THE FEDERAL GOVERNMENT OF SOMALIA Project Name: Somalia Electricity Access Project Implementing Entity (MDA): Ministry of Energy and Water Resources PROJECT GRANT/CREDIT NUMBER TF A9159 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). Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 Table of Contents ACRONYMS AND ABBREVIATIONS ................................................................................................................. 3 1. PROJECT INFORMATION AND OVERALL PERFORMANCE .................................................................. 4 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 ......................................... 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 AT THE END OF THE FINANCIAL YEAR 2021 .................................................................................................................... 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 ANNEX 5 – SFMIS REPORTS AND OTHER SUPPORTING SCHEDULES .................................................... 39 Reports and Financial Statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 ACRONYMS AND ABBREVIATIONS CoA - Chart of Accounts CPA - Certified Public Accountants EAFS - External Assistance Fiduciary Section FGS - Federal Government of Somalia FY - Financial Year GBP - British Pounds GFS - Government Finance Statistics GPO - General Post Office ICT - Information and Communication Technology IEC - International Electrotechnical Commission IESBA - International Ethics Standards Board for Accountants IPSAS - International Public Sector Accounting Standards IPSASB - International Public Sector Accounting Standards Board ISA - International Standards on Auditing MoEWR - Ministry of Energy and Water Resources MPF - Multi-Partner Fund PDO - Project Development Objective PIU - Project Implementation Unit SEAP - Somalia Electricity Access Project SFMIS - Somalia Financial Management Information System SOS - Somali Shilling USD - United States Dollars 3 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 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 Somali Electricity Access Project Objective: The key objective of the project is The Project Development Objective (PDO) is to expand access to electricity in targeted urban, peri- urban, and rural communities., Address: The project headquarter offices are at the Ministry of Energy and Water Resources, 3rd Floor Mogadishu GPO Building, Corso Somalia, Bondheere District, Mogadishu, Somalia. The address of its registered office is: Ministry of Energy and Water Resources, 3rd Floor Mogadishu GPO Building, Corso Somalia, Bondheere District, Mogadishu, Somalia Contacts: The following are the project contacts Telephone: (252) 612451375 E-mail: abdisalam43@gmail.com . Website: N/A 1.2 Project information Project start date: The project start date is 01 April 2019 Project end date: The project end date is 30 June 2022 Project manager: Abdisalam Abdullahi Project sponsor: The project sponsor is Multi-Partner Fund 1.3 Project overview Line Ministry/Department The project is under the supervision of the Ministry of Energy and Water of the project Resources. Project number TF- A9159-SO Strategic goals of the The strategic goals of the project are as follows: project The Project Development Objective (PDO) is to expand access to electricity in targeted urban, peri- urban, and rural communities. Achievement of strategic The project management aims to achieve the goals through the following goals means: Part 1: Electrification of Households and Small Business through Standalone Solar Home Systems. Improving access among off-grid households and small enterprises, in particular: • Carrying out a program of activities to facilitate a range of market- building supply - and demand - side interventions, through the provision of Expansion Grants and Seed Grants to solar distributors (collectively, Beneficiaries) for investment to catalyze key solar business functions. 4 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 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 • Promoting quality assurance to limit availability of and / or demand goals (Continued) for poor quality and / or counterfeit solar products. • Carrying out consumer awareness and citizen engagement campaigns to improve household understanding and use of quality off-grid solar technology. Part 2: Analytical work for enabling electrification through Solar- Powered/ Hybrid Mini-grids. Carrying out analytic work for development of mini-grid sector, in particular: - Carrying out detailed geospatial mapping to undertake a more comprehensive inventory of the current mini-grid situation in Somalia, identify potential future sites, and estimate future location- specific demand. - Reviewing property rights and land issues pertaining to energy infrastructure investment. - Carrying out pre-feasibility studies for hybridization, operation enhancements, and densification of brown (existing) mini-grid sites. - Carrying out pre-feasibility studies for greenfield (new) sites identified in geospatial mapping. - Developing structuring options for the financing, operation, and ownership of new mini grids. - Defining legal, institutional, and financing arrangements for developing mini grids. Part 3: Technical Assistance, Capacity Building, and Project Management: Strengthening the capacity of the Ministry of Energy and Water Resources (MoEWR) for overall energy sector management, power and access planning, and implementation of future development projects, including: - Carrying out required energy sector studies. - Developing energy strategies. - Reviewing energy policies. - Carrying out analytical work. - Improving internal MoEWR infrastructure and systems. - Provision of relevant training to staff of the MoEWR, and conducting workshops and study tours; and - Establishing a Federal PIU. Carrying out needs assessment to identify priority capacity-building interventions for MoEWR and training needs for the relevant staff of MoEWR. 