THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE AJDIT OF FINANCIAL STATEMENTS OF THE EXPANDED RICE PRODUCTION PROJECT THE FINANCIAL YEAR ENDED 3OTHJUNE 2018 Controller and Auditor General, National Audit Office, Audit House 16 Samora Machel Avenue, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8, Fax: 255 (022) 2117527 l E-mai: ocagongo.tz !Website: www.nao.Qo.tz December, 2018 AR/ERPP/201 7/2018 TABLE OF CONTENTS 1.0 GENERAL INFORMATION..................................................................1 1.1. M an d a te .................................................................................... 1 1.2. Vision, Mission and Core Values.......................................................... 1 1.3. A udit O bjectives ........................................................................... 2 1.4 . A udit Scope ............................................................................. 2 1.5. A udit M ethodology ....................................................................to... 2 1.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL ......... 3 ii National Audit Office AR/ERPP /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. / 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. Q This audit report is intended solely for the information of the Ministry of Agriculture (ERPP) and the World Bank. However, upon release by the World Bank, it becomes a public record and its distribution may not be limited National Audit Office AR/ERPP /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 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 expanded rice production project 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 Expanded Rice Production Project. 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 Expanded Rice Production Project 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 and recommendations and directives issued by PAC to ensure that proper action has been taken in respect of all matters raised. 2 National Audit Office AR/ERPP /2017/2018 2.0 INDEPENDENT REPORT OF THE CONTROLLER AND AUDITOR GENERAL Permanent Secretary, Ministry of Agriculture, P.O. Box 2182, DODOMA. Report on the Audit of Financial Statements of Expanded Rice Production Project for the Financial Year Ended 30th June, 2018 Unqualified Opinion I have audited the accompanying financial statements of Expanded Rice Production Project, which comprise the statement of Financial Position as at 30th June, 2018 and the statement of financial performance, the statement of changes in net equity, Statement of cash flow, Statement of comparison of budget and actual amount 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 Expanded Rice Production Project as at 30th 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 (ISSAls). 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 Expanded Rice Production Project 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. Other Information Management is responsible for the other information. The other information comprises of the statement of the Accounting Officer, Project Coordinator and the Declaration by the Head of Finance but does not include the financial statements and my auditor's report thereon. 3 National Audit Office AR/ERPP/2016/2017 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. 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 ISSAIs 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. 4 National Audit Office AR/ERPP/2016/2017 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, Expanded Rice Production Project 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. ONTROLLE AUDITOR GENERAL OF THE URT 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: ocag®nao.go.tz 5 National Audit Office AR/ERPP/2016/2017 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT (ERPP) - TANZANIA MAINLAND GLOBAL AGRICULTURE AND FOOD SECURITY PROGRAM TRUST FUND GRANT NUMBER TFO 18462 THE WORLD BANK REVISED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2018 Ministry of Agriculture Kilimo Complex, 1Kilimo Street, P. 0 Box 9192, 15471 DAR ES SALAAM. Telegram: "KILIMO DAR ES SALAAM Telephone: +255-22- 2862064 Fax: +255-22- 2862077 18TH DECEMBER, 2018 E-Mail ps@kilimo.go.tz THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND REVISED FINANCIAL OF STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 TABLE OF CONTENTS PAGES Statement of Accounting Officer 1-3 Statement of Project Coordinator 4-6 Statement of Management Responsibility 7 Statement of Declaration of Head of Accounts and Finance 8 Commentary on Financial Statements 9- 11 FINANCIAL STATEMENTS Statement of Affairs 12 Statement of Financial Performance (By nature) 13 Statement of Financial Performance (By Components) 14 Statement of Change in Net Assets/Equity 15 Statement of Cash Flows 16 Statement of Comparison of Budget and Actual Amounts 17 Notes to the Financial Statements 18 - 42 FINANCIAL STATEMENTS ANALYSIS Statement of Cash Receipts and Payments (By nature) 43 Statement of Cash Receipts and Payments (By Components) 44 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF ACCOUNTING OFFICER FOR THE YEAR ENDED 30th June 2018 The Government of Tanzania is implementing the Expanding Rice Production Project (ERPP) financed by the Global Agricultural and Food Security Program (GAFSP) and supervised by the World Bank. The project became effective on April 30th 2015 and is expected to be closed by April 30 2020. The GAFSP Steering Committee committed in principle US$ 22.91 million grant to implement the Expanding Rice Production Project (ERPP) for both Tanzania Mainland and Zanzibar (Mainland US$ 16.5 million and Zanzibar US$ 6.41 million). The objective of the project is basically increasing productivity and production of rice among smallholders in targeted areas of Tanzania Mainland (Morogoro Region) and Zanzibar (Unguja and Pemba). The project is implemented through four components: (i) Sustainable Seed Systems, (ii) Improving Crop Productivity through better irrigation and crop management, (iii) innovative Marketing Strategies and (iv) Project Management and Coordination. On the Mainland, the project supports the expansion/ rehabilitation of five irrigation schemes from three district councils of Morogoro region. The schemes are Njage and Msolwa-Ujamaa irrigation schemes in Kilombero DC; Mvumi irrigation scheme in Kilosa DC; and lastly Kigugu and Mbogo-Komtonga irrigation schemes from Mvomero DC. Other activities include introduction of new rice varieties to all seven districts where conditions are favourable. Also, the project is supporting design and eventually construction of Kilangali Seed Farm that belong to the Agricultural Seed Agency (ASA) for production of farmers preferred rice seeds. In addition, the project is supporting construction of five warehouses, one in each scheme. Implementation and recorded milestones from July 2017 up to June 2018 are discussed under each component of the project. As for Sustainable Seed Systems, the milestones include establishment of the demonstration plots in the irrigation schemes, lowland rainfed and upland areas. The leading entity is Agricultural Seed Agency (ASA) and collaborators are Kilombero Agricultural Research and Training Institute (KATRIN), Local Government Authorities (LGAs) and farmers. Demonstration plots were established in all seven (7) District councils namely Mvomero, Kilosa, Kilombero, Gairo, Malinyi, Ulanga and Morogoro, all in Morogoro Region. In the second round of introducing new rice varieties to farmers, 91 demonstration plots were established involving nine rice varieties, five (5) were lowland varieties and four (4) were upland varieties. Lowland varieties are TXD 306, TXD 68, Tai, Komboka and Supa. The four (4) upland rice varieties are NERICA 1, NERICA 2, NERICA 4 NERICA 7. About 1,388 were involved in establishing the demonstration plots and 1,418 farmers participated in field days. THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF ACCOUNTING OFFICER (Continued) FOR THE YEAR ENDED 30th June 2018 Improving Crop Productivity through better Irrigation and Crop Productivity and Water Management: There are two subcomponents under this which are (i) expansion and rehabilitation of irrigation infrastructure and (ii) promoting adoption of improved agronomic practices. Progress is that all necessary studies including water resources, hydraulics, economics, environment and social for the five irrigation schemes were completed 100% completed. Engineering designs for Njage, Msolwa Ujamaa, Kigugu and Mvumi are completed while the designs for Mbogo/Komtonga is completed by 80% to be finalized when Environmental and Social Impact Assessment (ESIA) is done . Training on operation and maintenance of irrigation infrastructure for 264 beneficiaries was conducted at Njage, MsolwaUjamaa, Mvumi, Kigugu and Mbogo/Komtonga irrigation schemes. About Promoting Adoption of Improved Agronomic Practices activities demonstration of best agronomic practices of rice production and productivity through improved technologies of practicing the System of Rice Intensification (SRI). For Innovative Marketing Strategies, the objective is to enhance value addition and market access. It is planned to construct 5 warehouses at Njage, Msolwa, Mvumi, Kigugu & Mbogo Komtonga irrigation sites. Designs of warehouses appropriate for each site are 100% completed. The work was undertaken by consultant M+M Architects Company and tendering process for construction was initiated at the end of May 2018. Design of market access roads for Njage and Mvumi Irrigation Schemes is completed by 100%. Regarding Project Management and Coordination, the objective is to facilitate effective coordination, management, monitoring and evaluation for the Project. Also address fiduciary matters covering financial and procurement form and integral part of this component. At the topmost level, there are two project management bodies guiding project implementation. They are Technical Steering Committee and Joint Steering Committee. The Technical Steering Committee met in July 2017 and the Joint Steering Committee which is composed by members from Mainland and Zanzibar met in Zanzibar in November 2017. There was also two World Bank Support Missions the 1st from 5-9 February 2018 and 2nd from May 21-25, 2018. All fiduciary matters noted during the missions were resolved. The payments for illegible expenditures have been accomplished, procurement arrangements put in place and used to procures different goods, works and other services. 