EAST AFRICAN COMMUNITY AUDIT COMMISSION JUMUIYAYAAFRIKA MASHARIKI, REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 JANUARY, 2024 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 TABLE OF CONTENTS LIST O F A BBR EV IATIO N S ...................................................................................................................3 1. STAT EM ENT O F PU RPO SE..........................................................................................................4 2. SUMMARIZED KEY ACHIEVEMENTS AS AT DECEMBER, 2022.........................................................5 3. STATUS OF FINANCIAL IMPLEMENTATION OF THE WORKPLAN ..................................................7 4 . H U M A N R ESO U RCE..................................................................................................................18 5 . T H E B U D G ET .........................................................................................................................18 6. CORPORATE GOVERNANCE STATEMENT....................................TN..... ...................................18 7. RISK MANAGEMENT AND INTERNAL CONTROL ........................................................................18 8. STATEMENT OF THE SECRETARY GENERAL'S RESPONSIBILITIES ...............................................22 9. REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 D E C E M B E R , 20 2 2 .......................................................................................................................... 24 10. FINANCIAL STATEM ENTS........................................................................................... 29 10.1. STATEMENT OF FINANCIAL POSITION AS AT 30 DECEMBER, 2022 .................................29 10.2. STATEMENT OF FINANCIAL PERFORMANCE FOR THE SIX MONTHS PERIOD ENDED 30 D EC E M B E R , 20 22........................................................................... .......................................... . 30 10.3. STATEMENT OF CASH FLOW FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 31 10.4. STATEMENT OF CHANGE IN NET ASSETS /EQUITY FOR THE SIX MONTHS PERIOD ENDED 30 D EC E M B E R , 20 22 .....................................................................................................................32 10.5. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE SIX MONTHS PERIO D ENDED 30 DECEM BER, 2022............. ........................................................................... .33 10.6. STATEMENT OF SPECIAL ACCOUNT ACTIVITY FOR THE SIX MONTHS PERIOD ENDED 30 D EC E M B E R , 20 22........................................................................................................................ 34 10.7. FUND ACCOUNTABILITY STATEMENT AS AT 30TH DECEMBER 2022 ...............................35 11, STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION .................................................36 12. KEY JUDGEMENTS AND SOURCES OF ESTIMATION ................................................................36 13. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES............................................................37 14. NOTES TO THE FINANCIAL STATEMENTS ..............................................................................43 Page 2 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 LIST OF ABBREVIATIONS Throughout this financial report unless otherwise stated, the abbreviations in the first column have the meanings stated opposite them in the second column. These descriptions and explanations, however, serve to clarify this report and are not intended to be authoritative. B/F Balance Brought Forward CM Common Market CPI Consumer Price Index/Indices DSG Deputy Secretary General EAC East African Community EAMU East African Monetary Union EAC/StatDHRP EAC Statistics Development and Harmonization Regional Project EARSPforR Eastern Africa Regional Statistics Program for Results ESS External Sector Statistics HCPI Harmonized Consumer Price Index IMF International Monitory Fund IT Information Technology KSH Kenya Shilling LPO Local Purchase Order MFS Monitory Financial Statistics NBV Net Book Value NISR National Institute Statistics for Rwanda NSO National Statistical Office ODP Open Data Platform PDO Project Development Objective RSDP Regional Statistical Development Plan RWF Rwanda Franc SG- Secretary General TWG Technical Working Groups TZS Tanzania Shilling RSSP Republic of South Sudan Pound UGX Uganda Shilling VAT Value Added Tax Page 3 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 1. STATEMENT OF PURPOSE 1.1.Background to the EAC Statistics Development and Harmonization Regional Project The main objective of the East African Community (EAC) is to widen and deepen economic, political, social, and cultural integration of East African countries. To achieve these objectives, the key building blocks are the Customs Union, Common Market, Monetary Union, and Ultimately the Political Federation. In the run-up to achieving a single currency, the EAC Partner States aim to harmonise monetary and fiscal policies; harmonise financial, payment and settlement systems; harmonise financial accounting and reporting practices; harmonise policies and standards on Statistical Information; and, establish an East African Central Bank. The East African Monetary Union Protocal (EAMU) was signed in November 2013. The EAMU Protocol, among other things, requires the Partner States to Develop and Adopt Common Methods, concepts, definitions and classifications for compiling, analysing and disseminating the statistics necessary for the proper functioning of the Monetary Union, while observing Internationally Acceptable best practices. To support implementation of this requirement, the EAC Secretariat secured a grant from World Bank to implement a 5-years Project; the EAC Statistics Development and Harmonization Regional Project (EAC/StatDHRP). REGISTERED OFFICE: East African Community P 0 Box 1096- ARUSHA TANZANIA AUDITOR East African Community Audit Commission P 0 Box 1096 ARUSHA. 1.2. Restructuring of StatDHRP into EARSPforR With the view of expanding the initially covered areas and technical support to PS in implementing the developed guidelines on one hand and also support participating countries national Prorgams implementation, the StatDHRP was restructured into Eastern African Statistics Program for Results (EARSPforR) as indicated in the PAD. "The EAC Secretariat, where the Statistics Department is currently located, is the implementing agency of the existing IPF 'Development and Harmonization Regional Project' (StatDHRP, P164243), which will be closed upon approval of this operation. The EAC Secretariat's Statistics Department reports to the Directorate of Planning. It will be the implementing agency until the East Africa Statistics Bureau (EASB), a semi-autonomous institution similar to Eurostat in the European Union, is fully operational". Page 4 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 The operational activities of EARSPforR started in November, 2022. The StatDHRP for the fiscal year 2022/23 reported activities cover only the first Quarter 2022/23. The work plan for the Year 2022/23 and Budget used remained the same. No separation was made on activities undertaken under StatDHRP and the activities undertaken under EARSPforR. This separation is shown only on the use of financial resources. The Official Closure Period for EAC Statistics DHRP was 30 December 2022. There was no any expenditure incurred from that date to 30th December, 2022. 