5 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.3 Project overview (Continued) Other important The project will be implemented across the entire Somali peninsula, background information of covering Southern Somalia (Banadir, Jubbaland, SouthWest State, the project Hirshabelle and Galmuudug), Puntland, and Somaliland. While there are tremendous needs with respect to energy access, the fragile and complex operating environment necessitates a selective approach to supporting the effective delivery of affordable and sustainable energy services. Somali’s private sector has impressively stepped up to deliver basic energy services in the aftermath of the protracted conflict of the 1990s. Nevertheless, these enterprises often lack the capital and latest technical, financing, and business model insights to scale their businesses. The core proposition of this project is that by leveraging these incumbent capabilities and activities, the overall quality of services they offer to their customers will be improved, especially as they are provided with technical and financial resources needed to deepen and broaden their geographic footprints. The intention to focus on off-grid standalone solar rather than mini-grids is deliberate considering the limited funding envelope as well as the yet unharnessed potential for the former. Current situation that the The project was formed to intervene in the following areas: project was formed to (i) Southern Somalia (Banadir, Jubbaland, SouthWest State, intervene Hirshabelle and Galmuudug) (ii) Puntland, and (iii) Somaliland Project duration The project started on 1 April 2019 and is expected to run until 30 June 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 Somali Office of the Auditor General. 6 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.6 Roles and responsibilities (Continued) Names Title designation Role / responsibilities Abdirizack Muhumed Mohamed Director General, MoEWR Accounting Officer Abdisalam Abdullahi Project Coordinator Project Coordinator/ Expenditure Authorizing Officer Abdiaziz Hassan Arte FM Specialist, PIU, MoEWR Financial Management Liban Ali Ibrahim Procurement Specialist, PIU, Procurement MoEWR Fatuma Osman Farah Accountant General Finance Management/Fiduciary Oversight Abdinasir Ahmed Head of External Assistance Financial Consulting Fiduciary Section (EAFS) Consultants Saleiman S Umar Director General- Ministry Finance Management of Finance Ahmed Abdi Adam (Iraad) Director of Budget Budgeting Tasks Department Mohamud Abdulkadir Arale Director of EAFS Finance Management and payments responsibility Mowliid Mohamed Ali Head of EAFS Accounts Accountant Section 1.6 Funding summary The Project is for duration of 3 years from 1 April 2019 to 30 June 2022 with an approved budget of USD 4,600,000 as highlighted in the table below: Below is the funding summary: Source of funds Donor commitment- Amount received Undrawn balance 1 April 2019 to to date – to date – 31 June 2022 31 December 2021 December 2021 USD USD USD (A) (B) (A)-(B) Grants Somalia Multi Partner Fund TF 3,150,000.00 2,965,163.00 184,837.00 A9159 Somalia Multi Partner Fund TF 1,450,000.00 303,152.00 1,146,848.00 B3136 Total 4,600,000.00 3,268,315.00 1,331,685.00 7 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.7 Summary of overall project performance The Somali Electricity Access Project (SEAP) became effective on the 1 April 2019. The Federal Government of Somalia launched the project on 20 May 2019. Significant progress has been made in implementing the major activities of the project. During the financial year 2021, the project has achieved the following key issues: The project has established a grant facility manager to implement the planned activities of supporting the solar providers in Somalia with the provision of grants. The grant facility manager, with the support of the Ministry finalized the evaluation of the Request for Expression of Interest from Solar Service Providers. This process was supplemented by several meetings and continuous engagement between IBS team and the Ministry. During the reporting period, request for business plan was issued to the Solar service providers. The contracted consultants to carryout consumers’ awareness campaign conducted detailed data gathering activity aimed to inform the development of the campaign strategy design and implementation. The consultant also submitted rough draft of the campaign tools for the review of the Ministry. The objective of this assignment is to keep the public informed about the opportunities that modern off-grid solar energy presents and assist them in making informed purchasing decisions. The project has also awarded a contract to Kungliga Tekniska Hogskolan Institution in a joint venture with Kartoza and Recon Energy to implement a least cost electrification plan for the country. The Project Implementation Unit (PIU) facilitated wider stakeholder consultation to gather comprehensive feedback, the Federal Member States (FMS) contributed greatly to the ongoing activities. Focal points representing all the FMS have been actively engaging the Ministry and the consultants leading this assignment, they are currently collecting data from their respective regions. The Project also contracted with Noma consultancy to implement consumer awareness and stakeholders’ engagements, the contract has successfully submitted the inception report and has prepared the strategy documents and other resources required. The project is also currently working on the preparation of the electricity sub-transmission and distribution integrated development least cost investment plan. The PIU is finalizing the evaluation of the proposal submitted by different bidders. During the reporting period the project organized several consultation meetings of