THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE ,.. I f REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF AGRICULTURAL SECTOR DEVELOPMENT PROGRAMME BASKET FUND HOLDING ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 2014 The Controller and Auditor General, National Audit Office, Samora Avenue/Ohio Street, P.O. Box 9080, Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 E-mail ocag@ nao.go .tz Website: www.nao .go .tz DARES SALAAM. December, 2014 AR/ASDP/HA/2013/2014 TABLE OF CONTENTS Page Office of the Controller and Auditor General .. ......................................... ~ ... ii Vision and Mission and Core Values ................. .. ..•..•. . . •..••••... •....•.•.••••....•.•... ii Definition of Terms and Abbreviations: ........................................ .. ............. iii 1.0 BACKGROUND INFORMATION ........................................................... 1 1. 1 Introduction ............................. . .................................... . ..... . ....... 1 1.2 Brief history of establishment of Agricultural Sector Development Programme. 1 1.3 Operational objectives Agricultural Sector Development Programme ............ 2 1.4 Financing ........... . .. . ........................................... ......................... 3 1. 5 Management Structure .................................................. . ........... . ..... 3 1.6 Audit Mandate .................................... . ........................................ 3 1. 7 Audit Objectives ............................................................. .. . ........... 4 1. 8 Audit Methodology ............ •.....•......................•...... . ....•... •..•..•.•.•..•. 4 1. 9 Audit Scope ............ . ....... . ........ . .... . .............................. .. .............. 5 2.0 AUDIT REPORT ON FINANCIAL STATEMENTS ........................ .. ............... 6 3.0 FINANCIAL STATEMENT AND NOTES ................................................... 9 Office of the Con t rol ler and Auditor Genera l AR/ASD P/HA/2013/201 4 Office of the Controller and Auditor General National Audit Office The United Republic of Tanzania Established under Article 143 o the Constitution of tne The statutory duties and responsibilities of the controller and Auditor General are enshrined under Article 143 of the Constitution of the URT of 1977 and further amplified under Sect. 10 of the Public Audit Act. No. 11 of 2008. Vision To be a centre of excellence in public sector auditing. Mission To provide efficient audit services in order to enhance accountability and value for money in the collection and use of public resources. Core Values In providing quality services, NAO is guided by the following Core Values: ../ Objectivity: We are an impartial organization, offering services to our clients in an objective and unbiased manner; ../ Excellence: We are professionals providing high quality audit services based on best practices; ../ Integrity: We observe and maintain high standards of ethical behavior and the rule of law; ../ People focus: We focus on stakeholders' needs building a culture of good customer care having competent and motivated work force; ../ Innovation: We are a creative organization that constantly promotes a culture of developing and accepting new ideas from inside and outside the organization; and ../ Best resource utilization: We are an organization that values and uses public resources entrusted to it in efficient, economic and effective manner. 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 adequate working process tools and facilities that promote independence. © This audit report is intended to be used by Agricultural Sector Development Programme. However, upon receipt of the report by the Accountant General and whoever concerned, the report becomes a matter of public record and its distribution may not be limited. 11 Office of the Controller and Audito r Genera l AR / ASDP-HA/2013/2014 Definition of Terms and Abbreviations: (i) Definition of Terms • Financial Statements mean: Statement of receipts and transfers; Notes and supporting schedules of the Agricultural Sector Development Programme Basket Fund. • Regulations mean the Regulations of the Public Finance Act 200112004 . • Act means the Public Audit Act No. 11 of 2008. • Programme means Agricultural Sector Development Programme . • MKUKUTA means National Strategy for Economic Growth and Poverty Reduction . (ii) Abbreviations ADB African Development Bank ASDP Agricultural Sector Development Programme Basket Fund DAN IDA Danish International Development Agency EU European Union G.N. Government Notice GBS General Budget Support lA Irish Aids ICC Inter-Ministerial Co-ordination Committee IDA Int ernational Development Association IF AD International Fund for Agricultural Association JICA Japanese International Co-operation Agency MAFS & C Mi