DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT IN THE HORN OF AFRICA - PHASE II (DRDIP II) PROJECT IMPLEMENTED BY INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT (IGAD) AND FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) GRANT NUMBER: D184 PROJECT REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 DRDIP II project implemented by IGAD and funded by IDA Glossary of abbreviations For the year ended 31 December 2021 Glossary of abbreviations Abbreviation I In full DRDIP Development Response to Displacement Impacts Project in the Horn of Africa DJF Djiboutian Franc FAS Fund Accountability Statement HoA Horn of Africa IDA International Development Association IESBA International Ethics Standards Board for Accountants IGAD Intergovernmental Authority on Development ISA International Standards on Auditing LLP Limited Liability Partnership NCRI National Commission for Refugees and IDPS (NCRI) PwC PricewaterhouseCoopers USD United States Dollar DRDIP II project implemented by IGAD and funded by IDA Table of contents For the year ended 31 December 2021 Table of contents 1. B ackgro und inform atio n ................................................................................... 2. Statement of management responsibilities....p-.lt............ -..................................................... ........... 2 3. Independent auditor's report to the IGAD Secretariat...................................................................................3 4 . F ina ncia l state m e nts..........................................................................t.s......... . .................................... 6 4.1. Fund Accountability Statement (FAS)....................................................................................................6 4.2. Notes to the fund accountability statement (FAS)....................................................... .......................7 A n n e x es.............................................................................................. . ........ ..................... . ...... ............. 1 0 Annex 1: - Statement of activity in the designated bank account for the year ended 31 December 2021.....10 Annex II: - A reconciliation of the receipts from the IDA...................................................................................11 Annex III: - Summary of SOE withdrawal schedule, listing individual withdrawal applications ........................12 Annex IV: - Fixed Assets Register of the project..............................................................................................13 DRDIP II project implemented by IGAD and funded by IDA Background information For the year ended 31 December 2021 1. Background information Intergovernmental Authority on Development (IGAD) IGAD was created in 1996 to supersede the Intergovernmental Authority on Drought and Development (IGADD), which was founded in 1986. The IGAD Member States are Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, South Sudan and Uganda. The mandate of IGAD is to coordinate the efforts of member states to advance their development goals in the priority areas of economic cooperation, political and humanitarian affairs and food security and environment protection. IGAD's vision is to be the premier Regional Economic Community (REC) for achieving peace and sustainable development in the region. The mission is to promote regional cooperation and integration to add value to Member States' efforts in achieving peace, security and prosperity. Background of the Development Response to Displacement Impacts Project in the Horn of Africa- Phase II (DRDIP II) project Development Response to Displacement Impacts Project in the Horn of Africa - Phase Two (DRDIP II) is a project financed by International Development Association (IDA) and implemented by IGAD. The objective of the project is to improve access to basic social services, expand economic opportunities and enhance management for communities hosting refugees in the targeted areas. The participating country is Republic of Kenya for phase II. The financing agreement was signed on 23 May 2017. The overall project budget is USD 3,000,000 financed fully by IDA. The budget for the year ended 31 December 2021 was USD 1,630,909 as per the annual budgets approved by IDA.The project closing date is 31 December 2022 as per an extension was granted via an amendment dated 4 February 2022. Summary of financial results During the year ended 31 December 2021, the total funds available for use amounted to USD 862,446 (Comprising an opening balance of USD 200,000, receipts from IDA of USD 601,244, direct payment to a consultant of USD 61,195 and other income of USD 7) while total expenditure amounted to USD 804,472 giving a fund balance of USD 57,974 as at 31 December 2021. 