the Electricity Act, whereby different stakeholders including the private sector, the federal member states representatives and different offices of the Federal Government of Somalia have been invited to add their inputs in the draft Electricity Act before it is submitted to the council of the Ministers. The PIU supported a two weeklong World Bank mission aimed to discuss the progress status of the Somali Electricity Access Project and the design of the Somali Electricity Sector Recovery Project. The PIU provided several presentations reflecting the implementation status of SEAP project. The preliminary design of the Sector Recovery Project was discussed in detail with the private sector and the government. This resulted in the initiation of the recruitment process of the environmental specialist, social safeguard expert into strategic environmental and social assessment. The procurement process of this activity is currently underway. 8 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.7 Summary of overall project performance (Continued) Financial statements discussion and analysis 1. Statement of cash receipts and payments This statement describes the cash received and the expenses incurred and paid during this reporting period. The expenses are recorded category-wise, and the details are provided under the notes section. The categories below are based on the charts of accounts (CoA) of the Federal Government of Somalia: - Compensation of employees: USD 22,200 - Use of goods and services: USD 1,989,612 - Capital expenditure: USD 79,187 Chart 1.1 describes how the payments made towards the different categories. Breakdown of Expenditure by Category 4% 1% Compensationof Employees Use of Goods andservices Capital Expenditure 95% The amounts received during the reporting period are also recorded under this Statement of Cash receipts and payments. The Project has received an amount of USD 2,344,382 in the period 1 January 2021 to 31 December 2021. This amount consists of USD 1,842,866 that is received at the Designated Account and USD 501,516 that was directly paid by the World Bank. Below is a chart on the project’s income and expenses during the reporting period. 9 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.7 Summary of overall project performance (Continued) Financial statements discussion and analysis (Continued) 1. Statement of cash receipts and payments (Continued) Chart 1.2 Project’s Income and Expenses Receipts and Payments 100% 2,344,382.00 2,090,999.00 253,383.00 50% 0% Income Expense Net Surplus Amounts 2. 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 Position Liabalities Financial Position Assets 0% 20% 40% 60% 80% 100% 10 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.7 Summary of overall project performance (Continued) Financial statements discussion and analysis (Continued) 3. Expenditure per component The Project has disbursed funds totaling USD 2,090,999 against numerous components that are defined at the Grant Agreement and the Project Appraisal document. The Project has the following components: Component 1: Electrification of households and small business through standalone solar home systems. Improving access among off-grid households and small enterprises. Component 2: Analytical work for enabling electrification through solar-powered / hybrid mini-grids. Component 3: Technical assistance, capacity building, and project management. During the reporting period the project has disbursed funds as below: Chart 3 the expenditure per component Expenditure per Components 100% 50% 0% … … ne ne … po ne po m po m Co m Co Co Component 1: Electrication of Component 2: Analytical Households and Small Component 3: Technical work for enabling Business through Assistance, Cpacity electricfication through Standalone Solar Home Building, and Project Solar-Powered/ Hybrid Systems. Improving Management Mini-grids access among off-grid households and small enterprises. Expenditure per Components $1,220,797.00 $283,450.00 $586,752.00 11 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 1. PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) 1.7 Summary of overall project performance (Continued) Financial statements discussion and analysis (Continued) 3. Statement of budget comparison with actuals The project gives details on the variance between the budget and the actual outturn. From the below chart, there is a significant difference between the budget and the actual outturn, the reason for this is explained below: The significant difference between the Budget and the actual is due to a delay in implementation of the planned activities which was caused by the recruitment process of the key personnel of the PIU i.e. the procurement specialist and the delays in financial management specialist. After these key positions have been filled, the PIU management will make sure to finalize the procurement process of the project planned activities so that the budgeted amounts will be paid against the deliverables of the project. Chart 4 Budget comparison with actual 2500000 2000000 1500000 Final Budget 1000000 Actual Outturn 500000 Budget Variance 0 Receipts Recurrent Capital Total Surplus -500000 Expenses Expenses Expenses -1000000 1.8 Summary of project compliance There have been no instances of noncompliance with terms and conditions with regards 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 Electricity Access Project (SEAP) Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Accountant General, the Director General (Authorizing Officer) for the Ministry of Energy and Water Resources and the Project Coordinator for Somali Electricity Access Project ((SEAP) 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 Director General for the Ministry of Energy and Water Resources and the Project Coordinator for SEAP accept responsibility for the Project’s financial statements, which have been prepared in