Deloitte. RESERVE BAN K OF MA L A WI FI NANCIAL ECTOR TEC HNI CAL ASS IST A CE PROJ ECT (FSTAP) WO RL D BAN K (I NTE RNATIONAL DEVE LOPMENT ASSOC I ATI ON) CRE DI T UM BER: 48970 MW PROJECT NUMB ER: P1226 16 RE PO RT OF T H E I NDEPEN DENT AUD IT OR ON TH E PROJECT'S FINANCIAL STATEMENTS FOR T H E YEAR ENDED 3 1 DECEMBER 20 16 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 TABLE OF CONTENTS CONTENTS 1. General Information 1.1 Background l -3 1.2 Audit Objectives and Scope 4 2. Independent Auditor's Report on Project Financial Statements 5-7 3. Independent Auditor's Report on the Designated Account Statement 8 - 10 4. Statement of Sources and Uses of Funds 11 5. Designated Account Activity Statement 12 6. Accounting policies 13 7. Notes to the Project Financial Statements 14 - 15 RESERVE BANK OF MALAWI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 1. GENERAL INFORMATION 1.1 Background The Malawi Government received funding from the International Development Association (IDA) of the World Bank to be applied towards increasing access to finance for the currently unbanked, but bankable, population of Malawi through the Financial Sector Technical Assistance Project (FST AP). The Reserve Bank of Malawi (RBM) is implementing the Financial Sector Technical Assistance Project (FST AP). The project is financed by a credit of USD28 .2 million, with the commencement date of December 21 , 2011 and was expected to close by August 2016. However, in order to accommodate finalisation of some activities, the closing date was extended to August 31 , 2017. The Malawi Government made available the entire USD28.2 million to the Reserve Bank of Malawi on a grant basis through a supplementary agreement that transfers implementation responsibility to the RBM . However, earlier in 2011 , there was a need to have some preparatory activities undertaken before the FST AP Project Implementation Unit (PIU) could be fully functional and it was in view of this need that BEST AP (another World Bank funded project under the Ministry of Trade and Industry) was identified to implement the project preparatory activities from July 2011 to December 2011 . After the completion of project preparation, the implementing entity (Reserve Bank of Malawi) took over the project and started implementing it through a PIU from January 2012 . The project provides the necessary financing for change management in key public sector institutions; primarily the Ministry of Finance and the Reserve Bank of Malawi ttiat already have an established source of recurrent funding. The activities have been identified through extensive economic sector work, policy dialogue with the Government, as well as through consultations with a wide range of stakeholders (including the private sector, civil society and donors) to achieve wider access to financial products thereby contributing to economic growth. During the year, the project received a total of USD5.12 million (20 16: USD3 .58 million) towards the implementation of project's activities. The IDA credit for project implementation supports five components and funds the following main activities: (i) training and workshops, (ii) short term consultancy services and (iii) goods, predominantly project vehicles and IT hardware and software systems. Activities supported by the project are aggregated in the five following five components: I. Strengthening mancial sector regulation and supervision. 2. Financial infrastructure. 3. Financial consumer protection and financ~l literacy. · . 4. Ministry of Finance financial sector policy and governance capacity and long tenn finance. 5. Project implementation support. RESERVE BANK OF MALA WI FINANCI AL SECTOR TECHNI CAL ASSI STANCE PROJECT (FSTAP ) WORLD BANK (IDA) CREDIT NO : 48970-M W ; PROJECT NUMBER: P122616 FOR T HE YEAR E NDED 31 DECEMBER 201 6 1. GENER AL INFORMATION (Continued) 1.1 Background (Continued) Project Financing T able Project Component Project cost IDA (in US$m) Financing Financing (in US$m) percentae:e Strengthening financial sector regulation and supervision 5.32 5.32 100 Financial infrastructure 13 .22 13 .22 100 Financial consumer protection and financial literacy 3.02 3.02 100 Ministry of Finance financial sector po licy and governance capacity and long 3.39 3.39 100 term fi nance Pro ject implementation suooort 3.26 3.26 100 Total 28.21 28.21 100 2 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 1. GENERAL INFORMATION (Continued) 1.1 Background (Continued) FST AP Project As noted above, the project is expected to run for a period of six years from December 21 , 2011 to August 3 I, 2017 and the budget for the project is as tabulated below: Total Budget US$ 2011 - 2017 1. Financial Sector, Regulation and Supervision Goods 2,800,000 Consultancy Services on legal and regulatory framework 1,670,000 Tra ining and Workshops 845 ,000 5,315,000 2. Financial Infrastructure Goods 8,590,000 Consultancy Services 4,3 48 ,000 Training and Workshops 280,000 13,218,000 3. Financial Conswner Protection and Financial Literacy Consultancy Services 1,392,000 Training and Workshops 1,632,000 3,024,000 4 . MOF Financial Sector Policy and Governance Capacity and Long -Term Finance Goods 405,000 Consultancy services 1,553,000 Training and Workshops 1,133 ,250 3,091,250 ......... 5. FST AP Implementation Support & Capacity Building Goods 300,000 Consultancy services 2,511,000 Training and workshops 264,000 Operating Costs 491,000 3,566,000 Total Budget 28 214,250 3 RESERVE BANK OF MALAWI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: Pl22616 FOR THE YEAR ENDED 31 DECEMBER 2016 1. GENERAL INFORMATION (Continued) 1.2 Audit Objectives and Scope Objectives The objective of the audit of the Project Financial Statements (PFS) is to enable the auditor to express a professional opinion on the financial position of the project at the end of each fiscal year, and on funds received and expenditures for the relevant accounting period as reported by the PFS , as well as an opinion on the eligibility of claims made through Statement of Expenditures, and on the Statements of Designated Account. The project books of accounts provide the basis for the preparation of the Project Financial Statements (PFS) and are prepared to reflect the financial transactions in respect of the project, as maintained by the Financial Sector Technical Assistance Project (FST AP). Scope of services We conducted our audit in accordance with International Standards on Auditing, and included such tests and procedures, as we considered necessary under the circumstances. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the amounts included in the statements of expenditure were used for the intended purpose. We believe that our audit provides a reasonable basis for our opinion. In order to satisfy this requirement, we report specifically on the following:- Whether all World Bank funds have been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; Whether goods and services financed have been procured in accordance with the relevant financing agreement and in accordance with the Bank's Guidelines; Whether all necessary supporting documentation, records and accounts have been kept in respect of all project activities, with clear linkages between the books of accounts and reports presented to the World Bank; Whether the Designated Account has been maHitained in accordance with the provisions of the relevant financing agreement; and Whether the project financial statements have been prepared in accordance with the International Financial Reporting Standards as pronounced by the International Accounting Standards Board (IASB) and as adopted by the Institute of Chartered Accountants in Malawi (ICAM), that they give a true and fair view of the financial position of the project at the relevant date and of receipts and expenditures for the year ended on that date. 4 Deloitte. PO Box 30364 Deloitte Clatered Accountants Capita City Registered Auditors Lllongwe3 Deloitte House Malawi Next to National Library Services Lilongwe3 Malawi Tel :+265 (0) 1 773 699 :+265 (0) 1 773 069 Fax :+265 (0) 1 772 276 Email :lldeloitte@deloitte.co.mw www.deloitte.com FINANCIAL SECTOR TECHNICAL ASSI STANCE PROJECT (FSTAP) WORLD BANK (INTERNATIONAL DEVELOPMENT ASSOCIATION) CREDIT NUMBER: 48970-MW PROJECT NUMBER: P122616 INDEPENDENT AUDITOR'S REPORT ON THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 Opinion We have audited the accompanying Project Financial Statements of the Financial Sector Technical Assistance Project (FST AP), World Bank (IDA) Credit Number: 48970-MW, Project Number P 122616, for the year ended 31 December 2016, as set out on pages 11 -15 which include: .. · (a) Statement of Sources and Uses of Funds including Use of Funds by Activity; (b) A summary of the principal accounting policies that have been adopted; and (c) Appropriate notes to the project financial statements (includes a summary of funds received