inancia Sat AUDIT FIPAG-Water Su A ASets and Investment Fund Integrated GrowtnhPoles Project Credit Agreement Number 52370 -MZ foi tMe ine mnontns Deli ended 30 SepteMer 2020 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement No. 52370 - MZ for the nine months period ended 30 September 2020 Financial Statements for the nine months period ended 31 December 2020 Index Page Management's responsibility statement 1 Independent auditor's report 2 -3 Statement receipts and payments 4 Statement of designed account 5 Statement of direct payments 6 Notes to the financial statements 7- 12 Management's responsibility statement The Water Supply Asset and Investment Fund (FIPAG) through a dedicated Project Management Team (Management) is responsible for preparation and presentation of the financial statements of Integrated Growth Poles Project for the nine months period ended 30 September 2020, which comprise the statement of receipts and payments, the statement of designated accounts, the statement of direct payments and the accompanying notes, in accordance with the cash basis of accounting described in note 3. The Management is also responsible for determining that the basis of accounting is an acceptable basis for preparing and presenting the financial statements in the circumstances; 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; and for maintaining adequate accounting and an effective system of risk management. The Management is also responsible for the other project internal controls and for compliance with the relevant agreement terms, local laws and regulations applicable to the project. The responsibility for the prevention and detection of non-compliance rests with Management. Approval of the financial statements The financial statements of Integrated Growth Poles Growth Project and related notes, as identified in the first paragraph, were approved by the Project Management Team on 21 September 2021 and are signed on its behalf b PAG Administ o and Fin ce Director RMoO neral irector OOV EP1 UEk KPMG Auditores e Consultores, SA Telefone: +258 (21) 355 200 Edificio KPMG Telefax: +258 (21) 313 358 Rua 1.233, N' 72 C Caixa Posiar. 2451 Maputo, Mogambique Email: mz-fminformation@kpmg.com Independent auditors' report web: www.kpmg,co.mz To the Water Supply Asset and Investment Fund (FIPAG) Opinion We have audited the financial statements of Integrated Growth Poles Project - Credit Agreement Number 52370 MZ ("project") for the nine months period ended 30 September 2020, set out on pages 4 to 12, which comprises the statement of receipts and payments, the statements of designated accounts, the statement of direct payments and notes to the financial statements, including a summary of significant basis of accounting and other explanatory notes. In our opinion, the statement of receipts and payments of Integrated Growth Poles Project - Credit Agreement Number 52370 MZ for the nine months period ended 30 September 2020 has been prepared, in all material respects, in accordance with the basis of accounting described in note 3. In our opinion the statement of designated account of Integrated Growth Poles Project - Credit Agreement Number 52370 MZ for the nine months period ended 30 September 2020 was prepared, in all material respects, in accordance with IDA's guidelines. With respect to statement of expenditure (SOE), we confirm that adequate supporting documentation has been maintained to support claims to International Development Association (IDA) for reimbursement of expenditure incurred and these are eligible for financing under the IDA Grant Agreement. 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 the 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' International Code of Ethics for Professional Accountants (including International independence Standards) (IESBA Code) together with the ethical requirements relevant to our audit of the financial statements in Mozambique, and we have fulfilled our other 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. Restriction on use and limitation of liability We draw attention to Note 3 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Project to comply with the financial reporting provisions of the agreement with International Development Associations (IDA). As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for FIPAG and IDA and should not be used by or distributed to parties other than FIPAG and IDA. Our opinion is not modified in respect of this matter. Other Information The Management is responsible for the other information. The other information comprises the Management' responsibility statement. The other information 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 an audit opinion or 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, 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. KPMG Auditores a o-nuitnres, SA, umn saniedade an6nima de Regi3tada em Magambique sob a dezignagoo do, KPMG responsabilidade limitada, 6 membro da KPMG Infernacional, uma Auditorese Constores, SA coaperatIva Sulia KPMG Auditores o Consuitores, SA, a MAambique limited liability Registered in Mnzambique. as KPMG Auditores oompany, is a membeir of KPMG Internaclnal a Swiss, cooperatie e Consultores. SA Responsibilities of the Management for the Financial Statements The Management is responsible for the preparation and presentation of the financial statements in accordance with the basis of accounting described in note 3 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. 