2 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF ACCOUNTING OFFICER (Continued) FOR THE YEAR ENDED 30th June 2018 WAY FORWARD There was remarkable progress in the areas of introduction of new rice varieties to farmers, training of both MoA staff and farmers on the technologies related to System of Rice Intensification (SRI) and noting cost effectiveness when two systems of weeding operation is undertaken using manual by push-weeders and herbicide application. Generally, tendering process for the 4 irrigation schemes is underway and expect to rehabilitate the schemes starting financial year 2018/19. Tendering process for two warehouses has commenced and expect to construct them within the financial year 2018/19. Remaining three warehouses will be constructed towards the end of in the financial year 2018/19. The tendering process to construct the two (2) access roads of Njage and Mvumi irrigation schemes is taking place together with tendering process for irrigation schemes. Before I conclude my statement, let me take this opportunity. to thank the Project Implementing Team for working together with all stakeholders to ensure the objectives of the project are realised. Let me also commend the Project Steering Committee for guiding the implementation of this project in the same spirit of ensuring the objectives of the project are met and intended benefits are realised. Eng. MatheCUohn Mtigumwe Dat Accounting Officer 3 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF PROJECT COORDINATOR FOR THE YEAR ENDED 30TH JUNE, 2018 The Expanding Rice Production Project (ERPP) is implemented by the Government of Tanzania on both Mainland and Zanzibar. The project is basically financed by the Global Agricultural and Food Security Program (GAFSP) and supervised by the World Bank. Implementation started in May 2015 and is expected to be closed by April 30th 2020 which is approximately five years. The financier i.e. GAFSP set aside in principle US$ 22.91 million as grant to implement the Project in the two parts of the union i.e. Tanzania Mainland and Zanzibar (Mainland US$ 16.5 million and Zanzibar US$ 6.41 million). The objective of the project is basically increasing productivity and production of rice among smallholders in targeted areas of Tanzania Mainland (Morogoro Region) and Zanzibar (Unguja and Pemba). The project is implemented through four components: (i) Sustainable Seed Systems, (ii) Improving Crop Productivity through better irrigation and crop management, (iii) innovative Marketing Strategies and (iv) Project Management and Coordination. On the Mainland, the project supports the expansion/ rehabilitation of five irrigation schemes from three district councils of Morogoro region. The schemes are Njage and Msolwa-Ujamaa irrigation schemes in Kilombero DC; Mvumi irrigation scheme in Kilosa DC; and lastly Kigugu and Mbogo-Komtonga irrigation schemes from Mvomero DC. Other activities include introduction of new rice varieties to all seven districts where conditions are favourable. Also, the project is supporting design and eventually construction of Kilangali Seed Farm that belong to the Agricultural Seed Agency (ASA) for production of farmers preferred rice seeds. In addition, the project is supporting construction of five warehouses, one in each scheme. PROJECT PERFORMANCE FOR THE YEAR ENDED 2017/2018 Implementation and recorded milestones from July 2017 up to June 2018 are discussed under each component of the project. Component 1: Sustainable Seed Systems Under this component the milestones include establishment of demonstration plots in the 40 irrigation schemes, lowland rainfed and upland areas. The leading entity is Agricultural Seed. Agency (ASA) and collaborators are Kilombero Agricultural Research and Training Institute (KATRIN), Local Government Authorities (LGAs) and farmers. Demonstration plots were established in all seven (7) District councils namely Mvomero, Kilosa, Kilombero, Gairo, Malinyi, Ulanga and Morogoro, all in Morogoro Region. 4 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF PROJECT COORDINATOR (Continued) FOR THE YEAR ENDED 30TH JUNE, 2018 Component 1: Sustainable Seed Systems (Continued) In the second round of introducing new rice varieties to farmers, 91 demonstration plots were established involving nine rice varieties, five (5) were lowland varieties and four (4) were upland varieties. Lowland varieties are TXD 306, TXD 88, Tai, Komboka and Supa. The four (4) upland rice varieties are NERICA 1, NERICA 2, NERICA 4 NERICA 7. About 1,388 were involved in establishing the demonstration plots and 1,418 farmers participated in field days. Component 2: Improving Crop Productivity through better Irrigation and Crop Management: Under this component there are two subcomponents which are (i) expansion and rehabilitation of irrigation infrastructure and (ii) promoting adoption of improved agronomic practices. Progress is that all necessary studies including water resources, hydraulics, economics, environment and social for the five irrigation schemes were completed 100% completed. Engineering designs for Njage, Msolwa Ujamaa, Kigugu and Mvumi are completed while the designs for Mbogo/Komtonga is completed by 80% to be finalized when Environmental and Social Impact Assessment (ESIA) report is available. Training on operation and maintenance of irrigation infrastructure for 264 beneficiaries was conducted at Njage, MsolwaUjamaa, Mvumi, Kigugu and Mbogo/Komtonga irrigation schemes. About Promoting Adoption of Improved Agronomic Practices activities demonstration of best agronomic practices of rice production and productivity through improved technologies of practicing the System of Rice Intensification (SRI). Component 3: Innovative Marketing Strategies: The objective of this component is to enhance value addition and market access. Other implied objectives of this component are (i) Increased produce quality for market assurance, (ii) Reduced post-harvest losses contributing to increased food basket, (iii) Improve farming skills and increase farmers' income, (iv) Linking small- holder farmers with financing institutions- using stock as collateral and sell when there are better prices, (v) Linking small-holder farmers with agro-processors for value addition and sell added value products, (iv) Create formal marketing system & effective networking through market associations for quick access of market information. As far as infrastructural development is concerned, the plan is to construct 5 warehouses at Njage, Msolwa, Mvumi, Kigugu & Mbogo Komtonga irrigation sites. Designs of warehouses appropriate for each site are 100% completed. The work was undertaken by consultant M+M Architects Company and tendering process for construction was initiated at the end of May 2018. Design of market access roads for Njage and Mvumi Irrigation Schemes is completed by 100%. 5 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF PROJECT COORDINATOR (Continued) FOR THE YEAR ENDED 30TH JUNE, 2018 Component 4: Regarding Project Management and Coordination: Under this component there are basically two subcomponents which are (i) project management and coordination and (ii) project monitoring and evaluation. The objective is to facilitate effective coordination, management, monitoring and evaluation for the Project. The fiduciary matters covering financial and procurement form and integral part of this component. The Joint Steering Committee Meeting was held in November 2017. There was also two World Bank Support Missions the 1st from 5-9 February 2018 and 2nd from May 21-25, 2018. All fiduciary matters noted during the missions were resolved. The payments for illegible expenditures have been accomplished, procurement arrangements put in place and used to procure different goods, works and other services. The Project Implementation Team (PIT) has been responsible for overall day to day project implementation including, budgeting, development of action plans and overall project implementation, monitoring and evaluation, procurement, environmental and social safeguards, accounts & tracking expenditures and reporting. WAY FORWARD There was remarkable progress particularly in the areas of introduction of new rice varieties to farmers, training of government staff from central and local government and farmers on the technologies related to System of Rice Intensification (SRI) and plan in place for a second local study tours where SRI has been adopted. The project management team will put in more efforts to ensure increased adoption on the uptake of SRI technologies. Generally, tendering process for the 4 irrigation schemes is underway and expect to rehabilitate the schemes starting financial year 2018/19. Tendering process for two warehouses has commenced and expect to construct them within the financial year 2018/19. Remaining three warehouses will be constructed towards the end of in the financial year 2018/19. The tendering process to construct the two (2) access roads of Njage and Mvumi irrigation schemes is taking place together with tendering process for irrigation schemes. Before ending my statement, let me take this juncture to thank the entire Project Implementing Team for the support they have accorded to me personally and other stakeholders in the course of implementing the project. I am looking forward for their continued support to ensure the objectives of the project are realised. Eng. January Raymond Kayumbe Project Coordinator Date 6 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF MANAGEMENT RESPONSIBILITIES FOR THE YEAR ENDED 30th JUNE 2018 Management of the Ministry of Agriculture is responsible for the preparation of the Financial Statements of Expanding Rice Production Project (ERPP) - Tanzania Mainland, 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), in conformity with the provision of the Public Finance Act No. 6 of 2001 Section 25 (2) & 25(2) & (4) (as revised in 2004), Grant Agreement Number TF018462 and World Bank Project Appraisal Document Report No: 81934-TZ. 