REPUBLIC OF KENYA AGk OFFICE OF THE AUDITOR-GENERAL Enhancing Accountabilitv REPORT OF THE AUDITOR-GENERAL ON KENYA INFORMAL SETTLEMENT IMPROVEMENT PROJECT NO. P113542 FOR THE YEAR ENDED 30 JUNE, 2020 STATE DEPARTMENT FOR HOUSING AND URBAN DEVELOPMENT PROJECT NAME: KENYA INFORMAL SETTLEMENT IMPROVEMENT PROJECT IMPLEMENTING ENTITY: STATE DEPARTMENT FOR HOUSING AND URBAN DEVELOPMENT PROJECT ID: P113542 CREDIT NUMBER: 4873 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 CONTENTS PAGE 1. PROJECT INFORM ATION AND OVERALL PERFORMANCE ............................................................................... 2. STATEMENT OF PERFORMANCE AGAINST PROJECT'S PREDETERMINED OBJECTIVES........................ i 3. CORPORATE SOCIAL RESPONSIBILITY STATEMENT/SUSTAINABILITY REPORTING............................. x 4. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES .................................................................... xi 5. REPORT OF THE INDEPENDENT AUDITORS ON THE KISIP PROJECT......................................................... xiii 6. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2020 .........................1 7. STATEMENT OF FINANCIAL ASSETS AS AT 30TH JUNE 2020..........................................................................2 8. STATEMENT OF CASHFLOW FOR THE PERIOD 30TH JUNE 2020....................................................................3 9. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS............................................................4 10. N OTES TO THE FIN AN CIA L STATEM EN TS....................................................................................................... 5 11. O TH ER IM PO RTA N T D ISCLO SU RE S ................................................................................................................. 23 12. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS .............................................................26 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project's official name is Kenya Informal Settlement Improvement Project. Objective: The key objective of the project is to improve living conditions of informal settlements in selected Counties in Kenya. Address: The project headquarters office is located in Nairobi County, Kenya. The address of its registered office is: Ardhi House, 1st Ngong Avenue, Nairobi Contacts: The following are the project contacts: P. O. Box 30119, 00100 Nairobi 1.2 Project Information Project Start Date: The project start date is 01.07.2011 Project End Date: The project end date is 30 12 2020 Project Manager: The project manager is Mrs Peris Mang'ira. Project Sponsor: The project sponsor is IDA, AFD, SIDA and GoK. 1.3 Project Overview Line Ministry/State The project is under the supervision of the State Department for Department of the project Housing and Urban Development. Project number P113542, TF:18327 Strategic goals of the The strategic goals of the project are as follows: project (i) Strengthening institutions and programme management (ii) Enhancing tenure security (iii) Investing in infrastructure and service delivery (iv) Planning for urban growth Achievement of strategic The project management aims to achieve the goals through the goals following means: (i) Strengthening institutions and programme management; (ii) Enhanced land tenure; (iii) Building of roads, floodlights, water and sewerage, and waste management; i Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 (iv) Extensive studies and planning on preventing informal settlements in future Other important The project completed its seventh year of implementation. background information of the project Current situation that the The project was formed to intervene in the following areas: project was formed to (i) lack of security of tenure intervene (ii) lack of physical infrastructure e.g. roads, foot paths, lighting, water, sewer and waste disposal Project duration The project started on 1st July 2011 and is expected to run until 30 June 2016. The time was extended to November 2019 1.4 Bankers The following are the bankers for the current year: Designated account: Equity Bank Limited Head Office, Equity Centre Branch Account No. 0810295112857 Central Bank of Kenya Account No. 1000339888 Project Account: Cooperative Bank of Kenya Upper Hill Branch Account No. 01141161460400 Auditors Auditor General Office of the Auditor General Anniversary Towers, University Way P.O. Box 30084 Nairobi 1.5 Project Governance The Project's governance framework requires the stakeholders to uphold the highest professional, ethical, moral and legal standards. This is achieved through effective segregation of duties with clear checks and balances as articulated in the Project Loan/Credit Agreement, the PFM Act, 2012, the Project Design Report, the Implementation Manual and the Finance and Procurement Manuals. 11 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 1. The Project Steering Committee (PSC) This Committee is responsible for overseeing the implementation of the Project, approving the annual work plan and budget, and ensuring that the activities are in compliance with the donor and government policies. 2. International Development Association These are the project sponsors. They are responsible for reviewing and approving the project's withdrawal applications, expenditure justifications, no objection requests, reviewing and approving the annual work plan and budget, expenditure category reallocation request, and participating in implementation support missions. 3. The Parent Ministry The parent ministry ensures that the Project's budget is captured in its development projects and disburses the government counterpart funding. The ministry reviews and tracks the Project's annual work plan and budget against the set targets and makes the approvals. The parent ministry also oversees the execution of the project coordinating team. 4. The Auditor The Supreme Audit Institution in Kenya, that is, the Office of the Auditor General, is mandated by the Constitution of Kenya Chapter 12, Part 6, Article 229 which establishes the Office of the Auditor General. Chapter 15, Article 248, Section 3 and Article 249, Section 2 (a) and (b) and section 10 of the Public Audit Act, 2015 provide for the independence of the Office of the Auditor General. The Auditor General is mandated to audit all national government entities, which include government development projects and present these statutory financial statements to the Parliament. This facilitates the submission of the audited report to the project's sponsors by 31 December each year. 1.6 Roles and Responsibilities This team is based in Nairobi and is responsible for the project management and coordination functions. The PCT comprises of the Project Coordinator and a team of Technical Officers. The PCT is also supported by other administrative staff. These key staff, who form the project coordinating team that is involved in the day to day management of the project and its implementation are: 111 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 Names Title designation Key qualification Responsibilities Peris Mang'ira Project Coordinator M.A. Planning, Overall programme SDS Physical Planning Registered Planner; coordination. Member AAK, KIP Stella Gitimu Head of Component 1 MBA, BA Land Manage component DD Slum Upgrading Economics