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 whn 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 the Management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We 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. MG, Re istered Audit Firm, 04/SCA/OCAM/2014 epres ste by: em Cha a J shi 57/CA/OCAM/2014 Pa 202 24 September 2021 3 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ Jor the nine months period ended 30 September 2020 Statement of receipts and payments for the nine months period ended 30 September 2020 Notes USD Receipts/sources Opening balance 325 777 Replenishments 5 639 170 Direct payments 6 2950910 Total receipts 3915857 Payments/uses (by category) Direct Payment Works, goods and consultants services (2) 2 950 910 Eligible expenditure paid Works, goods and consultants services (2) 7 964 947 Total payments 3 915 857 4 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ for the nine months period ended 30 September 2020 Statement of designated account /br the nine months period ended 30 September 2020 Notes USD Receipts/sources Opening balance 325 777 Replenishments 5 639 170 Total receipts 964 947 Payments/uses (by category) Eligible expenditure paid Works, goods and consultants services (2) 7 964947 Total payments 964 947 5 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ /br the nine months period ended 30 September 2020 Statement of direct payments for the nine months period ended 30 September 2020 Note USD Receipts/sources Direct payments 6 2950910 Total direct payments 2950910 Payments/uses (by category) Works, goods and consultants services (2) 2 950 910 Total Payments 2 950 910 6 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ fbr the nine months period ended 30 September 2020 Notes to the financial statements for the nine months period ended 30 September 2020 1. Nature of the project On 27 May 2013 a development credit agreement was signed between the Republic of Mozambique and International Development Association (IDA), wherein IDA agreed to provide a credit of an amount equivalent to SDR 66 100 000 to implement the integrated Growth Poles Project - Credit Agreement Nr.5237-MZ. The objective of the Project is to improve the performance of enterprises and Smallholders in the Zambezi Valley and Nacala Corridor, focusing on identified high growth potential zones (growth poles). The objectives of the Project are: (i) Support for the Tete agribusiness growth polo in the Zambezi Valley; A. Upgrading of local infrastructure; B. Innovation and Demonstration Catalytic Fund investments in the Zambezi Valley. (ii) Support for the Nacala Special Economic Zone (SEZ) A. Upgrading of the Nacala (SEZ) physical infrastructure; B. Innovation and Demonstration Catalytic Fund Investment in Nacala Corridor. (iii) Institutional development and capacity building: A. Strengthening of the capacity of the Ministry of Planning and Development for Planning, coordination, implementation and monitoring and evaluation of public investment programs and support for the ministry of industry and commerce; B. Strengthening of the capacity of the Zambezi Valley Development Agency (ZVDA) and the provincial authorities in the Zambezi Valley; C. Strengthening of the capacity of the GAZEDA UCODIN and the provincial authorities in the Nacala Corridor. (iv) Project implementation Provision of comprehensive support for Project implementation, including as required the provision of consultants' services, goods. Training and the financing of operating Cost for the Project Coordination Unit. In addition, FIPAG is the Project implementing entity responsible to carry out the expansion and extension of approximately 110 kilometers of water supply networks and distribution systems in Nacala including drilling of about six boreholes, construction of transmission lines, rehabilitation and construction of distribution centers, and installation of connections to approximately 26 000 new households, all through provision of works, goods, services and technical assistance recruited for the purpose, under Part II .A. I of the project. The amount of the financing allocated is SDR 16.190.000. 