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 services to the extent that they are reflected in these financial statements have been done in accordance with the Public Procurement Act No. 7 of 2011 and its Regulations of 2013 together with the Public Procurement (Amendment) Act, 2016 and its Regulations of 2016 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 2004) and its Regulations; International Financial Reporting Standards (IFRS); International Public Sector Accounting Standards (IPSAS) Grant Agreement Number TF018462, World Bank Project Appraisal Document Report No: 81934-TZ; 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 do not 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. Eng. Mathew Mtigumwe ate Accounting Officer 7 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF DECLARATION OF THE HEAD OF ACCOUNTS AND FINANCE OF THE MINISTRY OF AGRICULTURE FOR THE YEAR ENDED 30 JUNE 2018 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 Project under the Ministry 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 Management of Ministry as under Statement of Management Responsibility on an earlier page. I Godney E. Lauwo being the Head of Accounts and Finance of the Ministry of Agriculture hereby acknowledge my responsibility of ensuring that financial statements for the year ended 2017/2018 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 the Expanding Rice Production Project - Tanzania Mainland as on that date and that they have been prepared based on properly maintained financial records. Signed by: ....... Position: .... .. .......... .. NBAA MembeThip No* 3311 Date:. .. . ..... . 8 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND COMMENTARY ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30th June 2018 1. Introduction The financial statements of the Expanding Rice Production Project (ERPP) - Tanzania Mainland provide financial records of the Project over the 2017/2018 financial year. 2. Budget The approved budget for the project during financial year 2017/2018 were; Government contribution TZS 200,000,000.00 and foreign funds from World Bank TZS 17,882,665,150.00 which made up a total budget of TZS 18,082,665,150.00 3. Receipts During financial year 2017/2018 the Project received USD 1,330,407.48 equivalent to TZS 2,972,603,374.58 as grant from the Multilateral Agencies (World Bank) while TZS 37,050,000.00 was received from Government as contribution to the project. (Note 12 and Note 13) 4. Receipts / Payments by Third Parties There were no Receipts or Payments by third parties for the financial year 2017/2018 5. Wages, Salaries and Employee Benefits During financial year 2017/2018 a total of TZS 120,210,750.00 was budgeted for Casual Laborers and Non-Civil Servant Contracts. TZS 105,567,178.50 were paid for these purposes (Note 16) 6. Supplies and Consumable goods The Project incurred a total expenditure of TZS 1,012,063,714.22 for the year ended 30th June 2018 Compared to TZS 668,867,129.96 reported in the year ended 30th June 2017. (Note 17) 7. Bank Charges and Commissions Total of TZS 2,621,118.79 was paid as bank charges for the financial year 2017/2018. (Note 18) 8. Routine Maintenance and Repair There is an increases of amount spent on routine maintenance and repair from TZS 19,296,955.98 reported in the year ended 30th June 2017 to TZS 60,165,715.39 for the year 2017/2018. This is due to users' requirement for the year. (Note 19) 9 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND COMMENTARY ON THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th June 2018 9. Other Expenses During the year payments of TZS 28,846,291.84 was made under category of other expenses. (Note 20) 10. Current Grants Transfers and Subsidies Total of TZS 937,534,280 was transferred to the other entities for the implementing projects. Also TZS 123,217,475.00 was transferred back to the World Bank as refund for the ineligible expenditures occurred previous years. (Note 21) 11. Purchase and Construction of Property, Plant and Equipment During financial year 2017/2018 total amount of TZS 50,416,641.36 was paid for port and clearance charges which added to the value of Motor Vehicles and Motor cycles, the paid amount is related to previous year deferred liability. Computers equipment cost TZS 15,351,800.00 were bought. Air conditioner value TZS 2,124,000.00 was purchased. Also TZS 252,184,819.00 was spent on work on progress (Consulting work of architectural designing for five warehouse). (Note22) 12. Exchange gain (loss) Exchange gain reported during financial year 2017/2018 amounted to TZS 47,926,416.72 was due to different exchange rates used to translate cash receipts and balance held at USD Designated Account also was contributed by different rates applied to transfers funds/payments made from designated account. (Note 32) 13. Cash at the End of Year As at 30th June 2018 total cash balances at banks amounted to TZS 3,460,772,681.77 (Project account held at CRDB PLC, TZS 270,1147,34.57 and Designated account held at Bank of Tanzania US$ 1,414,826.54 equivalents to TZS 3,190,657,947.20). (Note 25) 14. Receivables Receivables for the financial year 2017/2018 includes imprest receivable amounted to TZS 56,801,315.71 (Note 26) 15. Inventories Inventories as at 30th June, 2018 valued TZS 2,611,770.00 (Note 27) 16. Related party Transactions During financial year 2017/2018 related party transaction to compensate key management personnel amounted TZS 89,367,178.50 10 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND COMMENTARY ON THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th June 2018 17.Auditors The Controller and Auditor - General (CAG) is the Statutory Auditor for the Ministry pursuant to the provisions of Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2000), and the Public Audit Act, 2008. (For better understanding Financial Statements should be read in conjunction with underlying notes) Eng.MathevG hn Mtigumwe Dt Accounting Officer 11 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF AFFAIRS AS AT 30th June 2018 2017/2018 2016/2017 TZS TZS Note ASSETS Current Assets Cash at end of year 25 3,460,772,681.77 2,993,816,924.58 Receivables 26 56,801,315.71 Inventories 27 2,611,770.00 Total Current Assets 3,520,185,767.48 2,993,816,924.58 Non-Current Assets Property, Plant and Equipment 33 805,316,477.88 624,240,605.00 Intangible Assets 32 Biological Asssets 29 Total Non-Crrent Assets 805,316,477.88 624,240,605.00 TOTAL ASSETS 4,325,502,245.36 3,618,057,529.57 LIABILITIES Current Liabilities Recurrent Deferred Income 30 3,460,772,681.77 2,993,816,924.58 Total Current Liabilities 3,460,772,681.77 2,993,816,924.58 Non-Current Liabilities Total Non-Current Liabiliaties TOTAL LIABILITIES 3,460,772,681.77 2,993,816,924.58 Net Assets 864,729,563.59 624,240,605.00 NET ASSETS/EQUITY Capital Contibuted by: TOTAL NET ASSETS/EQUITY Capital Grant Funds Accumulated Surplus / (Deficity) 864,729,563.59 624,240,605.00 TOTAL NET ASSETS/EQUITY 864,729,563.59 624,240,605.00 Accont ng Officer Da e 12 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 30th June 2018 (Classification of Payments by Nature) Notes 2017/2018 2016/2017 TZS TZS REVENUE Non - Tax Revenue 14 2,505,647,617.38 1,759,405,104.50 Exchequer Revenue 15 37,050,000.00 50,000,000.00 Exchange gain 32 47,926,416.72 66,605,646.20 TOTAL REVENUE 2,590,624,034.10 1,876,010,750.71 EXPENSES AND TRANSFERS Expenses Wages, Salaries and Employee Benefits 16 105,567,178.50 Supplies and Consumable Goods 17 952,650,628.51 668,867,129.96 Bank Charges and Commissions 18 2,621,118.79 1,203,835.40 Routine Maintenance and Repair 19 60,165,715.39 19,296,955.98 Other Expenses 20 28,846,291.84 57,509,189.37 Depreciation and armotization expense 31 139,532,387.48 TOTAL Expense 1,289,383,320.51 746,877,110.71 Transfers Current Grants Transfers and Subsidies 21 1,060,751,755.00 506,058,000.00 TOTAL Transfers 1,060,751,755.00 506,058,000.00 TOTAL EXPENSES AND TRANSFERS 2,350,135,075.51 1,252,935,110.71 Surplus I (Deficity) 240,488,958.59 623,075,640.00 Accouko g Officer Date 13 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 30th June 2018 (Classification of Payments by Components) 201712018 201612017 TZS TZS REVENUE Non - Tax Revenue 2,505,647,617.38 1,759,405,104.50 Exchequer Revenue 37,050,000.00 50,000,000.00 Exchange gain 47,926,416.72 66,605,646.20 TOTAL REVENUE 2,590,624,034.10 1,876,010,750.71 Expenses Sustainable Seed Systems 879,049,500,00 164,946,000.00 Improving crop productivity through better 611,553,098.48 642,042,276.02 