ISK 1 activities George Arwa Head of Component 2 MA Environmental Manage component SAD Survey Management Bsc Land 2 activities Survey BA Urban Planning ISK, AAK Julius Mugwika Head of Component 3 Msc Civil Engineering Manage component SPSE (S) MIEK 3 activities Wagura Theuri Project Accountant MA, BA (Econ), Financial PHO CPA(K) Management Member ICPAK 1.7 Funding summary The Project duration is five years (from 2011 to 2017) with a further extension to November 2019. The financing budget of US$ 157.3 Million equivalent to KES 15 Billion as highlighted in the table below: Below is the funding summar IDA $100,000,000 9,246,591,028 95,892,675 9,246,591,028 AFD 635,000,000/ 3,977,196,321 38,987,556 3,977,196,321 0 0 $38,987,556 _________ ______ (ii)Grn Counterpart funds Ge e $10,000,000 1,010,000,000 14,144,988 1,430,058,301 0 0 of Kenya _______ ________ ______ ________ ______ ____ ___ I T l $158,300,000 15,080,966,803 5157,325,219 15,501,025,104 0 0 1V Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 1.8 Summary of Overall Project Performance: 1.8.1 Budget performance against actual amounts for current year and for cumulative to- date During the year under review, the Project received KShs 2,118,310,132 and incurred expenditure of KShs 2,067,715,347. The cumulative receipts and expenditures are Kshs. 13,627,572,998 and Kshs. 12,645,511,911 respectively. Receipts & Payments Utilization Revenue Utilisation Bar Graph 1,800,000,000 1,600,000,000 Receipts in Kshs Million 1,600,000,0,58,304 909 1,400,000,000 1,200,000,000 c Final Budget 1,000,000,000 800,000,000 626,000,000 Actual on 600,000,000 521,000,000 Comparable Basis 400,000,000 200,000,000 Proceeds from Domestic Receipts from Loan from External Miscellaneous receipts and Foreign Grants Government of Kenya Development Partners Payment Utilization Bar Graph 2,500,000,000 Payments 2,110,000,000 oFinal BJ #4944,417 2,000,000,000 in Kshs Million 1,500,000,000 1,000,000,000 500,000,000 110,160,709 - - - - 116,000,000 - - - Compensation Use of goods Transfers to Other Grants Social Security Acquisition of of employees and services Other and Other Benefits Non-financial Government Payments Assets Entities v Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 People in informal settlements provided with access to improved drainage infrastructure under KISIP (Number). Access to drainage facilities were prioritised by communities in all Counties owing to constant flooding and need for storm water management; storm water drainage canals were constructed in Mombasa, Embu, Kericho, Kitui, Kisumu, Eldoret, Nakuru, Machakos, Naivasha and Nairobi. This has benefitted approximately 1,000,000 people in these urban areas. Number of People in urban areas provided with access to all-season roads within a 500-meter range under KISIP (number). Investments in access road network consist of settlement main access roads connecting the settlements and trunk roads, settlement roads providing access within the settlements, walkways and footpaths. A total of 98.289 km of settlement access roads and 120.078 km of footpaths have been constructed through KISIP benefitting 1,000,000 people. Number of people in urban areas provided with access to improved water sources under KISIP (number). Construction of 112.494 km of water pipeline has been completed with 9,312 water connections done to date; 11 Water Kiosks have been constructed in providing additional access to water. This has enabled 262,780 people to have access to water sources which are safe and clean. 21 ablution blocks have been completed under the project. Implementation of the National Hygiene Programme (Kazi Mtaani) Towards the end of the year, the programme also implemented the National Hygiene Program, which was the first of the Government of Kenya's efforts to cushion the most vulnerable population from the effects of the deadly COVID-19 pandemic as well as the drastic response measures against the virus. Specifically, the program dubbed 'Kazi Mtaani', has the twin objective of ensuring clean environments and putting money in the pockets of the youth. The total cost of the programme was Kshs. 716M as indicated in the notes under the item "Rehabilitation of civil works". Additionally, Kshs 104,726,947 were spent by KENSUP to purchase personal protective equipment for the workers as well as payment for wages. The first phase of Kazi Mtaani kicked off as a pilot program that focused on select informal settlements in the 8 counties of Nairobi, Mombasa, Kiambu, Nakuru, Kisumu, Kilifi, Kwale, and Mandera. The amount used under phase I was Kshs. 300M from the KISIP budget, Kshs. 200M being donor funds from AfD and Kshs. 1OOM being counterpart funds. An additional Kshs. 416 was re- allocated within the State Department towards the programme. The counties that were selected for the pilot phase were selected based on the increased cases of COVID 19 and those with higher likelihood of cases as well as those with high urban population density. A few weeks after the confirmation of the first positive case in Kenya, these areas were already beginning to bear the brunt of the government's response strategies such as the restricted movements policies initiated to contain the spread of the virus. With the contraction of the economy which has negatively affect many sectors, majority of low-income earners who are casuals had lost the opportunity to earn their daily wages and with it their ability to meet their families' basic needs leading to more desperation. It was therefore envisaged that Kazi Mtaani would help plug those income losses and reduce the desperation in those areas. A total of 26,148 young people across 27 informal settlements in the counties were enlisted in the programme where they earned a daily wage of Ksh 653.10 in major urban areas and Ksh 600 in others. The wages were paid directly to the workers through mobile money transfer and has gone a long way in supporting the youth to fend for their families. From the project, 1,696.94km of streets and paths were cleared; 2,282,558.515 tons of garbage was collected; 11,493,968m2 of bushes were cleared and 1,5=471.956km of drainage canals were cleaned, vii Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 unclogged and cleared. Implementation challenges and recommended way forward Issue/challenge Lesson Recommendation 1. Complex tenure security Interpretation of KISIP national team is taking arrangements and operational legislation on roles and a more active role in delays occasioned by changes responsibilities of key supervision in land surveying information actors in land management Involvement of the relevant continue to negatively county officials in affect delivery of results. identification and verification of list of beneficiaries. 