accordance with the Cash Basis, International Public Sector Accounting Standards (IPSAS) 2017, and the Funding Agreement. The Accountant General, the Director General for the Ministry of Energy and Water Resources and the Project Coordinator for SEAP 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 Director General for the Ministry of Energy and Water Resources and the Project Coordinator for SEAP 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 Director General for the Ministry of Energy and Water Resources and the Project Coordinator for SEAP confirm that the Ministry of Energy and Water Resources has complied fully with applicable laws, regulations, procedures and the terms of external financing covenants (where applicable), 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 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 – SOMALI ELECTRICITY ACCESS PROJECT (SEAP) REF: TF A9159 3.1 Report on the audit of financial statements Opinion We have audited the accompanying financial statements of the Somali Electricity Access Project (SEAP) 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 Electricity Access Project (SEAP) set out on 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 TF A9159. 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. 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. 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 – SOMALI ELECTRICITY ACCESS PROJECT (SEAP) REF: TF A9159 (CONTINUED) 3.1 Report on the audit of financial statements (Continued) 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 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 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. • 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. 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 – SOMALI ELECTRICITY ACCESS PROJECT (SEAP) REF: TF A9159 (CONTINUED) 3.1 Report on the audit of financial statements (Continued) Auditor’s responsibilities for the audit of the financial statements (Continued) • 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. The responsibility of the audit resulting in this report is ___________________________________ 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 Electricity Access Project Project grant / credit number TF A9159 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 1 January 1 January Cumulative Cumulative 2021 to 31 2020 to 31 from 1 April from 1 April December December 2019 to 31 2019 to 2021 2020 December 31 December 2021 2020 USD USD USD USD Receipts External assistance grants 10.2 2,344,382 677,595 3,268,315 923,933 Total receipts 2,344,382 677,595 3,268,315 923,933 Payments Compensation of 10.3 22,200 13,885 36,085 13,885 employees Use of goods and services 10.4 1,989,612 599,385 2,762,198 772,586 Capital expenditure 10.5 79,187 63,580 165,822 86,635 Total payments 2,090,999 676,850 2,964,105 873,106 Surplus for the year 253,383 745 304,210 50,827 Cash beginning of the 10.6 50,827 50,082 - - year Cash end of the year 10.6 304,210 50,827 304,210 50,827 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 27 July 2022 and signed by: 17 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 USD Financial assets Cash and cash equivalents 10.6 304,210 50,827 Total financial assets 304,210 50,827 Financial liabilities Payables - - Total liabilities - - Net financial assets 304,210 50,827 Represented by: Accumulated surplus from the previous years 10.7 50,827 - Net surplus for current year 10.7 253,383 50,827 Total closing balances / Net financial position 10.7 304,210 50,827 (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 27 July 2022 and signed by: 18 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 6. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 Notes 31 December 2021 31 December 2020 USD USD Cash flow from operating activities Receipts External assistance grants 10.2 2,344,382 677,595 Total receipts 2,344,382 677,595 Expenses Compensation of employees 10.3 (22,200) (13,885) Use of goods and services 10.4 (1,989,612) (599,385) Total expenses (2,011,812) (613,270) Net cash flows from operating activities A 332,570 64,325 Cash flows from investing activities Acquisition of fixed assets 10.5 (79,187) (63,580) Net cash flows from investing activities B (79,187) (63,580) Net increase in cash and cash equivalents A+B 253,383 745 Cash and cash equivalents at beginning of period 10.6 50,827 50,082 Cash and cash equivalents at end of period 10.6 304,210 50,827 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 27 July 2022 and signed by: 19 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 Final Actual Budget Percentage Revisions budget budget outturn variance variance 31 31 31 31 31 31 December December December December December December 2021 2021 2021 2021 2021 2021 USD USD USD USD USD % Receipts External assistance grants 2,809,285 - 2,809,285 2,344,382 464,903 [note 10.2] 17% Total cash receipts 2,809,285 - 2,809,285 2,344,382 464,903 17% Recurrent expenses Compensation of employees 25,200 - 25,200 22,200 3,000 [note 10.3] 12% Use of goods and services[note 2,724,085 (20,000) 2,704,085 1,989,612 714,473 10.4] 26% Total recurrent expenditure 2,749,285 (20,000) 2,729,285 2,011,812 717,473 26% Capital expenditure Capital [note 10.5] 60,000 20,000 80,000 79,187 813 1% Total capital expenditure 60,000 20,000 80,000 79,187 813 1% Total expenditure 2,809,285 - 2,809,285 2,090,999 718,286 26% Surplus - - - 253,383 (253,383) 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 27 July 2022 and signed by: 20 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 Financial year 2021 Financial year Previous years Financial year 2021 Cumulative current reporting 2021 up to 2020 previous quarters inception to date quarter Cumulative April - December January -September October -December January-December April 2019 – 2020 2021 2021 2021 December 2021 USD USD USD USD USD Sources of funds