1 DRDIP II project implemented by IGAD and funded by IDA Statement of management responsibilities For the year ended 31 December 2021 2. Statement of management responsibilities IGAD's Secretariat is required to prepare financial statements for the DRDIP II project for each financial year in all material respects, in accordance with the project accounting policies described under Note 4,2.1 to the financial statements. The Secretariat is responsible for ensuring that proper accounting records are kept that are sufficient to show and explain the transactions of the project disclose with reasonable accuracy at any time the financial position of the project: and that enables them to prepare financial statements of the project that comply with prescribed accounting policies They are also responsible for safeguarding the assets of the project and for taking reasonable steps for the prevention and detection of fraud and other irregularities The Secretariat accepts responsibility for the preparation and presentation of these financial statements in accordance with the accounting policies described under Note 4.2.1 to the financial statements They also accept responsibility for a) Designing, implementing and maintaining internal controi as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error b) Selecting suitable accounting policies and then apply them consistently and c) Making judgements and accounting estimates that are reasonable in the circumstances Having made an assessment on the project's ability to continue as a going concern, the management are not aware of any material uncertainties related to events or conditions that may cast doubt upon the project's ability to continue as a going concern. Management acknowledge that the independent audit of the financial statements does not relieve them of their responsibility Approved by the management on 0 2022 and sined on its behalf by Workneh Gebeyehu (PhD) Josephat OnyI Executive Secretary Director of Administration and Finance 2 pwc 3. Independent auditor's report to the IGAD Secretariat Report on the audit of the financial statements of the Development Response to Displacement Impacts Project in the Horn of Africa- Phase II (DRDIP II) project Our opinion We have audited the accompanying financial statements of the "Development Response to Displacement impacts Project in the Horn of Africa- Phase II (DRDIP II)" project implemented by Intergovernmental Authority on Development (IGAD) and funded by the International Development Association (the "project") set out on pages 6 to 9 which comprise the Fund Accountability Statement (FAS) for the year ended 31 December 2021 and the notes to the FAS, which include a summary of significant accounting policies. In our opinion, the financial statements of the project are prepared, in all material respects, in accordance with the basis of accounting described in Note 4.2.1 to the financial statements. Basis for our 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 the audit of the financial statements section of our report. We are independent of IGAD and the project in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Basis of accounting and restriction on use and distribution We draw attention to Note 4.2.1 to the financial statements, which describes the basis of accounting. The financial statements are prepared in accordance with IGAD's project accounting policies to satisfy the financial information needs of the users of the financial statements. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for IGAD and the Project funding partners and should not be distributed to or used by parties other than IGAD and the project funding partners. Our opinion is not modified in respect of this matter. Other information The other information comprises the information included in the project report other than the financial statements and our auditor's report thereon. The management are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, 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 identified above 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, 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. PricewaterhouseCoopers LLP. PwC Tower, Waiyaki Way/Chiromo Road, Westlands P 0 Box 43963 - ooloo Nairobi, Kenya T: +254 (20)28550oo F: +254 (20)2855001 www.pwc.com/ke Partners: E Kerich B Kirnacia M Mugasa A Murage F Muriu P Ngahu R Njoroge S 0 Norbert's B Okundi K Saiti pweC Independent auditor's report to the IGAD Secretariat (continued) Responsibilities of management for the financial statements The management are responsible for the preparation of the financial statements in accordance with the basis of accounting described in Note 4.2.1 and for such internal control as the 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, the management are responsible for assessing the ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intend to liquidate the Project or to cease operations, or have no realistic alternative but to do so. The management are responsible for overseeing the project's financial reporting process 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 judgement and maintain professional scepticism 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 IGAD's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the 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 ability to continue as a going concern. 