1.9 Summary of Project Compliance: The Program has ensured that all its activities carried out are within the laws of the Republic of Kenya and that all regulations and procedures have been followed. Among the regulations include the Environmental and Social Impact Assessment (ESIA) for which authority was issued for the implementation of the project. In cases of inconsistency between the GOK Regulations and those of the donors, the latter have been applied. Viii Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 2. STATEMENT OF PERFORMANCE AGAINST PROJECT'S PREDETERMINED OBJECTIVES The key development objectives of the project are to: a) To complete tenure regurlization for settlements under the project; b) To benefit persons living in selected settlements through both infrastructure and tenure options under KISIP c) To benefit females and males under the KISIP interventions; d) To provide people with access to improved drainage infrastructure under the project; e) To provide people living in urban informal settlements with access to all season roads within a 500-meter radius under KISIP; f) To provide people in urban areas with access to improved water sources under KISIP; Progress on attainment of Strategic development objectives Project Objective Outcome Indicator Performance Tenure security To enhance tenure Enhanced Enhanced Tenure security enhancement regularization ownership of security of improved in 80 under the project land to pave way tenure informal settlements for infrastructure and housing development Project To benefit females Females and Gender parity in 50% of males and beneficiaries by and males under males benefitted project females benefitted gender the KISIP from KISIP beneficiaries from the project interventions interventions alike People with To provide people Improved access Number of 1,000,000 people access to with access to to drainage people with with improved improved improved drainage infrastructure improved drainage drainage infrastructure under within drainage infrastructure infrastructure the project settlements infrastructure resulting from under the project drainage canals constructed under the project People with To provide people Improved access Number of 1,000,000 people access to all living in urban to all season people with with access to season road informal roads within 500 improved access improved all season within a 500 settlements with meter radius to all season road within a 500 meter radius access to all season roads within 500 meter radius roads within a 500- meter radius meter radius under KISIP ix Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 People within To provide people Improved access Number of 262,780 persons urban areas with in urban areas with within urban people with benefitted with access to access to improved areas to access to improved water improved water water sources improved water improved water sources within urban sources under KISIP sources sources within areas under the urban areas project Total project To benefit persons Improved living Number of 1,389,980 persons beneficiaries - living in selected conditions of people have benefitted from tenure and settlements through people living in benefiting from both tenure and infrastructure both infrastructure slums and the project - infrastructure and tenure options informal tenure and installation from the under KISIP settlements infrastructure project. through tenure security and installation of infrastructure and service delivery I x Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 3. CORPORATE SOCIAL RESPONSIBILITY STATEMENT/SUSTAINABILITY REPORTING KISIP exists to transform lives. This is our purpose; the driving force behind everything we do. It's what guides us to deliver our strategy, which is founded on three pillars: putting the customer/Citizen first, delivering relevant goods and services, and improving operational excellence. Below is a brief highlight of our achievements in each pillar: 1. Sustainability strategy and profile - KISIP is being implemented in the fastest growing urban areas in Kenya which have witnessed increased number of people living and working in informal settlements. The five major urban areas per population and contribution to the GDP are: Nairobi, Mombasa, Kisumu, Eldoret and Nakuru. Mombasa works were completed and handed over by H.E President on 5th January 2017. Works in the Counties of Nairobi, Nakuru, Kericho, Kisumu, Machakos, Embu, Kitui have been completed. As a result of KISIP, 1,389,980 people are currently benefitting from KISIP interventions, of which 694,990 are females. The urban transition is well under way in Kenya and urbanization is projected to continue to grow at a rapid pace. Devolution will further speed up the rate of urbanization for the country. Due to the growth and entrenchment of devolution, the urban areas of Nakuru and Eldoret are currently being prepared to assume city status, which will increase Kenyan cities from three to five: Nairobi, Mombasa, Kisumu, Nakuru and Eldoret. KISIP has intervened in all the major five urban areas and hence supporting efforts aimed at sustainable urbanization. The urban transition in Kenya will play an important role in determining the country 's growth prospects and social stability. KISIP was formulated to bridge and contribute to improving the living conditions of people living in informal settlements in Kenya and make urban areas more liveable. 2. Environmental and social management The project developed and implements an effective Environmental and Social Management Framework. This has facilitated resettlement of project affected persons including resettlement of structures and businesses. Compliance with the environmental policies and concerns are addressed through environmental impact assessments (EIAs), which further have the provisions for an effective Environmental Management Plans (EMP) to ensure sustainability of the KISIP projects. Additionally, under the National Hygiene Programme (lA), further safeguard protocols were developed for the implementation of the Kazi Mtaani programme. These have continued to be used even under the GoK financing of the second phase of the programme. 3. Community Engagements- The communities were greatly involved throughout the year through the Settlement Executive Committees (SECs) in resolving various issues pertaining to operationalization of bio digesters in Nairobi and Naivasha; participation in planning and survey activities of RAP implementation and infrastructure development. xi Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 4. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project are responsible for the preparation and presentation of the project's financial statements, which give a true and fair view of the state of affairs of the project for and as at the end of the quarter ended on June 30, 2020. This responsibility includes: (i) maintaining adequate financial management arrangement 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 position of the project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, 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 Principal Secretary for the State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project accept responsibility for the project's financial statements, which have been prepared on the Cash Basis Method of Financial Reporting, using appropriate accounting policies in accordance with International Public Sector Accounting Standards. The Principal Secretary for the State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project are of the opinion that the project's financial statements give a true and fair view of the state of project's transactions during the financial period ended June, 2020, and of the project's financial position as at that date. The Principal Secretary for State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project further confirm the completeness of the accounting records maintained