KENYA NATIONAL AUDIT OFFICE MOT/NUTRIP/5140/2013/2014(12) 30 December, 2014 The Pnncipal Secretary, Mimstry of Transport and Infrastructure. State Department of Transport, P.O. Box 52692-00200. NAIROBI Dear Sir, AUDIT REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL URBAN TRANSPORT IMPROVEMENT (NUTRIP) PROJECT IDA CREDIT NO. 5140 (MOT COMPONENT) FOR THE YEAR ENDED 30 JUNE 2014- MINISTRY OF TRANSPORT AND INFRASTRUCTURE Enclosed herewith , please find two sets of the audited financial statements for National Urban Transport Improvement Project for the year ended 30 June 2014 duly certified and with the seal of the Auditor-General affixed thereon for your use and retention . Another set of the financ1al statements has been transmitted to the Director - External Resources Department- The National Treasury. B. Kalinda Mulli For: AUDITOR-GENERAL Copy to: The D1rector. External Resources Department. P.O. Box 30007, The National Treasury, NAIROBI. (Encl.) REPLBLIC OF KENYA KENYA NATIONAL AUDIT OFFICE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT IDA CREDIT NO. 5140 (MOT COMPONENT) FOR THE YEAR ENDED 30 JUNE 2014 MINISTRY OF TRANSPORT AND INFRASTRUCTURE REPUBLIC OF KENYA rclcphooe +254-20-342330 P.O. Box 30084-00100 Fax t25.J-20-311-182 E-Mail oag ctoagkenya.go.ke NA IROBI V,ebstte _..~ .... kenao go.ke KENYA NATIONAL AUDIT OFFICE REPORT OF THE AUDITOR-GENERAL ON NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT IDA CREDIT NO. 5140 (MOT COMPONENT) FOR THE YEAR ENDED 30 JUNE 2014 - MINISTRY OF TRANSPORT AND INFRASTRUCTURE REPORT ON THE FINANCIAL STATEMENTS I have audited the accompanying financial statements of National Urban Transport Improvement Project set out on pages 1 to 18, which comprise the statement of financial assets and liabilities as at 30 June 2014 , the statement of receipts and payments, the statement of cash flows, the statement of comparative budget and actual amounts for the year then ended, together with a summary of significant accounting policies and other explanatory information in accordance with provisions of Article 229 of the Constitution of Kenya and Section 8 of the Public Audit Act, 2003 and Financing Agreement dated 26 September 2012 between the International Development Association (IDA) and the Government of Kenya (GOK). 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. Management's Responsibility for Financial Statements The Accounting Officer- Ministry of Transport and Infrastructure and the Project Coordinator are responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards and for such 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. The Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 13 of the Public Audit Act, 2003. Auditor-General's Responsibility My responsibility is to express an opinion on the financial statements based on the audit and report in accordance with the provisions of Section 9 of the Public Audit Act, 2003. The audit was conducted in accordance with International Standards on Auditing . Those standards require compliance with ethical requirements and Promotmg Accoumabiltf) m the Public Sector I I \ that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. \ An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion , the financial statements present fairly, in all material respects the financial position of the Project as at 30 June 2014, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards and comply with the Financing Agreement dated 26 September 2012 . In addition , the special account statement presents fairly the special account transactions and the ending balance has been reconciled with the Books of account. REPORT ON OTHER LEGAL AND REGULA TORY REQUIREMENTS As required by the International Development Association , I report based on my audit that:- i) All International Development Association funds have been used in accordance with the conditions of the Credit Agreement, with due attention to economy, and efficiency and only for the purpose for which the funds were provided; ii) Counterpart funds have been provided and used in accordance with the conditions of the Agreement, with due attention to economy and efficiency and only for the purpose for which they were provided; iii) Goods and Services financed have been procured in accordance with the conditions of the agreement and in compliance with the Development partner's rules and procedures ; 2 iv) Necessary supporting documents, records and accounts have been kept in respect of all project activities; v) Adequate internal controls to monitor expenditure and other financial transactions exist; and vi) The fixed assets reg ister for the Projects' assets was maintained during the year. Edward R.O. Ouko, CBS AUDITOR-GENERAL Nairobi 22 December 2014 3 NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT Rep01·ts and Financial Statements I ' For the financial year ended June 30, 2014 CONTENTS PAGE I. PROJECT INFORMATION AND OVERALL PERFORMANCE.. ................. .................................... .......... i 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBlLITJES.............. .. .. ... ................ .... .... ... .. ..... iv 3. REPORT OF THE INDEPENDENT AUDITORS ON THENUTRIP PROJJ::CT ....................................... vi 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERJOD ENDED 30TH JUNE 2014 ........ 11 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JLNE 2014 ........................ 12 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS ........................................... 14 8. NOTES TO THE FINANCIAL STATEMENTS .......................................................................................... 15 9. PROGRESS ON FOLLO\V UP OF AUDITOR RECOMMENDATIONS .................................................. 19 NATIONAL URBAN TRA.NSPORT IMPROVEMENT PROJECT Reports and Financial Statements I•'ot· the financial year ended June 30, 2014 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and rcgistct·ed office Name: The project's official is George Ndegwa Objective: The key objective of the project is to improve the efficiency of road transport along the Northan Conidor and to improve the institutional capacity and arrangements in the urban transpot1 sub-sector. Addr~ss: The project heaclqum1ers office is: Trm1scom House (Nairobi) Nairobi County, Kenya. P.O Box 52692 00200 Nairobi. Contacts: The following are the project contacts Telephone: (254) 2729200 E-mail: ps@transport.go.ke Website: wv.rw.go.ke 1.2 Project Jnfonnation ,------------------,------------------------------------------------------------~ ! Project Start Date: 3rd August 2012 f Project End Date: 31 51 December 2018 i i Project Manager: Mr George Ndegwa I Project Sponsor: I International Development Association (\VORLD BANK) I 1.3 Pt·ojcct Ovcniew Line Ministry/State The project is under the supervision of the Ministry of Transport and ~~ . I-LD_edp_a_rt_n_Je_J_1t_o_f_t_h_e____+-r-n_n_·a_s_tJ-·u_c_tt-tr_e_._________________________________________________ project j 1 Project number I i Strategic goals of the I The strategic goals of the project are as follows: J project j (i) To reduce road fatality, training and capacity building of sta/1 in 1 · I transp011 sector. II 1 ( ii) To have an harmonized urban transport system. 1 NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT Reports and Financial Statements For the financial yem· ended June 30,2014 Achievement of The project management aims to achieve the goals through the following strategic goals I means: j (i) Implementation of various road safety interventions. I (ii) Undertaking consultancy on various urban transport system. Project duration The. project sta11ed on 3rd August 2012 and is expected to run until 31st December 2018. 1.4 Bankns The pr?ject banker for the currem year: Equity Bank Centre Branch P.O Box 75104-00200 Nairobi. Kenya 1.5 Auditors Auditor General Kenya National Audit Office Anniversary Towers, University Way P.O. Box 30084 GPO 00100 Nairobi. Kenya 1.6 Roles and Responsibilities List the different people who will be working on the project. This Jist would include the project manager and all the key stakeholders who will be involved with the project. Also. record their role, their positions. and their contact information. Names Title designation Key qualification Responsibilities I George Ndegwa Chief economist Economist Team leader J George Wanj au D.Chief economist Economist Deputy Team leader I Paul Kingori Economist Economist PIT I ! II NATIONAL URBAN TRANSPORT IMPROVEl'dENT PROJECT Reports and Financial Statements For the financial yca1· ended June 30, 2014 1.7 Funding summary The Project is for duration of six years from 2012 to 2018 \Vith an approved budget of US$ 16,900,000 equivalent to Kshs 1.5 Billion as highlighted in the table below: Below is the funding summary: 13,400.000 735,046 63,213,940 I I 3,460,000 I 297,560,000 -! 3.460,000 ' I ! Total 16,860,000 1,449,960,000 I 735,046 63,213,940 16,124,954 1,383.746,060 1.8 Summary of Overall Project Performance: Budget performance against actual amounts for current year and for cumulative to-elate. Physical progress based on outputs. outcomes and impacts since project commencement. Comment on value-for-money achievements. List the implementation challenges and recommended way forward. 