REPUBLIC OF KENYA Telephone: +254-(20) 3214000 HEADQUARTER E-mail: info@oagkenya.go.ke -5 Anniversary Towei Website: www.oagkenya.go.ke L Monrovia StreE OFFICE OF THE AUDITOR-GENERAL P.O. Box 30084-0010 Enhancing Accountability NAIROE 4111@w~AN SOWML PROETO OAG/HL&SP/SDSP&SCA/2023/2024 (1p jl 15 jovember, 2024 AR Y, %Cilq [1R0'T0q Joseph Mogosi Motari Principal Secretary State Department for Social Protection & Senior Citizens Affairs P.C BOX 30016-00100 Nairobi Dear Sir, REPORT OF THE AUDITOR-GENERAL ON KENYA SOCIAL AND ECONOMIC- INCLUSION PROJECT CREDIT NUMBER 6348-KE FOR THE YEAR ENDED 307- JUNE, 2024 - STATE DEPARTMENT FOR SOCIAL PROTECTION AND SENIORri CITIZEN AFFAIRS Your response dated 4 November, in respect of the draft audit report for the financial yea'r ended 30 June 2024 refers. The additional information and evidence provided in the response have been examined and issues that have not been satisfactorily explained and (or) supported are now included in the audit report. Enclosed herewith please find two sets of the report of the Auditor-General on Kenya Social and Economic Inclusion Project Credit Number 6348-KE for the year ended 30 June, 2024 - State Department for Social Protection and Senior Citizen Affairs duly certified and with seal affixed thereon for your use and retention. Yours faithfully Dorcas Muli 20ka For: AUDITOR-GENERAL Regional Offices: Nairobi * Nakuru * Eldoret * Embu * Garissa Kakamega Kisumu * Mombasa * Nyeri * Bungoma * Kisii * Machakos _________________________________________________ ______ ___________________________________________________________ _________________________________________________________________________________________________________ _____ REPUBLIC OF KENYA 16, OFFICE OF THE AUDITOR-GENERA L ESnhanciiig Accountabilit, REPORT OF THE AUDITOR-GENERAL ON KENYA SOCIAL AND ECONOMIC INCLUSION PROJECT CREDIT NUMBER 6348-KE FOR THE YEAR ENDED 30 JUNE, 2024 STATE DEPARTMENT FOR SOCIAL PROTECTION AND SENIOR CITIZEN AFFAIRS ¾ D /R,j" 15', KENYA SOCIAL AND ECONOMIC INCLUSION PROJECT ) MINISTRY OF LABOUR AND SOCIAL PROTECTION STATE DEPARTMENT OF SOCIAL PROTECTION AND SENIOR CITIZEN AFFAIRS PROJECT NUMBER: P164654 IDA CREDIT NO. 6348-KE GRANT NO. TF A9527 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2024 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) 取 Ken),a Social and Economic Inclusion Pi-oject State Del)artmentfoi- Social PI-ofection and Senior Citizen Affairs Annual Rel)oi-t and Financial Statementsfoi- thefiltanciaij,em, en(ted June 30, 2024 Table Contents Page 1 . Acronyms and Definition of Terms ............................................................................................. 6 2. Project Information and Overall Performance ........................................................................ iv 3. Statement of Performance against Project's Predetermined Objectives .......................... xiv 4. Environmental and Sustainability Reporting ........................................................................ Xvili 5. Statement of Project Management Responsibilities ........................................................... xxii 6. Report of the Independent Auditor on Financial Statements for Kenya Social and Econom ic Inclusion P roject . ........................................................................................................... Xxiv 7. Statement of Receipts and Payments for the Year Ended 30th June 2024 ....................... 1 8. Statements of Financial Assets as at 301h JUne 2024 3 9. Statement of Cash flows for the year ended 3011 June 2024 4 10. Statement of Comparison of Budget and Actual Amounts for the Year ended 3011 June 2 0 2 4 ........................................................................................................................................................ 5 11. S ignificant A ccounting Policies .................................................................................................. 6 12. Notes to the Financial Statements ............................................................................................ 13 13. Pending Accounts Payable (See Annex 4a) ........................................................................... 24 14 . E xte rnal A ssistance ..................................................................................................................... 25 15. R elated Party D isclosures .......................................................................................................... 27 16 . A n n exe s ........................................................................................................................................ 28 i Kenya Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for lie financial jear eided June 30, 2024 Acroniyms and Definition of Terins ROS Beneficiary Outreach Strategy BETA Bottom Up Economic Transformation Agenda BWCs Beneficiary Welfare Committees CBK Central Bank of Kenya CCTPMIS Consolidated Cash Transfer Programme Management Information System CHWs Community Health Workers CT-OVC Cash Transfer for Orphans and Vulnerable Children DFID United Kingdom's Department for International Development DLI Disbursement Linked Indicator DLR Disbursement Linked Result EIP Economic Inclusion Programme G&CM Grievance and Case Management GoK Government of Kenya ISNP Hunger Safety Net Programme ICPAK Institute of Certified Public Accountants of Kenya IDA International Development Association IFMIS Integrated Financial Management System IMF International Monetary Project IPF Investment Project Financing IPSAS International Public Sector Accounting Standards KSEIP Kenya Social and Economic Inclusion Project M&E Monitoring and Evaluation ii Ken y'a Social and Econonic Inclusioj Project State Department for Social Protection and Senior Citizen Affairs Annul RportandFinacia St temntsfoi-tlie f'ianicial.)Yeaj,eti dJune 30, 2024 MDA