the financial statements (Continued) • Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project’s ability to continue sustaining its services. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Project to cease sustaining its services. • 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 communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. __________________________ Mohamed M. Ali Auditor General Federal Republic of Somalia Mogadishu, Somalia 31, JULY 2022 16 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 4 STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 Notes 31 December 31 December Cumulative 2021 2020 Project balances 31 December 2021 USD USD USD Receipts External assistance grants 10.2 1,925,149.45 1,250,841.00 12,389,485.45 Other assistance, domestic - - 5,991.00 borrowings or refunds Total receipts 1,925,149.45 1,250,841.00 12,395,476.45 Payments Compensation of employees 10.3 205,180.00 205,266.00 820,296.00 Use of goods and services 10.4 1,247,078.28 799,282.00 9,296,501.28 Capital expenditure 10.5 302,000.00 112,650.00 1,974,104.00 Total payments 1,754,258.28 1,117,198.00 12,090,901.28 Surplus for the year 170,891.17 133,643.00 304,575.17 Cash beginning of the year 6 133,684.00 41.00 - Cash end of the year 6 304,575.17 133,684.00 304,575.17 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 25 July 2022 and signed by: 17 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 5 STATEMENT OF FINANCIAL ASSETS AS AT 31 DECEMBER 2021 Notes 31 December 2021 31 December 2020 USD UD Financial assets Cash and cash equivalents 10.6 304,575.17 133,684 Total financial assets 10.6 304,575.17 133,684 Financial liabilities Payables - - Total liabilities Net financial assets 304,575.17 133,684 Represented by: Accumulated surplus from the previous years 10.7 133,684.00 41.00 Net surplus for current year 10.7 170,891.17 133,643.00 Total closing balances / Net financial position 10.7 304,575.17 133,684.00 (Fund balance). The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 25 July 2022 and signed by: 18 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 6 STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 31 December 31 December Notes 2021 2020 USD USD Cash flow from operating activities Receipts External assistance grants 10.2 1,925,149.45 1,250,841.00 Total receipts 1,925,149.45 1,250,841.00 Expenses Compensation of employees 10.3 205,180.00 205,266.00 Use of goods and services 10.4 1,247,078.28 799,282.00 Total operating expenses 1,452,258.28 1,004,548.00 Net cash flows from operating activities A 472,891.17 246,293.00 Cash flows from investing activities Acquisition of fixed assets 10.5 (302,000.00) (112,650.00) Net cash flows from investing activities B (302,000.00) (112,650.00) Net increase in cash and cash equivalents A+B 170,891.17 133,643.00 Cash and cash equivalents at beginning of year 10.6 133,684.00 41.00 Cash and cash equivalents at end of year 10.6 304,575.17 133,684.00 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 25 July 2022 and signed by: 19 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 7 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 31 DECEMBER 2021 Original Actual Budget Percentage Revisions Final budget budget outturn variance variance 31 December 31 December 31 December 31 December 31 December 31 December 2021 2021 2021 2021 2021 2021 USD USD USD USD USD % Receipts External assistance grants [Note 10.2] 4,127,080.00 - 4,127,080.00 1,925,149.45 2,201,930.55 53% Total cash receipts 4,127,080.00 - 4,127,080.00 1,925,149.45 2,201,930.55 53% Recurrent expenses Compensation of employees [Note 10.3] 207,120.00 - 207,120.00 205,180.00 1,940.00 1% Use of goods and services[Note 10.4] 3,579,960.00 - 3,579,960.00 1,247,078.28 2,332,881.72 65% Total recurrent expenditure 3,787,080.00 - 3,787,080.00 1,452,258.28 2,334,821.72 62% Capital expenditure Capital [Note 10.5] 340,000.00 - 340,000.00 302,000.00 38,000.00 6% Total capital expenditure 340,000.00 - 340,000.00 302,000.00 38,000.00 6% Total expenditure 4,127,080.00 - 4,127,080.00 1,754,258.28 2,372,821.72 57% Surplus / (deficit) - - - 170,891.17 (170,891.17) The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 25 July 2022 and signed by: 20 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 8 STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS / PROGRAMS FOR