I THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE AUDIT OF FINANCIAL STATEMENTS OF THE SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT (SMMRP-Il) CR.5633 - TZ FOR THE FINANCIAL YEAR ENDED 30TH JUNE, 2018 Controller and Auditor General, National Audit Office, 16 Samora Machel Avenue, P.O. Box 9080, 11101 Dares Salaam, Tanzania. Tel: 255 (022) 2115157/8, Fax: 255 (022) 2117527 E-mail: ocag@nao.go.tz Website: www.nao.go.tz December, 2018 AR/SMMRP/CG/2017/201 TABLE OF CONTENTS Abbreviations..................................................................................... iii 1.0 GENERAL INFORMATION.................................................................. 1 1 .1 . M a n d a te ..................................................................................... 1 1.2. Vision, Mission and Core Values.......................................................... 1 1.3. A udit O bjectives .......................... ...............................................ji2 1.4. A udit Scope ....................op2...................................................... 2 1.5. A udit M ethodology ........................................................................2 2.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL.........3 National Audit Office AR/SMMRP/CG/2017/2018 Abbreviations CAG Controller and Auditor General ISSAls International Standards of Supreme Audit Institutions IPSAS International Public Sector Accounting Standards PAA Public Audit Act No.11 of 2008 PAR Public Audit Regulation, 2009 PFA Public Finance Regulations, 2009 PPA Public Procurement Act, 2011 PPR Public Procurement Regulations, 2013 National Audit Office AR/SMMRP/CG/2017/2018 1.0 GENERAL INFORMATION 1.1. Mandate The statutory duties and responsibilities of the Controller and Auditor General are given under Article 143 of the Constitution of the URT of 1977 (revised 2005) and in Sect. 10 (1) of the Public Audit Act No.11 of 2008. 1.2. Vision, Mission and Core Values Vision To be a highly regarded Institution that excels in Public Sector Auditing. Mission To provide high quality audit services that improves public sector performance, accountability and transparency in the management of public resources. Core Values In providing quality services, NAO is guided by the following Core Values: " Objectivity: We are an impartial public institution, offering audit services to our clients in unbiased manner. " Excellence: We are professionals providing high quality audit services based on standards and best practices. " Integrity: We observe and maintain high standards of ethical behaviour, rule of law and a strong sense of purpose. " People focus: We value, respect and recognize interest of our stakeholders. " Innovation: We are a learning and creative public institution that promotes value added ideas within and outside the institution. V Results Oriented: We are an organization that focuses on achievement based on performance targets. V Team work Spirit: We work together as a team, interact professionally, share knowledge, ideas and experiences. We do this by: * Contributing to better stewardship of public funds by ensuring that our clients are accountable for the resources entrusted to them; * Helping to improve the quality of public services by supporting innovation on the use of public resources; * Providing technical advice to our clients on operational gaps in their operating systems; * Systematically involve our clients in the audit process and audit cycles; and * Providing audit staff with appropriate training, adequate working tools and facilities that promote their independence. 0 This audit report is intended solely for the information of Ministry of Minerals (SMMRP II) and the World Bank. However, upon release by the World Bank, it becomes a public record and its distribution may not be limited. I National Audit Office AR/SMMRP/CG/2017/2018 1.3. Audit Objectives To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and are prepared in accordance with an applicable financial reporting framework; and whether laws and regulations have been complied with. 1.4. Audit Scope The audit was carried out in accordance with the, the International Standards of Supreme Audit Institutions (ISSAIs) and other audit procedures as were deemed appropriate under the circumstances. This covered the evaluation of the effectiveness of the financial accounting system and internal control over various activities of the Sustainable Management of Mineral Resources Project (SMMRP-II). The audit was conducted on a sample basis; therefore, the findings are confined to the extent that records, documents and information requested for the purpose of the audit were made available to me. Audit findings and recommendations arising from the examination of the accounting records, appraisal of the activities as well as evaluation of the Internal Control System which requires management's attention and actions, are set out in the management letter issued separately to the Sustainable Management of Mineral Resources Project (SMMRP-1l). As an auditor, I am not required to specifically search for fraud and therefore, my audit cannot be relied upon to disclose all such matters. However, my audit was planned in such a way that I would have reasonable expectations of detecting material errors and misstatement in the financial statements resulting from irregularities including fraud. The responsibility for detection, prevention of irregularities and the maintenance of an effective and adequate system of internal control rests with the management of the Sustainable Management of Mineral Resources Project (SMMRP-ll). 