irrigation and crop management Innovative marketing strategies 260,562,819.00 85,849,000.00 Project Management and Coordination: 598,969,658.03 360,097,834.69 TOTAL EXPENSES AND TRANSFERS 2,350,135,075.51 1,252,935,110.71 Surplus / (Deficity) 240,488,958.59 623,075,640.00 Accouifg Officer Da e 14 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF CHANGES IN NET ASSETS/EQUITY FOR YEAR ENDED 30th June 2018 Capital Grant Accumulated Total Funds Surplus I (Deficit) TZS TZS TZS Opening Balance as 1st July 2017 - 624,240,605.00 624,240,605.00 Capital Fund Received Adjustment of Capital Grants Fund Adjustment of Acc. Depreciation for previous year Surplus / (Deficity) during the year - 240,488,958.59 240,488,958.59 Closing Balance at 30th June 2018 - 864,729,563.59 864,729,563.59 Opening Balance as 1st July 2016 - 1,164,965.00 1,164,965.00 Capital Fund Received - Adjustment of Capital Grants Fund - Adjustment of Acc. Depreciation for previous year - Surplus / Deficity during the year - 623,075,640.00 623,075,640.00 Closing Balance at 30th June 2017 - 624,240,605.00 624,240,605.00 Account Officer Da 15 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF CASH FLOW FOR YEAR ENDED 30th June 2018 2017/2018 2016/2017 Notes Receipts / Receipts / Receipts / Receipts / Payments Payments Payments Payments controlled by entity by third controlled by entity by third parties parties TZS TZS TZS TZS Cash Flow from Operating Activities Receipts Government of United Republic of Tanzania 13 37,050,000.00 - 50,000,000.00 - Multilateral Agencies 12 2,972,603,374.58 - 1,774,160,449.12 - Total Receipts 3,009,653,374.58 - 1,824,160,449.12 - Payments Wages, Salaries and Employee Benefits 16 105,567,178.50 - - - Supplies and Consumable Goods 17 952,650,628.51 - 668,867,129.96 - Bank Charges and Commissions 18 2,621,118.79 - 1,203,835.40 - Routine Maintenance and Repair 19 60,165,715.39 - 19,296,955.98 Other Expenses 20 28,846,291.84 - 57,509,189.37 - Receivables 26 56,801,315.71 - - - Inventories 27 2,611,770.00 - - - Total Payments 1,209,264,018.74 746,877,110.71 - Transfers Current Grants Transfers and Subsidies 21 1,060,751,755.00 - 506,058,000.00 Total Transfers 1,060,751,755.00 - 506,058,000.00 - Total payments and transfers 2,270,015,773.74 - 1,252,935,110.71 - Net Cash Flow From Operating Activities 739,637,600.84 - 571,225,338.41 Cash Flow From Investing Activities Purchase/construction of Non-Current Assets 22 (320,608,260.36) - (623,075,640.00) Purchase of Intangible Assets 23 - Purchase of Biological Asssets 24 - - - - Net Cash Flow From Investing Activities (320,608,260.36) - (623,075,640.00) Cash Flow From Financing Activities Interest Repayments Repayments of Borrowing - _- - - Net Cash Flow From Financing Activities - - - - Increasel(Decrease) in Cash 419,029,340.48 - (51,850,301.59) - Cash at beginning of year 2,993,816,924.58 - 2,979,061,579.96 Exchange Gain/(Loss) 32 47,926,416.72 - 66,605,646.20 Cash at end of year 25 3,460,772,681.77 - 2,993,816,924.58 Accouhtin"g Officer ate 16 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF CAMPARISON OF BUDGET AND ACTUAL AMOUNT FOR YEAR ENDED 30th June 2018 Budgeted Amounts Actual amounts Differece: Final Original Budget Reallocations / Final Budget (B) on Comparable Budget and Actual Adjustment(s) Basis TZS TZS TZS TZS RECEIPTS Government of United Republic of Tanzania 200,000,000.00 - 200,000,000.00 37,050,000.00 162,950,000.00 Multilateral Agencies 17,882,665,150.00- 17,882,665,150.00 2,972,603,374.58 14,910,061,775.42 TOTAL RECEIPTS 18,082,665,150.00 18,082,665,150.00 3,009,653,374.58 15,073,011,775.42 PAYMENTS Operations Wages, Salaries and Employee Benefits 16,200,000.00 104,010,750.00 120,210,750.00 105,567,178.50 14,643,571.50 Supplies and Consumable Goods 3,208,299,084.29 315,000,000.00 3,523,299,084.29 952,650,628.51 2,570,648,455.78 Bank Charges and Commissions - 3,000,000.00 3,000,000.00 2,621,118.79 378,881.21 Routine Maintenance and Repair 7,186,027,650.00 - 7,186,027,650.00 60,165,715.39 7,125,861,934.61 Other Expenses - 30,000,000.00 30,000,000.00 28,846,291.84 1,153,708.16 Receivables 56,801,315.71 - 56,801,315.71 56,801,315.71 - Inventories 2,611,770.00 - 2,611,770.00 2,611,770.00 - Transfers Grants transfers 5,123,839,330.00 (577,010,750.00) 4,546,828,580.00 1,060,751,755.00 3,486,076,825.00 Capital Expenditure Purchase/construction of Non-Current Assets 2,488,886,000.00 125,000,000.00 2,613,886,000.00 320,608,260,36 2,293,277,739.64 Purchase of Intangible Assets 232,806,000.00 - 232,806,000.00 232,806,000.00 Purchase of Biological Asssets - - TOTAL PAYMENTS 18,082,665,150.00 18,082,665,150.00 2,590,624,034.10 15,492,041,115.90 NET RECEIPTS/PAYMENTS - .- 419,029,340.48 (419,029,340.48) Accounting Qff er Dae 17 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2018 1. GENERAL INFORMATION Expanding Rice Production Project (ERPP) - Tanzania Mainland which is under the Ministry of Agriculture was launched on 17 June 2016 The objective of the Project is to increase the productivity and production of rice among smallholders in targeted areas of Morogoro Region. The Ministry of Agriculture, was established by the Presidential decree vide Government Notice (GN) No. 431 of 20 October, 2017 and charged with the responsibility of facilitating the development of policies on Agriculture, and their Implementation. (i) Principle place of business Ministry of Agriculture Kilimo Complex, 1 Kilimo Street, P. 0 Box 9192, 15471 DAR ES SALAAM. (ii) Bankers Bank of Tanzania, P.O.Box 2939, Dar es Salaam, Tanzania. CRDB, Quality Centre Branch (Nyerere Road), P.O.BOX 268, Dar es Salaam, Tanzania. (iii) Lawyers Attorney General, Attorney General's Chambers, P.O.Box 9050, Dar es Salaam, Tanzania. 18 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 1. GENERAL INFORMATION (Continued) (iv) External Auditor The Controller and Auditor General, The National Auditor Office, P.O. BOX 9080, Dar es Salaam, Tanzania. 2. BASIS OF PREPARATION These financial Statements comply with International Public Sector Accounting Standards, the measurement bases applied is historical cost adjusted for revaluation of assets to ascertain the deemed cost. The financial statements have been prepared on a going concern basis and the accounting policies have been applied consistently throughout the period. Moreover, the financial Statements have been prepared in accordance with Public Finance Act of 2001 (revised 2004 and its amendments made in 2015), World Bank Grant Agreement Number TF018462, Project appraisal Document Report No: 81934-TZ and Comply with the requirements of International Public Sector Accounting Standards (IPSAS). The Financial statements are presented in Tanzania shillings (TZS) 3. AUTHORISATION DATE The Financial Statements were authorized for issue/publication on .by........... ............... by Eng. Mathew n Mtigumwe Accounting Officer 19 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 4. REPORTING ENTITY The financial statements are for Expanding Rice Production Project (ERPP) - Tanzania Mainland under the Ministry of Agriculture. The financial statements encompass Expanding Rice Production Project (ERPP) - Tanzania Mainland as specified in the relevant Grant Agreement and legislation. Project institutional and Implementation Arrangements. The day to day implementation of project is overseen by Project Implementation Team (PIT) comprises team leader (Project Coordinator) and other eight members. 5. GOVERNMENT BUSINESS ENTITIES These include both trading and statutory enterprises which are either fully Government owned or Government has a stake. These entities operate commercially and do not rely on continuing Government funding to be a going concern. Government Business Entities are excluded from the consolidated Accounts. Such entities contribute dividends to the Government and such earnings are recognised as revenue. The following is the list of significant controlled entities under the Ministry which are also implementing Expanding Rice Production Project (ERPP) - Tanzania Mainland. These are Agencies and Institutes as indicated bellow: - AGENCIES I INSTITUTES S/NO NAME PERCENTAGE JURISDICTION CONTROLLED 1 Agricultural Seed 100% Executive Agencies Agency (ASA) Actl 997 2 Tanzania Official Seed 100% Seed Act 1997 Certification Institute 3 Agriculture Research 100% Established under MOU Institute - KATRIN Apart from the above list there are also other entities which implement the project but not controlled by the Ministry, these including Zonal Irrigation Unit - Morogoro and Local Government Authorities at Morogoro region. 20 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Government accounting policies adopted by Project for preparation of the Financial Statements are as shown below. Foreign currency translation Functional and presentation currency Items included in the financial statements of the project are measured using the currency of the primary economic environment in which the Project operates ("the functional currency"). The financial statements are presented in Tanzanian Shillings (TZS), which is the project's functional and presentation currency. Transactions and balances Foreign currency transactions are translated into Tanzanian Shillings using the exchange rates (buying rate) prevailing at the dates of the transactions. 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 recognized in the statement of cash receipts and payments. The functional and reporting currency is The Tanzanian Shillings (TZS), which is the legal tender of the Government of the United Republic of Tanzania. Items in the financial statements are measured in the currency of the primary economic environment in which the project operates. Cash and cash equivalents Cash and bank balances in the statement of affairs comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, and is measured at amortised cost. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Employment benefits Project Coordinator is a contractual employee, other project officials (Project Implantation Team members) are employees of the Government seconded to the project. Also other Government staff are sometimes performing project duties. Employee benefits include salaries, pensions and other related - employment costs. Employee benefits are recognized on accrual basis. 21 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employment benefits (Continued) The Government operates a defined benefit plans. Different plans and contribution rates for employer and employees are detailed below: No. Name of the Fund Employer Employee Contribution Contribution 1 National Social Security 10% 10% Fund (NSSF) 2 Parastatal Pension Fund 15% 5% (PPF) 3 Public Services Pension 15% 5% Fund (PSPF) 4. Government Employee Provident Fund GEPF) 15% 5% 5.0% 0% (Private) 5 Local Authorities Pension 15% 5% Fund (LAPF) 6 Workers Compensation 2.5% 0% (Government) Fund (WCF) Additionally, the Government operates insured health, National Health Insurance Fund (NHIF) plan where contributions are made by the employer and employee, each contributing 3% of gross salary of the respective employee. However, the government through Public Service Social Security Fund Act No. 2 of 2018, inaugurated the amalgamated social security funds mentioned above to form Public Service Social Security Fund (PSSSF). Revenue from exchange transactions Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Project and the revenue can be reliably measured. Revenue is reduced for estimated customer returns, rebates and other similar allowances. The following specific recognition criteria must also be met before revenue is recognised: (a) Sale of goods Revenue from the sale of goods is recognized when all the following conditions are satisfied: i. The Project has transferred to the buyer the significant risks and rewards of ownership of the goods; ii. The Project retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; iii. The amount of revenue can be measured reliably; 22 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue from exchange transactions (Continued) (a) Sale of goods (Continued) iv. It is probable that the economic benefits associated with the transaction will flow to the entity; and v. The costs incurred or to be incurred in respect of the transaction can be measured reliably. (b) Rendering of services Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows: i. Installation fees are recognized by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the statement of Affairs date; ii. Servicing fees included in the price of products sold are recognized by reference to the proportion of the total cost of providing the servicing for the product sold, taking into account historical trends in the number of services actually provided on past goods sold; and iii. Revenue from time and material contracts is recognized at the contractual rates as labour hours are delivered and direct expenses are incurred. iv. Income from providing financial guarantee is recognized in statement of financial performance over the guarantee period on a straight line basis. (c) Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. (c) Rental income Rental income from investment properties is recognized on a straight-line basis over the term of the relevant lease. Revenue from non-exchange transactions Revenue from non-exchange transactions is governed by IPSAS 23 and mainly comprises taxes and transfers. Taxes are economic benefits or service potential compulsorily paid or payable to the public sector entities, in accordance with laws and/or regulations, established to provide revenue to the government. Taxes do not include fines or other penalties imposed for breach of laws. 23 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue from non-exchange transactions (Continued) Revenue comprises gross inflows of economic benefits or service potential received and receivable by reporting entity, which represents an increase in net asset/equity, other than increases relating to contributions from owners. Moreover, revenue is recognized to the extent that it is probable that the economic benefits will flow to the Project and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: (a) Government grants Government grants are not recognised until there is reasonable assurance that the Government will comply with the conditions attaching to them and the grants will be received. Government grants whose primary condition is that the Government should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the statement of financial position and transferred to statement of financial performance on a systematic and rational basis over the useful lives of the related assets. Other government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Government with no future related costs are recognised in the statement of financial performance in the period in which they become receivable. (b) Other transfers Other transfers include fees, fines, penalties, licenses, gifts, donations (including goods-in-kind), and transfers from other government entities. These are recognised when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity; and the fair value of the asset can be measured reliably. Services-in-kind are not recognised as revenue, but are disclosed in the financial statements. 24 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Agriculture Agriculture activity is the management by an entity of the biological transformation of living animals or plants (biological assets) for sale, or for distribution at no charge or for nominal charge or for conversion into agricultural produce or into additional biological assets. It covers diverse range of activities such as raising livestock, forestry, annual and perennial cropping, cultivating orchards and plantations, fluoric culture and aquaculture (including fish farming), Biological asset is recognized when and only when the entity controls the asset as a result of past events, it is probable that future economic benefits or service potential associated with the asset will flow to the entity and the fair value or cost of the asset can be measured reliably. Biological assets shall be measured on initial recognition and at each reporting date at its fair value less cost of sell. Property, plant and equipment Property, Plant and Equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of any replacement parts in accordance with the related recognition criteria. Depreciation: The Project depreciates its assets by following Government methods. Government has adopted straight line method for depreciation of Public Assets which is allocated systematically over the useful life of the respective assets as issued in Government Asset Guideline on 10th December, 2012 and the accounting policies applicable. The depreciable amount of an asset shall be allocated on a systematic basis over its estimated useful life. The prevailing International Standard for depreciation shall be applied over the useful life of the assets. In accordance with the Generally Acceptable Valuation Principles (GAVP), depreciation for valuation purposes shall be the adjustment made to the replacement cost to reflect physical deterioration, functional and economic obsolescence. Estimated Useful Life (EUL) Assets ran an economic life peculiar to themselves depending on make, constant handling and operational use. Some assets are continued in use much beyond the EUL due to periodical maintenance and repairs. 25 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Estimated Useful Life (EUL) (Continued) Assets exected life are proected in ran es as follows: Description Years Administration assets Y ar Leasehold land Over the lease term Buildin s: Residential 50 * Office ---- 50 * Dweling50 Plant and machinery 15 Furniture and fixture 5 Ofice Equipntn 5 Motor vehicles 5 Heav duty (tonsandabove 10 * Lightdut below5ton 5 Motor cycle 7 Con uter (Desktops and Laptops) 4 Video conference Equipments 4 Savers 7 Network/Telecom Equipment -7 Equipment Racks 10 Other Equipments (With purchase value > or = $ 50,000) 10 Automated files storage equipment 7 Equipment for production, storage and viewing of 7 microforms Document processing equipment e.g. Photocopiers, mail 7 handling equipments, check handling equipment and shredders. Television studio, cameras and other photographic 7 equipments. Uninterruptible power supplies (UPS) 7 Infrastructural Assets: Shallow wells 15 Boreholes: 15 Sewerage systems 15 Water systems Drainagle systems 15 Agriculture and livestock extensiom syste 25 Boreholes (0-200 meters) hand pumped well 30 Shallow wells (0-1 00 meters) hand pumped well 4 26 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Estimated Useful Life (EUL) (Continued) Large dam earth fill 15-20 meters > 1,000,000 cubic meters 25 Medium dam earth fill 5-15 meters 250,000 - 1,000,000 20 cubic meters Small dam (Chaco) earth fill > 5meters 25,000 - 250,000 20 cubic meters Sub surface Dam Concrete or masonry 3-10meters 45,000 - 40 150,000cubic meters Telecom & Signaling 25 The carrying values of cash - generating property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of financial performance in the year the asset is derecognized. The residual values, useful lives and methods of depreciating property, plant and equipment are reviewed, and adjusted if appropriate, at each financial year end. When each major inspection is performed, its cost is recognized in the carrying amount of property, plant and equipment as a replacement if the recognition criteria are satisfied. Intangible assets Intangible assets (consisting of computer software) acquired are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is charged against surplus/deficit in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The expected useful life is approximately 5 years. The amortization period and the amortisation method for an intangible asset are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. 