THE YEAR ENDED 31 DECEMBER 2021 Notes Previous Financial year Financial year Financial year Cumulative years 2021 2021 2021 inception to up to 2020 previous current reporting Cumulative to date quarters quarter date USD USD USD USD USD Sources of funds A B C D = A+ B E=A+D Receipts Multi partner fund 7,796,889.00 789,737.62 696,644.83 1,486,382.45 9,283,271.45 Direct payment 2,667,447.00 389,759.00 49,008.00 438,767.00 3,106,214.00 Refund 5,991.00 - - - 5,991.00 Total receipts 10,470,327.00 1,179,496.62 745,652.83 1,925,149.45 12,395,476.45 Expenditure by components / sub- components / programs Development capacity for key cross-cutting gov. 2,353,385.00 263,021.40 74,464.00 337,485.40 2,690,870.40 functions Established management frameworks, structure to 3,305,321.00 179,594.96 73,880.00 253,474.96 3,558,795.96 supply capacity development Established management frameworks, structure to 375,750.00 66,312.00 73,800.00 140,112.00 515,862.00 supply capacity development Project management 4,302,187.00 754,396.79 268,789.13 1,023,185.92 5,325,372.92 Total expenditure by components / sub- 10,336,643.00 1,263,325.15 490,933.13 1,754,258.28 12,090,901.28 components / programs Surplus (deficit) for the year 133,684.00 (83,828.53) 254,719.70 170,891.17 304,575.17 Cash beginning of the year - 133,684.00 49,855.47 - - Cash end of the year 133,684.00 49,855.47 304,575.17 170,891.17 304,575.17 Items of cash and bank balances Changes during Balance brought forward Balance carried forward the period Designated Account at Central Bank of Somalia 304,575.17 21 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (i) General information The Somalia Capacity Injection Project has its offices / headquarters in Mogadishu, the capital of the Federal Republic of Somalia. The principal address of the project is: Office of Prime Minister Villa Somalia, Mogadishu, Somalia The principal activity of Somalia Capacity Injection Project is to strengthen the staffing and institutional capacity of selected line ministries and central agencies to perform core government functions. The relevant legislation governing the Somalia Capacity Injection Project operations during the reporting period is the Appropriation Act 2019, the public financial management (PFM) Act 2019, the PFM regulation 2020, and the financing agreement between the FGS and the Development Partner. (ii) Significant accounting policies These are the specific principles, bases, conventions, rules, and practices adopted by the Project in preparing and presenting the financial statements. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all transactions unless otherwise stated. The following specific policies have been used: (a) Statement of compliance and basis of preparation of the accounts The financial statements have been prepared in accordance with Cash-basis International Public Sector Accounting Standards (IPSAS). These financial statements have been authorized for issue by the Accountant General on 25 July 2022. The accounting policies have been applied consistently throughout the period. The presentation and classification of items in the financial statements are consistent from one period to the next. In line with Cash-basis International Public Sector Accounting Standards (IPSAS), the financial statements have been prepared in accordance with Cash-basis International Public Sector Accounting Standards (IPSAS) as prescribed by the International Public Sector Accounting Standards Board (IPSASB) and set out in the accounting policy note below. (b) Reporting entity These financial statements are for Somalia Capacity Injection Project under the Federal Government of Somalia and encompass the reporting entity as specified in the Appropriation Act, 2019. (c) Reporting currency The functional currency of the Federal Government of Somalia is the United States dollar (USD) because: (a) government revenues and expenditures are made in that currency; (b) most of the financing is provided in that currency; and (c) bank transactions and balances are principally in the USD. 22 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (d) Reporting period The Somalia Capacity Injection Project financial year runs from 1 January to 31 December, the calendar year. These financial statements are for the period 1 January 2021 to 31 December 2021. The comparative figures reflect