nistry of Agriculture, Food Security and Co -operation MITM Ministry of Industry Trade and Marketing MKUKUTA Mkakati wa Kukuza Uchumi na Kuondoa Umaskini Tanzania MLD Min istry of Livestock Development PFA Public Finance Act PFR Public Finance Regulations PMO-RALG Prime minister office-Regional Administration and local Government SME Small and Medium Enterprises USD United States Dollar 111 Office of the Control ler and Audi t or General AR / ASD P/ HA / 201 3/ 2014 1.0 BACKGROUND INFORMATION 1.1 Introduction We have audited the financial statements and related records of Agricultural Sector Development Programme Holding Account (ASDP) for the year ended 30th June, 2014. Audit findings and recommendations arising from the examination of the accounting records, appraisal of activities as well as evaluation of the internal control system which requires management attention and action are set out in a management letter issued separately to the Accounting Officer. 1.2 Brief history of establishment of Agricultural Sector Development Programme In recognition of the importance and contribution of agricultural sector to the economy of Tanzania, the Government has developed an agricultural sector support framework through the Agricultural Sector Development Strategy (ASDS) and the Agricultural Sector Development Programme (ASDP) as well as the National Strategy for Growth and Poverty Reduction (MKUKUTA). The Government of Tanzania signed an agreement with development partners who agreed to support the United Republic of Tanzania in respect of Agricultural Sector Development Programme through the basket funding . It was agreed and accepted to establish the Agricultural Sector Development Programme Basket Fund into which the development partners' contributions in support of the implementation of the ASDP will be deposited, managed and expended in accordance with the approved principles and procedure agreed upon. In line with the ASDP, the Government and Development Partners are working together in formulating a consolidated set of interventions in support of the ASDP. An increasing proportion of future Development Partners support to agricultural sector development is proposed to be provided through the ASDP Basket Fund. The interest to support the ASDP basket has been expressed in princi ple by the following development partners: Irish Aid (lA) , and the International Fund for Agricultural Development (IFAD) , the International Development Association (IDA) and Japan International Co-operation Agency (JICA). Other partners are expected to join at a later stage. The use of the ASDP Basket Fund is a transitional arrangement to the General Budget Support (GBS). Office of t he Controller and Auditor General AR / ASDP / HA / 2013/ 14 1.3 Operational Objectives of Agricultural Sector Development Programme The operational objectives of Agricultural Sector Development Programme are as follows: • To enable farmers to have better access to and use of agricultural knowledge , technologies, marketing systems and infrastructure, all of which contribute to higher productivity, profitability, and farm incomes; • To promote private investment based on an improved regulatory and policy environment. • Improve and increase access to support services with particular focus on research and extension, meeting the needs of farmers , fisherman , foresters and livestock keepers; and increase communications and collaboration in extension delivery. • Improve human resource capacity and efficiency in agricultural service delivery. • Increase productivity in existing agricultural activities through adoption of and investment in more productive technological packages in agriculture. • Increase area under irrigation and promote water use efficiency in irrigation schemes and encourage utilization of low cost technologies. • Refocus public expenditure to priority outcomes and associated priority actions and ensure delivery of these resource direct to local authorities. • Upgrade and develop new capabilities in order to maintain the growth of domestic markets and exports and promote specialization of dynamic exports and encourage increased competition. • Increase access to rural financial services for subsistence farmers, particularly targeting youths and women and promote on-farm activities with particular focus to supporting agro-processing SMEs, promote and sustain community based savings and credit schemes such as SACCOS/SACCAS and revolving funds. • Improve transport systems, thus, lowering transportation costs and improve marketing to ensure profit margins for producers. 