7 FlPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ jor the nine months period ended 30 September 2020 Notes to the financial statements for the nine months period ended 30 September 2020 2. Procedures of designated account for the IDA credit The Development Credit Agreement requires the opening of a Designated Account in USD, The purpose of the Designated Account is for payment of eligible expenditures. These payments will be subsequently justified to IDA with respective documentation or issuance of SOEs (Statement of Expenditures) for replenishment of the Designated Account or refunding of the initial deposit. 3. Accounting policies The following paragraphs describe the main accounting policies applied consistently by the project. 3.1 Basis ofPreparation The financial statement, compiled from FIPAG accounting records, are prepared on a cash basis from the information reflected in the financial and accounting reports of the Project. Under this basis, receipts are not recorded until received in cash and disbursements are assigned to the year in which the respective cash payment is made. 3.2 Receipts recognition Receipts are recorded in the books on deposit of the funds by the donor into the Program's bank account. 3.3 Payments Payments are recorded in the books on disbursement of the funds. 3.4 Foreign Currency Transactions The books of account of the Project are maintained in United States Dollars (USD). The financial statements are also expressed in United States Dollars (USD) unless otherwise stated. The transactions in other currencies are translated to USD at the official exchange rate ruling at the date of the transactions. The closing balance in other currencies are translated at the exchange rate ruling at the period end date. 3.5 Fixed assets Fixed assets acquired by the project are expensed in the year of purchase. 3.6 Procedures The disbursements of the funds, made available by the International Development Association (IDA), are carried out by: * Direct payments - direct transfers from IDA to the suppliers; or by * Replenishments - disbursements into the bank accounts (designated account - FNB Bank) opened for funds made available by IDA. 8 I. FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ jor the nine months period ended 30 September 2020 Notes to the financial statements for the nine months period ended 30 September 2020 4. Advances from IDA In line with the Projeci Grant Agreement, an amount of USD 571 280 was advanced and withdraw from the credit balance and maintained in the designated account DA-A for the project use during the year. 4.2 Project Termination The project was terminated on 30 September 2020 (30 April 2020 per agreement), and the remaining amount advanced to designated account, amounting to USD 163 630 was refunded to world bank. 9 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ for the nine months period ended 30 September 2020 Notes to the financial statements for the nine months period ended 30 September 2020 5. Replenishment to Designated Account Application number Category USD SDR 53 2 570372 413592 54 2 68798 51 003 639 170 464 595 6. Direct payments Appication Supplier name Category USD SDR number 55 Sotux 2 206207 151 506 56 Luis Paulo Mondlane 2 89 370 65 430 57 Jiangsu Geology Engineering 2 481 285 353 138 58 Nicholas Odwyer 2 580 309 426 369 60 Sinohydro Corporation, Ltd 2 178 992 130 940 61 Sinohydro Corporation, Ltd 2 474 455 347 360 63A Sinohydro Corporation, Ltd 2 150 883 107 339 64 Sinohydro Corporation, Ltd 2 409 890 297 582 65 Jiangsu Geology Engineering 2 379519 275533 2950910 2155197 7. Designated account payments during the year Supplier name USD Jiangsu Geology 67 177 Nicholas O'Dwyer 50706 Sinohydro 194 264 AiMPHOS21 44903 COBA 171 762 Jiangsu Geology 59 651 Jiangsu Geology & Enginee 77 961 Luis Paulo Mandlate 5 094 Recovery Solutions 73 247 Others 56 401 Refund to world Bank 163 630 Bank Charges 150 964 946 10 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ for the nine months period ended 30 September 2020 Notes to the financial statements for the nine months period ended 30 September 2020 8. Designated account advance reconciliation USD Advance to designated account 1 000 000 Represented by: a) Amount deducted on 28th July 2019 under WA 46 37096 b) Amount deducted on 27th August 2019 under WA 48 66756 c) Amount deducted on 2nd June 2020 under WA 59A 159 169 d) Amount deducted on 18th June 2020 under WA 62 9 243 e) Amount deducted on 23rd July 2020 under WA 66 173 218 1) Amount deducted on 24th September 2020 under WA 68 391 197 g) Amount deducted on 08th September 2020 163 321 1 000 000 FIPAG - Water Supply Assets and Investment Fund Integrated Growth Poles Project IDA Credit Agreement Number 52370 - MZ for the nine months period ended 30 September 2020 Disbursement summary at 30 September 2020 IDA Credit agreement No. 52370 - MZ Total Available Ca Budget per Disbursements Disbursements Disbursements up balance as at tegory credit agreement in prior periods during the 30 September 30 September period 2020 2020 2020 SDR SDR SDR SDR SDR Works, goods and consultants services (2) 16 190000 12697009 2619792 15316801 873 199 Designated account - 571 282 - 571 282 (571 282) 16 190 000 13 268 291 2 619 792 15 888 083 301 917 12