the 12 months ended 31 December 2020. (e) Payments by third parties The Somalia Capacity Injection Project may also benefit from goods and services purchased on its behalf as a result of cash payments made to third parties during the period. Requests for third party payments are processed through the use of country systems, and at the request of the Entity, the donor makes payment directly to a third party (e.g. supplier, contractor, and consultant) for eligible expenditures. Direct payments were processed by the World Bank upon requests from the Project which were formally advised and verified by the Government and included in the financial statements. Note 10.8 and Annex 1 provides a further analysis of third- party direct payments. On the other hand, and through Direct Execution, third parties including donors may make payments to external suppliers outside the country systems and provide goods and services including in-kind donations e.g. food aid, big contract of works, vehicles, equipment, technical assistance or personnel services. The payments made by the third parties outside the country systems do not constitute cash receipts or payments managed by the Somalia Capacity Injection Project even though the entity does benefit from such payments. Such payments are therefore not included in the statement of cash receipts and payments but are reported and disclosed where the financial value of the goods and services received can be reliably verified and determined by the Somalia Capacity Injection Project. (f) Revenue (Recognition of receipts) The Project recognizes all receipts from the various sources when the event occurs, and the related cash has been received by the Government. • Transfers from the treasury and other general government units / entities: - Where transfers are received from the treasury and / or other general government units /entities, these are recognized in the Project books of account when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity (Project). • Other receipts: - These include receipts such as proceeds from disposal of assets and refunds. These are recognized in the financial statements the time associated cash is received. • External assistance: - External assistance is received through grants and loans from multilateral and bilateral development partners. 23 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (f) Revenue (Recognition of receipts) Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity (Project) or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowing Includes external loans acquired by the Project and is treated on cash basis and recognized as a receipt during the year they were received. Undrawn external assistance These are loans and grants at reporting date as specified in a binding agreement and relate to funding for the Project currently under development where conditions have been satisfied or their ongoing satisfaction is highly likely, and the project is anticipated to continue to completion. An analysis of the Project’s undrawn external assistance is shown in the funding summary and in Note 10.2 of these financial statements. • Other assistance: - Relates to resources received from non-governmental organizations and other assistance that is voluntarily provided by, for example, individuals, private entities, and charitable and other organizations (Para 2.1.87 Cash Basis IPSAS 2017). During the reporting period, only external assistance grants were received as revenue by the project. (g) Expenses (Recognition of payments) Payments represent outlays of cash made by the entity or other agencies for and on behalf of the Project. All payments are recognized and included in the financial statements when cash is paid out. • Compensation of employees: - Salaries and wages, allowances, statutory contribution for employees are recognized in the period when the compensation is paid. • Use of goods and services: - Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they shall be included in the statement of financial assets and liabilities (Balance sheet) as financial liabilities with supporting schedules (detailed notes). 