A B C D = B+C E = A+D Receipts Multi partner fund – cash disbursements 633,428 1,542,867 300,000 1,842,867 2,476,295 Multi partner fund - direct payments 290,505 439,271 62,244 501,515 792,020 Total receipts 923,933 1,982,138 362,244 2,344,382 3,268,315 Expenditure by components / sub- components / programs Electrification of households and small business through standalone solar home 193,706 535,672 51,080 586,752 780,458 systems Analytical work for enabling electrification through solar-powered / - 283,450 - 283,450 283,450 hybrid mini-grids Technical assistance, capacity building 679,400 872,963 347,834 1,220,797 1,900,197 and project management Total payments 873,106 1,692,085 398,914 2,090,999 2,964,105 Surplus (deficit) for the year 50,827 290,053 (36,670) 253,383 304,210 Cash beginning of the year – 2021 50,827 - Cash end of the year – 2021 304,210 304,210 Changes during the Balance brought forward Period Balance carried forward Designated Account at CBS 50,827 253,384 304,210 21 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 9. GENERAL INFORMATION AND ACCOUNTING POLICIES (i) General information The Somali Electricity Access Project has its offices/headquarters in Mogadishu, the capital of the Federal Republic of Somalia. The principal address of the project is: Ministry of Energy and Water Resources, 3rd Floor Mogadishu GPO Building, Corso Somalia, Bondheere District, Mogadishu, Somalia The principal activity of Somali Electricity Access Project is to provide Access to Electricity and ensure quality government services. The relevant legislation governing Somali Electricity Access Project operations during the reporting period is the Appropriation Act 2020, the Financial and Accounting Procedures Regulations of 1961 of the State as amended 1971 and the financing agreement between the FGS and the Development Partners. (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 27 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). (b) Reporting entity These financial statements are for Somali Electricity Access Project under the Federal Government of Somalia and encompass the reporting entity as specified in the Appropriation Act, 2021. 22 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (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. (d) Reporting Period The Somali Electricity Access 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. This is the first year of the project hence there are no comparative figures. (e) Payments by Third Parties The Somali Electricity Access Project may also benefit from goods and services purchased on its behalf because of cash payments made to third parties during the period. Requests for third party payments are processed using country systems, and at the request of the Project, 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 10.7 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 for example. 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 Somali Electricity Access 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 Somali Electricity Access 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). 23 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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) (Continued) • 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. 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 under Section X 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 year, only external assistance grants were received 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 Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 9. GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (g) Property, plant and equipment & 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 Somali Electricity Access 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. (h) 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. (i) 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 cash 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. (j) 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. (k) 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. (l) 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. (m) 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 Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 9 GENERAL INFORMATION AND ACCOUNTING POLICIES (Continued) (ii) Significant accounting policies (Continued) (n) 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 2021 to 31 December 2021) as for the financial statements. The original budget of USD 2,809,285 was approved by Parliament on 31 December 2020 and reallocations were made and included in the supplementary appropriation approved by Parliament on 2 August 2021 following a review in the timing of some of the project activities. 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. The difference between the Budget and the actual is caused due to a delay in the procurement process of the Transmission and Distribution activity whereby the process was cancelled due to failed negotiations with the first and second best bidders for this activity. However, the project made a significance change to address the budget burnout rate which was 74% compared to financial year 2020 where the variance was 31%. 