from the World Bank). In our opinion, the project financial statements give a true and fair view of the financial position of the Financial Sector Technical Assistance Project (FST AP) - World Bank (IDA) Credit/ Number: 48970-MW, Project Number P 122616, and of its performance for the year ended 31 December 2016, in accordance with Generally Accepted Accounting Principles (GAAP) and that: 1. All World Bank funds have been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; 2. Goods and services financed have been procured in accordance with the relevant financing agreement and in accordance with the Bank' s Guidelines; 3. All necessary supporting documentation, records and accounts have been kept in respect of all project activities, with clear linkages between the books of accounts an9 reports presented to the World Bank; .,... 4. Designated Account has been maintained in accordance with the provisions of the relevant financing agreement; 5. Interim Financial Reports can be relied upon as a basis for process ing withdrawal applications; and 6. The project financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) and that they give a true and fair view of the financial position of the project at the relevant date and of receipts and expenditures for the period ended on that date. Partners: NT Uka JS Melrose VW Beza CA Kapenda MC Mweneh7pembe (Mrs) Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited RESERVE BANK OF MALAWI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (lSAs). Our responsibilities under those standards are further described in the Auditor' s Responsibilities for the Audit of the Proj ect Financial Statements section of our report. We are independent of FST AP 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 Project Financial Statements in Malawi. 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. Responsibilities of FSTAP Management for the Project Financial Statements Financial Sector Technical Assistance Project (FST AP) management are responsible for the _ preparation of the Project Financial Statements that give a true and fair view in accordance with Generally Accepted Accounting Principles and for such internal control as management determine is necessary to enab le preparation of the Project Financial Statements that are free from material misstatement whether due to fraud or error. In preparing the Project Financial Statements, management are responsible for assessing FST AP ' s ability to contin ue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Project Financial Statements Our objectives are to obtain reasonable assurance about whether the Project Financial Statements as a who le are free from material misstatement, whether due to fraud or erro r, 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 th basis of the Project 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 Project 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 i 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 opiruon on the effectiveness ofFST AP's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. 6 Auditor's Responsibilities for the Audit of the Project Financial Statements (Continued) • Conclude on the appropriateness of management' 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 FST AP 's 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 Project 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 FSTAP to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Project Financial Statements, including the disclosures, and whether the Project Financial Statements represents 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. We also provide management with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Basis of Accounting The accompanying statement is expressed in terms of the historic cost convention applying the cash basis of accounting, where income is recognised when received rather than when earned and expenses are recognised when paid rather than when incurred. Deloitte Chartered Accountants Per: Christopher Kapenda Partner 31 March 2017 7 PO Box 30364 Deloitte Chartered Accountants Deloitte. Capita City Lilongwe 3 Mal awl Registered Auditors Deloitte House Next t o National Library Services Lllongwe3 Malawi Tel :+ 265 (0) 1 773 699 :+265 (0) 1 773 069 Fax :+265 (0) 1 772 276 Email :lldeloitte@deloltte.co.mw www.deloitte.com FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (INTERNATIONAL DEVELOPMENT ASSOCIATION) CREDIT NUMBER: 48970-MW