24 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (h) Property, plant and equipment and other non-current assets (Capital items) Non-current assets principally comprise land, buildings, plant, vehicles, equipment, and any other capital assets controlled by the Project Somalia Capacity Injection Project. Under the cash basis of accounting, purchases of property, plant , equipment and other non-current assets have been expensed fully in the year of purchase. However, these assets are recorded in Asset Registers at historical cost as a memorandum record. (i) Comparative figures for previous period Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to conform to the required changes in the presentation of the financial statement to ensure full compliance with the Cash Basis IPSAS, 2017. (j) Foreign currency transactions and foreign operations Foreign currency transactions denominated in foreign currencies would be recorded into United States Dollars and incorporated in the statement of receipts and payments at the exchange rate ruling on the date of the transaction; Cash balances denominated in foreign currency at the year- end would be translated at the closing rate of exchange with the resulting exchange gains / (losses) dealt with as a reconciling item between the opening and closing cash balances for the financial year. (k) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term 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. (l) Refunds of previous year receipts and expenditures Receipts refunded from the previous years are recorded as expenditures in the current year. Expenditures refunded from previous years are recorded as receipts in the current year. (m) Employee benefits Employee benefits include salaries, allowances, and other related-employment costs and these have been recognized in the financial statements only when actual payments are made. (n) Contingencies Contingent liabilities are recorded and disclosed when the contingency becomes evident. Contingent assets are neither recognized nor disclosed. 25 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (o) Original and final approved budget and comparison of actual and budget amounts The approved budget is developed on the same accounting basis (cash basis), same classification basis (GFS, 2014 economic classification), and for the same period (1 January to 31 December 2021) as for the financial statements. The original annual budget of USD 4,127,080 was approved by Parliament on 31 December 2021. The original budget objectives and policies, the subsequent revisions, and the material differences between the budget and actual amounts, are explained more fully under Section I regarding overall performance of the project. A commitment control system is in place and is implemented through the Somali Financial Management Information System (SFMIS) with adequate system controls to ensure that no expenditure can be incurred in excess of the approved budget as may be revised. (p) Subsequent events There have been no significant events after the reporting date to the date of signing these accounts which have a material financial statement impact at 31 December 2021. (q) Authorization date The financial statements of the Project Somalia Capacity Injection Project were authorized for publication on 25 July 2022 by the Accountant General of the Federal Government of Somalia. 26 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS 10.1 Exchange rates All monetary amounts in the financial statements are expressed in United States Dollars, the transaction and Project reporting currency. The USD closing rates for major currencies were: Actual Actual 31 December 2021 31 December 2020 USD USD Somali Shilling (SOS/USD) 22,500 22,500 British Pound (GBP/USD) 0.81757 0.641584 Euro(Euro/USD) 0.97890 0.825748 10.2 External assistance grants External assistance was received in the form of grants from multilateral donor agencies under agreements specifying the purposes for which the assistance will be utilized, and the grants received from the donor community are not repayable in future. The amounts in the statement of receipts and payments are only recognized when received by and are under the control of the FGS. The amount of external assistance received in 2021 consists of the following: Current financial Cumulative balances (Project- Year balances Current financial year 2021 – to-date) year 2021 - Previous Current Quarter Reporting As at 31 As at 31 31 December 2021 31 December 2020 Quarter 4 December 2021 December 2020 (A) (B) (C= A+B) (E= C+D) (D) USD