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 more than the approved budget as may be revised. (o) 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. (p) Authorization date The financial statements of the Project Somali Electricity Access Project were authorized for publication on 27 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 Electricity Access Project Project grant / credit number TF A9159 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 31 December 2021 Actual 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 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 Cumulative balances Current Year balances financial (Project-to-date) financial year 2021 – 31 31 As at 31 As at 31 year 2021 - current December December December December previous reporting 2021 2020 2020 2021 quarter quarter A B C=A+B D E=C+D USD USD USD USD USD USD Grants received during the year Somalia Multi-Partner Fund (MPF) 1,982,138 362,244 2,344,382 677,595 3,268,315 923,933 Total grants received 1,982,138 362,244 2,344,382 677,595 3,268,315 923,933 during the year 27 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.2. External assistance (Continued) Analysis of the purpose for which the external assistance was received is as follows: Current Cumulative balances Current Year balances financial (Project-to-date) financial year 2021 – 31 31 As at 31 As at 31 year 2021 - current December December December December previous reporting 2021 2020 2021 2020 quarter quarter A B C=A+B E=C+D D USD USD USD USD USD USD Grants received during the year Development Assistance 1,982,138 362,244 2,344,382 677,595 3,268,315 923,933 Total grants received 1,982,138 362,244 2,344,382 677,595 3,268,315 923,933 during the year Non – compliance with significant terms and conditions: 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. 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: 31 December 2021 31 December 2020 USD USD Multilateral World Bank - Somalia Multi-Partner Fund (MPF) 1,331,668 3,676,099 Total undrawn grant facilities 1,331,668 3,676,099 Undrawn grant facilities include an amount of USD 1,331,668 from Multilateral Development World Bank Group which is stipulated to expand access to electricity in targeted urban, peri- urban, and rural communities. 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. 28 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10.3. Compensation of employees Principally comprise: Current Cumulative balances Current Year balances financial (Project-to-date) financial year 2021 – 31 31 As at 31 As at 31 year 2021 - current December December December December previous reporting 2021 2020 2021 2020 quarter quarter A B C=A+B E=C+D D USD USD USD USD USD USD Wages and salaries 14,800 7,400 22,200 - 36,085 13,885 Total compensation of 14,800 7,400 22,200 - 36,085 13,885 employee costs. 10.4. Use of goods and services These are mainly: Current Cumulative balances Current Year balances financial (Project-to-date) financial year 2021 – 31 31 As at 31 As at 31 year 2021 - current December December December December previous reporting 2021 2020 2021 2020 quarter quarter A B C=A+B E=C+D D USD USD USD USD USD USD Rent - - - 18,200 18,200 18,200 Fuel and lubricant 526 2,199 2,725 - 2,725 - Office materials and other 19,377 12,620 31,997 48,448 16,451 consumables 4,000 Travel expenses 19,770 37,256 57,026 42,705 210,891 153,865 Educational expenses 15,412 8,497 23,909 - 23,909 - Training expenses 47,103 3,251 50,354 31,228 81,582 31,228 Professional fees 1,141,546 323,142 1,464,688 491,414 2,002,532 537,844 Bank commission 23,232 4,548 27,780 6,688 37,628 9,848 Insurance charges/ - - - 5,150 5,150 5,150 premium To non-financial private 331,133 0 331,133 331,133 - enterprises - Total use of goods and 1,598,099 391,513 1,989,612 599,385 2,762,198 772,586 services 29 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 during 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 Cumulative balances Current Year balances financial (Project-to-date) financial year 2021 – year 2021 - 31 31 As at 31 As at 31 current previous December December December December reporting quarter 2021 2020 2021 2020 quarter A B C=A+B E=C+D D USD USD USD USD USD USD ICT Infrastructure, hardware, network, - - - 63,580 78,835 78,835 facilities Other fixed assets 79,187 - 79,187 - 86,987 7,800 Total capital expenditure 79,187 - 79,187 63,580 165,822 86,635 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 2021 31 December 2020 USD USD Bank account at the Central Bank of Somalia 304,210 50,827 Total cash and cash equivalents 304,210 50,827 The above amount is restricted to eligible expenditures of the project in line with the financing agreement. 30 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 year-end was as follows: 31 December 2021 31 December 2020 USD USD At beginning of the year, 1 January 50,827 50,082 Surplus for the year- see Statement of Cash Receipts & Payments 253,383 745 At end of the year, 31 December 304,210 50,827 10.8. Other important disclosures 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 377,891.74 244,167 Bilateral Agencies - - Total payments by donors directly to suppliers (grants) 377,891.74 244,167 31 December 2021 31 December 2020 USD USD Supply of services 377,891.74 244,167 377,891.74 244,167 31 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 Below is the recommendation from the previous audit of the project: Audit finding Auditor Status recommendation Inadequate evidence of competitive procurement SEAP Project Airport Hotel Payment: Resolved process Coordination Unit (PCU) and Project This payment relates to expenses for a reverse We noted instances where transparent, fair and Implementation Unit mission by the World Bank team which took competitive procurement procedures were not followed (PIU) should ensure that place on 20-24, July 2019 in Mogadishu. The in obtaining vendors / service providers for the project all procurements follow meeting expenses was expected to be paid by the such as lack of quotation, purchase order and evidence the best practices in World Bank but due to technical problems, the of payment. public procurements – to Bank could not make the payment to Airport ensure procurements are Hotel which was not registered at the World Bank Examples are as follows: undertaken in an open, system at that time. It was later agreed to make fair, transparent and the payment from the Project funds. Please refer Name of Nature of Date of Amount competitive manner, free to the email correspondences and the No vendor services payment (USD) from any