1.9 Summary of Project Compliance: ]nclude significant cases of non-compliance vvitb applicable Jaws and regulations, and essential external financing agreements/covenants. Include consequences suffered on account of non-compliance or likely to be suffered Indicate mitigation measures taken or plmmed to be taken to alleviate the adverse effects of actual or potential consequences of non-compliance Ill • . :ATIONAL URBAN TH.ANSPOHT I1VIPHOVEMENT PROJECT Reports and Financial Statements ~For the financial year ended June 3Q, 2014 1. STATEMF:NT OF PROJECT l\·1ANAGEMEl\T RE.SPONSIBILITIES The Principal Secretary for the Ministry of Transport & Jnfrastructurc.State Dcpmtment of Transport and the Project Coordinator Jar NUTRIP project (arc responsible for the preparation and presentation of the Project' s financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year (period) ended on June 30. 2014 . This responsibilit) includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reponing period: (ii) maintaining proper accounting records which disclose with reasonable accuracy at any time the financial position of the Project: (iii designing. implementing nnd maintaining internal controls relevant to the preparation and f~ti ! presentation of the financial statement, and 'e nsuring that they are free from material misstatements ·\\•hether due to error or fraud: (iv) safeguarding the assets of the Project; (v) selecting and applyin! ;1ppropriate accounting policies: and (vi) making accounting estimates that arc reasonable in tht circumstances. The Piincipal SccreHu·y for the Ministry of Transp011 &Infrastructure. State Depa11mcnt of Transpor and th~ Project Coordinator for NUTRIP pnJjcct ucccpt responsibility for the Project's financi;J statements. which have been prepared on the Cash Basis !v1cthod of f-inancial Reporting. usin; appropriate accounting policies in accordance \l'ith International Public Sector Accounting Standard~ . The Principai Secretary /or the Ministry of Transport &Jnfnstructurc,State Department of Transpor and the Project Coordinator for l'rUTRIP project arc of the opinion that the Projcct"s /inanci; statements give a true and fair view of the state of Project" s transactions during the financial year cndc June 30, 2014, and of the Project's financial position as at that date. The Principal Secretary l()r Stat Department of Transport and the Project Coordinator for NUTIHP pmjcct fwther conlim1 th completeness of the accounting records maintained for the Project. which have been relied upon in th preparation or the Project financial statements as \Yell as the adequacy of the systems of intcm: financial contTol. The Principal Secretary for the l\·1 inistry of Transport and Infrastructure and the Project Coordinator I( 1\'UTRIP project conlim1 that the Project has complied fully with applicable Govemmcnt Regulati01 and the terms of external financing co\'enants. and that Project funds received during the financial yc: under audit we~e used for the eligible purposes for 'vhich they were intended and were proper accounted for. Approval of the Pr·ojcct financial ~tatemcnts The Project financial statements were approved by the Principal Secretary tor the Mini~try of Transpc &lnlfastructure and the Project Coordinator for NUTRIP project on ~ ..C-\ .:.. _S:1: -8P.~~ ____ _ 2014 and si gncd by them. \~c--S- -~ Project Coordinator I\' XX.\:X.X P roj I! ct Starenu!llr <~l Budget Performance For t~ _I'_L~'" en:Jed .1 une_:3_0_:•,_2_0.::..j'<....: ' ]_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ 4. STATL\1 1-:"\'T OF RECEIPTS AND PA 'r'\1ENTS FOR THE PERIOD ENDED 30TH JUNF 2014 Note Cumulativ• 2014 2013 to-date Kshs Kshs Kshs . RECFW!" 8.2 6.:1.213.940 64,213.940 Total ru:c ipb 64,2!3,940 64,213,940 PA). \!E\T~ Purch .t~c '• i '-'' ,,,d~ and sen· ices 8.3 3.768.948 3.768.948 TOTAL I'\ \1\IJENTS 3,768,948 3,768,948 SUR I' I t ·<.. I· .fc rs I I -- Other paym .... nt:-- - - --- i I I I I I I I Total Payments I i Note: Th~ ~lgntlicant budget utilisation/performance differences in the last column are explained in Annex I lll thc-~l· financial statements. _N_~--~~~~-- ---- ------ Project Coordinator · ~9 - ~rY? "')c · \ c \ _l_\_.U.l'i .-:i- Date Date 14 NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT Reports and Financial Statements For the financial year ended June 30,2014 8. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1 Statement of compliance and basis of pr·cpa1·ation The financial statements have been prepared in accordance with and comply with lntemational Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and c9nform to the form of presentation prescribed by the Accow11ing Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project and all values are rounded to the nearest one Shilling. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognises transactions and events only when cash is received or paid out by the Project. 1. Recognition of revenue and expenses The Project recognises all revenues from the various sources when the event occurs and the related cash has actually been received by the Project. In addition, the Project recognises all expenses when the event occurs and the related cash has actually been paid out by the Project. 11. In-kind donations In-kind donations are contributions 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. ·w here the financial value of in-kind donations can be reliably determined, the Project includes such value in the statement of receipts and payments both as revenue and as an expense in equal and opposite amounts: otherwise. the donation is not recorded. 111. 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 puq)oses of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorised public officers and/or institutions which had not been surrendered or accounted for a\ the end of the financial year. 15 NATIONAL URBAN TRANSPORT IMPROVEMENT PROJECT Reports and Financial Statements For the financial year ended June 30, 2014 SIGNIFICANT ACCOUNTING POLICIES (Continued) 1v. 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 repmiing period, they are simply disclosed as an Annex to the financial statements. \Vhen the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments arc made. \'. Budget The budget is developed on the same accounting basis (cash basis). the same accounts classification 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 pmtners, as detailed in the Government of Kenya Budget Printed Estimates for the year. A high-level assessment of the Project's actual performance against the comparable budget for the financial year under review has been included in an annex to these financial statements. VJ. 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 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 111 foreign cmrencies are recognised in the statements of receipts and payments. VII. Comparative figm·cs Where necessary comparative figures for the previous financial year have been amended or reconfigured to conform to the required changes in financial statement presentation. vn1. Subsequent events There have been no events subsequent to the financial year end with a signilicant impact on the financial staternents for the year ended June 30, 2014. 16 NATIONAL URBAN TRANSPORT IMJlROVEMENT PROJECT Heports and Financial Statements _For the financial year ended June 30,2014 NOTES TO THE FINANCIAL STATEMENTS (Continued) 8.2 LOAN FROM EXTERNAL DEVELOPMENT PARTNERS Dming the 12 months to 3 0 June 20xx we received funding from development partners in form of loans negotiated by the National Treasmy donors as detailed in the table below: 8.3 PURCHASE OF GOODS AND SERVICES 2013/14 2012/13 Cumulative Kshs Kshs To-date Domestic travel and subsistence 287,000 287,000 Foreign travel and subsistence 826,940 826,940 Training expenses 2,646,808 2,646,808 Other operating expenses 8,200 8,200 3, 768.948 3,768,948 17 NATIONAL URBAN TRA.NSPORT IMPROVEMENT PROJECT Reports and :F inancial Statements For the financial yeat· ended June 30,2014 8.4 CASH AND CASH EQUIVALENTS C/F\VD 2013/14 2012/13 Kshs Ksbs Bank accounts (Note 8.4A) 60,444,992 60,444,992 8.4 A Bank Accoums Local Currency Accounts Equity Bank [A/c No 0810260438350] 60,444,992 Total bank account balances 60,444,992 18 NATIOf\AL URBAN TRANSPOHT IMPROVEJVIENT PROJECT Reports and Financial Statements For the lin_<~I~ial yea!:__ c_n_d_e_d_J_u_n_c_3_0....:.,_2_0_1_4________________________ PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS The following is the summary of issues raised by the external auditor. and management comments that were pnl\·idcd lO the auditor. We have nominated focal persons to resolve the various issues as shown belo\\ \\ith the associated time ti-ame vvithin which we expect the issues to be resolved. Referen Focal Point Timeframc: Status: ceNo. person to (Put a date (Resolved on the Issue I Observations from .lV[anagemcnt resolve the when you /Not external I Auditor comments issue (Name Resolved) expect the audit I and issue to be Report I i - I designation) resolved) I ! I -- - I I i I I I I I NO\:[ ---- IN THE YEAR I . ! I I I I I I ... ---- I I I ' I . __ __j L- _ -- ----- ·-·---·- - '---- _ _ _L..._ ___ _ __ - · - ' - - - - - - - - ' - - - - - - - Sl-9-Cf- ?~H