27 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible assets (Continued) The amortisation expense on intangible assets is recognised in the statement of financial performance. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in surplus/deficit when the asset is derecognised. Provisions Provisions are recognized when the Government has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Government expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in surplus/deficit net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Impairment of non-financial assets The Government assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Government makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognized in the statement of financial performance in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. 28 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of non-financial assets (Continued) That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of financial performance. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Types of Assets tested for Impairments Cash generating assets are assets held with the primary objective of generating a commercial return. Non cash generating assets are assets other than Cash generating assets, Impairment is a loss in the future economic benefits or service potential of an asset, over the systematic recognition of the loss of the asset's future economic benefits or service potential through depreciation OR decline in the utility of an asset to the entity that control. Key important issues to consider are value in use of a non-cash generation asset which is the present value of the assets remaining service potential and the recoverable amount which is the higher of an asset's fair value less cost to sell and its value in use. Impairment of Asset is guided by two IPSAS which are: IPSAS 21 Impairment of non- cash generating assets and IPSAS 26 Impairment of Cash Generating Assets. However, the revalued assets are subjected to testing for Impairment and charging depreciation. An asset is subject to impairment test when conditions that drive the purpose exist and these are external indicators and internal indicators that the asset is not performing as desired or its purpose for constructions ceased. Therefore, an asset is said to be impaired when the carrying amount of the asset exceed its recoverable services amount. Carrying Amount is the amount at which an asset is recognized in the statement of financial position, after deducting any accumulated depreciation I amortization and accumulated impairment losses thereon. Whereas, recoverable service amount is the higher of a non- cash generating asset's fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an orderly transaction in addition, value in use of non-cash generating asset is the present value of the asset's remaining service potential. 29 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories are stated at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition, are accounted for as follows: * Raw materials - purchase cost on first in first out basis; first out basis. * Stationeries and other consumables - cost is determined on first in * Finished goods and work in progress - cost of direct materials and labour and a proportion of manufacturing overheads based on normal capacity but excluding borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Related Party Transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. They include relationship with subsidiaries, associates, joint ventures and key Management personnel. For Tanzania Government key management include; President, Ministers and Deputy Ministers and Members of Parliament. For The Ministry of Agriculture key management include, Minister, Deputy Ministers, and Permanent Secretary, Deputy Permanent Secretary and Directors. For the project key management is Project Coordinator. Some of the Government's transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements. During financial year 2017/2018 related party transaction to compensate key management personnel amounted to TZS 89,367,178.50 Events after reporting date Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified: * those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and * those that are indicative of conditions that arose after the reporting period (non- adjusting events after the reporting period). 30 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Agriculture assets Agriculture assets are measured at their fair value less estimated point-of-sale costs. These assets are re-valued at their net market values each year at the reporting date. Net market value is calculated as the difference between the net present value of cash flows expected to be generated by the plantation and the fair value of the land on which the assets are grown. Increase/decrease in the net market value from the previous valuation is recognised as revenue/expense in the statement of financial performance. Periodic changes resulting from growth, prices, discount rate, costs and other premise changes are included in the consolidated statement of financial performance. 7. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the Government's financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. Judgments In the process of applying the Government's accounting policies, management has made the following judgment, apart from those involving estimations, which has the most significant effect on the amounts recognized in the financial statements: Determination of the useful lives of property, plant and equipment Management uses reasonable judgment in determining the useful lives and hence depreciation rates of the items of property, plant and equipments. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 31 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 7. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued) Estimates and assumptions (Continued) Impairment of non-financial assets The Government assesses whether there are any indicators of impairment for all non- financial assets at each reporting date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Standards issued but not yet effective up to the date of issuance and some amendment thereon which might have impact in the entities financial statements are listed below. This listing of standards issued is those that the entity reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The entity intends to adopt these standards when they become effective. 8. FUTURE CHANGE IN ACCOUNTING POLICIES Standards issued but not yet effective up to the date of issuance and some amendment thereon which might have impact in the entities financial statements are listed below. This listing of standards issued is those that the entity reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The entity intends to adopt these standards when they become effective. >- IPSAS 40 - Public Sector Combinations: - This Standard is effective for annual financial statements covering periods beginning on or after January 1, 2019. The entity is currently assessing the impact of the standard. 9. EXCHANGE RATES All monetary amounts in the financial statements are expressed in Tanzanian Shillings, the legal tender shown as TZS. The Tanzanian Shillings closing rate (The Bank of Tanzania buying rates) for major currencies were: Currency 30th June 2018 30th June 2017 United State Dollar 2,255.1584 2,219.0495 British Pound 2,948.3941 2,877.8853 Euro 2,614.1796 2,529.2726 Swedish Kronor 250.8742 260.4274 Japanese Yen 20.4903 19.6724 32 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 10. RISK MANAGEMENT The Ministry-is subjected to a number of risks, which arise as a result of climatic changes, outbreak of pests and plant diseases, unpredictable cash inflows, food shortage in the country, voucher handling, changes of cash or food crops prices and fluctuation of exchange rates etc. These risks can be managed as follows: (i) Natural disasters Natural disasters including drought and floods generally if occurs affect agricultural production and productivity, as a result reduce contribution of agriculture sector in the National economy. (ii) Drought risk Generally, insufficient rainfalls pose risk to Government efforts to increase agricultural production and productivity. To overcome such a situation, the Government promotes irrigation farming by hugely investing in the irrigation schemes, encouraging cultivation of draught resistant crops, and harvesting rain waters etc. (iii) Flood risk Floods mostly destroy crops, cultivated lands and settlements, which leads to the hunger, and leave large of people without shelter. The Government established the National Food Reserve Agency (NFRA) to ensure most of the time the country has enough grain reserve to overcome such calamity. (iv) Pest risk Pests (mainly Rodents, Locusts, and Quelea quelea) destroy crops both food and cash crops in the form of grains or plantations before harvest. The Government mostly scouts and controls them by spraying pesticides to the swarm of pests before migrating from one place to another or before causing destruction. Also as a backstopping the Ministry provides skills and creates awareness to the farmers in applying different alternatives to control pest outbreak. 