conflict of objection letter from the Bank. Airport Study tours 8/8/2020 1,809.15 interest (perceived or Hotel and actual). Insurance Charges for Abdisalam Mohamud Conference Abdullahi Abdisalan Insurance 9/8/2020 5,150 For frequently used Mohamud charges/premium Abdulahi services/supplies where As per the contract of the Project Coordinator, the Abdisalan Overseas air 11/11/2020 13,548 each instance of supply consultant is entitled to medical insurance which Mohamud ticket cost is below procurement will be reimbursed to the consultant on the actual Abdulahi threshold but amount paid for medical insurances and not Abdisalan Overseas per 18/02/2020 11,860 cumulatively involves exceeding the amount mentioned in the contract. Mohamud diem large amounts of money, Therefore, the project does not need to carryout Abdulahi the project should procurement process for allowances of the consider having a consultant that needs to be reimbursed to him/her. We were unable to obtain evidence (in form of framework contract with However, the project undertook competitive quotations or evaluation report) in support of a the preferred supplier. process in recruiting the Project coordinator by competitive hiring process for the above vendor. The using the World Bank guidelines for the amounts are material and have impacts on the financial recruitment of individual consultants. A copy of statements. the contract is attached to this response. 32 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 Audit finding Auditor Status recommendation Travel Expenses As per the Comprehensive Operating Procedures Manual (COPM), the project has set out procedures of processing the payment for travel advances. Before carrying out any travel related activity, the project requests the Banks no objection letter to carryout the activity and also submits a budget for the trip. The Bank TTL reviews the request and issues a no objection letter for the activity and the related expenses. The PIU then requests an advance for the trip based on the approved budget and the World Bank approved per diem and hotel rates for the destination. Once an advance for travel is issued, the consultant is required to use the approved amounts. Upon completion of the activity or the mission, the consultant must submit the Travel Advance Record clearance form (TAC) with it supporting documentation including receipt of deposit of excess funds from the Bank. The above expenses are related to travel trips to USA ($11,860) by the Project Coordinator and the Project Technical Advisor, trip to Turkey ($13,548) by the Project Coordinator and the Minister. And both advances have been fully accounted for after their completion. Once a travel advance is issued to the consultant, the project doesn’t require the consultant to carryout procurement process for the per diems, hotel accommodation and other related expenses but rather require to submit receipts and other supporting documentations such as the boarding buses for the expenses related to the trip. 33 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 Audit finding Auditor Status recommendation Low budget burn rate The project activities The reason for the low budget burnout rate in Resolved should be implemented 2020 is due to the following reasons: We noted that the project burn out was only 31% for the as per the approved year under review, signifying lower the expected / budget timeline. a. A delay in implementation of the planned planned level of activity. activities due to the Covid-19 in early 2020, this has delayed the implementation of the project activities and thus affected the implementation of the project. b. The procurement process for the recruitment of the key personnel of the PIU i.e. the Financial Management Specialist and the Procurement Specialist took long time and these consultants were hired on April and May 2020 respectively. After these key positions were filled, the project fast tracked the procurement processes of the project activities which took quite some time. Therefore, the implementation of the key activities started late FY 2020 and early FY 2021 and thus the budget burnout rate have been increased in the FY 2021. 34 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 paid Name of third party Brief transaction description Date of payment during the year USD Supply of services 1. Abdisalam Mohamud Abdullahi Consultancy fee for January 2021 22 February 2021 4,525.20 2. Abdisalam Mohamud Abdullahi Consultancy Fee for February 2021 10-March-2021 4,525.20 3. International Bank of Somalia Grant Manager Quarter 4 2020 payment 12-March-2021 24,667.67 4. KTH First and Second payment for the least cost electricity options contract 19-March-2021 113,380.00 5. Abdisalam Mohamud Abdullahi Consultancy Fee for March 2021 09-April-2021 - 6. KTH Third payment for the least cost electricity options contract 20-April-2021 85,035.00 7. Abdisalam Mohamud Abdullahi Consultancy Fee for April 2021 13-May-2021 6,545.50 8. Abdisalam Mohamud Abdullahi Consultancy Fee for May 2021 15-June-2021 6,545.50 9. International Bank of Somalia Grant Manager Contract Quarter 1 2021 Payment 16-June-2021 24,666.67 10. KTH Fourth payment for the least cost electricity options contract 24-June-2021 85,035.00 11. University of Washington Tuition fee for the Project Coordinator 24-June-2021 10,122.00 12. Abdisalam Mohamud Abdullahi Consultancy Fee for June 2021 14-July-2021 2,722.00 13. University of Washington Tuition fee for the Project Coordinator 23-July-2021 10,122.00 Sub total 377,891.74 35 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 ANNEX 2 – SUMMARY OF THE PROJECT ASSET (NON-CURRENT ASSETS) REGISTER AT THE END OF THE FINANCIAL YEAR 2021 Asset class Historical cost Additions Disposals during Historical cost brought forward during the year the year carried forward 1 December 2021 2021 2021 31 December 2021 USD USD USD USD Office equipment, furniture, and fittings 71,380 79,187 - 150,567 ICT Equipment, Software and Other ICT Assets 15,255 - - 15,255 Total 86,635 79,187 - 165,822 The balance as at the end of the year is the cumulative cost of all assets under the control of the Project. An asset listing is provided separately for asset details. 