2. SUMMARIZED KEY ACHIEVEMENTS AS AT DECEMBER, 2022 2.1.Improving harmonization and quality This area is dominated by development and implementation of guidelines of the various statistical dimensions. Development of guidelines No Areas Current status Comment 1 Consumer Price Guidelines completed Under implementation Indices 2 Poverty Guidelines completed and Ready for implementation approved by the (SCS) 3 Communication and Strategy for communication of Ready for implementation advocacy statistics completed and approved by the SCS 4 External Sector Guidelines completed validated To be approved by the Sectoral Statistics by the TWG Committee on Statistics (SCS) 5 Agriculture Guideline/Agriculture To be approved by the SCS completed validated by the TWG Food and Nutrition Guidelines completed validated Under external review by the TWG 6 Government Finance Guidelines completed validated To be approved by the SCS Statistics by the TWG 7 Monetary and Finance Guidelines completed validated To be approved by the MAC Statistics by the TWG Financial Soundness Guidelines completed validated To be approved by the MAC indicators by the TWG 8 National Accounts Guidelines validated by the Under review by an external TWG reviewer Page 5 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 No Areas Current status Comment 9 Database No guideline required Management 2.2.Provisional assessment of guidelines implementation After the guidelines were developed, each Technical Working Group developed its area assessment framework tools to monitor the implementation of the guidelines at national level. Below is the sectors assessment made in December, 2022 as well as the provisional target by end of the project. Assessment of guidelines implementation- End December, 2022 Sector/Statistics Domain HCPI Poverty NA ESS GFS MFS FSI Agriculture Partner 78% 85% 70% 75% 80% 80% 75% State/ Target Burundi 5496 81% 51% 49% 78% 59% 35% Kenya 71% 79% 56% 55% 75% 69% 54% Rwanda 73% 74% 57% 55% 77% 85% 51% South Sudan 46% 58% 30% 46% 34% 46% 30% Uganda 70% 78% 58% 55% 88% 73% 53% URT (URT) 65% 71% 55% 53% 62% 77% 54% Average 63% 73% 51% 1 52% 69% 68% 46% 2.3. Challenges i. The delays in procurement of the Verification agencies especially UNECA that was proposed to verify most of the indicators may affect PS waiting for verification of reached indicators. ii. Departure of 2 staff from project affected the project performance. During the period under review, the project procurement specialist did not report to office without giving any information. The project procurement status has been affected by his absence. His case has been submitted to Human Resources. The MFS/FSI expert got a position with IMF. We expect to fill the positions in the very near future. iii. The internal procurement processes, as well as the contract approvals can take a long time while already cleared by the Word Bank which may impact on the assessment of the project implementation at the Bank side. Quick processes may highly improve the work of the project. The recruitment of an additional Procurement Officer to support the EAC existing team planned in the new project may contribute to addressing the issue. Page 6 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 3. STATUS OF FINANCIAL IMPLEMENTATION OF THE WORKPLAN The Project Development Objective (PDO) was "to support the production of harmonized and quality statistics in the EAC, in support of the regional integration in the region, through capacity building of the National Statistical Offices (NSOs) of the East African Community (EAC) Partner States and the EAC Secretariat." Guidelines on Consumer Price Index, External Sector, Poverty and National Accounts" have been developed in collaboration with experts from Partner States. At the closing of the project, the implementation status for the developed guidelines on the above- mentioned areas was as follows: Compliance External National (# of guidelines Country HCPI Poverty Sector Accounts implemented above the 60 Statistics (NA) pervent ,percent threshold) Burundi 54 81.0 51 1 Kenya 71 78.5 56 2 Rwanda 73 73.5 57 ament 2 South Sudan 46 57.5 30 fraer 0 under Uganda 70 78.2 58 2 development United Republic of 65 70.5 55 2 Tanzania (URT) Page 7 of 49 Workplan and budget performance 2022-2023 COMBINED BUDGET PERFORMANCE EAC STATISTICS DEVELOPMENT HARMONIZATION REGIONAL PROJECT (DHRP) AND EAC STATISTICS PROGRAMME FOR RESULTS AS AT 30TH DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in % IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual To retain project staff under EAC 1,035,456 338,223 668,749 1,006,972 97 Statistics Project Management Unit Undertake National workshops on 76,700 5,981 49,831 55,812 73 awareness advocacy for the Third EAC Regional Statistics Development Strategy (RSDPIII) Print the EAC RSDPIII and advocacy 30,000 materials Conduct a half day in house 1,150 dissemination session for the RSDPIII - at the EAC Secretariat Maintain Compatible Consumer Price 260,000 143,378 114,500 257,878 99 Indices (CPI) Software for use by the Partner States in the compilation of CPI REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in /6 IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Stakeholder consultations on the CPI 63,540 63,166 374 63,540 100 software Workshop to undertake stakeholder 85,190 - 59,947 59,947 70 consultations on poverty statistics by the Partner States Convene a regional workshop to 83,190 75,114 - 75,114 90 compile multi-sectoral statistics for dissemination in the EAC Statistics portal Conduct regional training workshop 106,790 33,090 49,913 83,003 78 on open data platform Peer to peer support to review and 21,000 - - - 0 improve the NSOs websites for data dissemination Undertake study to develop proposal 131,400 for the organizational Structureand Partner States contribution to East African Statistics Bureau (EASB Convene Two (2) Ordinary meetings 85,610 - 63,486 63,486 74 of the Sectoral Committee on Statistics to provide high level Page 9 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in % IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual guidance on statistics harmonisation in EAC Participate in regional and 43,400 963 18,282 19,245 44 international statistical forums Convene Two (2) Extraordinary 43,600 - 5,505 5,505 13 meeting of the Sectoral Committee on Statistics to provide high level guidance on harmonisation of statistics in EA Attend statutory Meetings of the EAC 45,440 - 11,020 11,020 24 organs - Council, Sectoral Council on Finance and Economic Affairs, Monetary Affairs Committee / Committee on Fiscal Affairs / to present progress report on Project activities and policy guidance National Technical Assistance 583,200 224,170 307,717 531,887 91 missions to support implementation of regional guidelines on compilation of regional Statistics Page 10 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in % IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Undertake Studies to adapt 8,400 international statistical standards, classifications and methods to the circumstances of the region Undertake regional round scoping 20,700 - 12,301 12,301 59 missions to undertake situation analysis for social sectors Convene annual retreat for Statistics 127,420 - 104,016 104,016 82 staff Disseminate baseline survey report to 66,890 - 34,755 34,755 52 stakeholders, Validate , adopt report and Formulate Policy Statistics . Develop Statistics Curriculum designs for Primary Education Constitute and train a panel to 146,320 - 81,223 81,223 56 develop a statistics curriculum for primary education. Develop Scope & Sequence Charts for Statistics . Develop Statistics Curriculum designs for Primary Education. Page 11 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in /o IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Convene annual workshops for 130,420 50,279 50,279 39 stakeholders consultations to collect and collate views on Communication and advocacy of community statistic Develop advocacy materials (policy 20,000 1,840 1,840 9 briefs, documentaries, newsletter, fact sheet, brochure) to facilitate dialogue and advocacy with stakeholders Participate in African Statistics Day 27,050 3,274 3,274 12 celebrations at National level to advocate for integration of regional data requirements in the national statistical programmes Develop strategies for capacity 92,410 33,848 6,589 40,437 44 building of teachers to deliver these knowledge areas and Competencies. Develop Implementation schedule for the statistics in Primary Education Curricula. Develop a Monitoring Framework to Monitoring Page 12 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in % IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Validate and approve Statistics 67,290 25,774 25,774 38 Curriculum designs Adapt Statistics Curriculum designs in 177,190 - 80,038 80,038 45 Primary education for learners with special needs Curriculum designs for Primary Education. Edit Statistics Curriculum Designs for 52,150 - 42,116 42,116 81 Primary Education Conduct training workshops for 91,800 40,179 35,001 75,180 82 statisticians on specialized statistics domains Facilitation of short Online course 50,200 - - 0 ware for academic staff- Makerere conduct short course on Big data and 68,350 - 66,247 66,247 97 data visualization for academic staff Makerere Conduct of Bench marking tours for 41,500 - - - academic staff (Makerere) to learn best practices in Methodologies to EASTC, NISR Data Center and ESEA Page 13 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in 0/0 IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Conduct two short courses for 36,800 23,500 23,500 64 academic staff EASTC Conduct Study Visits to share 20,000 4,070 4,070 20 experiences with other centers for EASTC Facilitate refresher seminars on 73,000 - - statistics for professional development of staff in the EAC Secretariat Statistics Department Training at Masters or PHD level for 208,800 - 162,083 162,083 78 students from the National Statistics Offices in the Republics of Burundi & South Sudan and other Partner State Support for the regional statistics 163,800 training centers to proure equipment for building capacity on statistics Makerere university Consultancy to conduct feasibility 36,000 study; and prepare environmental assessment and social studies for Page 14 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in O/o IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual construction of multipurpose building at EASTC consultancy to prepare architectural, 83,500 structural drawings, bill of quantity and supervision of construction of multipurpose building and conduct supervision of construction works of multipurpose building at EASTC Facilitate exchange capacity building 51,300 - 13,109 13,109 26 programs among the NSOs, [4 sectors for 3PS, 2 Persons for 1 week] Working sessions for the regional 917,030 195,629 685,744 881,375 96 technical working groups to Produce Common Statistical Production Architecture; Production of guidelines and regulations; Harmonize the timing and content of key surveys and censuses; Harmonize methodologies Payments for bank charges and other 5,040 455 572 1,027 20 fees to facilitate delivery of for goods and services Page 15 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in % IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Purchase of data analysis software 8,000 0 Development and implementation of 71,500 - the E-Waste Management Plan Recruitment costs for project staff 53,750 - - - - (Social sectors and M&E expert) Convene at least one meeting of 21,350 3,099.00 13,657 16,756 78 development partners each year Maintenance of the staff in the 398,811 - - Project Management Unit To procure office furniture and IT 58,000 - - - - equipment for project staf Meeting of the EA StatDHRP Project 163,320 - 163,388 163,388 100 Steering Committee Recruit 9 Subject matter 740,600 - - - - specialists/experts for EAC StatDHP Facilitate undertaking the Internal 70,810 - 7,564 7,564 11 and External Audit for the EAC Statistics Development and Harmonisation Regional Project (StatDHRP Page 16 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Description of activities BUDGET EAC East African Total Actual Utilization in 0/ IN USD Statistics Statistics Amount Spent DHRP July To Program For in USD December Result- 2022 In USD- November 2022 Actual to 30th June 2023 USD- Actual Procure consultancy services to 20,000 undertake the end-term review of the EAC Statistics Development and Harmonisation Regional Project (StatDH RP) Training of Trainers Retreat on the 24,370 Stakeholder Engagement plan, E- waste management plan and Environment and Social Commitment Plan TOTAL 7,109,537 1,160,546 2,963,213 4,123,759 58 Page 17 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 4. HUMAN RESOURCE As at 30 December, 2022, the EAC/StatDHRP had the following human resource capacity: - EAC/StatDHRP 30/12/2022 30/6/2022 Project Staff 12 13 One Staff left the project - the Monitory Financial Statistician 5. THE BUDGET The Budget of the EAC Statistics Development and Harmonization Regional Project plus EARSPforR for the financial year 2022/23 was USD 7,109,537. The Budget was approved as one budget and restructuring did not affect budget lines in the sense that activities remained the same. 6. CORPORATE GOVERNANCE STATEMENT The implementation of the project activities is vested with the Steering Committee and EAC Management plus Supervision Mission from World Bank. The EAC/StatDHRP Steering Committee is responsible for providing Policy and strategic oversight to the project, while the EAC Management is responsible for overseeing project operations. Meetings of the Steering Committees, EAC Management and supervision mission will continue to regularly consider budgetary strategy, assess project outcomes, monitor risks, make policy and resourcing decisions, and review requests for changes in project scope. 7. RISK MANAGEMENT AND INTERNAL CONTROL 7.1.Overview of EAC's risk management framework The East African Community (EAC) is responsible for the risk management and internal control system of the project. EAC is committed to a process of risk management that is aligned to the principles of sound corporate governance recognizing that the management of risk is an important strategy for the achievement of the EAC Mission and supporting objectives. The project management is task to ensure that the adequate internal financial and operational control systems are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding: * The effectiveness and efficiency of operations * The safeguarding of the project assets * Compliance with signed grant agreement, EAC Rules and Regulations and other applicable laws and regulations * Reliability of accounting records * Responsible behavior towards all stakeholders Page 18 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 7.2.Approach to Risk Management A description of EAC's approach to risk management covering a summary of the overall methodology and the management of individual types of risks is included in the EAC Risk Management Framework, Policy and Strategy (2011) and expounded as below. The EAC's risk management framework is based on a well-established governance process, with different lines of defense and relies both on individual responsibility and collective oversight, supported by a