1.5. Audit Methodology My audit approach included tests of the accounting records and other procedures in order to satisfy the audit objectives. My audit procedures included the following: * Planning the audit to identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity's internal controls. * Obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks. * Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained. * Follow up on the implementation of the previous year's audit findings to ensure that proper action has been taken in respect of all matters raised. 2 National Audit Office AR/SMMRP/CG/2017/2018 2.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL Accounting Officer t Permanent Secretary, Ministry of Minerals, Kikuyu Street, P.O. Box 422, DODOMA. Report on the Audit of Financial Statements for the Financial Year Ended 30th June, 2018 Unqualified Opinion I have audited the accompanying Financial Statements of the Sustainable Management of Mineral Resources Project II (SMMRP-1l), which comprise the Statement of Financial Position as at 30th June, 2018 and the Statement of Financial Performance, the Statement of Changes in Net Assets/Equity the Cash Flow Statement and the Statement of Comparison of Budget and Actual amounts for the year then ended, as well as the Notes to the Financial Statements, including a summary of significant accounting policies. In my opinion, the accompanying financial statements present fairly in all material respects, the Financial Position of the Sustainable Management of Mineral Resources Project- II (SMMRP-1l) as at 30' June, 2018, and its Financial Performance and its Cash Flows for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS) Accrual basis of accounting and in the manner required by the Public Finance Act, 2001 revised 2004. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the financial statements section of my report. I am independent of SMMRP-ll in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Tanzania, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Emphasis of Matter(s) Without qualifying my opinion, I draw the attention of the users of this report on the following matter (s) to the financial statements: 3 National Audit Office AR/5MMRP/CG/2017/2018 Note 6 of the financial statements shows accounts receivables representing the funds held for two years without proper justifications by Tanzania Investment Bank Ltd amounting TZS 1,533,436,372.07, after expiry of the contract Agreement. The Bank stated in its report to the management of Ministry of Minerals on 31st October, 2016 that the bank is waiting for directives from Ministry on the remaining balances, but the Ministry's management has not acted upon this issue to the date of finalising this audit on 4th December, 2018. Information Other than the Financial Statements and Auditor's Report Thereon Management is responsible for the other information. The other information comprises of the Director's Report and the Declaration by the Head of Finance but does not include the financial statements and our auditor's report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined that there are no key audit matters to communicate in my report. Responsibilities of Management and those charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSASs, 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. In preparing the financial statements, management is responsible for assessing the entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. 4 National Audit Office AR/5MMRP/CG/2017/2018 Those charged with governance are responsible for overseeing the entity's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, Sect. 10 (2) of the PAA No.11 of 2008 requires me to satisfy myself that, the accounts have been prepared in accordance with the appropriate accounting standards. Further, Sect. 48(3) of the Public Procurement Act No.7 of 2011 requires me to state in my annual audit report whether or not the audited entity has complied with the provisions of the Law and its Regulations. Report on Other Legal and Regulatory Requirements Compliance with the Public Procurement Act, 2011 In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I have reviewed as part of this audit, I state that, SMMRP-1l procurement transactions and processes have generally complied with the requirements of the Public Procurement Act No.7 of 2011 and its underlying Regulations of 2013. Sathina M. Mkumba Ag. CONTROLLER AND AUDITOR GENERAL OF THE URT 31st December, 2018 National Audit Office of Tanzania, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 Email: ocap@nao.gpo.tz 5 National Audit Office AR/SMMRP/CG/2017/2018 Copy to: The Chief Secretary, State House, P.O. Box 9120, 1 Barack Obama Road, 11400 DAR ES SALAAM. Permanent Secretary and Paymaster General, Ministry of Finance and Planning, Treasury Square Building, 18 Jakaya Kikwete Road, P.O. Box 2802, 40468 DODOMA. World Bank Representative, 50 Mirambo Street, P.O. Box 2054, DAR ES SALAAM. 