2 Office of t he Contro ller and Audito r Genera l AR / ASDP / HA/ 2013 / 14 1.4 Financing The Agricultural Sector Development Programme Basket Fund (ASDP) is financed by the embassy of Ireland, International Development Association, IFAD and JICA. During the year under review the Programme received a total of USD 32 ,055 , 595.92 from the development partners and there was an opening balance of USD 15, 517,408.99 from the previous year as well as unspent balance from projects of USD 1,016, 996.06 thus making total funds available for the year to be USD 48, 590,000.97 as in a table below: Development Partners 2013/14 Amount (USD) Account No.9931206251: Openi ng Balance 15' 517' 408. 99 IDA - World Bank 11, 000,000.00 IFAD Loan 4, 890,174.14 Irish Embassy 5,439 ,600.00 Japan (JICA) 10,725,821 .78 Unspent Balance from Projects 1,016, 996.06 Fund Available 48,590,000.97 1. 5 Management Structure The ASDP is managed by Agricultural Sector Lead Minist ry t hrough their established institutional arrangements. ASLMs comprise the Ministry of Agriculture, Food Security and Cooperatives (MAFC) acting as agricultural sector coordinating ministry, the Ministry of Industry, Trade and Marketing (MITM), The Ministry of Livestock Development (MLD) , and the Prime Minister's Office - Regional Administration and Local Government (PMO- RALG) . The Inter-Ministerial Coordination Committee (ICC }, which is composed of Permanent Secretaries of the ASLMs and Permanen t Secretaries of the main collaborating ministries serves as its overall steering committee responsible for the policy guidance of the Programme and is chaired by the Permanent Secretary of Ministry of Agriculture, Food and Cooperative. The ICC also oversees cross sectorial issues and facilitates the ASLMs to make contact with other sectors and groups. 1.6 Audit Mandate By virtue of the provisions of Articles 143 of the Constitution of the United Republic of Tanzania and Sect.10 of the Public Audit Act No 11 of 2008 , the Controller and Audi tor General is the statutory auditor of all Government revenues and expenditure including the revenue and expenditure of the ASDP. 3 Office of the Contro ller and Auditor General AR/AS DP/HA/201 3/14 1. 7 Audit Objectives The main objective of conducting the audit is to enable the Controller and Auditor General to express an independent opinion on the financial statements of the Programme for the year ended 30th June, 2014 and in particular: • To test whether funds were correctly received and deposited to the respective accounts of the Programme and withdrawals and transfers follows the appropriate procedures as agreed in the signed Memorandum of Understanding between the Government and the Development Partners. • To ascertain whether all relevant supporting records and accounts have been kept properly; • To perform compliance tests to determine whether Management complied in all material respects with Financial Regulations and donor requirements; and • To evaluate whether the internal control procedures instituted are effective to provide relevant and reasonable information to management for implementing and monitoring activities to enhance achievement of the intended Programme objectives. 1.8 Audit Methodology In auditing the financial statements together with the related records and schedules of ASDP Holding Account, the following steps were followed : • Planning the audit to obtain an adequate understanding of the Programme, its activities and operations and assessment of the major risk areas . • Review of the financial statements whether they were prepared in accordance with generally accepted accounting principles. • Review of legal documents including the signed Memorandum of Understanding and Government Financial Regulations. • Examination of transfers to confirm compliance with the terms of MoU, Treasury circulars, financial regulations, and other instruction or directives. • Review of the internal control structure to assess significant policies, procedures and regulations and determine its adequacy. • To verify the correctness and completeness of the figures in the accounts. • Hold interviews and discussions with some of the staff and other key stakeholders in the implementation of the various activities . . • Have entrance and exit meetings to agree on the execution and discuss the results of the audit findings. 4 Office of t he Cont roller and Auditor General AR /ASDP / HA/ 2013/14 1. 9 Audit Scope The audit was carried out in accordance with The International Standard of Supreme Audit Institution (ISSAI) and other audit procedures as were deemed appropriate under the circumstances. The audit covered the evaluation of the effectiveness of the financial accounting system and internal control over the activities of the ASDP Holding account, examination and verification of the accompanying financial statements, and other procedures as was considered necessary in the circumstances. Therefore, the audit findings are confined to the extent that records, documents and information requested for the purpose of the audit were made available to me. As an auditor, I am not required to specifically search for fraud; 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 expectation of detecting material misstatement in the financial statements, including those resulting from fraud or irregularities. The responsibility for detection and prevention of fraud and irregularities rests with management of the ASDP Holding Account who are responsible for setting up and maintaining an adequate system of internal controls. 