36 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 per Entity Receipts as per Donor Variance Date Received Description Amount Confirmation Amount Amount USD USD USD 08-February-2021 Designated Account 199,255.23 199,255.23 22-February-2021 Direct Payment 6,545.5 6,545.5 - 10-March-2021 Direct Payment 6,545.5 6,545.5 - 12-March-2021 Direct Payment 24,666.67 24,666.67 - 19-March-2021 Direct Payment 113,380.00 113,380.00 09-April-2021 Direct Payment 6,545.5 6,545.5 - 20-April-2021 Direct Payment 85,035.00 85,035.00 - 21-April-2021 Designated Account 365,149.68 365,149.68 - 13-May-2021 Direct Payment 6,545.5 6,545.5 - 15-June-2021 Direct Payment 6,545.5 6,545.5 - 16-June-2021 Direct Payment 24,666.66 24,666.66 - 24-June-2021 Direct Payment 85,035.00 85,035.00 24-June-2021 Direct Payment 10,122.00 10,122.00 - 30-June-2021 Designated Account 178,271.02 178,271.02 - 14-July-2021 Direct Payment 6,545.5 6,545.5 14-July-2021 Designated Account 314,534.44 314,534.44 - 23-July-2021 Direct Payment 2,722.00 2,722.00 - 30-July-2021 Designated Account 146,836.40 146,836.40 - 04-August-2021 Direct Payment 2,106.00 2,106.00 11-August-2021 Direct Payment 6,545.5 6,545.5 - 23-August-2021 Direct Payment 9,320.00 9,320.00 - 23-August-2021 Designated Account 338,820.53 338,820.53 - 02-September-2021 Direct Payment 24,666.67 24,666.67 - 03-September-2021 Direct Payment 11,732.50 11,732.50 - 06-October-2021 Direct Payment 0 6,545.50 6,545.5 07-October-2021 Direct Payment 0 -6,495.50 -6,495.50 26-October-2021 Direct Payment 6,545.5 6,545.5 12-November-2021 Direct Payment 6,545.5 6,545.5 - 07-December-2021 Direct Payment 24,666.67 24,666.67 - 10-December-2021 Direct Payment 6,545.5 6,545.5 - 10-December-2021 Designated Account 300,000.00 300,000.00 - 16-December-2021 Direct Payment 8,242.00 8,242.00 - 30-December-2021 Direct Payment 6,545.5 6,545.5 - 23-December-2021 Direct Payment 1,123.00 1,122.16 0.84 10-December-2021 Direct Payment 2,030.00 2,030.00 - 2,344,381.97 2,344,431.13 (49.16) 37 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 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 Receipts per Entity Receipts as per Donor Variance Date Received Description Amount Confirmation Amount Amount US$ US$ US$ 08-February-2021 Designated Account 199,255.23 199,255.23 22-February-2021 Direct Payment 6,545.5 6,545.5 - 10-March-2021 Direct Payment 6,545.5 6,545.5 - 12-March-2021 Direct Payment 24,666.67 24,666.67 - 19-March-2021 Direct Payment 113,380.00 113,380.00 09-April-2021 Direct Payment 6,545.5 6,545.5 - 20-April-2021 Direct Payment 85,035.00 85,035.00 - 21-April-2021 Designated Account 365,149.68 365,149.68 - 13-May-2021 Direct Payment 6,545.5 6,545.5 - 15-June-2021 Direct Payment 6,545.5 6,545.5 - 16-June-2021 Direct Payment 24,666.66 24,666.66 - 24-June-2021 Direct Payment 85,035.00 85,035.00 24-June-2021 Direct Payment 10,122.00 10,122.00 - 30-June-2021 Designated Account 178,271.02 178,271.02 - 14-July-2021 Direct Payment 6,545.5 6,545.5 14-July-2021 Designated Account 314,534.44 314,534.44 - 23-July-2021 Direct Payment 2,722.00 2,722.00 - 30-July-2021 Designated Account 146,836.40 146,836.40 - 04-August-2021 Direct Payment 2,106.00 2,106.00 11-August-2021 Direct Payment 6,545.5 6,545.5 - 23-August-2021 Direct Payment 9,320.00 9,320.00 - 23-August-2021 Designated Account 338,820.53 338,820.53 - 02-September-2021 Direct Payment 24,666.67 24,666.67 - 03-September-2021 Direct Payment 11,732.50 11,732.50 - 06-October-2021 Direct Payment 0 6,545.50 6,545.5 07-October-2021 Direct Payment 0 (6,495.50) (6,495.50) 26-October-2021 Direct Payment 6,545.5 6,545.5 12-November-2021 Direct Payment 6,545.5 6,545.5 - 07-December-2021 Direct Payment 24,666.67 24,666.67 - 10-December-2021 Direct Payment 6,545.5 6,545.5 - 10-December-2021 Designated Account 300,000.00 300,000.00 - 16-December-2021 Direct Payment 8,242.00 8,242.00 - 30-December-2021 Direct Payment 6,545.5 6,545.5 - 23-December-2021 Direct Payment 1,123.00 1,122.16 0.84 10-December-2021 Direct Payment 2,030.00 2,030.00 - 2,344,381.97 2,344,431.13 (49.16) N.B: The difference between the Bank records and the SFMIS records is USD 49.16 that resulted from: - a. USD 50 of bank charges that occurred within the Client Connections as a result of a payment to the Project Coordinator with regards to the September 2021 consultancy fee that has been returned by the Beneficiary Bank as the bank’s intermediary bank in the USA has been changed. This didn’t affect the SFMIS accounts as it occurred only at the client connection. b. USD 0.84 resulted the differences between the exchange rates of EURO to USD at the date of the payment sent to the World Bank and the date World Bank made the payment. 38 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 ANNEX 5 – SFMIS REPORTS AND OTHER SUPPORTING SCHEDULES SFMIS Trial Balance 39 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 SFMIS Budget Utilization Report 40 Report and financial statements for the year ended 31 December 2021 Federal Government of Somalia Somalia Electricity Access Project Project grant / credit number TF A9159 Report and financial statements For the year ended 31 December 2021 The following SFMIS financial reports and other supporting schedules are provided separately. i. SFMIS Project Bank reconciliations for all bank accounts ii. SFMIS Project Statement of Budget Utilization iii. SFMIS Fixed Asset Register iv. SFMIS statement of sources and application of funds v. SFMIS Direct Payments Listing vi. Schedule of disbursements vii. Contract listing/register 41 Report and financial statements for the year ended 31 December 2021