6 National Audit Office AR/SMMRP/CG/2017/2018 MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT FOR MINERAL RESOURCES PROJECT REVISED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KIKUYU ROAD P.O.BOX 422 DODOMA The United Republic of Tanzania Ministry of Minerals Sustainable Management of Mineral Resources Project TABLE OF CONTENTS Introduction ......d................ 1 Statement by Accounting Officer...........--- ................ ................. 4 Statement of Management Responsibility ............................................ 6 Declaration of the head of Finance......................................... 7 Statem ent of Financial Position .................................. .......... 8 Statem ent of Financial Perform ance................................................. 9 Statem ent of C ash Flow ................................................................ 10 Statem ent of Changes in Net Assets..................................................... 11 Statement of comparison Budget Vs Expenditure ................................... 12 Notes to the Financial Statem ents ...................................................... 13 Statem ent of Physical perfom ance................................................. 20 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT INTRODUCTION The Sustainable Management of Mineral Resources Project is an IDA funded project with co-funding from Tanzania Government. The first phase of the Project (SMMRP 1)became operational in June 2009 and ended in June 2015. The primary objective of the Project was to strengthen Tanzania's capacity to manage the mineral sector and improve socio-economic impacts of large and small scale mining for Tanzania and Tanzanians, and enhance private local and foreign investment. The Project also aimed at enhancing principles of good governance so as to improve transparency of the legal and regulatory framework applicable to the mineral sector. Following the successful implementation of SMMRP 1, the Government requested the World Bank for an Additional Financing (SMMRP II) to scale up more activities that will increase benefits of Tanzania to Mineral sector in line with the Policy priorities specifically poverty reduction in the rural mining areas. The World Bank Group's Executive Directors on 7th May, 2015, approved the Additional Financing amounting to US$ 45 million as an IDA fund and US$ 5 million as counterpart fund from the Government. The AF was launched on 1st September, 2015 and it is expected to end on 31st December, 2018. PROJECT SCOPE AND COMPONENTS: SMMRP II has three core components which are: A. Improving the benefits of the mineral sector for Tanzania B. Strengthening governance and transparency in mining C. Project coordination and management Component A: Improving the Benefits of the Mineral Sector for Tanzania Under this component the Ministry through the SMMRP will establish the Center of Excellence and Demonstrating Centers in mining hot spots throughout the country which will serve to catalyze the technical, financial, environmental and social transformation of Artisanal Small Scale Miners (ASM). Also the Ministry through Geological Survey of Tanzania (GST) will undertake detailed geoscientific investigation in selected small scale mining areas proposed for establishment of centres of excellence. 1 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT Component B: Strengthening Governance and Transparency in Mining This component focuses on furthering legal reform and fiscal transparency that is aimed at supporting the ongoing review and updating of the legal and regulatory frameworks for the mineral sector in Tanzania with emphasis on harmonization of laws and supporting activities related to the implementation of Extractive Industries Transparency Initiative (EITI); building institutional capacity and strengthening linkages and coordination with other government institutions that take part in the administration of the mineral sector, and improving the Mining Cadastral Information Management System (MCIMS). Component C: Project Coordination and Management The objective of this component is to strengthen the capacity of Ministry of Minerals for coordination and management of the project including supporting the enhancement of 1) day to day management of the project; 2) procurement; 3) monitoring and evaluation; and 4) coordination of the project exit studies to evaluate the overall performance of the project, and achievement of the project's objective, through the provision of technical advisory services and training. The principal SMMRP Implementing Agency is the Ministry of Minerals (MoM) through the Minerals Department and the Geological Survey of Tanzania. ACHIEVEMENTS: * Research has been done in five areas that the Government has decided to establish demonstration centres which is Katente(Bukombe), Itumbi (Chunya),Kona Z (Tanga), Masakasa Kilwa and Lwamgasa (Geita). * Consultancies for designing of mines offices that will serve for the Centres of Excellence were completed. The offices that will be renovated and upgraded to the level of Centers of Excellence includes that of Bariadi, Musoma, Bukoba, Mpanda, Chunya, Songea, Handeni and Minerals Resources Institute in Dodoma. * The Artisanal Small scale Mining handbooks have been prepared by the Ministry. 