comprehensive reporting and escalation process. The EAC's internal audit function independently audits the adequacy and effectiveness of the EAC's risk management framework. The head of Internal Audit reports and provides independent assurance on the same to the Audit and Risk Committee and has unrestricted access to the Secretary General and the chairman of the Audit and Risk Committee. a) Operational risk Operational risk is the potential for loss resulting from the inadequacy of, or a failure in internal processes, people, systems or external events. The Project recognizes the significance of operational risk, and the fact that it is inherent in all business units. b) Occupational health and safety The health and safety of our employees, our partners and other stakeholders continues to be a priority. The Project seeks to effectively identify, reduce or control accidents or injuries to employees, contractors and clients. The Project continues to focus on ensuring compliance with current legal and regulatory framework and ensuring that occupational health and safety procedures are closely linked to the operational needs of the business. c) Reputational risk Safeguarding the Project's reputation is of paramount importance to its continued operations and is the responsibility of every member of staff. Reputational risks can arise from social, ethical or environmental issues, or as a consequence of operational risk events. The Community's strong reputation is dependent upon the way in which it conducts its business, but it can also be affected by the way in which its clients, to whom it provides services, conduct themselves. Effective management of all operating activities is required to establish a strong internal control framework to minimize the risk of operational and financial failure and to ensure that a full assessment of reputational implications is made before strategic decisions are taken. Page 19 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 7.3.Independent Assurance The EAC's Internal Audit function operates under a mandate from the Council Audit and Risk Committee. The Internal Audit's primary objective is to provide assurance to the Audit and Risk Committee on the quality of controls in the EAC's operational activities. It also assists the EAC executive management in meeting their business objectives by, assessing the risks involved and evaluating the adequacy and effectiveness of processes, systems and controls to manage these risks. A risk based audit approach has been adopted. Material or significant control weaknesses and planned management remedial actions are reported to management and Auditand Risk Committee. These issues are tracked to ensure that agreed remedial actions have been implemented. Overdue issues are also reported to the Audit and Risk Committee on a quarterly basis. 7.4. Key Risks for Consideration in the Period Ended 30 December, 2022 In the financial year under review, management paid attention to risks that could potentially affect the continuation of attainment of the strategic objectives of the East African Community as enshrined in the 6th East African Community Development Strategy 2020/2021 - 2025/2026.The major risks of concern that management paid attention to in the financial year were the following; 7.4.1. Strategic Management Risk In the context of the East African Community, Strategic Risks are those that arise from the fundamental decisions taken by the EAC Council of Ministers concerning the Community's purpose and objectives as provided for in the Treaty for the Establishment of EAC and the East African Community Development Strategy. Essentially, strategic risks are the risks of failing to achieve these objectives and the sources of these risks could be any of the following, including financial issues with Cashflows management; human resource issues, such as staffing, ICT disasters and equipment failure, to mention but a few. EAC management has established mechanisms to manage Strategic Risk of the East African Community which include; i, Defining EAC Organisational strategy and objectives in the EAC Development Strategy 2020/2021 - 2025/2026; ii. Establish key performance indicators (KPIs) to measure results towards attainment of the purpose and goals of the EAC. The East African Monitoring and Evaluation system has gone a long way towards this objective; and' iii. Identification of risk that can drive variability in performance, establishing key risk indicators (KRIs) and tolerance levels for critical risks, as well as providing integrated risk reporting andmonitoring on a continuous basis to the EAC Council of Ministers through its technical Committee, the EAC Audit and Risk Committee 7.4.2. Cybersecurity Risk Cybersecurity risk is the probability of exposure or loss resulting from a cyber-attack or data breach of and organisation. This also encompasses the potential loss or harm related to technical infrastructure, use of technology or reputation of an organization. Cybersecurity risk management which is the process of Page 20 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 identifying an organization's digital assets, reviewing existing security measures, and implementing solutions to either continue what works or to mitigate security risks that may pose threats, is as important to East African Community as it is to any other organisation in the current information era and therefore management of this risk isparamount in the continued achievement of the EAC integration agenda. In the financial year under review, the East African Community was exposed to this risk and measures were and continue to be implemented to successfully counter this risk. In managing cybersecurity risk at the East African Community, management is in the process ofdeveloping an EAC cybersecurity framework, policy, strategy, which outline guidelines, security-related standards, and best practices to help EAC better manage and protect their assets from cybersecurity threats. The proposed framework, strategy will borrow from existing cybersecurity frameworks including the National Institute of Standards and Technology (NIST) cybersecurity framework (NIST CSF), the ISO 27001 framework and the Cybersecurity maturity model (CMMC). The EAC cybersecurity framework, policy, strategy once developed will provide a set of guidelines to improve cybersecurity risk management in critical infrastructure by all relevant stakeholders to protect the increasingly connected and complex systems of EAC. The core competencies on which the framework, policy, strategy shall be based on and aligned to the 5 NIST functions which are Identify, Protect, Detect, Respond and Recover, five security functionswhich are ever-increasingly relevant to organizations like EAC in any sector or community. In the financial year under review, the above risk(s) and proposed initiatives have been brought to the attention of the ICT Management Steering Committee for guidance. Page 21 of49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 8. STATEMENT OF THE SECRETARY GENERAL'S RESPONSIBILITIES The Treaty for the Establishment of the East African Community and the Financial Rules and Regulations require the Secretary General to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Community. These annual financial statements have been prepared in accordance with International Public Sector Accounting Standards, under the Accrual Basis of Accounting. The financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgment and estimates. They have been presented to ensure comparability with the EAC annual financial statements of previous periods and with