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 IGAD to cease to continue as a going concern. 4 pwc Independent auditor's report to the IGAD Secretariat (continued) We communicate with the 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. PA Stephen Ochieng' Norbert's, Practising Number P/1 819 Engagement partner responsible for the audit For and on behalf of PricewaterhouseCoopers LLP Certified Public Accountants Nairobi So)S%A. 2022 5 DRDIP II project implemented by IGAD and funded by IDA Financial statements For the year ended 31 December 2021 4. Financial statements 4.1, Fund Accountability Statement (FAS) Budget Actual (Year ended 31 (Year ended 31 December 2021) December 2021) Note USD USD Opening balance 4 2.2 200 000 Grant income 4.2.3 1,630,909 601,244 Direct payment 424 61,195 Other income 4.2.5 7 Total funds available for use 1,630,909 862,446 Expenditure Project expenditure 4,2.6 1,630,909 804,472 Total expenditure 1,630,909 804,472 Fund balance _ 57,974 Represented by Bank balances 4.2-7 71,874 Accounts payable 4.2.8 (13,900) 57,974 The fund accountability statement above and the accompanyin summary of accounting policies and notes on pages 7 to 9 were approved by the IGAD Secretariat on oC) y 2022 and signed on its behalf by: Workeneh Gebeyehu (PhD) Josephat Onyart Executive Secretary Director of Administration and Finance 6 DRDIP II project implemented by IGAD and funded by IDA Financial statements For the year ended 31 December 2021 4.2. Notes to the fund accountability statement (FAS) 4.2.1. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. a) Basis of preparation The financial statements are prepared under the modified cash basis of accounting, modified to accrue for outstanding payables and receivables at the close of the financial year. The measurement basis applied is the historical cost basis, except where otherwise stated in the accounting policies below. b) Income recognition Income is recognised once received from International Development Association into the IGAD's project bank account in Exim Bank Djibouti. c) Expenditure recognition Expenditure recognised on a cash basis, but modified to accrue for outstanding obligations, if any at year end. d) Budget The total approved budget for the year ended 31 December 2021 was USD 1,630,909. The budget amount was obtained from the agreed annual workplan between IDA and IGAD. e) Reporting currency The FAS is presented in United States Dollars (USD). f) Foreign currency translation Transactions in other foreign currencies (namely Djibouti Francs) are translated to US dollars using the Exim Bank rates on the date of transaction. g) Accounts payable This relates to amounts owed to suppliers for goods and services provided during the year that remained unpaid as at year-end. h) Fixed assets Assets purchased using project funds are expensed in full on the date of acquisition. They are however tracked by use of an assets register maintained by IGAD. 7 DRDIP I project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Notes to the FAS (continued) 4.2.2. Opening balance The project had an opening balance of USD 200,000 as at 1 January 2021 which was carried forward from the previous year ended 31 December 2020. The opening balance agreed to the prior year audit report. 4.2.3. Grant income This relates to actual receipts from the International Development Association (IDA) to the project bank account with Exim bank account. During the year, the project received a total of USD 601,244 from the IDA as indicated in the table below: No Date of receipt Amount received (USD) 1 25 March 2021 102,941 2 10 July 2021 79,283 3 12 August 2021 182,635 4 21 October 2021 236,385 Total 601,244 4.2.4. Direct payment This relates to a direct payment made by IDA to a consultant of USD 61,195. 4.2.5. Other income This relates to exchange gains of USD 7. 