2 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT * Furniture and office equipments for Madini House were purchased * Geographical field equipments for GST, Training equipments for MRI , and Portable field equipment for zonal mines offices were purchased. CHALLENGES: Despite of the achievements, there are number of challenges in the implementation of SMMRP; * Long procurement procedures remain the main challenge in implementing the Project activities. * Lack of counterpart fund. * The mining sector is going through a period of important change whereby the Government has introduced major legislative changes to address concerns of benefit sharing and revenue flows in the sector. * Submission of bids with high value than budget which forces review of the work and re-advertisement of the tender hence leads to time delay. WAY FORWARD * The procurement procedures will start in time and the project will avoid any unnecessary delays. * The ministry should disburse counterpart fund to the project as per financing agreement. * The project will abide with the new legislations. * Budgets will be prepared precisely. 3 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT FROM THE ACCOUNTING OFFICER FOR THE YEAR ENDED 30TH JUNE, 2018 This report has been prepared pursuant to Section 25(4) (a) (b) of the Public Finance Act No. 6 of 2001 as amended in 2015 which requires the Accounting Officer to prepare financial statements within three months after the end of the financial year and submit the same to the Controller and Auditor General (CAG) in respect of Voles, Revenues and Monies for which he is responsible. The financial statements must be prepared in accordance with generally accepted accounting practice and in line with day-to-day instructions issued by the Accountant General and National Board of Accountants and Auditors (NBAA). In all aspects, the accounts were prepared on International Public Sector Accounting Standard (IPSAS) basis. The Project has constantly kept accurate accounting records. In that respect, accuracy of our records extracted from the system cannot be compromised. Management of the Ministry, in furtherance of the integrity and objectivity of data in the financial statements, has maintained a comprehensive system of internal controls based on Integrated Financial Management System (IFMS). Management believes that this system of internal controls provides reasonable assurance that financial records are reliable and form a proper basis for preparation of financial statements and that assets are properly accounted for and safeguarded. On behalf of the Ministry, I accept responsibility for the Annual Financial Report and all statements attached thereto; and extracted from the system without any amendments or changes. The financial report has been prepared in accordance with the Accrual basis of IPSAS. In preparing this annual report, appropriate accounting policies have been adopted. However, prudent judgments and estimates have been applied all along. It is my opinion that the financial statements present a true and fair view of the financial affairs of the Project for the covered period. The Management has a reasonable expectation that the Ministry has adequate resources to carry on the existing operations of the Project for the foreseeable future, especially during the implementation of activities under Additional Financing. Accordingly, the Ministry considers it appropriate to continue to adopt the going concern basis in preparing this Annual Financial Statement. The Project implementation has maintained the satisfactory rating on both financial, procurement, environmental and other safeguard for the entire year (2017/18) as categorized by the World Bank. .,~- 1..- ACCOUNTING OFFICER Dat:.. 