financial statements of other entities. The statements have been prepared as general-purpose financial statements intended to provide information about the financial position, financial performance, and cash flows of the EAC/StatDHRP that is useful to a wide range of users. The Secretary General is responsible for establishing and maintaining a system of effective internal control designed to provide reasonable assurance that the transactions recorded in the books of accounts and reported in these annual financial statements are within the statutory authority and reflect with reasonable accuracy the receipt and use of public financial resources by the EAC/StatDHRP. The Secretary General is responsible for and acknowledge the ultimately responsibility for the system of internal financial control established by the EAC and place considerable importance on maintaining a strong control environment, To enable the Secretary General to meet these responsibilities, the Secretary General sets standards for internal control aimed at reducing the risk of error or deficit in a cost-effective manner. These standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures, and adequate segregation of duties to ensure an acceptable level of risk. To ensure that these controls are monitored throughout the EAC and all employees are required to maintain the highest ethical standards in ensuring the EAC business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the EAC is on identifying, assessing, managing and monitoring all known forms of risk across the Community. While operating risks can be fully eliminated, the Community endeavors to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints. The Secretary General is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that financial P"age 22 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. To the best of my knowledge, the system of internal control has operated adequately throughout the reporting period. The financial statements set out on the pages below which have been prepared on a Going Concern Basis, were approved by the Secretary General on the date indicated below. T ecretary General accepts responsibility for the integrity of the financial statements and all e in mation contained therein for the period under review. Hon. r. eter Mutuku Mathuki JunaI N imurirwo (FCCA) Secreta General Director of Finance Date. . Date .... .... Page 23 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 9. REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 To: Chairperson, Council of Ministers, East African Community REPORT ON THE FINANCIAL STATEMENTS Opinion We have audited the financial statements of the EAC Statistic Development Harmonization Regional Project set out on pages 29 to 49, which comprise the statement of financial position as at 30 December 2022, and the statement of financial performance, statement of changes in equity and statement of cash flows for the six months period then ended, and a summary of significant accounting policies and other explanatory information. In our opinion, the financial statements present fairly, in all material respects, the financial position of EAC Statistic Development Harmonization Regional Project as at 30 December 2022, and of its financial performance and its cash flows for the six months period then ended, in accordance with International Public Sector Accounting Standards and comply with the Treaty for Establishment of the East African Community, 1999 (as amended), Financing Agreement Grant No.D3630 dated 10 October, 2018, between the International Development Association (IDA) and the East African Community and EAC Financial Rules and Regulations, 2012. Basis for Opinion The audit was conducted in accordance with International Standards for Supreme Audit Institutions (ISSAIs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the EAC Statistic Development Harmonization Regional Project in accordance with the ethical requirements of International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants and Article 134(4) of the Treaty for Establishment of the East African Community, 1999 (as amended) and we have fulfilled our ethical responsibilities in accordance with these requirements and the ISSAIs. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Page 24 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. We have determined that there are no other key audit matters to communicate in our report. Other Matter Status of Implementation of Prior Years Audit Recommendations An assessment of the status of implementation of prior years audit recommendations revealed that 20% of the audit recommendations made in the previous audits were fully implemented, 20% were partially implementated and 60% were yet to be implemented. Non-implementation of the previous audit recommendations implies that weaknesses noted by the Audit Commission may have continued to recur. This may continue affecting the operational efficiency of EAC Statistic Development Harmonization Regional Project. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards and Regulations 78 and 79 of the East African Community Financial Rules and Regulations, 2012, and for such internal control as the 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 EAC Statistic Development Harmonization Regional Project ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management intend to cease operations of the EAC Statistic Development Harmonization Regional Project, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the EAC Statistic Development Harmonization Regional Project financial reporting process. Audit Commission's Responsibilities for the Audit of the Financial Statements The audit objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion in accordance with the provisions of Article 134(2) of the Treaty for Establishment of the East African Community, 1999 (as amended). 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. Page 25 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 As part of an audit in accordance with ISSAIs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the EAC Statistic Development Harmonization Regional Project internal controls. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the EAC Statistic Development Harmonization Regional Project ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the EAC Statistic Development Harmonization Regional Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Community to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. We communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all Page 26 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Page 27 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS As required by the Article 134(2) of the Treaty for Establishment of the East African Community, 1999, we report based on the audit that any contributions received or revenue collected by the EAC Statistic Development Harmonization Regional Project have been allocated and distributed in accordance with this Treaty. Ms. Nancy Gathungu Mr. Charles E. Kichere Mr. John F. S. Muwanga AUDITOR-GENERAL OF CONTROLLER AND AUDITOR AUDITOR GENERAL OF THE REPUBLIC OF KENYA GENERAL OF THE UNITED THE REPUBLIC OF UGANDA REPUBLIC OF TANZANIA Date \ .k Date ... .. Date .. Amb Steven Kiliona Mr. Alexis Kamuhire Mr. Elys6e Ndaye Wondu AUDITOR GENERAL OF STATE INSPECTOR GENERAL AUDITOR GENERAL OF THE THE REPUBLIC OF RWANDA OF THE REPUBLIC OF REPUBLIC OF SOUTH SUDAN BURUNDI . ............Date. / c 'X Date.... . .. Mr. Munganga Ngwaka Jimmy FIRST PRESIDENT OF THE COURT OF ACCOUNTS OF THE DEMOCRATIC REPUBLIC OF CONGO Date. '.