USD USD USD USD USD Multilateral Agencies 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 Total grants received during the 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 year Total external assistance 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 received during the year 27 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.2 External assistance grants (Continued) Analysis of the purpose for which the external assistance was received is as follows: Current financial Cumulative balances (Project- Year balances Current financial year 2021 – to-date) year 2021 - Previous Current Quarter Reporting As at 31 As at 31 31 December 2021 31 December 2020 Quarter 4 December 2021 December 2020 (A) (B) (C= A+B) (E= C+D) (D) USD USD USD USD USD USD Grants received during the year Development assistance 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 Total grants received during the 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 year Total external assistance 1,179,496.62 745,652.83 1,925,149.45 1,250,841.00 12,389,485.45 10,464,336.00 received during the year Non – compliance with significant terms and conditions: There have been no instances of noncompliance with terms and conditions regarding grant agreements or guarantees which have resulted in cancellation of the assistance or has given rise to an obligation to return the assistance previously given. Undrawn external assistance – grants The undrawn grant facilities available to fund future operations under binding agreements and where the terms and conditions are to be met, consist of: 28 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.1 External assistance grants (Continued) Undrawn external assistance – grants (Continued) 31 December 2021 31 December 2020 USD USD Multilateral World Bank 5,027,515.00 6,952,664.50 Total undrawn grant facilities 5,027,515.00 6,952,664.50 Undrawn grant facilities amount to USD 5,027,515 from Multilateral Development Fund-World Bank which is stipulated for use for capacitating Federal government agencies. There are no restrictions imposed on the undrawn grant facilities other than ensuring that the disbursements for any year are planned and budgeted for using country systems and any expenditure incurred is in line with the eligibility criteria specified in the financing agreement. 10.3 Compensation of employees Principally comprise: Current financial Cumulative balances (Project- Year balances Current financial year 2021 – to-date) year 2021 - Previous Current Quarter Reporting As at 31 As at 31 31 December 2021 31 December 2020 Quarter 4 December 2021 December 2020 (A) (B) (C= A+B) (E= C+D) (D) USD USD USD USD USD USD Wages and salaries 136,060.00 69,120.00 205,180.00 205,266.00 820,296.00 615,116.00 Total compensation of employee 136,060.00 69,120.00 205,180.00 205,266.00 820,296.00 615,116.00 costs 29 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.4 Use of goods and services These are mainly: Current financial Cumulative balances (Project- Year balances Current financial year 2021 – to-date) year 2021 - Previous Current Quarter Reporting As at 31 As at 31 31 December 2021 31 December 2020 Quarter 4 December 2021 December 2020 (A) (B) (C= A+B) (E= C+D) (D) USD USD USD USD USD USD Office materials and consumables 30,025.62 34,550.50 64,576.12 48,581.00 770,164.12 705,588.00 Travel expenses 6,912.00 98,294.00 105,206.00 41,512.00 698,200.00 592,994.00 Utilities 6,000.00 - 6,000.00 14,520.00 83,424.00 77,424.00 Training - - - - 335,352.00 335,352.00 Education - - - - 7,291.00 7,291.00 Consulting and professional fees 714,158.43 199,946.57 914,105.00 605,883.00 6,624,331.00 5,710,226.00 Pension for the services - - - - 306,060.00 306,060.00 Commission on transfers 11,905.17 10,493.99 22,399.16 18,092.00 140,825.16 118,426.00 Other general expenses 28,749.00 47,767.00 76,516.00 19,911.00 183,409.00 106,893.00 Fuel and lubricants 26,855.00 27,120.00 53,975.00 50,305.00 141,591.00 87,616.00 Repairs and maintenance 660.00 3,641.00 4,301.00 478.00 5,854.00 1,553.00 Total use of goods and services 825,265.22 421,813.06 1,247,078.28 799,282.00 9,296,501.28 8,049,423.00 30 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.5 Capital expenditure – consumption of non-current assets As explained in accounting policy all non-current assets purchased during the year are