41 Page THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE YEAR ENDED 30TH JUNE 2018 Management of the Sustainable Management of Mineral Resources Project is responsible for the preparation of the annual Financial Statements, which give a true and fair view of the entity's state of affairs and its operating results in accordance with International Public Sector Accounting Standards (IPSAS) on Accrual Basis, in conformity with the provision of the Public Finance Act No. 6 of 2001 Section 25(2) & (4) (as revised in 2015). This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and presentation of the financial statements that are free from material misstatement, whether on account of fraud or error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances which provide reasonable assurance that the transactions recorded are within statutory authority, and properly record the use of all public financial resources accordingly. To the best of our knowledge, the system of internal control has operated adequately throughout the reporting period and that the records and underlying accounts provide a reasonable basis for the preparation of the Financial Statements for the year ended 30th June, 2018, Procurement of goods, works and consultancy and non consultancy service to the extent that they are reflected in these financial statements have been done in accordance with the Public Procurement Act no. 9 of 2011 and its Regulations 2013. We accept responsibility for the integrity of these financial statements, the information they contain and their compliance with the Public Finance Act No. 6 of 2001 (as revised in 2015) and its Regulations; International Public Sector Accounting Standards (IPSAS) Accruals basis; and Guidelines issued or may be issued from time to time by Paymaster General and Accountant General. In our opinion, nothing has come to the attention of the management that the financial statements doesn't present fairly all material respect of the operations of the entity and will not remain a going concern for the next twelve months from the date of these statements. .. I................ . ..... I ........D a te :.......... .... .. ACCOUNTING OFFICER 5 | P age THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT DECLARATION OF THE HEAD OF FINANCE AND ACCOUNTS SMMRP The National Board of Accountants and Auditors (NBAA) according to the power conferred under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a declaration issued by the Head of Finance/Accounting responsible for the preparation of financial statements of the entity concerned. It is the duty of a Professional Accountant to assist the Board of Directors/Governing Body/Management to discharge the responsibility of preparing financial statements of an entity showing true and fair view of the entity position and performance in accordance with applicable International Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the Board of Directors/Governing Body as under Directors Responsibility statement on an earlier page. 1, Suma N. Mwakipunda being the Head of Finance/Accounting of SMMRP hereby acknowledge my responsibility of ensuring that financial statements for the year ended 30th June, 2018 have been prepared in compliance with applicable accounting standards and statutory requirements . I thus confirm that the financial statements give a true and fair view position of Sustainable Management For Mineral Resources Project (SMMRP) as on that date and that they have been prepared based on properly maintained financial records. Signed by: ...... ............... Position: ACCOUNTANT NBAA Membership No: GA 3069 Date: 12th December, 2018 6 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF FINANCIAL POSITION AS AT 30TH JUNE, 2018 NOTES 2017/2018 2016/2017 T.SHS T.SHS Non-Current Assets Equipment Office Furniture Motor Vehicle Total Non-Current Assets Current Assets: Cash and Cash equivalents 13 22,427,179,043.85 5,864,702,857.41 Receivables 6 40,141,133.14 20,937,165.18 Receivables (From TIB) 6 1,533,436,372.08 0.00 Total Assets 24,000,756,549.07 5,885,640,022.59 Current Liabilities - Withholding tax payable 576,928.75 Non - Current Liabilities: Deffered Revenue 5 16,562,476,186.44 0.00 Total Net Assets 7,437,703,433.88 5,885,640,022.59 Net Assets/Equity Accumulated surplus/Deficit 7,437,703,433.88 5,885,640,022.59 Total Net Assets/Equity 7,437,703,433.88 5,885,640,022.59 Suma Mwakipunda Andrew Eriyo Project Accountant Project Manager 7 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF FINANCIAL PERFOMANCE FOR THE YEAR ENDED 30 JUNE, 2018 NOTES 2017/2018 2016/2017 TSHS TSHS REVENUE Government Contribution 4 200,000,000.00 Fund transferred from IDA 5 5,762,838,423.88 21,023,561,562.20 TOTAL REVENUE 5,762,838,423.88 21,223,561,562.20 EXPENSES: Consultancy fee 7 523,800,364.97 8,726,457,286.39 Training 8 132,366,984.91 78,882,353.01 Goods 9 3,093,130,272.55 8,044,913,543.92 Works 10 38,068,891.88 457,912,131.66 Operating Costs 11 1,975,171,909.57 3,727,169,340.41 Other Expenditure 12 300,000.00 213,246,894.19 Exchange gain/loss -312,024,669.68 TOTAL EXPENSES 5,762,838,423.88 20,936,556,879.90 Surplus/Deficity for the period 287,004,682.30 Suma Mwakipunda Andrew Eriyo Project Accountant Project Manager 8 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30TH JUNE 2018 2017/2018 2016/2017 Cash flow from operating activities RECEIPTS Notes TZS TZS Government Contribution 200,000,000.00 IDA 5 22,173,475,391.17 21,023,561,562.20 TOTAL RECEIPTS 22,173,475,391.17 21,223,561,562.20 PAYMENTS Consultancy fee 7 523,800,364.97 8,726,457,286.39 Training 8 132,366,984.91 78,882,353.01 Goods 9 3,093,130,272.55 8,044,913,543.92 Works 10 38,068,891.88 457,912,131.66 Operating costs 11 1,975,171,909.57 3,727,169,340.41 Other exp 12 300,000.00 213,246,894.19 Receivables 6 - -11,772,650.00 TOTAL PAYMENTS 5,762,838,423.88 21,236,808,899.58 Net Cash Flow From Operating Activities 16,410,636,967.29 -13,247,337.38 CashFlow From Investing Activities Purchase/Construction of Non Current Assets Net Cash Flow from Investing Activities CashFlow From Financing Activities Net CashFlow from Financing Activities - Net Increase/Decrease in Cash and Cash Equivalents 16,410,636,967.29 Exchange G ain/loss 13 151,839,219.15 -312,024,669.68 Cash and Cash Equivalent at the beginning of the period 5,864,702,857.41 5,589,470,825.10 Cash and Cash Equivalent at the end of the period .... 