(... . Page 28 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10. FINANCIAL STATEMENTS 10.1. STATEMENT OF FINANCIAL POSITION AS AT 30 DECEMBER, 2022 Notes 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) (USD) ASSETS Current Assets Cash and Cash Equivalents 7 150,716 179,254 Accounts Receivable 8 229,545 357,290 Total Current Assets 380,261 536,544 NON-CURRENT ASSETS Property, Plant and Equipment 10 21,795 29,005 Work in Progress 11 172,054 28,676 Total Non-Current Assets 193,849 57,681 TOTAL ASSETS 574,110 594,225 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable 9 - 475,780 Total Current Liabilities 475,780 TOTAL LIABILITIES - 475,780 Total Net Assets/Equity (Deferred 574,110 118,445 Revenue plus NBV/deferred credit of fixed assets TOTAL LIABILITIES AND NET 574,110 594,225 Ap%'TS/E,QtlTY . Peter Mutuku Mathuki Juea-imurirwo (FCCA) Secr General Director inance Date ................ Date... Page 29 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.2. STATEMENT OF FINANCIAL PERFORMANCE FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Notes 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) (USD) REVENUE Special funds from Development Partners 1 /Earned Revenue 1,021,767 5,177,982 Total Revenue 1,021,767 5,177,982 EXPENSES Salaries, Wages and Employee Benefits 2 338,223 1,027,931 Administrative and consultancy Expenses 3 675,876 3,007,186 Depreciation Expenses 4 7,210 15,114 Finance Cost 5 458 836 Assets Transferred to Statistics Institutions 6 - 1,126,916 Total Expenses 1,021,767 5,177,982 SURPLUS/(DEFICIT) FOR THE YEAR Page 30 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.3. STATEMENT OF CASH FLOW FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 6-Months Period FY Ending 2021/2022 30/12/2022 Notes USD USD Cash flow from operating activities Surplus at the end of the year Adjustment for: Depreciation 4 7,210 15,114 Decrease/(Increase) in Receivables 8 127,744 -249,717 (Decrease)/Increase in Payables 9 -475,780 303,965 Change in deferred Revenue increase/decrease 455,666 (252,217) Cash generated from operating activities 114,840 (182,855) Cash flow from investing activities Acquisition of fixed assets/intangibles 11 -143,378 -30,836 Cash generated from investing activities -143,378 -30,836 Net increase in cash and cash equivalents -28,538 -213,691 Cash and cash equivalents at beginning of 7 179,254 392,946 period Cash and cash equivalents at end of the 7 150,716 179,254 period Page 31 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.4. STATEMENT OF CHANGE IN NET ASSETS /EQUITY FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Capital Grant/Deferred Revenue Credit on Fixed Reserves/Deferred Assets Revenue Total USD USD USD At 1 July 2021 0 0 0 Prior year adjustment/Change 0 0 0 For the year ended 30 June 2022 0 0 0 At 1 July 2022 0 0 0 Prior year adjustment 0 0 0 Change during the year 0 0 0 At 30 December 2022 0 0 0 Page 32 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.5. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Variance Actual Between Explanation e D Amounts Budget and of USD Actual variances USD REVENUE Original Final Special funds from Development Partners 7,109,537 7,109,537 6,953,691 155,846 (i) Total Revenue 7,109,537 7,109,537 6,953,691 155,846 EXPENSES Salaries, Wages and Employee Benefits 2,174,828 2,174,828 966,972 1,207,856 (ii) Administrative, meetings & consultancy Expenses 4,928,709 4,928,709 3,155,796 1,772,913 (iii) Financial costs 6,000 6,000 1,027 4,873 (iv) Total Expenses 7,109,537 7,109,537 4,123,796 2,985,642 Surplus / (Deficit) for the Period 0 0 2,829,896 (i) The actual amount received excludes the Deferred Revenue C/F from 2022/2023 USD 60,766. Originally Funds were release by World Bank based on actual spending to replenish imprest through Withdrawal Applications submitted by the project to replenish actual spending to the initial deposit /imprest upon effectiveness of the project and not based on the budget estimates. This arrangement has changed from November 2022 to quarterly projected cash flow- as per projected activities. (ii) The Salary figure was budgeted twice, in two different cost centers (HR Department as Staff emolument and statistics cost center as expert fee, however the project was expected to recruit about 5 positions, but the recruitment did not take place. (iii) Some few activities did not take place as indicated in the budget performance. (iv) KCB Bank does not charge withdrawal fee on local withdrawals. Page 33 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.6. STATEMENT OF SPECIAL ACCOUNT ACTIVITY FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 6-Months Period Ending Description Note 30/12/2022 179,254.11 Opening Balance as at 1st July 2022 Add: 1,477,433.04 Amount Deposited by World Bank 1 1,656,687.15 Total Fund (Cash) Available for year 1,505,971 Amount withdrawn/payments 150,716.31 Closing Bank Balance as at 30th December 2022/ Balance as per cash book Page 34 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10.7. FUND ACCOUNTABILITY STATEMENT AS AT 30TH DECEMBER 2022 Fund Balance as at 1 July 2022 60,766 Cash Received from World Bank (during the year) 1,477,433 Total Fund available for the year 1,538,199 Less Exp During the year 1,157,935 Fund Balance as at 30tt June 2023 380,264 Reconciled to Bank Balance as 30 December 2022 150,716.31 Less Payables - Add Receivables 229,548 FUND BALANCE AS AT 30 DECEMBER 2022 380,264 Page 35 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 11.STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION Basis of Accounting The accompanying financial statements have been presented on an accrual basis of accounting while the budget has been prepared using cash basis of accounting. Accrual basis means a basis of accounting under which transactions and other events are recognized when they are occurred (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate. Accrual accounting allows for revenue to be recognized when earned and expenses to be recognized when incurred. Budgetary accounting allows for compliance with the requirements for and controls over the use of Partner States Approved Budgeted funds. Basis of Preparation The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board (IPSASB). When the IPSASB does not prescribe any specific standard, IFRSs and IASs are applied. The financial statements have been prepared on a going concern basis. The measurement base applied is historical cost. The accounting policies have been applied consistently throughout the period. The principal accounting policies adopted are set out below. Duration of Financial Statements The Financial Statements have been Prepared on a shorter Period. The Financial Statements have been prepared for a period of Six-Month July 2022 to December 2022 because the project number 3630 was officially closed on 30th December 2022, this might affect the comparability of Financial Statements of FY 2021/22 and 2022/2023 and they have been prepared on the understanding that The World Bank is the Sole User of These Financial Statements. Adoption of new and revised Standards From July 2022 to December 2022, there were no new IPSAS standard having an impact on these financial Statements of the Project. 12. KEY JUDGEMENTS AND SOURCES OF ESTIMATION The preparation of financial statements requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and Page 36 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 expenses in conformity with IPSAS 3 - Accounting Policies, Changes in Accounting Estimates and Errors. The key judgements management made in preparing the financial statements are as follows: * Key estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the period of revision and future periods. 