for the project, which have been relied upon in the preparation of the project financial statements as well as the adequacy of the systems of internal financial control. The Principal Secretary for the State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project confirm that the project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that project funds received during the financial year under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by the Principal Secretary for the State Department for Housing and Urban Development and the Project Coordinator for Kenya Informal Settlement Improvement Project on %9 2020 and signed by them. Prifficipal S`cretary Prkect Coordinator Project Accountant: Name: Charles M. Hinga CBS Nane: Peris Mang'ira Name: Wagura Theuri ICPAK No: 13047 xii REPUBLIC OF KENYA Telephone: +254-(20) 3214000 HEADQUARTERS E-mail: info@oagkenya.go.ke Anniversary Towers Website: www.oagkenya.go.ke Monrovia Street OFFICE OF THE AUDITOR-GENERAL P.O. Box 3oo84-00100 Enhancing Accountability NAIROBI REPORT OF THE AUDITOR GENERAL ON KENYA INFORMAL SETTLEMENT IMPROVEMENT PROJECT NO. P113542 FOR THE YEAR ENDED 30 JUNE, 2020 - STATE DEPARTMENT FOR HOUSING AND URBAN DEVELOPMENT REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Informal Settlement Improvement Project set out on pages 1 to 26 which comprise the statement of financial assets as at 30 June, 2020,statement of receipts and payments, statement of cash flows and the statement of comparative budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with provisions of Article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, 2015. I have obtained all the information and explanations which to the best of my knowledge and belief were necessary for the purpose of the audit. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Kenya Informal Settlement Improvement Project as at 30 June, 2020, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with Financing Agreements between the Republic of Kenya International Development Association (IDA)- No.4873-KE and Agency Francaise De development (AFD)-CKE 1055 01 J and Grant Agreement with Swedish International Agency (SIDA)-TF:018327 dated 23 May, 2011, 17 December, 2015 and 7 July, 2015 respectively and the Public Finance Management Act, 2012. In addition, the special account statement present fairly, the special account transactions and the closing balance has been reconciled with the books of account. Basis for Opinion The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of the Kenya Informal Settlement Improvement Project Management in accordance with ISSAI 130 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Report of the Auditor-General on Kenya Informal Settlement Improvement Project, No. P113542 for the year ended 30 June, 2020 - State Department for Housing and Urban Development Emphasis of Matter Special Account Reconciliation The statement of receipts and payments reflects proceeds from domestic and foreign grants of Kshs.1,558,304,909 and as disclosed under Note 10.5 to the financial statements. However, this excludes amounts withdrawn but unclaimed of USD12,998,243.20 equivalent to Kshs.1,335,530,325 as at 30 June, 2020 reflected in the Project special account statement. The amount represents cumulative funds transfers to the Project bank account, but whose expenditure returns had not been submitted to the National Treasury by the close of the financial year. My opinion is however not modified on the effects of the above matter. Key Audit Matters Key audit matters are those matters that, in my professional judgement, are of most significance in the audit of the financial statements. There were no key audit matters in the year under review. REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the audit procedures performed, I confirm that, nothing has come to my attention to cause me to believe that public resources have not been applied lawfully and in an effective way. Basis for Conclusion The audit was conducted in accordance with ISSAI 4000. The standard requires that I comply with ethical requirements and plan and perform the audit to obtain assurance about whether the activities, financial transactions and information reflected in the financial statements are in compliance, in all material respects, with the authorities that govern them. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT AND GOVERNANCE Conclusion As required by Section 7(1)(a) of the Public Audit Act, 2015, based on the audit procedures performed, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. Basis for Conclusion The audit was conducted in accordance with ISSAI 2315 and ISSAI 2330. The standards require that I plan and perform the audit to obtain assurance about whether effective Report of the Auditor-General on Kenya Informal Settlement Improvement Project, No. P113542 for the year ended 30 June, 2020 - State Departmentfor Housing and Urban Development 2 processes and systems of internal control, risk management and overall governance were operating effectively, in all material respects. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS As required by the International Development Association (IDA), except for the matter under emphasis of matter, I report based on my audit that: - i. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit; ii. In my opinion, adequate accounting records have been kept by the Project, so far as appears from the examination of those records; and, iii. The Project's financial statements are in agreement with the accounting records and returns. Responsibilities of Management and those Charged with Governance Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such maintaining effective internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and for its assessment of the effectiveness of internal controls, risk management and overall governance. In preparing the financial statements, Management is responsible for assessing the Project's ability to continue to sustain services, disclosing as applicable, matters related to sustainability of services and using the applicable basis of accounting unless Management is aware of the intention to terminate the Project or cease operations. Management is also responsible for the submission of its financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. In addition to the responsibility for the preparation and presentation of the financial statements described above, Management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them, and that public resources are applied in an effective way. Those charged with governance are responsible for overseeing the financial reporting process, reviewing the effectiveness of how the Project monitors compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in relation to overall governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor General's Responsibilities for the Audit The audit 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, Report of the Auditor-General on Kenya Informal Settlement Improvement Project, No. P113542 for the year ended 30 June, 2020 - State Department for Housing and Urban Development 3 and to issue an auditor's report that includes my opinion in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement and weakness 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. In addition to the audit of the financial statements, a compliance audit is planned and performed to express a conclusion about whether, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities that govern them and that public resources are applied in an effective way, in accordance with the provisions of Article 229(6) of the Constitution and submit the audit report in compliance with Article 229(7) of the Constitution. Further, in planning and performing the audit of the financial statements and review of compliance, I consider internal control in order to give an assurance on the effectiveness of internal controls, risk management and overall governance processes and systems in accordance with the provisions of Section 7(1)(a) of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. My consideration of the internal control would not necessarily disclose all matters in the internal control that might be material weaknesses under the ISSAls. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of its inherent limitations, internal control may not prevent or detect misstatements and instances of non-compliance. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. As part of an audit conducted in accordance with ISSAls, I exercise professional judgement and maintain professional skepticism throughout the audit. I 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 my 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. * 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 applicable 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 Report of the Auditor-General on Kenya Informal Settlement Improvement Project, No. P113542 for the year ended 30 June, 2020 - State Department for Housing and Urban Development 4 ability to continue to sustain its services. If I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the Project to cease to continue to sustain its services. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information and business activities of the Project to express an opinion on the financial statements. * Perform such other procedures as I consider necessary in the circumstances. I 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 are identified during the audit. I also provide Management with a statement that I 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 my independence, and where applicable, related safeguards. n cy athung AUDITOR-GENERAL Nairobi 31 December, 2020 Report of the Auditor-General on Kenya Informal Settlement Improvement Project, No. P113542 for the year ended 30 June, 2020 - State Department for Housing and Urban Development 5 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 6. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2020 Note Cumulative 2019/20 2018/19 to-date Receipts and Payments Receipts and Payments payments made by payments made by controlled by third controlled by third the entity parties the entity parties KShs KShs KShs KShs KShs RECEIPTS Transfer from Government entities 10.3 521,000,000 - 150,000,000 - 1,430,058,301 Proceeds from domestic 10.4 847,179,454 and foreign grants - - Loan from external 13,223,787,349 development partners 1,558,304,909 - 1,896,986,000 - Miscellaneous receipts 10.6 - 71,324,132 205,852,804 TOTAL RECEIPTS 2,079,304,909 - 2,118,310,132 - 15,706,877,907 PAYMENTS Compensation of 10.7 employees Purchase of goods and 10.8 services 110,160,709- 125,172,774 - 715,370,436 Social security benefits 10.9 - Acquisition of non- 10.10 financial assets 1,981,944,417- 1,942,542,573 - 13,924,151,220 Transfers to other government entities 10.11 - - - - 373,272,002 Other grants and transfers and payments 10.12 TOTAL PAYMENTS 2,092,105,125 - 2,067,715,347 - 15,012,793,657 SURPLUS/(DEFICIT) (12,800,216) - 50,594785 - 694,084,250 The accounting policies and explanatory notes to these financial statements are an integral part of the financial statements. Principal Secretary Pfo ct Coordinator Project Accountant: Name: Charles M. Hinga CBS Na e: Peris Mang'ira Name: Wagura Theuri ICPAK No: 13047 1 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 7. STATEMENT OF FINANCIAL ASSETS AS AT 30TH JUNE 2020 Note 2019/20 2018/19 KShs KShs FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 10.14.A 694,084,250 706,884,466 Cash Balances 10.14.B - - Cash Equivalents (short-term deposits) 10.14.C - - Total Cash and Cash Equivalents 694,084,250 706,884,466 Accounts receivables - Imprest and Advances 10.15 0 0 TOTAL FINANCIAL ASSETS 694,084,250 706,884,466 REPRESENTED BY Fund balance b/fwd 10.16 706,884,466 656,289,681 Prior year adjustments 10.17 - - Surplus/(Deficit) for the year (12,800,216) 50,594,785 NET FINANCIAL POSITION 694,084,250 706,884,466 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 1 02ce.1e/2020 and signed by: Principal Secretary /Poject Coordinator Project Accountant: Name: Charles M. Hinga CBS aame: Peris Mang'ira Name: Wagura Theuri ICPAK No: 13047 2 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 8. STATEMENT OF CASHFLOW FOR THE PERIOD 30TH JUNE 2020 2019/20 2018/1 Note KShs KSih Recei ts for operating activities Transfer from Government entities 10.3 521,000,000 150,000,00 Proceeds from domestic and foreign grants 10.4 - Miscellaneous receipts 10.671,324,13: 5210000 221,324,13: Pa ments for operatin activities 521,000,000 22 Compensation of employees 10.7 Purchase of goods and services 10.8 (110,160,709) (125,172,774 Social security benefits 10.9 Transfers to other government entities 10.11 Other grants and transfers 10.12 Adjusted for: -- - Chan e in Im rests & Advances Adjustments durin the year 10.15 (110,160,709) 125,172,774 Net cash flow from operating activities 410,839,292 96,151,358 CASHFLOW FROM INVESTING ACTIVITIES Ac uisition of Assets 10.10 (1,981,944,417) (1,942,542,573) (1,981,944,417) Net cash flows from Investing Activities (1,981,944,417) - ___1,942,542,573 CASHFLOW FROM BORROWING ACTIVITIES Proceeds from Foreign Borrowings 10.5 1,558,304,909 1,896,986,000 Net cash flow from financing activities 1,558,304,909 1,896,986,000 NET INCREASE IN CASH AND CASH EQUIVALENT (12,800,216) 50,594,785 Cash and cash equivalent at BEGINNING of the ear 706,884,466 656,289,681 Cash and cash e uivalent at END of the year 694,084,250 706,884,466 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The entity financial statements were approved on i 1 2020 and.signed by: Principal Secretary ect Coordinator Project Accountant: Name: Charles M. Hinga CBS 1 ame: Peris Mang'ira Name: Wagura Theuri ICPAK No: 13047 3 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 9. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Actual on Budget % Original Comparable Utilization Utilizat: Receipts/Payments Item Budget Adjustments Final Budget Basis Difference n a b c=a+b d e=c-d f-d/c % Receipts Transfer from Government 210,000,000 416,000,000 626,000,000 521,000,000 105,000,000 83' entities Proceeds from domestic and - - - - - foreign grants Proceeds from borrowings 1,850,000,000 -250,000,000 1,600,000,000 1,558,304,909 41,695,091 97' Miscellaneous receipts - - - - - 0 Total Receipts 2,060,000,000 166,000,000 2,226,000,000 2,079,304,909 146,695,091 93' Payments Compensation of employees 0 Purchase of goods and 116,000,000 - 116,000,000 110,160,709 5,839,292 95' services Social security benefits - - - - - 0' Acquisition of non-financial 1,944,000,000 166,000,000 2,110,000,000 1,981,944,417 128,055,584 94' assets Transfers to other 0' governent entities Other grants and transfers - - - - - 0' Total Payments 2,060,000,000 166,000,000 2,226,000,000 2,092,105,125 133,894,875 94' Note: The significant budget utilisation/performance differences in the last column are explained in Annex 1 to these financial statements. Principal Secretary 7ject Coordinator Project Accountant: Name: Charles M. Hinga CBS qme: Peris Mang'ira Name: Wagura Theuri ICPAK No: 13047 4 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 10. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below 10.1 Basis of Preparation 10.1.1 Statement of compliance and basis of preparation The financial statements have been prepared in accordance with Cash-basis IPSAS financial reporting under the cash basis of Accounting, as prescribed by the PSASB and set out in the accounting policy note below. This cash basis of accounting has been supplemented with accounting for; a) receivables that include imprests and salary advances and b) payables that include deposits and retentions. The financial statements comply with and conform to the form of presentation prescribed by the PSASB. The accounting policies adopted have been consistently applied to all the years presented. 10.1.2 Reporting entity The financial statements are for the Kenya Informal Settlement Improvement Project under National Government of Kenya. The financial statements encompass the reporting entity as specified in the relevant legislation PFM Act 2012 . 10.1.3 Reporting currency The financial statements are presented in Kenya Shillings (KShs), which is the functional and reporting currency of the Project and all values are rounded to the nearest Kenya Shilling. 10.2 Significant Accounting Policies a) Recognition of receipts The Project recognises all receipts from the various sources when the event occurs and the related cash has actually been received by the Government. * Transfers from the Exchequer Transfer from Exchequer is be recognized in the books of accounts when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity. * External Assistance External assistance is received through grants and loans from multilateral and bilateral development partners. 5 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 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 Borrowing includes Treasury bill, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Project or any other debt the Project may take on will be 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 * Other receipts These include Appropriation-in-Aid and relates to receipts such as proceeds from disposal of assets and sale of tender documents. These are recognised in the financial statements the time associated cash is received. b) Recognition of payments The Project recognises all payments when the event occurs and the related cash has actually been paid out by the Project. * 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 disclosed as pending bills. * Interest on borrowing Borrowing costs that include interest are recognized as payment in the period in which they incurred and paid for. 6 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 SIGNIFICANT ACCOUNTING POLICIES (Continued) * Repayment of borrowing (principal amount) The repayment of principal amount of borrowing is recognized as payment in the period in which the repayment is made. The stock of debt is disclosed as an annexure to the consolidated financial statements. * Acquisition of fixed assets The payment on acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of these items are treated as payments and receipts items respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as receipt and as a payment. A fixed asset register is maintained by each public entity and a summary provided for purposes of consolidation. This summary is disclosed as an annexure to the consolidated financial statements. c) In-kind donations In-kind contributions are donations that are made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment or personnel services. Where the financial value received for in- kind contributions can be reliably determined, the Project includes such value in the statement of receipts and payments both as receipts and as payments in equal and opposite amounts; otherwise, the contribution is not recorded. d) 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. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks at the end of the financial year. For the purposes of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year. Restriction on cash Restricted cash represents amounts that are limited/restricted from being used to settle a liability for at least twelve months after the reporting period. This cash is limited for direct use as required by stipulation. Amounts maintained in deposit bank accounts are restricted for use in refunding third part deposits. 7 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 SIGNIFICANT ACCOUNTING POLICIES (Continued) e) Accounts receivable For the purposes of these financial statements, imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year is treated as receivables. This is in recognition of the government practice where the imprest payments are recognized as payments when fully accounted for by the imprest or AIE holders. This is an enhancement to the cash accounting policy. Other accounts receivables are disclosed in the financial statements. f) Contingent Liabilities A contingent liability is: a) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or b) A present obligation that arises from past events but is not recognised because: (i) It is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or (ii) The amount of the obligation cannot be measured with sufficient reliability. Some of contingent liabilities may arise from: litigation in progress, guarantees, indemnities. Letters of comfort/ support, insurance, Public Private Partnerships, The Entity does not recognize a contingent liability but discloses details of any contingencies in the notes to the financial statements unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. Annex 4 of this financial statement is a register of the contingent liabilities in the year. Section 89 (2) (i) of the PFM Act requires the National Government to report on the payments made, or losses incurred, by the county government to meet contingent liabilities as a result of loans during the financial year, including payments made in respect of loan write-offs or waiver of interest on loans g) Contingent Assets The Entity does not recognize a contingent asset, but discloses details of a possible asset whose existence is contingent on the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Entity in the notes to the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset's value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs. 8 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 h) Pending bills Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. As pending bills do not involve the payment of cash in the reporting period, they recorded as 'memorandum' or 'off-balance' items to provide a sense of the overall net cash position of the Project at the end of the year. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. i) Budget The budget is developed on a comparable accounting basis (cash basis), the same accounts classification basis (except for accounts receivable - outstanding imprest and clearance accounts and accounts payable - deposits, which are accounted for on an accrual basis), and for the same period as the financial statements. The Project's budget was approved as required by Law and National Treasury Regulations, as well as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. The Development Projects are budgeted for under the MDAs but receive budgeted funds as transfers and account for them separately. These transfers are recognised as inter-entity transfers and are eliminated upon consolidation. A high-level assessment of the Project's actual performance against the comparable budget for the financial year/period under review has been included in an annex to these financial statements. j) Third party payments Included in the receipts and payments, are payments made on its behalf by to third parties in form of loans and grants. These payments do not constitute cash receipts and payments and are disclosed in the payment to third parties column in the statement of receipts and payments. During the year no loan disbursements were received in form of direct payments from third parties. 9 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 SIGNIFICANT ACCOUNTING POLICIES (Continued) k) Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year/period are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments. 1) Comparative figures Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to conform to the required changes in financial statement presentation. m) Subsequent events There have been no events subsequent to the financial year/period end with a significant impact on the financial statements for the year ended June 30, 2020. n) Errors Material prior period errors shall be corrected retrospectively in the first set of financial statements authorized for issue after their discovery by: i. Restating the comparative amounts for prior period (s) presented in which the error occurred; or ii. If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. 10 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.3 RECEIPTS FROM GOVERNMENT OF KENYA These represent counterpart funding and other receipts from government as follows: Counterpart funding through State Department for Housing and Urban Development______ Counterpart funds Quarter 2 235,000,000 Counterpart funds Quarter 3 7000,03115,800,0 Counterpart funds Quarter 4 350,000,000 000,00544 ,88,2 Counterpart funds forNtiona Hyin Progam0041 ,000 150,46000,000,851 Coutepat fnd fr Ntina Hyiee roga5 16,000,000 150,000,0000531 Other transfers from government entities _______ Appropriations-in-Aid Total 521,000,000 150,000,000 1,430,058,301 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.4 PROCEEDS FROM DOMESTIC AND FOREIGN GRANTS During the 12 months to 30 June 2020, we received grants from donors as detailed in the table below: ree receive received i received reev indonor cahas dietd In currency Panet kund FY2019120 VY 20t18/19 K$hs Kshs Kshs KShs kShs Grants Received from Bilateral Donors (Foreign Governments) 0 0 0 Grants Received from Multilateral Donors (International Organizations) SIDA Grants Received from Local Individuals and organisations Total - 12 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.5 LOAN FROM EXTERNAL DEVELOPMENT PARTNERS During the 12 months to 30 June 2020, we received funding from development partners in form of negotiated by the National Treasury donors as detailed in the table below: flam ofDnrDte Aon;n LonsLoans Totalaiount in KShs receied noa received ini fr Brrency casho (dire Gament* Shhs KYh 01 2YIS8/19 Loans Received from Bilateral Donors (Foreign Governments) Loans Received from Multilateral Donors (International Organisations) International Development 123,031 12,754,589 12,754,589 Association (IDA) French Development 15,057,556 1,545,550,321 1,545,550,321 1,896,986,0( Agency (AFD) Total 15,180,587 1,558,304,909 - 1,558,304,909 1,896,986,0( 10.6 MISCELLANEOUS RECEIPTS TOTAL RECEIPTS Cumulative to- date FY 2019/20 FY 2018/19 KShs KShs KShs Property income Sales of goods and services Administrative fees and charges Fines, penalties and forfeitures Voluntary transfers other than grants - Other receipts not classified elsewhere 71,324,132 205,852,804 __________71.324j13 25.580 **This receipt was an amount received from an encashed performance guarantee. 13 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 10.7 COMPENSATION OF EMPLOYEES 14 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.8 PURCHASE OF GOODS AND SERVICES by tolitylin Paymlents thAdt, cash b., y tird parties 'otalP-Ayme6N KShs KShs KShs KShs KSh Utilities, supplies and 15,058,476 15,058,476 13,910,061 93,767,071 services Communication, supplies 4,650,076 4,650,076 6,373,486 41,213,464 and services Domestic travel and 55,592,591 55,592,591 41,809,559 321,493,70( subsistence Foreign travel and - - 5,976,662 5,976,662 subsistence Printing, advertising and - 3,923,520 3,923,520 1,104,614 40,734,711 information supplies & services Rentals of produced assets Training payments 18,529,890 18,529,890 44,865,983 142,315,865 Hospitality supplies and - - 668,500 4,443,43( services Insurance costs 168,796 168,796 0 1,651,79E Specialized materials and services Other operating payments Routine maintenance - 12,237,360 12,237,360 10,463,909 63,773,735 vehicles and other transport equipment Routine maintenance- other assets Exchange rate losses/gains (net) Total 110,160,709 110,160,709 125,172,774 715,370,43( 15 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.9 SOCIAL SECURITY BENEFITS No payments for social security benefits 10.10 ACQUISITION OF NON-FINANCIAL ASSETS made by the niade by' Total Eintity in Cash -third parties Pa.yments- KShs KShs KShs KShs KShs Purchase of buildings Construction of buildings Refurbishment of buildings Construction of roads Construction of civil works 819,096,612 819,096,612 1,477,218,625 9,488,535,605 Overhaul & refurbishment of construction and civil works Purchase of vehicles & other transport equipment 82,478,360 Overhaul of vehicles & other transport equipment Purchase of household furniture & institutional equipment Purchase of office furniture & general 5,504,593 5,504,593 107,544,562 247,517,757 equipment Purchase of specialised plant, equipment and machinery Rehabilitation & renovation of plant, equipment & machinery Purchase of certified seeds, breeding stock and live animals Research, studies, project preparation, 441,343,212 441,343,212 357,779,386 3,389,619,497 design & supervision Rehabilitation of civil works 716,000,000 716,000,000 716,000,000 Acquisition of strategic stocks Acquisition of land Total 1,981,944,417 - 1,981,944,417 1,942,542,573 13,924,151,220 16 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.11 TRANSFERS TO OTHER GOVERNMENT ENTITIES During the 12 months to 30t" June 2020, we transferred funds to reporting government entities as shown below: Crnfrulative to iFY 2019/20 FY 101/ 19 'date payments maeby Boyaets ade by third Total Coastntaern Cash partiesvPsn,nt0 KShs KShs KShs KShs KShs Transfers to National Government entities Athi Water Services - 203,237, 099 Board Coast Water Services --71, 200, 000 Board Lake Victoria North 98,834,903 Water Services Board 373,272,002 Transfers to County Government TOTAL 373,272,002 We have confirmed that the beneficiary institutions have received the funds and have recorded these as inter-entity receipts. We have attached these duly signed confirmations as an Appendix to the financial statements. 