22,427,179,043.85 5,864,702,857.41 Surna Mwakipunda Andrew Eriyo Project Accountant Project Manager 9 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF CHANGES IN NET ASSET FOR THE YEAR ENDED 30TH JUNE 2018 2017/2018 2016/2017 Details Tzs Tzs Restated Restated Opening balance 7,419,076,394.67 5,598,635,340.28 Adjustments during the year 18,627,039.21 1,533,436,372.08 Surplus/Deficity for the year 287,004,682.31 Closing Balance 7,437,703,433.88 7,419,076,394.67 Suma Mwakipunda Andrew Eriyo Project Accountant Project Manager 10 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF BUDGET VS EXPENDITURE FOR THE YEAR ENDED 30TH JUNE 2018 ACTUAL VARIANCE(APPR.BUDGE ITEM APPROVED BUDGET(Tzs) ACTUAL RELEASE(Tzs) EXPENDITURE(Tzs) T VS ACT. EXPENDITURE) RATIO INCOME Opening Balance 5,864,702,857.41 5,864,702,857.41 100 Receipts for the year: - 0 IDA 22,173,475,391.17 22,173,475,391.17 22,173,475,391.17 100 10TAL INCOMI- AS Al 3TH JUNE 2018 22,173,475,391.17 28,038,178,248.58 28,038,178,248.58 EXPENDITURE Consultancy fee 7,172,679,600.00 7,000,000,000.00 523,800,364.97 6,648,879,235.03 7.303 Training 482,565,600.00 3,000,000,000.00 132,366,984.91 350,198,615.09 27.43 Goods 25,488,237,600.00 8,000,000,000.00 3,093,130,272.55 22,395,107,327.45 12.14 Works 15,253,459,920.00 1,173,475,391.17 38,068,891.88 15,215,391,028.12 0.25 Operating costs 4,606,308,000.00 3,000,000,000.00 1,975,471,909.57 2,630,836,090.43 42.89 TOTAL EXPENDITURE 53,003,250,720.00 22,173,475,391.17 5,762,838,423.88 Suma Mwakipunda Andrew Eriyo Project Accountant Project Manager 11 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 1. GENERAL INFORMATION The Sustainable Management of Mineral Resources Project - AF (SMMRP) is a two year project, which became effective in the financial year 2015/2016. The objective of the project is to improve the socio-economic impact of mining for Tanzania and Tanzanian, and Government capacity to manage the mineral sector and enhance local and foreign investment. 2. SIGNIFICANT ACCOUNTING POLICES The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated. 2.1 Basis of Accounting The financial statements have been prepared in accordance with International Public Sector Accounting Standard (IPSAS) Accrual basis of Accounting. 2.2 Going Concern The accounts have been prepared on going concern basis on assurance by the project Management that they will continue to provide financial support for the foreseeable future. 2.3 Revenue Recognition Revenue is recognised when they are realised or earned. In the Statement of financial performance only revenue that has been spent is recognised. The differed revenue that is unspent revenue is treated in the Statement of financial position as non -current liability. 2.4 Functional and presentation In view of the joint financing of the Project, some transactions are carried out with different functional currencies. A functional currency is the currency of the primary economic environment in which the entity operates (SMMRP). Items included in the financial statements of the Reporting Entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The SMMRP financial statements are presented in (TZS). 12 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT NOTES TO FINANCIAL STATEMENTS (Continues) Significant Accounting Policy (Continues) 2.5 Foreign Currency Translation Transactions and balances: Foreign currency transactions are translated into the functional currency using the prevailing exchange rate on the date of transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation to year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement .The Exchange rates used are the Central Bank-ruling rate of transactions date. 2.6 Cash and Cash Equivalents Cash and cash equivalents are carried in balance sheet at face value, For the purpose of cash flow statement cash and cash equivalents consist of cash at bank. 3. RISK MANAGEMENT The Ministry is subject to a number of financial risks which arise as a result of its routine operations. Consequently, MoM ensures that risks which it faces are dealt with in an appropriate manner, in accordance with relevant aspects of best practice in corporate governance, and it has developed a risk management strategy, in accordance with the available guidance on Management of Risk. Steps have been taken to identify and assess risks to meeting objectives, to weigh and prioritise these on the basis of their assessed impact and likelihood, and then to take timely actions to manage or eliminate them through compensating internal controls. The Ministry recognizes that risks arise from many internal and external sources and that a wide range should be considered. The effectiveness of these actions is monitored and reviewed regularly. They also help to identify areas for improving risk-based internal controls and to target the Ministry's programme. 