expensed in the year of purchase [fully depreciated in the year of purchase]. The value of capital expenditure acquired during the financial year and expensed comprise: Current financial Cumulative balances (Project- Year balances Current financial year 2021 – to-date) year 2021 - Previous Current Quarter Reporting As at 31 As at 31 31 December 2021 31 December 2020 Quarter 4 December 2021 December 2020 (A) (B) (C= A+B) (E= C+D) (D) USD USD USD USD USD USD Fixed assets 302,000.00 - 302,000.00 112,650.00 1,974,104.00 1,672,104.00 Total capital expenditure 302,000.00 - 302,000.00 112,650.00 1,974,104.00 1,672,104.00 expensed 10.6 Cash and cash equivalents Comprise cash and bank balances of all bank accounts operated by the project. It also includes petty cash balances held by the Project at the end of the financial year. 31 December 2020 31 December 2020 USD USD CIP account 1090 at the Central Bank of Somalia 304,575.17 133,684.00 Total cash and cash equivalents 304,575.17 133,684.00 The above amount is restricted to eligible expenditures of the project in line with the project financing agreement. 31 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.7 Accumulated funds (Fund balance / surplus) The accumulated surplus as at the yearend was as follows: Accumulated surplus 2021 2020 USD USD At beginning of the year, 1 January 133,684.00 41.00 Surplus for the year- see Statement of Cash Receipts & 170,891.17 133,643.00 Payments At end of the year, 31 December 304,575.17 133,684.00 10.8 Payments by third parties directly to suppliers – Direct payments (See also Annex 1) 31 December 2021 31 December 2020 USD USD Payments by donors directly to suppliers (grants): Multilateral Agencies - - Bilateral Agencies 438,767.00 49,584.00 Total payments by donors directly to suppliers 438,767.00 49,584.00 (grants) This is analyzed as follows: 31 December 2021 31 December 2020 USD USD Construction of buildings Construction of civil works - - Supply of goods Supply of services 438,767.00 49,584.00 438,767.00 49,584.00 32 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.9 Progress on follow up of recommendations from the Auditor General and other project reviews Description Recommendation Management Status comments Inadequate evidence of competitive procurement CIP Project Implementation Unit We agreed to the Resolved process. For example, in the current year; should ensure that all procurements recommendation Name of Nature of service Amount follow the best practices in public vendor (USD) procurements – to ensure Hormud Internet Charge 3,000 procurements are undertaken in an Telecom October - December open, fair, transparent and competitive 2020 manner, free from any conflict of interest (perceived or actual Vehicle log sheets are only signed by the vendor and PIU team to ensure that on receiving We agreed to the Resolved the CIP driver, there were no controls from the CIP goods or services from suppliers, they recommendation office to confirm the delivery of service. must be verified by the PC/PMU. Examples are as follows: The receiving officer must sign the Name of Nature of services Amount Goods Received Notes (GRN) or the vendor (USD) Delivery Note (DN) and retain one DAACAD Vehicles - Fuel and 3,555 copy. CAR CARE lubricants Additionally, the supplier’s invoice CENTER must be carefully compared to the PO and the GRN/DN to verify that; the amount is correct; and goods received match with the description on the documents. We noted that the project burn out was at 50% for the We recommend the budget is This issue was due to the Not resolved annual period ending 31 December 2020. implemented as per the approved COVID-19 and such budget. delay affected all the World Bank projects in Somalia. 