13.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Donations and Grants The financial statements are in conformity with IPSAS 23 - Revenue from Non-Exchange Transactions, require management to recognize liabilities from transfers with restrictions and/or conditions over the period of which economic benefits will be received from such transfers, with disclosure of such restricted contributions from Development Partners. Most of the assistance given to EAC/StatDHRP receives funds from World Bank which is considered as restricted contributions, Restricted contributions are recognized as Revenue over the periods necessary to match them with the related costs which they are intended to compensate on a systematic basis. On the Financial Statements for projects, receipts to finance annual budget are recognized as revenue for the year, and then Expenses are deducted. The surplus to the donor, which is Net Asset/equity for the Project, is thereafter disclosed on the Statement of Financial Performance as "attributable to Development Partners", reported as deferred revenue on the Statement of Financial Position and adjusted from Net cash flow from operating activities on the Cash flow statement. Grants related to assets are presented in the statement of financial position as deferred revenue, which is recognized as revenue on a systematic and rational basis over the useful life of the asset. Foreign Exchange Rates The financial statements are prepared in conformity with IPSAS 4 - The Effects of Changes in Foreign Exchange Rates which requires management to disclose effects of foreign currency transactions in their financial statements. In accordance with IPSAS 4 and related definition, the Presentation Currency of EAC, the currency in which its financial statements are prepared, is the United States Dollar. The United States Dollar is also the operating currency of EAC/StatDHRP Page 37 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 The Functional Currency (ies) of EAC, the currency (ies) of the primary economic environment in which an entity operates - a country in which an entity primarily generates and expends cash is (are) the United States Dollar and the following currencies - Burundian Francs, Kenyan Shilling, Rwandan Francs, South Sudan pound, Tanzanian shilling and the Ugandan Shilling, for the six (6) EAC Partners States of Republic of Burundi, Republic of Kenya, Republic of Rwanda, Republic of South Sudan, United Republic of Tanzania and the Republic of Uganda respectively. EAC/StatDHRP has its Presentation currency, the United States Dollar, as its functional currency and hence uses the following procedure to translate its foreign currency transactions into the Presentation currency for reporting purpose - i. monetary assets/liabilities are translated at current exchange rate ii. non-monetary assets/liabilities measured at historical cost are translated at historical exchange rate iii. non-monetary assets/iabilities measured at current value are translated at the exchange rate at the date when the current value was determined iv. Owners' interest accounts are translated at historical exchange rate v. Revenues/expenses other than those expenses related to non-monetary items ( as in (i) (b) above) are translated at the exchange rate that existed when transactions took place (for practical reasons, average rates may be use) vi. Expenses related to non-monetary assets, such as depreciation (fixed assets) and amortization (intangible assets) are translated at the exchange rate used to translate the related assets. Both realised and unrealised gains and losses resulting from the settlement of such transactions, and from the retranslation at the reporting date of assets and liabilities denominated in foreign currencies, are recognised in the Statement of Financial Performance. The exchange rates used for the following reporting dates are as follow; Currency 30/12/2022 30/6/2022 1 USD. /KES (Kenya Shillings) 122.5 117.8300 1 USD. /TZS (Tanzania Shillings) 2,308.5447 2,304.2000 1 USD. /UGX (Uganda Shillings) 3,745.8 3,953.4700 1 USD. /BIF (Burundi Francs) 2,058.4 2,033.5500 1 USD. /RWF (Rwanda Francs) 1,058.2824 1,024.4800 1 USD. /EURO 1.0364 0.9463 Total amount of loss on foreign exchange was debited to the Statement of Financial performance. Page 38 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Property, Plant and Equipment Property, Plant and equipment are carried in the Statement of Financial Position at their historical cost. Expenditure incurred to replace a component of item of property, plant and equipment is accounted for separately and capitalized while the major replaced component is derecognized. All other expenditure items which do not meet recognition criteria are recognized in the statement of Financial Performance as expenses as they are incurred. EAC/StatDHRP derecognises items of Property, plant and equipment and/or any significant part of an asset upon disposal or when no economic benefits or service potential is expected from its continuing use. Any gain or loss arising on de-recognition of the assets (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognised. Depreciation The financial statements in conformity with IPSAS 1 - Presentation of Financial Statement and IPSAS 17 - Property, Plant and Equipment recognize depreciation in the Statement of Financial Performance, Management charges depreciation to the Statement of Financial Performance on a straight-line basis to write off the cost of property, plant and equipment to their residual values over their expected useful lives. Depreciation for Property, Plant and Equipment purchased during the year is apportioned proportionately to the remaining period of the year. Property, plant and equipment acquired during the year is depreciated from the date when it is available for use and cease to be depreciated at earlier of the date that the asset is derecognized. Annual depreciation rates applied are as follows: FY22/23 FY21/22 Buildings 2.50% 2.50% Motor vehicles 25.00% 25.00% Computer equipment 33.33% 33.33% Telecommunication equipment 33.33% 33.33% Office equipment 25.000/a 25.00% Office fixtures and fittings 12.50% 12.50% Office furniture 12.50% 12.50% Residential assets 12.50% 12.50% Intangible assets 20.00% 20.00% Page 39 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Impairment of tangible and intangible assets The carrying values of fixed assets are reviewed for impairment if events or changes in circumstances indicate that they may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Any provision for impairment is charged against the Statement of Financial Performance in the year concerned. Intangible Assets Intangible assets relate to computer software. Software is amortized at 20% per annum on a straight-line basis if in use. Generally, costs associated with maintaining computer software programs are recognised as expenses when incurred. The intangible asset of the project was in use during the year under review since Partner States are yet to link to the system Taxation Article 4 Section (1) subsection (d) of the Headquarters Agreement between East African Community and the United Republic of Tanzania states that: "The Secretariat, its property, assets, income and transactions shall be exempt from all direct taxation including sales tax and from Customs Duties and prohibitions, restrictions on imports and exports in respect of articles imported or exported by Secretariat for its official use. The Secretariat shall also be exempt from any obligation relating