5 Office of t he Cont roller and Auditor Genera l AR / ASDP/HA/ 2013 / 14 2.0 AUDIT REPORT ON FINANCIAL STATEMENTS To: Accountant General P.O.Box 9111, DAR ES SALAAM. RE: REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF AGRICULTURAL SECTOR DEVELOPMENT PROGRAMME (ASDP) BASKET FUND HOLDING ACCOUNT FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2014 Introduction I have audited the financial statements of Agricultural Sector Development Programme (ASDP) Basket Fund Holding Account maintained by the Treasury which comprises the statement of receipts and transfers for the year ended 30th June 2014 and a summary of significant accounting policies and other explanatory notes as set out on page 9 to 11 of this report. Management's Responsibilities for the financial statements The preparation of the financial statements is the responsibility of the management of the Agricultural Sector Development Programme Holding Account (ASDP) as per the Statement of Management responsibility on the Financial Statements. Management is responsible for the preparation and fair presentation of these financial statements in accordance with Generally Accepted Accounting Principles. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatements, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Responsibilities of the Controller and Auditor General My responsibility as auditor is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the International Standards of Supreme Audit Institutions (ISSAis) and other procedures I considered necessary under the circumstances. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of 6 Office of the Controller and Auditor Genera l AR/ASDP/HA/2 013 / 14 the financial statements, whether due to fraud or error. In making those risk assessments, I considered internal controls relevant to preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall Presentation of the financial statements In addition , Sect. 10 (2) of the PAA No. 11 of 2008 requires me to satisfy myself that the accounts have been prepared in accordance with the appropriate accounting standards and that; reasonable precautions have been taken to safeguard the collection of revenue, receipt , custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have been duly observed and expenditures of public monies have been properly authorized . I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Unqualified opinion In my opinion , the financial statements present fairly, in all material respects, the Receipts and Transfers of the Agricultural Sector Development Programme Basket Fund Holding Account for the year ended 30th June 2014, in accordance with International Public Sector Accounting Standards - cash basis of accounting and the Memorandum of Understanding. Francis Mwakapalila Ag. CONTROLLER AND AUDITOR GENERAL December, 2014 Copy: The Chief Secretary, State House, P.O. Box 9120, DAR ES SALAAM. Permanent Secretary and Paymaster General, Ministry of Finance, P.O . Box 9111 , DAR ES SALAAM. PMO-RALG P:6. Box 9312 , DODOMA. 7 Office of the Contro ller and Auditor General AR / ASDP/ HA/201 3/ 14 STATEMENT OF MANAGEMENT RESPONSIBILITY ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2014 I have prepared the Financial Statements of the Agricultural Sector Development Programme Basket Fund (ASDP) Holding Account set out in page 9 to 11 for the financial year ended on 30th June, 2014. These Financial Statements have been prepared by the Management in accordance with the provisions of section 25(4) of the Public Finance Act. No 6 of 2001 (Revised 2004). The financial statements as required by the said Act are presented in a manner consistent with the International Public Sector Accounting Standards - Cash basis of accounting. The Management of the Project is responsible for establishing and maintaining a system of effective internal control designed to provide reasonable assurance that the transactions recorded in the accounts are within the statutory authority and that they contain the receipt and use of all public financial resources . To the best of my knowledge, the system of internal control has operated adequately throughout the reporting period and that the accounts and underlying records provide a reasonable basis for the preparation of the financial statements for the financial year ended 30th June, 2014. I accept responsibility for the integrity of the financial statements, the information they contain and their compliance with the International Public Sector Accounting Standards and the reporting guideline issued by IFAC in respect of the year under review . ........................... ~.Z:.:..