17 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.12 OTHER GRANTS AND TRANSFERS AND PAYMENTS There were no other grants and transfers and payments 10.13 CASH AND CASH EQUIVALENTS CARRIED FORWARD 2019/20 2018/19 KShs KShs Bank accounts (Note 8.13A) 694,084,250 706,884,466 Cash in hand (Note 8. 13B) Cash equivalents (short-term deposits) (Note 8.13C) Total 694,084,250 706,884,466 The project has 1 number of project accounts spread within the project implementation area and 2 number of foreign currency designated accounts managed by the National Treasury as listed below: 18 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.14 A Bank Accounts Project Bank Accounts K(Shs Kh Foreign Currency Accounts No foreign currency accounts Total Foreign Currency balances Local Currency Accounts Co-operative Bank of Kenya [A/c No...01141161460400] 691,534,250 704,334,466 Others (amount held by Bank as collateral) 2,550,000 2,550,000 Total local currency balances 694,084,250 706,884,466 Total bank account balances 694,084,250 706,884466 19 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) Special Deposit Accounts The balances in the Project's Special Deposit Account(s) as at 30th June 2020 are not included in the Statement of Financial Assets since they are below the line items and are yet to be drawn into the Exchequer Account as a voted provision. Below is the Special Deposit Account (SDA) movement schedule which shows the flow of funds that were voted in the year. These funds have been reported as loans/grants received in the year under the Statement of Receipts and Payments. Special Deposit Accounts Movement Schedule (i) Equity Bank Limited [A/c NO:0810295112857] Opening balance 12,754,589 0 Total amount deposited in the account - 12,754,589 Amount withdrawn (as per Statement of Receipts & Payments)-Grant amount withdrawn (as per Statement of Receipts & Payments)- Loan 12,754,589 Total amount withdrawn (as per Statement of Receipts & Payments) Closing balance (as per SDA bank account reconciliation attached) 12.364.581 (ii) KISIP-CKE 1055 01 J [A/c No 1000339888] Opening balance (as per the SDA reconciliation) 165,164,750 148,920,864 Total amount deposited in the account 1,380,385,571 1,909,135,418 Total amount withdrawn (as per Statement of Receipts & Payments) 1,545,550,321 1,896,986,000 Closing balance (as per SDA bank account reconciliation attached) 161,070283 The Special Deposit Account(s) reconciliation statement(s) has (have) been attached as Appendix i support these closing balances. NB; The difference between opening balances is due to exchange rate movements; closing balances for IDA have been restated to reflect actual exchange rate. 10.14B Cash In Hand There was no cash at hand as at 30.06.2020 20 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.14C Cash equivalents (short-term deposits) FY 2019/20 FV 2018/19 Co-Operative Bank of Kenya [A/C No ...... Total 10.15 OUTSTANDING IMPRESTS AND ADVANCES D"e Date Ampount Amiouni: Balance Balance, Name Of Officer or Institution of r Taken Srendered, 2018 )017' Surrender Total _ _______ 10.16 FUND BALANCE BROUGHT FORWARD FY 2019/20 F12018/19 KShs KShs Bank accounts 694,084,250 706,884,466 Cash in hand - - Cash equivalents (short-term deposits) -_- Outstanding imprests and advances - - Total 694,084,250 706,884,466 21 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10.17 PRIOR YEAR ADJUSTMENT KShs KShs Bank accounts Cash in hand Cash equivalents (short-term deposits) Receivables - Outstanding Imprests Total 10.18 CHANGES IN RECEIVABLE Description of the error 2,019 - 2020 2018 -,20-19. KShs, KShs Outstanding Imprest as at 1st July 2019 (A) -__ Imprest issued during the year (B) -_- Imprest surrendered during the Year (C) -_- Net changes in account receivables D= A+B-C - 10.19 CHANGES IN ACCOUNTS PAYABLE - DEPOSITS AND RETENTIONS Description of the error 2019 -2020 2018 -2019 KShs KShs Deposit and Retentions as at 1st July 2019 (A) Deposit and Retentions held during the year (B) Deposit and Retentions paid during the Year (C) Net changes in account receivables D= A+B-C 22 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 OTHER IMPORTANT DISCLOSURES (Continued) 11.4 External Assistance Description Kshs Kshs External assistance received in cash External assistance received as loans and grants External assistance received in kind- as payment by third parties T otal xxx xx a) External assistance relating loans and grants There was no External assistance relating loans and grants b) Undrawn external assistance There was no External assistance relating loans and grants c. Classes of providers of external assistance FY 2019/2020 FY 2018/2019 .Descriptioft Kshs 'Kshs Multilateral donors -_- Bilateral donors -_- International assistance organization -_- NGOs National Assistance Organization _ _- Total Provide details of the reasons for external assistance e,g. Economic development or welfare objective, Emergency relief Trading activities etc 24 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 OTHER IMPORTANT DISCLOSURES (Continued) d. Non-monetary external assistance there was no non-monetary assistance. e Purpose and use of external assistance PAYMENTS MADE BY THIRD PARTIESFYY 2019/2020 2018/20W19, Kshs ksh, Compensation of Employees - - Use of goods and services - - Subsidies - - Transfers to Other Government Units - - Other grants and transfers -_ _ Social Security Benefits - - Acquisition of Assets - - Finance Costs, including Loan Interest - - Repayment of principal on Domestic and Foreign borrowing - - Other Payments -_- TOTAL N/B The above sub-classification will be adopted based on the purpose of the external assistance and how the external assistance was used f External Assistance paid by Third Parties on behalf of the Entity by Source This relates to external assistance paid directly by third parties to settle obligations on behalf of the entity National government- Multilateral donors-- Bilateral donors- International assistance organization NGOs National Assistance Organization Total 25 Kenya Informal Settlement Improvement Project Reports and Financial Statements For the financial year ended June 30, 2020 12. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS The following is the summary of issues raised by the external auditor, and management comments that were provided to the auditor. We have nominated focal persons to resolve the various issues as shown below with the associated time frame within which we expect the issues to be resolved. Focal 'Point Tiffeframe: Referencoe 1st'atus:- dt peron to (Put I. date No on theo(esl: Issue / Observations Management resolve, the whe 1ou external,. d / Not,' frt udtrcomnwents issuee(Nameexpect,. the audit Ruitresolved . anid issue. to, be Report) designationz resolved) The project received an unqualified audit opinion in the FY 2018/2019 Principal Secretary Project Coordinator Date 'Date 26 1' 4ч о т� , .�'' `. . :.fl �> �� � $. � ;� � � ;� � � .. � � L & • 4� CZ� �'�:Т �� П7 � � U � J СС � � � 3 � д % ' ' � а� � � 3� � � N � �I �`АΡ�"(�.�'уΡ �� � О О 1 О О О О О О О О О О U '..W. W �:• � � � р р � � р � � � � � �.. 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