3.1 Credit risk Credit risk refers to the risk of a loss due to the non-performance by counterparties to discharge an obligation. Financial instruments which subject the Ministry to credit risk include bank balances, receivables, advances and investments. 13 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT 3.2 Foreign exchange risk Foreign exchange risk refers to the risk of loss due to adverse movements in foreign exchange rates. 3.3 Liquidity risk Liquidity risk refers to the loss due to the lack of liquidity preventing quick or cost- effective liquidation of products, positions or portfolios. Liquidity risk is managed on an individual entity basis, which generally requires entities to hold assets of appropriate quantity and quality to meet all their obligations as they fall due. 3.4 Contractual risk Typically, this arises from failure of contractors to deliver goods or services to the agreed prices or specifications. 3.5 Environmental risk Investors in the mineral sector tend to affect the environment during mining activities; whereas small scale miners cause to contaminations, such as mercury. To ensure the risks mitigation is enhanced; there is systematic measuring and recording of physical, social and economic variables associated with project impacts before initiation of any mining activities to large companies. One of the key roles of the Sustainable Management of Mineral Resources Project is to gather Information from the baseline surveys which will be used to identify gaps and challenges related to environmental and social management of the mining sector, and device strategies to improve monitoring capacity. 3.6 Information Communication risk Information Communication Risk refers to information management, data protection, and freedom of information, which lead to difficulties in collection of revenue from Mineral and Energy Sectors. The guideline on dealing with documents has been drawn, the government security agency provide vetting exercises and in-house training for handling and managing document appropriately. 14 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT NOTES TO FINANCIAL STATEMENTS (Continues) There are primary risks arising from financial reporting, which include fraud, loss or embezzlement of assets, improper favouring of a third party at the expense of the Ministry and other risks related to material misstatements in the valuation of assets, liabilities, revenue and expenses or deviations from the disclosure requirements. The Ministry engages a team to identify types of risks involved in each departments and unit. 4. GOVERNMENT CONTRIBUTION During financial year 2017/2018, there was no Government contribution to the project. 5. IDA FUNDS Funds received during the year 22,173,475,391.17 Funds amortised during the year as revenue 5,762,838,423.88 Balance 16,410,636,967.29 Differed revenue(Balance+Exchange Gain Note 13) 16,562,476,186.44 6. RECEIVABLES Unretired Imprest 40,141,133.14 SCHEDULE Date CHQ NO PAYEE AMOUNT 06-07-17 977906 John Benedict Issangu 11,210,857.14 12-07-17 977921 Veronica Simba 1,850,000.00 14-07-17 977924 Heri Gumbo 5,720,276.00 16-08-17 977980 John Benedict Issangu 2,300,000.00 12-09-17 978000 John Benedict Issangu 8,580,000.00 22-09-17 978013 John Benedict Issangu 8,283,000.00 12-12-17 978084 Jonathan W Bruno 2,197,000.00 Total 40,141,133.14 FUNDS FROM TIB 15 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT S/N Account Name currency Account No USD TZS 1. MEM-TIB-Small Grants USD 5200001063402.00 121,908.01 0 Program Trust 2. MEM/TIB-SmalL Grants USD USD164000076 500,267.40 0 Program Trust 3. MEM/TIB Trust Account- TZS 5201001058901.00 0 5,413,587.14 Technical Account 4. MEM/TIB Trust Account TZS 5200001058901.00 0 124,917,687.32 Total Balance USD 622175.41*2255.16 130,331,274.46 TZS CONVERSION TZS 1,403,105,097.61 TZS 130,331,274.46 TOTAL TZS 1,533,436,372.07 7. CONSULTANCY FEE DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Consultancy fee 523,800,364.97 8,726,457,286.39 TOTAL 523,800,364.97 8,726,457,286.39 8. TRAINING DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Training cost 132,366,984.91 78,882,353.01 TOTAL 132,366,984.91 78,882,353.01 9. GOODS DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Purchase of goods for MEM office 2,927,763,161.88 6,859,534,817.26 Other consumables 858,692,214.73 Office supplies 165,367,110.67 326,686,511.93 TOTAL 3,093,130,272.55 8,044,913,543.92 10. WORKS DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Rehabilitation 38,068,891.88 403,317,552.11 Minor works 54,594,579.55 