33 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2018 10. RISK MANAGEMENT (Continued) (v) Market risk Markets are mainly the driving forces for increasing production. In most cases farmers have tended to abandon crops which fetch low market prices. On the other hand, the purchasing power of the farmer tends to dwindle on case of unfavorable market leading to low productivity. To say the least crop markets are unpredictable and poses a great risk to the Government efforts to bring about green revolution or agricultural development in the country. The Government however is working out on measures to improve crop marketing system through establishing and strengthening cooperative societies and encourage farmers to establish SACCOS. (vi) Price fluctuation Risk Change in average price of agricultural commodities in the world market can influence the agriculture sector either positively or negatively. High prices can encourage more production for exports while low prices might lower production to avoid losses. Unfortunately Developing countries (including Tanzania) are price takers; they cannot influence prices in the World markets. However, the Ministry provides up to date market information on market opportunities and price trends as well as encouraging diversification of crop production to counter balance the fluctuations in world market prices. Also the input prices especially fertilizers are being skyrocketed. These affect productions as the prices are too high for the most farmers to afford a bag of fertilizer. The government is tackling that by providing input subsidy and loans through the Agricultural Inputs Trust Fund (AGITF). (vii) Human resource risk Across the Ministry particularly Research Institutions, there is a wave of majority of researchers turning to retirement age without proper replacement system. Also there has been a turnover of personnel as they move for greener pastures. This has affected performance of the planned activities. Continuous recruitment and improvement of working conditions are undertaken to minimize the situation. 34 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2017 10 .RISK MANAGEMENT (Continued) (viii) Financing risk The budget of the Ministry includes donor funds; therefore, donor pullout is the danger that may affect budget implementation and performance. However, the Ministry together with other Agriculture Sector Lead Ministries (ASLMs) has taken some measures to have donor commitment before budgeting. This includes early disbursement of funds to the Holding Account. Effective management and utilization of the funds as well as accounting for the same is another measure taken by the Ministry in order to enhance transparency and accountability. (ix) Foreign Exchange Rate risk The Ministry is at risk of incurring less when foreign exchange rates move adversely. The fluctuation of exchange rates may affect level of production and prices of cash or food crops. Also changes of exchange rates may result into exchange gains or loss when dealing with foreign transactions. The best way to control exchange rate risk is for the Government to control inflation. (x) Credit risk Another area where the Ministry is subjected to risk includes stakeholders' loan repayment on agricultural machinery, implements and tools. The Ministry through Agricultural Inputs Trust Fund (AGITF) is issuing loans for purchase of farm inputs and mechanization inputs to the farmers. The risk is for the farmers' failure to repay back the loans or to default. The Ministry to overcome this risk collaborates with the Local Government Authorities (LGAs) to ensure the farmers are known to LGAs and their respective villages so that their properties used as securities can be sold to restore the loans. The proper dealers are registered by the Agricultural Inputs Trust Fund (AGITF). The contracts signed by farmers and dealers with Agricultural Inputs Trust Fund (AGITF) need thorough follow ups on repayment schedules and duties of assisting farmers (after sales services) respectively. (xi) Post-harvest loss as a risk The fact that despite an effects and resource inverted to train Facilitation Teams (FTs) in the Local Government Authorities (LGAs) in post harvest technologies, all these may amount to nothing if similar efforts or resources and activities are not transmitted to the eventual target groups - farmers and rural population. This may result into increased post-harvest losses and hence reduced food availability. Reduced food availability will mean more food and resources will be required to meeting the requirements of food insecure population. Efforts to reduce post harvest losses are therefore very vital in minimizing such risks. 35 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDED RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30TH JUNE 2017 10. RISK MANAGEMENT (Continued) (xii) Early warning systems The system deals with field predictions and response to drought, floods, famine and other forms of disasters which cause food insecurity. It analyses a variety of data and information such as market prices for food crops, precipitation, crop production, available stocks, trade, etc, to predict when and where food insecurity will occur. In this case, timeliness and accuracy of data and information obtained is vital for economically, financially and socially sound decisions to address food insecurity in the county. Omissions/serious errors may therefore, lead to misinform authorities and subsequently lead to wrong decisions and commitments of resources to address the food shortages. Efforts to strengthen data and information collection systems are of paramount importance in such minimizing such risks. (k) Price of Agricultural Machinery Escalating prices of agricultural machinery, tools, equipment and implements in the market whereby suppliers are inflating prices. The government is to conduct research on the supplied machinery and implements from the manufacturers so as to discuss with the suppliers on how to stabilize agricultural machinery prices. Supply of substandard agricultural machinery tools and implements for farmers in the country. The Government is intending to establish appropriate standards for tools, agricultural Machinery and implements and prepare legislation for enforcement. Lack of adequate after sale services for agricultural machinery sold to farmers through loan from Agricultural Inputs Trust Fund (AGITF). The best way to control is that the government will conduct a survey to ascertain the extent of the problem and recommend to Agricultural Inputs Trust Fund (AGITF) to exclude such companies and tractor makes from provided loans. 11.ORIGINAL AND FINAL APPROVED BUDGET AND COMPARISON OF ACTUAL AND BUDGET AMOUNTS The approved budget is developed on the cash basis for the period from 1st July, 2017 to 30th June 2018. 36 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 2017/2018 201612017 Actual Receipts / Actual Receipts/ Actual Receipts / Actual Receipts/ Payments Payments by Payments Payments by controlled by entity third parties controlled by entity third parties TZS TZS TZS TZS 12 Multilateral Agencies World Bank - IBRD 2,972,603,374.58 - 1,774,160,449.12 - Total 2,972,603,374.58 - 1,774,160,449.12 - 13 Government of United Republic of Tanzania Ministry of Agriculture 37,050,000.00 - 50,000,000.00 - Total 37,050,000.00 - 50,000,000.00 - 14 Non - Tax Revenue World Bank 2,505,647,617.38 - 1,759,405,104.50 - Total 2,505,647,617.38 - 1,759,405,104.50 - 15 Exchequer Revenue Development Exchequer 37,050,000.00 - 50,000,000.00 - Total 37,050,000.00 - 50,000,000.00 - 16 Wages, Salaries and Employee Benefits Casual Labourers 16,200,000.00 Non-Civil Servant Contracts 89,367,178.50 Professional Allowances Special Allowance Total 105,567,178.50 - 37 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 201712018 201612017 Actual Receipts / Actual Receipts/ Actual Receipts / Actual Receiptsl Payments Payments by Payments Payments by controlled by entity third parties controlled by entity third parties TZS TZS TZS TZS 17 Supplies and Consumable Goods Advertising and Publication Agricultural Chemicals Agricultural Implements 362,500.00 Air Travel Tickets 45,865,900.00 - 4,050,000.00 Computer Supplies and Accessories Computers & other compter related equip Conference Facilities 1,000,000.00 - 1,942,729.00 Diesel 112,758,775.00 - 60,006,851.00 Fertilizers 41,334,120.00 - Food and Refreshments 34,726,100.00 - 17,000,000.00 Furniture and Appliances Ground Transport (Bus, Train, Water) Ground travel (bus, railway taxi, etc) 11,951,000.00 8,241,000.00 Internet and Email connections 5,325,000.00 - 33,497,203.70 Mobile Charges 29,135,055.07 14,035,770.24 Office Consumables 54,619,245.98 - 43,976,300.00 Per Diem - Domestic 571,697,428.98 - 485,059,776.02 Per Diem - Foreign 30,625,413.98 Printing and Photocopy paper Printing and Photocopying Costs 9,900,000.00 - 817,500.00 Printing Material 360,000.00 - Programs Transmission Fees - Protective Clothing, footwear and 263,900.00 gears Rent of Private vehicles . Seeds Training Allowances - Training Materials 2,614,000.00 - 240,000.00 Visa Application Fees 112,189.50 Total 952,650,628.51 - 668,867,129.96 38 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 2017/2018 2016/2017 Receipts / Receipts I Receipts / Receipts / Payments Payments by third Payments Payments by controlled by entity parties controlled by entity third parties TZS TZS TZSTZ 18 Bank Charges and Commissions Bank Charges and Commissions 2,621,118.79 1,203,835.40 Total 2,621,118.79 1,203,83540 19 Routine