4.2.6. Project expenditure The total project expenditure reported in the year ended 31 December 2021 was USD 804,472 as detailed below: Budget line Budget Actual Comments (USD) (USD) Rapid assessment of 15,000 15,000 The budget line relates to recruitment of a consultant, capacities, systems, partners consultative meeting, validation of rapid processes in support of assessment workshop and validation of implementation return and reintegration by member states. quick mapping and profiling of key actors. Strengthen existing 341,100 123,768 This relates to support of coordination efforts between coordination mechanisms resilience and durable solutions actors in areas of at both federal and regional return, development of a coordination plan to guide level relocation of IDPs to their places of origin, improved coordination of NCRI activities at the national and sub- national levels and strengthening the capacity of Durable Solutions Unit (DSU) to perform its roles. Policy development and 139,780 19,140 This relates to development of a social cohesion policy legal frameworks to and development of an NCRI strategic plan 2020 - promote durable solutions 2023. 8 DRDIP I project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Budget line Budget Actual Comments (USD) (USD) Strengthening information 434,160 173,110 This relates to development of durable solutions systems for the durable database, upgrade and expansion of refugee solution to the forced returnee's registration system, mapping of socio- displacement economic services in areas of return and reintegration and strengthening communication for durable solutions efforts. Specific technical 216,120 80,000 This relates to facilitation and coordination of efforts for assistance national and regional durable solutions, Technical assistance to support the DSU and technical assistance to support resilience and durable Solutions directorate through short term consultancy. Enhanced and effective 166,810 120,390 This relates to monitoring and evaluation, supervisory monitoring, evaluation and visits, staff training and midterm review. learning system Operational costs 317,939 273,064 This relates to staff costs, rent, utilities, bank charges and office supplies. Total 1,630,909 804,472 4.2.7. Bank balances This represents bank balances held at the Exim Bank, Djibouti as at 31 December 2021. No Description Amount (USD) 1 DRDIP II USD Bank Account - Djibouti 71,425 2 DRDIP II DJF Bank Account - Djibouti 449 Total 71,874 4.2.8. Accounts payable This represents accrual for audit fees and consultancy fees that had not been paid as at 31 December 2021. Description Amount (USD) Audit fee 4,400 Consultancy fee 5,000 Accrued payroll costs 4,500 Total 13,900 9 DRDIP I project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Annex 1: Statement of activity a) Statement of activity in the designated bank account for the year ended 31 December 2021 Account number 0010004272 Account name IGAD DRDIP II USD Account Bank Exim Bank Djibouti Amount (USD) Opening balance as at 1 January 2021 204,837 Transfers from IDA directly to IGAD during the year ended 31 December 2021 601,244 Total 806,081 Less: Payments out of designated bank account (734,656) Closing balance as at 31 December 2021 71,425 b) Statement of activity in the Djiboutian Franc (DJF) bank account for the year ended 31 December 2021 Account number 0010006452 Account name DRDIP DJF Account Bank Exim Bank Djibouti Amount (DJF) Opening balance as at 1 January 2021 865,500 Internal transfers from USD account during the year ended 31 December 2021 177,721 Total 1,043,221 Less: Payments out of the bank account (963,400) Closing balance as at 31 December 2021 79,821 10 DRDIP 11 project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Annex II: - A reconciliation of the receipts from the IDA Amount (USD) Amount received by IGAD (through the special account) 601,244 Amount disbursed by the bank 601,244 Variance - 11 DRDIP II project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Annex III: - Summary of SOE withdrawal schedule, listing individual withdrawal applications Date of application Date received Withdrawal application Amount (USD) 23 March 2021 25 March 2021 Application number 13 102,941 8 July 2021 10 July 2021 Application number 14 79,283 10 August 2021 12 August 2021 Application number 15 182,635 18 October 2021 21 October 2021 Application number 17 236,385 Total 601,244 12 DRDIP II project implemented by IGAD and funded by IDA Annexes to the financial statements For the year ended 31 December 2021 Annex IV: - Fixed Assets Register of the project Asset Number Asset description Asset amount (USD) Purchase date IGAD/DRDIP I/ IT /1 HP EliteBook 820 1,523 1/2/2018 IGAD/DRDIP II/ IT /2 HP EliteBook 820 1,523 1/2/2018 IGAD/DRDIP Il/ IT /3 HP EliteBook 820 1,523 1/2/2018 IGAD/DRDIP I/ IT /4 Ultra slim Docking station 228 1/2/2018 IGAD/DRDIP I/ IT /5 Ultra slim Docking station 228 1/2/2018 IGAD/DRDIP Il/ IT /6 LED Backlit LCD Monitor 168 1/2/2018 IGAD/DRDIP I/ IT /7 23-Inch LED Backlit monitor 299 1/2/2018 IGAD/DRDIP Il/ IT /8 Photocopying machine 2,056 12/9/2019 IGAD/DRDIP I/ IT /9 Printer 1,070 12/9/2019 13