TOTAL 38,068,891.88 457,912,131.66 16 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT 11. OPERATING COSTS DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Repair & Maintenance of Vehicle 90,349,989.82 47,215,622.08 Air Ticket 37,885,964.30 93,889,684.47 Accommodation 516,000.00 Advertisement 17,382,000.00 61,526,170.22 Conference Facilities 441,596,818.29 1,062,160,421.66 Office Entertainment 16,499,865.18 22300000 Car parking 1,760,000.00 2,035,000.00 Repair & Maintenance of Equipment 5,482,763.00 26655759.29 Telephone & Faxes 1,270,433.86 2,161,382.21 Special Allowance 23,647,463.60 Night Allowance 194,824,237.34 1,031,329,459.81 Supervision - 34,508,051.46 Office Consumable 362,644,842.80 375,123,697.64 Registration 18,000,000.00 4,475,000.00 Withholding Tax 306,845,321.31 Travelling cost 138,640,000.00 12,843,000.00 Salaries 47,160,540.00 58,365,978.68 Electricity 53,913,073.56 95,014,922.25 Diesel 48,324,291.00 Office Rent 425,162,118.76 434,275,820.93 Service charge 70,860,371.66 Leave travel 3,414,600.00 3,802,600.00 PAYE 28,477,984.80 Total 1,975,171,909.57 3,727,169,340.41 12. OTHER EXPENSES DESCRIPTION 2017/2018 (Tzs) 2016/2017 (Tzs) Office supplies 124,261,510.27 Arusha Gem Fair 87,985,383.92 Other operating costs 300,000.00 1,000,000.00 TOTAL 300,000.00 213,246,894.19 17 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT 13. CASH AND CASH EQUIVALENTS AS AT 30/06/2017 SN ACCOUNT NO CURRENCY AMOUNT EXCHANGE AMOUNT IN TZS RATE 01, 9921156501 TZS 1,428,402.25 1 1,428,402.25 02 9931206401 USD 2,642,245.31 2,219.05 5,863,274,455.16 TOTAL 5,864,702,857.41 CASH AND CASH EQUIVALENT AS AT 30/6/2018 SN ACCOUNT NO CURRENC AMOUNT EXCHANGE RATE Balances translated Balances available Exchange loss (a- Y using BOT rate as at 30 in the Cash Book (b) b) June 2018 (a) 1 9921156501 TZS 282,301,953.34 1 282,301,953.34 282,301,953.34 2 9931206401 USD 9,819,647.87 2,255.16 22,144,877,090.51 21,993,517,564.01 TOTAL 22,427,179,043.85 22,275,819,517.35 151,359,526.50 COMMITMENTS The contingent liabilities amounting to Tzs 537,618,806.39 which were declared in the last financial year are yet to be paid. The contingent liabilities comprised of liabilities incurred during SMMRP I for which the balance was refunded to the World Bank and hence there was no funds for settlement of the liabilities. 18 ТНЕ UNITED REPUBLIC OF TANZANIA M1NISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT сом:-яwсн+я. ог-лп.w л пивтлпп� О ыr 1 гяwпст. wavr Овсаснап.w, xo�r виввя 1мнп�ы r,.vvкпra ��хп� тоты. � квацв ~д со иwюs в вvюlт�l вvвв 1тzв1 ппг n ^°°о� 51 � ^°"oIT�; w панвwни . . 1тгвlт ...I 1тгв1/ - , ........... .. . ...-.� . _ "- - - � _ " - �' -"64.i?.МК4-" - _ �<чE-.eii:r!•Гл гnui.t _ - - - 1юи/оов/вюкг/w/оа:пRиSнл 9 1.iпг.��г.э� Е �ипе е ьго irvc со wm,г�e��i..a ,авъ.вв�.4оо.о -'_- ь•1°2,яv�.в i'an � __� __ г�F��+� �юе/оов/вюкР/oc-w/оъг гг��г�+����г.�п.iеi�агi i.ге вв.г . в. --- --- - 1в1.�вэ.iиал -------- т.2тwгТ, лл2.123:'^ �ю1в/оов/вюкн/w /оз1� ii[ iiгi inn��.. o0i о --_ E.i __ 'i ь ваеэиа =.�1L.�Ч i,тn ' ' . - __.,.^_'1и' .:4.{ г • . ..ь_г�ov�.v��i ��,о��,:н�п�i. �я -� -- -- -�^ _ - .г •rсс.гд. - 1ю�/оов/вюкv/w/оаlг �� �� и.у.ь i л. ii , г! г.i i. . � п�г. •. �.iм�.апя:п0 .,.� .%.i!Jlг , э.ыов.<вэ Л � t�riPeYn>•i z.9въ5i>О,Бiв-�� � 29Рlan9 wл.ло ��г �:л 1гi1г• Г.-�•г�Е �.гц __- п1].мi1.П1УЛU ____ _ 1r4c1у 19 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF MINERALS SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT STATEMENT OF PHYSICAL PERFOMANCE FOR THE YEAR ENDED 2018 ACTUAL EXPENDITURE Component A, :mproving the Benefits of BUDGET (TZS) (TZS) % STATUS the MInera I See or for Tanzania I Consultancles for designing of mines offices that will -,erve for I he Cenlres of Excellence were completed. The offices that will be renovated and upgraded to the level of Centers of Excellence includes that of Bariadi, Musoma, Bukoba, Mpanda, Chunya, Songea, Handeni and Minerals Resources lnstiiule in Dodoma. 2. Furniture and office A I Center of Excellence 16,495,331,880.00 590.818,928.22 358 equipmen s for Madini House were purchased A 2 Geological Works 3,924,000.000 00 - A 3 Small Grants 2,470,665,940.00 A 4 Value Addition 1,017,331,8130 00 A 5 Mainsireaming/integra lion with LGAs 944,665,940.00 Sub total Component 6 -Strengthening Governance and Transparency In Mining I Geographical field equipments for GST were purchased. I Training equipment at MR1 were supplied and installed 3 Portable field equipment for 7onal mines offices were purchased 4 Consullancy for development of guidelines Filling policy, legal and regulatory gaps for lor a simplified Environmental Protection Plan (EPP) for ASM R I ASM 3,180,000,000 00 3,144,332,701.00 9888 t was completed B 2 Strengthen Transparency 90,000,000 00 - Sub Total Component C-Training and Project Coordination I Rent and service charge for project office for the year Project Coordination and Management - 2017/18 were covered 2 Operating costs for the project for IDA 4,578,000,G00 00 2,027,686,794.66 4429 FY 2017/2018 were covered 32.699.995.640.00 1 5.762.838.423.88 20