Maintenance and Repair Direct Labour (contract,casual hire) 405,000.00 Motor Vehicles and Water Craft 60,165,715.39 - 18,891,955.98 Outsource Maintenance Contract Services Total 60,165,715.3911 19,296,955.98 20 Other Expenses Consultancy Fees 28,846,291.84- 57,509,189.37 Total 28,846,291.84 - 57,509,189.37 21 Current Grants Transfers and SubsidIes ARI - KATRIN 23,021,500.00 53,551,000.00 Agriculture Seed Agency (ASA) 717,928,000.00 Kilombero District Councils 32,407,425.00 - 22,000,000.00 Kilosa District Councils 59,671,807.00 - 22,000,000.00 Mvomero District Councils 17,689,635.00 - 22,000,000.00 Malinyi District Councils 10,414,289.00 - Morogoro District Councils 14,019,235.00 - Ulanga District Councils 10,414,289.00 - RAS - Morogoro 13,868,100.00 - Tanzania Official Seed Cert. Inst. 38,100,000.00 - 111,395,000.00 World Bank 123,217,475.00 - Zonal Irrigation Unit - Morogoro - 275,112,000.00 Total 1,060,751,755.00 506,058,000.00 22 Purchase/construction of Non-Current Assets Air Conditioner 2,655,000.00 Computers and Photocopiers 15,351,800.00 - 55,395,974.00 Four Wheel Drive Vehicles 48,534,141.36 524,131,138.03 Materials and Supplies for Construction Motor Cycles 1,882,500.00 - 43,548,527.97 Printers and Scanners Consulting Work 252,184819.00- Total 320,608,260.36- 623,075,640.00 23 Purchase of Intangible Assets Reports, documents, etc. Total 24 Purchase of Biological Asssets Certified Seed Total 39 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 2017/2018 2016/2017 TZS TZS 25 Cash at end of year Designated Account (BoT) 3,190,657,947.20 2,739,912,232.46 Project Account (CRDB Bank PLC) 270,114,734.57 253,904,692.12 Total 3,460,772,681.77 2,993,816,924.58 26 Receivables Imprest Receivable 56,801,315.71 Total 56,801,315.71 27 Inventories Office Consumables 2,611,770.00 Total 2,611,770.00 28 Intangible Assets Consulting Work - Reports, documents, etc. - Total ._. 29 Biological Asssets Certified Seed - Total . 30 Recurrent Deferred Income Unspent balance 3,460,772,681.77 2,993,816,924.58 Total 3,460,772,681.77 2,993,816,924.58 31 Depreciation and armotization expense Air Conditioner 531,000.00 - Computers and Photocopiers 17,978,184.75 - Four Wheel Drive Vehicles 114,533,055.88 - Motor Cycles 6,490,146.85 - Consulting Work -_- 139,532,387,48 40 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 32 Exchange Gain (Loss) Desinated Account Date US$ TZS Exchange rate Opening Balance 1-Jul-2017 1,234,723.35 2,739,912,232.46 2,219.05 Receipts World Bank - IBRD 23-Aug-2017 46,076.62 102,378,591.48 2,221.92 World Bank - IBRD 30-Aug-2017 60,673.23 134,922,847.56 2,223.76 World Bank - IBRD 4-Sep-2017 430,027.30 956,499,918.77 2,224.28 Mvomero District Council (Reversal) 17-Nov-2017 6,812.21 15,220,885.00 2,234.35 World Bank - IBRD 4-Dec-2017 74,235.08 164,947,416.94 2,221.96 World Bank - IBRD 5-Jan-2018 93,723.31 208,109,366.54 2,220.47 World Bank - IBRD 11-Jan-2018 112,944.90 250,870,758.57 2,221.18 World Bank - IBRD 14-Jun-2018 30,526.77 68,758,979.07 2,252.42 World Bank - IBRD 14-Jun-2018 69,130.66 155,710,979.59 2,252.42 World Bank - IBRD 14-Jun-2018 49,369.24 111,200,056.21 2,252.42 World Bank - IBRD 14-Jun-2018 94,630.11 213,146,354.92 2,252.42 World Bank - IBRD 14-Jun-2018 98,136.85 221,044,991.50 2,252.42 World Bank - IBRD 14-Jun-2018 170,933.41 385,013,113.43 2,252.42 Total Receipts 1,337,219.69 2,987,824,259.58 Total Funds Available 2,571,943.04 5,727,736,492.03 Transfers/Payments to: - Project Account 24-Jul-2017 157,582.46 350,000,000.00 2,221.06 Project Account 6-Oct-2017 179,629.01 400,000,000.00 2,226.81 ERPP Zanzibar 16-Oct-2017 12,953.04 28,846,676.55 2,227.02 RAS - Morogoro 19-Oct-2017 6,225.62 13,868,100.00 2,227.59 Kilombero District Council 31-Oct-2017 10,614.28 23,632,425.00 2,226.47 Morogoro District Council 31-Oct-2017 6,296.61 14,019,235.00 2,226.47 Malinyi District Council 31-Oct-2017 4,677.48 10,414,289.00 2,226.47 Ulanga District Council 31-Oct-2017 4,677.48 10,414,289.00 2,226.47 Mvomero District Council 10-Nov-2017 6,843.01 15,220,885.00 2,224.30 TOSCI 10-Nov-2017 17,129.01 38,100,000.00 2,224.30 Kilosa District Council 14-Nov-2017 10,086.77 22,430,777.00 2,223.78 Agricultural Seed Agency 21-Nov-2017 123,834.93 275,301,000.00 2,223.13 Project Account 16-Jan-2018 202,483.26 450,000,000.00 2,222.41 Mvomero District Council 20-Feb-2018 1,105.76 2,468,750.00 2,232.64 ARI - KATRIN 27-Feb-2018 10,309.63 23,021,500.00 2,233.01 Mvomero District Council 20-Mar-2018 6,803.55 15,220,885.00 2,237.20 ZIU - Morogoro 19-Apr-2018 1,511.06 3,403,120.00 2,252.14 Kilombero District Council 19-Apr-2018 3,896.30 8,775,000.00 2,252.14 Project Account 30-Apr-201 8 177,689.42 400,000,000.00 2,251.12 Kilosa District Council 8-Jun-2018 3,387.80 7,629,000.00 2,251.90 Agricultural Seed Agency 28-Jun-2018 196,250.73 442,627,000.00 2,255.42 Kilosa District Council 28-Jun-2018 13,129.30 29,612,030.00 2,255.42 Total transfers/Payments 1,157,116.50 2,585,004,961.55 Total Funds Available less total transfers/Payments 1,414,826.54 3,142,731,530.48 Difference - Exchange gain (loss) - 47,926,416.72 Closing Balance 30-Jun-2018 1,414,826.54 3190,657,947.20 2,255.16 41 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED FOR THE 30th June 2018 33 Property, Plant and Equipment Description Furniture and Motor Vehicles Computers Work on Total Fittings and Cycles Equipments Progres TZS TZS TZS TZS TZS CostNaluation At 1 July 2017 - 567,679,666.00 56,560,939.00 - 624,240,605.00 Additions (monetary) 2,655,000.00 50,416,641.36 15,351,800.00 252,184,819.00 320,608,260.36 Additions (non-monetary) Transfers Revaluation adjustments Disposal At 30 June 2018 2,655,000.00 618,096,307.36 71,912,739.00 252,184,819.00 944,848,865.36 Accumulated Depreciation and Impairment At 1 July 2017 - Charge during the year - Depreciation 531,000.00 121,023,202.73 17,978,184.75 - 139,532,387.48 Charge during the year - Impairment Revaluation adjustments Disposal . At 30 June 2018 531,000.00 121,023,202.73 17,978,184.75 139,532,387.48 Carrying value at 30 June 2018 2,124,000.00 497,073,104.63 53,934,554.25 252,184,819.00 805,316,477.88 CostlValuation A 1 July 2016 - - 1,164,965.00 - 1,164,965.00 Additions (monetary) - 567,679,666.00 55,395,974.00 - 623,075,640.00 Additions (non-monetary) - - . - Transfers Revaluation adjustments Disposal At 30 June, 2017 - 567,679,666.00 56,560,939.00- 624,240,606.00 Accumulated Depreciation and Impairment At 1 July 2016 Charge during the year - Amortisation Charge during the year - Impairment Revaluation adjustments Disposal At 30 June 2017 Carrying value at 30 June 2017 - 567,679,666.00 56,560,939.00 624,240,605.00 Accoudng fficer Da 42 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR YEAR ENDED 30th June 2018 (Classification of Payments by Nature) 201712018 201612017 Notes Receipts / Receipts / Receipts / Receipts/ Payments controlled Payments by Payments Payments by entity third parties controlled by entity by third parties TZS TZS TZS TZS RECEIPTS External Assistance Multilateral Agencies 12 2,972,603,374.58 - 1,774,160,449.12 - 2,972,603,374.58 - 1,774,160,449.12 - Internal Funds Government of United Republic of Tanzania 13 37,050,000.00 - 50,000,000.00 - 37,050,000.00 - 50,000,000.00 - TOTAL RECEIPTS 3,009,653,374.58 - 1,824,160,449.12 - PAYMENTS Operations Wages, Salaries and Employee Benefits 16 105,567,178.50 - - - Supplies and Consumable Goods 17 952,650,628.51 - 668,867,129.96 - Bank Charges and Commissions 18 2,621,118.79 - 1,203,835.40 - Routine Maintenance and Repair 19 60,165,715.39 - 19,296,955.98 - Other Expenses 20 28,846,291.84 - 57,509,189.37 - Receivables 26 56,801,315.71 - Inventories 27 2,611,770.00 - - - 1,209,264,018.74 - 746,877,110.71 - Transfers Current Grants Transfers and Subsidies 21 1,060,751,755.00 - 506,058,000.00 - 1,060,751,755.00 - 506,058,000.00 - Capital Expenditures Purchase/construction of Non-Current Assets 22 320,608,260.36 - 623,075,640.00 - Purchase of Intangible Assets 23 - - . Purchase of Biological Asssets 24 - - - - 320,608,260.36 - 623,075,640.00 - TOTAL PAYMENTS 2,590,624,034.10 1,876,010,750.71 - Increasel(Decrease) in Cash 419,029,340.48 - (51,850,301.59) - Cash at beginning of year 2,993,816,924.58 - 2,979,061,579.96 - Exchange Gain/(Loss) 32 47,926,416.72 - 6 6 ,605,6 4 6 .2 0 - Cash at end of year 25 3,460,772,681.77 - 2,993,816,924.58 - AccoOnjlfl Officer Da 43 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF AGRICULTURE EXPANDING RICE PRODUCTION PROJECT - TANZANIA MAINLAND STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR YEAR ENDED 30th June 2018 (Classification of Payments by Components) 2017/2018 2016/2017 Receipts / Receipts / Receipts / Receipts / Payments Payments Payments Payments controlled by entity by third controlled by entity by third parties parties TZS TZS TZS TZS RECEIPTS Internal Funds Government of United Republic of Tanzania 37,050,000.00 - 50,000,000.00 - 37,050,000.00 - 50,000,000.00 - External Assistance Multilateral Agencies 2,972,603,374.58 - 1,774,160,449.12 - 2,972,603,374.58 - 1,774,160,449.12 - TOTAL RECEIPTS 3,009,653,374.58 - 1,824,160,449.12 - PAYMENTS AND TRANSFERS Sustainable Seed Systems 879,049,500.00 - 164,946,000.00 - Improving crop productivity through better 611,553,098.48 642,042,276.02 irrigation and crop management Innovative marketing strategies 260,562,819.00 - 85,849,000.00 - Project Management and Coordination: 839,458,616.62 - 983,173,474.69 - TOTAL PAYMENTS AND TRANSFERS 2,590,624,034.10 - 1,876,010,750.71 - Increase/(Decrease) in Cash 419,029,340.48 - (51,850,301.59) - Cash at beginning of year 2,993,816,924.58 2,979,061,579.96 - Exchange Gain/(Loss) 47,926,416.72 - 66,605,646.20 - Cash at end of year 3,460,772,681.77 - 2,993,816,924.58 - AccoWg Officer Da 44