to payments, withholding or collection of any tax or duty provided that such assets and other property shall not be sold within the United Republic of Tanzania except in accordance with conditions agreed to with the Government". The EAC/StatDHRP activities comply with the Headquarters agreement. The Grant agreement considers all expenditures incurred including taxes as eligible for accountability of the Grant purposes. Cash and cash equivalents Cash and cash equivalents comprise cash in banks, term deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Presentation of Budget Information The financial statements in conformity with IPSAS 24 requires management of a public sector entity to show comparison of budget amounts arising from execution of the budget to be included in the financial statements of the entity which are required to, or elect to, make publicly available their approved budget for which they are, therefore, held publicly accountable. The Standard also requires disclosure of an explanation of the reasons for material differences between budget and actual amounts. Page 40 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 The EAC/StatDHRP Budget was approved on cash basis, with classification by nature, for a period of one year, i.e. 1st July 2022 to 30th June 2023. EAC/StatDHRP Project prepares its financial statements clearly indicating the actual expenditure in comparison with the approved budgetary provisions and in so doing fully complies with this Standard. Related Parties The financial statements in conformity with IPSAS 20 requires EAC/StatDHRP to show the aggregate remuneration of key management personnel and the number of individuals, determined on full time equivalent basis, receiving remuneration within this category, showing separately major classes of key management personnel and including a description of each class and the total amount of all other remuneration and compensation provided to key management personnel and close family members itemized separately. During the year to 30 December, 2022, the remuneration paid to Professional experts was US$. 338,223.44 Financial Risks EAC/StatDHRP is exposed to a variety of financial risks, including market risk (foreign exchange and price), liquidity and credit risks. EAC/StatDHRP does not make use of financial derivatives to hedge its risk exposures. i. Foreign-exchange risk EAC/StatDHRP receives donor grants in US Dollar and is thus not exposed to foreign-exchange risk arising from fluctuations in currency rates. ii. Liquidity risk EAC/StatDHRP may not negotiate and use uncommitted short-term bank credit facilities in the event of liquidity requirements. It can only seek assistance from the EAC Secretariat. Provisions, Contingent Liabilities and contingent Assets Provisions are constituted when EAC/StatDHRP recognises a liability arising from a past event, for which it will probably have to bear the cost. Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the date of the Statement of Financial Position. There were neither contingent liabilities nor contingent assets as at 30 December 2022. 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 or Page 41 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 if the related party entity and another entity are subject to common control. In the case of EAC/StatDHRP related parties have been taken to be: - i. key Project management experts, and close members of the family of these key management experts, ii. Key EAC management including the members of Executive and Steering Committees. There were no material transactions with related parties during the period ended 30 December, 2023. Events After the Reporting Period There were no events after the reporting date that warrants disclosure in the financial statements. Page 42 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 14. NOTES TO THE FINANCIAL STATEMENTS 1. Revenue from Non-Exchange Transactions- Special Fund from Development Partner -WB 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) 21/07/2022 494,548 25/08/2022 492,412 11/10/2022 490,473 Special funds from WB during the year 1,477,433 4,925,765 Earned Revenue/expenditure for the year 1,021,767 5,177,982 Deferred Revenue 455,666 (252,217) 2. Salaries, Wages and Employee Benefits 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Salaries and Allowances 338,223 1,027,931 Subtotal 338,223 1,027,931 3. Administrative, Meetings, Consultancy Expenses & Scholarships 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Printing and advertising 3,250 - Hiring of Conference Facilities 45,150 174,114 Other Sundries for Workshops 3,789 17,232 Page 43 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Travel & Subsistence 623,686 2,474,159 Scholarships & Other Educational Benefits- Tertiary - 175,259 Consultancy - 95,992 Subtotal 675,875 3,007,186 4. Depreciation Expenses 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Computer equipment 5,860 12,282 Office Furniture 1,350 2,832 Subtotal 7,210 15,114 5. Finance Cost 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Bank Charges 471 824 Exchange Loss/ Gain -13 12 Subtotal 458 836 Page 44 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 6. Transfers to Institute of Statistics 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) East African Statistical Training Centre (EASTC) - 421,582 National Institute of Statistics of Rwanda - 282,254 Makerere University School of Statistics and Planning - 423,080 Subtotal - 1,126,916 7. Cash and Cash Equivalents 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) EAC Regional Statistics Harmonization Project (KCB) 150,716 179,254 Account 3390407944 Note: Though the Project was Closed on 30/12/2022-Cash of USD 150,716 was transferred to the World Bank on 81' March 2023. 8. Accounts Receivable 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Imprest for Activities - 15,663 Other Receivables (Receivable from World Bank) - 119,060 VAT Claims 229,545 222,567 Subtotal 229,545 357,290 Page 45 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 9. Accounts Payable 6-Months Period FY Ending 2021/2022 30/12/2022 (USD) Particulars (USD) Staff Refunds - 12,934 Creditors - 462,846 Subtotal - 475,780 Page 46 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 10. Property, Plant and Equipment Property, Plant and Equipment as at 30 December, 2022. NET BOOK GROSS VALUE DEPRECIATION VE VALUE Closing Opening Closing Closing Opening Balance Additions Balance Balance Depreciation Balance Balance 1st July 2022 30th Jl202 for the year 30th 30th Dec 1st July 2022 Dec 22 Dec 22 22 Computer Equipment 38,285 38,285 25,327 5,860 31,187 7,098 Office Furniture 22,655 - 22,655 6,608 1,350 7,958 14,697 TOTAL 60,940 - 60,940 31,935 7,210 39,145 21,795 Page 47 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 Property, Plant and Equipment FY 2021/2022 NET GROSS VALUE DEPRECIATION BOOK VALUE Closing . Closing Closing Opening Balance A Balance Opening Depreciation Balance Balance 1st July 2021 30th Balance21 for the year 30th 30th 1st July 2021 June 22 June 22 June 22 Computer Equipment 36,125 2,160 38,285 13,045 12,282 25,327 12,958 Office Furniture 22,655 - 22,655 3,776 2,832 6,608 16,047 TOTAL 58,780 2,160 60,940 16,821 15,114 31,935 29,005 Page 48 of 49 REPORT OF THE AUDIT COMMISSION FINANCIAL STATEMENTS FOR THE EAC STATISTICS DEVELOPMENT AND HARMONIZATION REGIONAL PROJECT FOR THE SIX MONTHS PERIOD ENDED 30 DECEMBER, 2022 11. Work in Progress HCPI Software (USD) Cost: As at 01 July 2021 - Additions 28,676 As at 30 June 2022 28,676 As at 01 July 2022 28,676 Additions 143,378 As at 30 December 2022 172,054 Page 49 of 49