PROJECT NUMBER: P122616 INDEPENDENT AUDITOR'S REPORT ON THE DESIGNATED ACCOUNT ACTIVITY STATEMENT Opinion We have audited the accompanying Designated Account Activity Statement of Financial Sector Technical Assistance Project (FSTAP), World Bank (IDA) Credit Number: 48970-MW, Project Number P12 26 16, for the year ended 3 1 December 2016 as set out on page 12. In our opinion, the Designated Account Activity Statement gives a true and fair view ·of the financial position of Financial Sector Technical Assistance Project (FST AP), World Bank (IDA) Credit Number: 48970-MW, Project Number P 1226 16, for the year ended 3 I December 2016, in accordance with Generally Accepted Acco unting Principles (GAAP) and that: I. All World Bank funds have been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purpo es for which the financing was provided; 2. Goods and services financed have been procured in accordance with the relevant financing agreement and in accordance with the Bank's Guidelines; 3. All necessary supporting docwnentation, records and accounts have been kept in respect of all project activities, with clear linkages between the books of accounts and reports presented to the World Bank; 4. Designated Account Activity Statement has been maintained in accordance with the provisions of the relevant financing agreement; and 5 The Designated Account Activi Statement has been prepared in accordance with Genera lly Accepted Accounting Principles (GAAP) and that they give a true and fair view of the financial position of the project at the relevant date and of receipts and expenditures for the petiod ended on that date. 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 Designa ted Account Activity Statement section of our report. We are independent of FST AP in accordance with the International Ethi cs Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of financial statements in Malawi. We have fulfilled our ethica l respon ibilities in accordance with these requirements and the IESBA code. We believe that the audit evidence we have obtained i sufficient and appropriate to provide a basis for our opinion. ~., . Partners : NT Uka JS Melrose VW Beza CA Kapenda MC Mwenelupembe (M rs) 8 Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 Responsibilities of the FST AP management or the Designated Account Statement Financial Sector Technical Assistance Project (FST AP) management are responsible for the preparation of the Designated Account Activity Statement that gives a true and fair view in accordance with Generally Accepted Accounting Principles and for such internal control as management determine is necessary to enable preparation of Designated Account Statement that is free from material misstatement whether due to fraud or error. In preparing the Designated Account Statement, management are responsible for assessing FST AP ' s ability to continue as a going concern, disclosing, as applicab le, matters related to going concern and using the going concern basis of accounting unless management either intend to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Designated Account Activity Statement Our objectives are to obtain reasonable assurance about whether the Designated Account Activity Statement as a whole is 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 the Designated Account Activity Statement. 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 Designated Account Activity Statement, 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 ofFSTAP ' s internal control. • Evaluate the appropriateness o accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. • Conclude on the appropriateness of management' 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 FST AP ' s 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 Designated Account Activity Statement 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 FST AP to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Designated Account Activity Statement, including the disclosures, and whether the Designated Account Activity Statement represents the underlying transactions and events in a manner that achieves fair presentation. 