~·..................................... . Signed by the Accountant General ... :~.~:\.\.1.1.?:-9.~.i .................. Date 8 Office of the Controller and Auditor Genera l AR /ASD P/ HA / 2013 / 14 3.0 Financial Statement and Notes MINISTRY OF FINANCE ACCOUNTANT GENERAL'S DEPARTMENT AGRICULTURE SECTOR DEVELOPMENT PROGRAMME (ASDP) BASKET FUNDS AJC No.9931206251 ASDP BASKET FUND HOLDING STATEMENT OF RECEIPTS AND TRANSFERS NOTE Amount Amount US$ US$ Balance as at July 1, 2013 1 15,517,408.99 Receipts IFAD 2 4,890,174.14 IDA - World Bank 3 11, 000,000.00 Irish Embassy 4 5,439 ,600.00 Japan (JICA ) 5 10,725,821 .78 Total Funds Received 32,055,595.92 Unspent Balances 6 1,016,996.06 Total Funds Available 48,590,000.97 Transfers Local Government Authorities 7 35,211 ,351 .12 PMO - RALG 10 275,678.85 Ministry of Livestock Development 11 710,965.55 Regional Secretariats 12 220,091 .51 Ministry of Agriculture 13 5,182,326.67 Min of Industry, Trade & Marketing 14 340 ,344.34 Total Transfers 41,940,758.04 Adjustments : Reversal - MAFC 8 493 ,745.51 Re im bursement (IFAD) 9 8,900.00 REFUND TO PHRD- ASDP 15 40,602.99 543,248.50 Balance as at 30th June 2014 16 6,1 05,994.43 9 Office of the Controller and Auditor Genera l AR/ ASDP / HA / 2013/14 NOTES TO THE STATEMENT OF RECEIPTS AND TRANSFERS Amount: US$ 1 Balance b/d 15,517 ,408 .99 Total 15,517,408.99 RECEIPTS 2 IFAD 4,890,17 4.14 Total 4,890,174.14 3 IDA- World Bank 6,000,000.00 5,000,000 .00 Total 11,000,000.00 4 Irish Embassy 5,439,600 .00 Total 5,439,600.00 5 Japan (JICA) 10,725 ,821 .78 Total 10,725,821.78 6 Unspent balances 487 ,252 .70 61,673 .25 468,070.11 Total 1,016,996.06 TRANSFERS 7 Local Government Authorities 11,356,593.61 10,247 ,064.65 8,121 ' 134.61 1,728 ,075.70 654 ,102.53 3,104,380.02 Total 35,211,351.12 8 Reversal - MAFC 493 ,745 .51 10 Office of the Controller and Auditor General AR /ASDP / HA / 2013 / 14 Total 493,745.51 9 Reimbursement (IFAD) 8,900.00 Total 8,900.00 10 PMO- RALG 140,986 .19 134,692 .66 Total 275,678.85 11 Min of Livestock Development 524 ,712 .78 186,252.77 Total 710,965.55 12 Regional Secretariats 220,091 .51 Total 220,091.51 13 Min of Agriculture 2,334,772 .08 1,709,111 .71 1' 138,442 .88 Total 5,182,326.67 14 Min of Industry, Trade & Marketing 240 ,849 .85 99,494.49 Total 340,344.34 15 REFUND TO PHRD- ASDP 40,602 .99 Total 40,602.99 16 Balance c/d 6,105,994.43 11 Office of the Contro ller and Audi tor Genera l AR/ASDP/HA/2013/14 ASDP BASKET FUND HOLDING ACCOUNT No. 9931206251 Movement in the Holding Account with the Bank of Tanzania From July 1, 2013 to June 30, 2014 FY 201312014 DATE DESCRIPTIONS AMOUNT IN USD AMOUNT IN TSHS. 1-Jul-2013 Opening Balance 15,517,408.99 Add: Inflows 2-Sep-2013 IFAD 4,890,174.14 18-Sep-2013 Unspent Balances (Min . of Agriculture) 487,252.70 18-Sep-2013 Unspent Balances (Min . of Industry) 61 ,673.25 22-0ct-2013 Unspent Balances (Min. of Agriculture) 468,070.11 29-Nov-2013 Irish Embassy 5,439,600.00 13-Dec-2013 IDA 6,000,000.00 22-Jan-2014 Japan (JICA) 10,725,821 .78 12-Jun-2014 IDA 5,000,000.00 Total Inflows 33,072,591.98 0.00 Funds A vai/able 48,590,000.97 0.00 Less: Outflows 29-Jul-2013 Local Government Authorities 11,356,593.61 18,225,084,136.00 15-0ct-2013 Reversal - MAFC 493 ,745.51 0.00 8-Nov-2013 Reimbursement (/FAD) 8,900.00 0.00 16-Dec-2013 PMO- RALG 140,986.19 224 ,895 ,302.00 16-Dec-2013 Min of Livestock Development 524,712 .78 837 ,000,000.00 19-Dec-2013 Regional Secretariats 220,091 .51 350,000,000.00 20-Dec-2013 Min of Agriculture 2,334,772.08 3,703,341,700.00 9-Jan-2014 Min of Industry, Trade & Marketing 240 ,849.85 384,281 ,904.00 29-Jan-2014 Local Government Authorities 10,247 ,064.65 16,466,830,000.00 12-Mar-2014 Local Government Authorities 8,121,134.61 13,117,000,000.00 13-Mar-2014 Min of Agriculture 1,709,111 .71 2,761,365,990.00 18-Mar-2014 Local Government Authorities 1,728 ,075.70 2,795,000,000.00 25-Mar-2014 Local Government Authorities 654 ,102.53 1,061,252,174.00 28-Apr-2014 Local Government Authorities 3,104,380.02 5,039,269,300.00 8-May-2014 Min of Livestock Development 186,252 .77 302,845,144.00 12-May-2014 PMO-RALG 134,692 .66 219,327 ,650.00 13-May-2014 Min of Agriculture 1,138,442.88 1,853,892,300.00 2-Jun-2014 REFUND TO PHRD- ASDP 40 ,602.99 0.00 10-Jun-2014 Min of Industry, Trade & Marketing 99,494.49 163,300,000.00 Amount transferred to Exchequer Account thereafter to Components 42,484,006.54 67,504,685,600.00 Loss on Exchange Fund balance in the holding account as at 3010612014 6,105,994.43 10,022,777,978.84 12 Office of the Controller and Auditor General AR /ASDP/HA/2013 /14 13 Office of the Controller and Auditor General AR / ASDP / HA / 2013/14