33 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 10 EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.9 Progress on follow up of recommendations from the Auditor General and other project reviews 34 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ANNEX 1 - ANALYSIS OF THIRD-PARTY PAYMENTS (DIRECT PAYMENTS) AT THE END OF THE FINANCIAL YEAR 2021 Amount Brief transaction Date of Name of third party paid during Comments description payment the year USD Supply of services CH Business Consulting S.A Consultancy Service February 2021 72,186.25 Net amount Kenya School of Government (KSG) Consultancy Service March 2021 146,228.86 Net amount Giulio De Tommaso Consultancy Service March 2021 13,434.00 Net amount Africa Development Professional Group Consultancy Service April 2021 10,890.19 Net amount Hamisi Jonn Ogend Williams Consultancy Service April 2021 16,386.00 Net amount Africa Development Professional Group Consultancy Service May 2021 49,005.86 Net amount Africa Development Professional Group Consultancy Service June 2021 27,225.47 Net amount Africa Development Professional Group Consultancy Service August 2021 21,780.38 Net amount Hamisi Jonn Ogend Willams Consultancy Service August 2021 32,622.00 Net amount Hamisi Jonn Ogend Willams Consultancy Service November 2021 32,622.00 Net amount Hamisi Jonn Ogend Willams Consultancy Service December 2021 16,386.00 Net amount Sub-total 438,767.00 Grand total 438,767.00 35 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ANNEX 2 – SUMMARY OF THE PROJECT ASSET (NON-CURRENT ASSETS ts) REGISTER Asset class Historical Cost Additions Disposals Historical cost b/f during the during the carried forward 2021 year year 31 December 2021 USD USD USD USD Office equipment, furniture and fittings 241,409.00 - - 241,408.00 ICT Equipment, software and other ICT 813,211.00 302,000.00 - 1,115,211.00 Assets Transportation equipment 617,484.00 - - 617,484.00 Total 1,672,104.00 302,000.00 - 1,974,104.00 The details of the project assets are in an asset listing provided separately. 36 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ANNEX 3 – RECEIPTS PER ENTITY VERSUS THE CONFIRMATION AT THE END OF THE FINANCIAL YEAR 2021 Receipts as per Variance Date received Description Receipts per entity donor confirmation USD USD USD 3 February 2021 Designated account 366,316.04 366,316.04 - 10 March 2021 Direct payment 72,186.25 72,186.25 - 13 April 2021 Direct payment 146,228.82 146,228.82 - 22 April 2021 Designated account 143,858.21 143,858.21 - 11 May 2021 Direct payment 13,434.00 13,434.00 - 24 May 2021 Direct payment 10,890.19 10,890.19 - 15 June 2021 Direct payment 49,005.86 49,005.86 - 29 June 2021 Direct payment 16,386.00 16,386.00 - 14 July 2021 Designated account 168,320.31 168,320.31 - 19 July 2021 Direct payment 27,225.47 27,225.47 - 29 August 2021 Designated account 111,243.06 111,243.06 - 7 September 2021 Direct payment 21,780.38 21,780.38 - 11 September 2021 Direct payment 32,622.00 32,622.00 - 5 October 2021 Designated account 85,450.93 85,450.93 - 9 November 2021 Designated account 364,693.62 364,693.62 - 01 December 2021 Direct payment 32,622.00 32,622.00 - 23 December 2021 Designated account 246,500.31 246,500.31 - 25 December 2021 Direct payment 16,386.00 16,386.00 - Total 1,925,149.45 1,925,149.45 - 37 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Capacity Injection Project Project Grant / credit number: TF0 A0415, TF0 5472 TB0 0692 Report and financial statements For the year ended 31 December 2021 ANNEX 4 – RECONCILIATION BETWEEN APPLICATION FOR WITHDRAWALS AND RECEIPTS FROM THE WORLD BANK AT THE END OF THE FINANCIAL YEAR 2021 Confirmed Date of Application withdrawal application Date of receipt Actual receipt Variance application number form USD USD USD 9 January 2021 FGS-DA-115 366,316.04 3 February 2021 366,316.04 - 10 March 2021 FGS-DA-115 72,186.25 12 March 2021 72,186.25 - 13 April 2021 FGS-DA-116 146,228.82 20 April 2021 146,228.82 - 17 April 2021 FGS-DA-119 143,858.21 22 April 2021 143,858.21 - 11 May 2021 108 13,434.00 13 May 2021 13,434.00 - 24 May 2021 109 10,890.19 27 May 2021 10,890.19 - 15 June 2021 110 49,005.86 21 June 2021 49,005.86 - 29 June 2021 FGS-DA-108 16,386.00 30 June 2021 16,386.00 - 2 July 2021 FGS-DA-120 168,320.31 14 July 2021 168,320.31 - 19 July 2021 112 27,225.47 23 July 2021 27,225.47 - 4 August 2021 FGS-DA-121 111,243.06 29 August 2021 111,243.06 - 07 September 113 21,780.38 10 September 2021 21,780.38 - 2021 11 September FGS-DA-109 32,622.00 14 September 2021 32,622.00 - 2021 26 September FGS-DA-122 85,450.93 5 October 2021 85,450.93 - 2021 10 October 2021 FGS-DA-123 364,693.62 9 November 2021 364,693.62 - 01 December FGS-DA-110 32,622.00 07 December 2021 32,622.00 - 2021 9 December 2021 FGS-DA-125 246,500.31 23 December 2021 246,500.31 - 25 December FGS DA 111 16,386.00 30 December 2021 16,386.00 - 2021 Total 1,925,149.45 1,925,149.45 38 Report and financial statements for the year ended 31 December 2021