9 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 Auditor's Responsibilities for the Audit of the Designated Account Activity Statement (Continued) We communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings , inc lud ing any significant deficiencies in internal control that we identify during our audit. We also provide management with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicab le, related safeguards. Basis of Accounting The accompanying statement is expressed in tenns of the historic cost convention applying the cash basis of accounting, where income is recognised when received rather than when earned and expenses are recognised when paid rather than when incurred. Deloitte Chartered Accountants Per: Christopher Kapenda Partner 31 March 20 17 10 ,, RESERVE BANK OF MALAWI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FSTAP) WORLD BANK (IDA) CREDIT NUMBER : 48970-MW; PROJECT NUMBER: Pl22616 STATEMENT OF SOURCES AND USES OF FUNDS: FOR THE YEAR ENDED 31 DECEMBER 2016 2016 20 16 201 5 20 15 Period C umulative Period Cu mulative US$ US$ US$ US$ O pening Cash Balances FST AP Project Operating Accounts 185 882 22 45 1 - FST AP Designated Account I 823 933 1 880 174 - 2 009 815 1 902 625 - Add: Receiots IDA Funds 5 120 000 22 674 7 16 3 580 000 17554716 - Cash Available 7 129 815 22 674 716 5 482 625 17554716 Less : Uses of Funds by Proj ect Component/Sub Component I. Financial Sector Regulation and Supervisio n 653 546 4267201 978 730 3 613 655 2. Financial Infrastructure 932 714 7 163 443 1 046 799 6 230 729 3. Financial Consumer Protection and Financia l Literacy 437 877 1 925 338 284 530 l 487 461 4. MOF Financial Sector Policy and Governance Capacity and Long -Term Finance 580 153 2 740 466 744 347 2 160 313 5. Capacity Building and Implementation Support 353 943 2 406 686 418 404 2 052 743 Total Expenditures 2 958 233 18 503 134 3 472 8 10 15 544 901 Cash available less expenditure 4 171 582 4 171 582 2 009 815 2 009 815 C los ing Cash Bal ance FST AP Project Operating Accounts 182373 182 373 185 882 185 882 --, FST AP Designated Account 3 989 209 3 989 209 l 823 933 1 823 933 Total Closine. Cash Balance 4 171 582 4171 582 2 009 815 2 009 815 -· The Statement of Sources and Uses of Funds was approved and authorised for issue by the Project Management on ~ -.March 20 17 and was signed on its behalf by: Signed By: 11 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 RESERVE BAN K OF MALA WI FI NANCIAL SECTOR TECHNICAL ASSISTANC E PROJECT (FST AP) WORLD BANK (IDA) CREDIT NUMBER: 48970-MW; PROJECT NUMBER: Pl22616 DESIG NATED ACCOUNT (DA) ACTIVITY STATEMENT: YEAR ENDED 31 DECE M BER 2016 2016 2015 Deposit Bank: Reserve Bank of Malawi Account Number: Account Number: Account Name: FST AP Designated Account 001-000034-USD - 001-000034-USD - Currency of DA: United States Dollars 2036-01 2036-01 PART I US Dollars US Dollars 1 Cumulative advances to end of current reporting period 22 674 716 17 554716 2 Cumulative expenditure to end oflast reporting period 15 544 901 12 072 091 3 Outstanding advance to be accounted (line 1 minus line 2) 7· 129 815 - - 5 482 625 - PART II Opening SA balance at beginning of reporting period (as of 4 January O1, 20 16) 2 009 815 1 902 625 5 Add/subtract: Cumulative adjustments (if any) - - 6 Advances from World Bank during reporting period 5 120 000 3 580 000 7 Add lines 5 and 6 5120000 3 580 000 8 Outstanding advances to be accounted for (add line 4 and line 7) 7 129 815 5 482 625 9 Closing DA balance at the end of the reporting period 4 171 582 2 009 815 10 Add/subtract: Cumulative adjustments (if any) - - 11 Expenditures for current reporting period 2 958 233 34728 10 12 Add lines 10 and line 11 2 958 233 3472810 13 Add lines 9 and line 12 7 129 815 5 482 625 14 Difference (if any) (line 8 minus line 13) - - " The Designated Account statement was approved and authorised for issue by the Pr9ject Management on ~ March 2017 and was signed on its behalf by: ,.... Signed By: FSTAP Project Manager FST AP Financial Managemen t Specialist 12 RESERVE BANK OF MALAWI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 ACCOUNTING POLICIES I.I Basis of accounting The Project Financial Statements and the Designated Account Activity Statement have been prepared on the basis of cash accounting where income is recognised when received rather than when earned and expenses are recognised when paid rather than when incurred. 1.2 Receipts Included in the receipts are initial deposits into the Designated Account on the basis of the withdrawal applications submitted during the period and all disbursements made directly by the IDA to those suppliers that have either rendered services or have supplied goods to the P!"oject. 1.3 Expenditures These represent all expenditure actually incurred through the Designated Account, through the local account in the period under review and all disbursements made directly by the IDA to those suppliers that have either rendered services or have supplied goods to the project. 1.4 Foreign currency translations The opening and closing bank balances for the project are translated to US$ at the conversion rate used when transferring funds from the designated US$ account to local currency on a first in first out basis. Expenditures are also translated to the US$ at the conver ion rate of funds transferred from the designated US$ account on a first in first out basis. The transactions and financial position of the project are expressed in United States Dollars . Contributions are received in United States Dollars. Transfers are then made from the United States Dollars Designated Account into~ cal accounts held at the Reserve Bank of Malawi . No exchange gain/ loss is made on the funds. ._.,.,. 1.5 Capital expenditure items Fixed assets investments and other capital items are recorded at cost (treated as operating expenditures) and classified under the respective projects that have made the capital expenditure. An asset register is maintained that provides infonnation on the value, location and identity of all assets acquired . No depreciation or amortization is recognised. 13 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE PROJECT FINANC IAL STATEMENTS 1. WITHDRAWAL APPLICATIONS (FSTAP FUN DS)- PRO CESSE D BY IDA-AS AT 31 DECEM BER 2016 R ESE RVE BAN K O F MALA W I FINANC IAL SECTOR TEC HNICAL ASS ISTANCE PROJ ECT (FSTAP) IDA C R EDI T NUM BER 48970-MW PROJECT NUM BER: P1 22616 Annlication Receipt World Ba n k W ithdrawal Transactio ns Beneficiary Amount Amoun t Paid Account Application IDA CREDIT N umber Bo rrowe r Refer ence Na me Details Applied US D USD Value Date Voucher NO. USD 0001 FSTAP PPF 02 FSTAIWPF Withdrawal Application 150 000.00 150,000.00 22/ 12/2011 SPAC 002 0002 FSTAP PPF 03 FSTAP PPF Withdrawal Application 39 893.63 39,893.63 22/ 12/2011 SPAC 003 0003 FSTAP PPF 03 FSTAP PPF Withdrawal Apofication 652 .53 652.53 22/12/2011 SPAC 004 0004 FST AP SP AC 04 FSTAP Direct Payment 53 551.55 53 ,551.55 17/02/2012 SPAC 004 0005 FST AP SP AC 05 FSTAP Withdrawal Application 1 387 198.22 1,387,198.22 07/03/2012 SPAC 005 0008 FST AP SP AC 0008 FSTAP Withdrawal Application 4·244 049.75 4,244,049. 75 19/03/2013 SPAC 0008 0011 FSTAP SPAC 0011 FSTAP Withdrawal Aoolication 959 370.00 959,370.00 08/08/2013 SPACOOll 0012 FSTAP SPAC 0012 FSTAP Withdrawal Aoolication 1 940 000.00 1,940,000.00 17/01 /2014 SPAC 0012 0013 FSTAP SPAC 0013 tFSTAP Withdrawal Application 2 450 000 .00 2,450,000.00 18/03/2014 SPAC 0013 0014 FSTAP SPAC 0014 FSTAP Withdrawal Aoolication 1 890 000.00 1,890,000.00 15/07/2014 SPAC 0014 0015 FSTAP SPAC 0015 FSTAP Withdrawal Application 860 000.00 860,000.00 17/09/2014 SPAC 0015 0017 FSTAP SPAC 0015 FSTAP Withdrawal Aoolication 2 180 000.00 2 180 000.00 06/03/2016 SPAC0017 0018 FSTAP SPAC 0015 FSTAP Withdrawal Aoolication 1 400 000.00 1 400 000.00 16/07/2015 SPAC 0018 0019 FSTAP SPAC 0019 FSTAP Withdraw Application 820 000.00 820 000.00 14/03/2016 SPAC 0019 0021 FSTAP SPAC 0021 FSTAP Withdraw Application 826 000.00 826 000 .00 18/05/2016 SPAC 0021 0023 FSTAP SPAC 0023 FSTAP Withdraw Application 1 624 000.00 1 624 000.00 06/12/2016 SPAC 0023 0024 FST AP SP AC 0024 FSTAP Withdraw Application 1 850 000.00 1 850 000.00 23/ 12/2016 SPAC 0024 Tota l W ithdrawn 22 674 715.68 22 674 715.68 TOTAL 28 200 000.00 BALANCE 5 525 284.32 14 RESERVE BANK OF MALA WI FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT (FST AP) WORLD BANK (IDA) CREDIT NO: 48970-MW; PROJECT NUMBER: P122616 FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE PROJECT FINANCIAL STATEMENTS (Continued) 2. Economic factors The average of the year-end buying and selling rates of the foreign currencies most affecting the perfonnance of the project are stated below, together with the increase in the National Consumer Price Index, which represents an official measure of inflation. Kwacha/US Dollar Middle rate Kwacha/US Dollar - 31 December 2016 Inflation rate (%) - 31 December 2016 725.42 20.00 As at 24 March 20 I 7 the exchange and inflation rates had moved as follows : Kwacha/US Dollar Inflation rate(%) - February 2017 721.19 16.10 No adjustments arising from the movement in exchange rates and inflation rates after year end have been made in the financial statements. 15