Ministries, Departments and Agencies MIS Management Information Systems MLSP Ministry of Labour and Social Protection NICHE Nutrition Improvements through Cash and Health Education NHIF National Health Insurance Project NSNP National Safety Net Program NT National Treasury OPCT Older Persons Cash Transfer PFM Public Finance Management PLW Pregnant and Lactating Women PSASB Public Sector Accounting Standards Board PWSD-CT Persons with Severe Disability Cash Transfer SDSP State Department for Social Protection SP Social Protection WB World Bank Comparative FY Financial year preceding the current financial year. KeIII'a social wiid EcoIiOlic Inlulsionl Project tie Afar State Departillinf0l, Social Pro tectiolt and Senior Citie Affairs0 202 Annual Report and F4inancial StatemnItsfor tie fin,anlcial Yew. eiidedue3,22 2. Project InformIlationl and Overall Performance 2.1 Name and Registered Office Name Kenya Social and Economic Inclusion Project Objective The key objective of the project is to strengthen delivery systems for enhanced access to social and economic inclusion services and shock-responsive safety nets for poor and vulnerable households. Address The project headquarters offices are in NSSF Building, Nairobi (city), and Nairobi County, Kenya. The address of its registered office is: P.O. Box 40326-00 100 GPO, Nairobi. Contacts: The following are the project contacts State Department for Social Protection and Senior Citizen Affairs P.O. Box 40326-00 100 NSSF Building, Bishop Road Nairobi, Kenya Telephone: +254 (0) 2729800 E-mail: ps@socialprotectioi.go.ke Website: www.socialprotection.go.ke iv Ken Ia Social and Economic Inclusion Project State Departmnewfoi. Social Prolectioti and Senioir cilizeni Affair-s Annmal Repod* anid 17incial Statemeitisfibi. the finanicialy;ew, en(dedl Jullie 30, 2024 Project inforia tion and Overall performance (contitied) 2.2 Project Inforimation Project Start Date: 3 1 -Jan-2019 Project End Date: 3 1-Dec-2024 Project Coordinator: Mrs Jane Muyanga Project Sponsor: World Bank 2.3 Project Overview Line Ministry and State The project is under the supervision of the Ministry of Labour County Department and Social Protection(State Department for Social Protection) Project number P164654 Strategic goals of the The strategic goals of the project are as follows: (i) Strengthening Social Protection Delivery Systems (ii) Increasing Access to Social and Economic Inclusion Interventions Increasing Access to Social and Economic inclusion Interventions Summary of the Project The project management aims to achieve the goals through the -jStrategies for- achievemen~t following means: of strategic goals floigmas (i) Provision of social inclusion (nutrition-sensitive safety net and referrals to the NHIF) and economic inclusion (livelihoods enhancement support) services to the existing National Safety Net Programme beneficiaries, as well as other poor and vulnerable, to be identified through the use of an objective targeting system already being used in the country. v Kenyja Social and Eco"OMc Inclusioni PrOoct ieAfds State DepUadtnenCtfol- Social Pi-otection and Senior'Citzi Affairs A202 Aninal Report and Fin ancia! StateniCtnsfoi- the Inancialj,eatr euien ue3,22 (ii) By expanding their coverage to additional households and the functionality of financing arrangements for timely response in the event of drought; (iii) Strengthening of Social Protection delivery systems by enhancing the scope and coverage of the Single Registry and support relevant program information systems, investments in the rollout of the improved payment system, and supporting greater integration and implementation of the Grievances & Case Management mechanism for all interventions supported by the proposed KSEIP. Other important Social Protection has long been an important part of the Other important o t an rmt qiale background information of Government strategy to fight poverty and promote equitable thle project growth and social inclusion, as well as respond to emergencies such as natural disasters. The Government is committed to move beyond cash transfers to an integrated Social Protection system to enhance social and economic inclusion of the poor and vulnerable. Therefore, the underlying objective of KSlILP is to strengthen the delivery systems. Areas that the project was The project was formed to intervene in the following formed to intervene problems/gaps: (i) Strengthening Social Protection Delivery Systems (ii) Increasing Access to Social and Economic Inclusion Interventions (iii) Improving the Shock Responsiveness of Safety Net System Project duration Five years plus one year extension vi Kenya Social and Econonic Inllusion Project State Deparinientfor Social Proteclion and Senior Citizen Affairs Annual Repor (and Financial Statenents for the financial year ended June 30, 2024 Project Information and Overall Perforniance (Continued) 2.4 Bankers The following are the bankers for the project: (i) Central Bank of Kenya Limited - Account number: 1000425059 (ii) Central Bank of Kenya Limited -. Accout number: 1000488395 (iii) Kenya Commercial Bank Kenya Limited - Account number 1293561193 2.5 Independent Aiuditor The project is audited by the Offlice of The Auditor General. Auditor General Kenya National Audit Office Anniversary Towers,University Way P.O Box 30084 GPO 00100 Nairobi,Kenya 2.6 Roles and Responsibilities JaneDiretor hilren aste's roject Coordmnator 0722653187 Muyanga Services Franklyn Assistant Director Degree Lead-NICHE 0724510847 Makhulu Children Services Linet Deputy Director PiD Lead-Economic 0721669104 Ochuma Social Development Inclusion Programme CPA Benard Deputy Accountant Masters Head of Accounts 0721589904 M. Sabwami General Unit vii Kenya Social and EcoOflic Inclusion nioCitizen Affais State Del)(tl1menltfo)' Sociaul Pirotectioni ad Seio Citize Affairs202 Annual Report and Financial Stateinzentsfior the financialyeareieJue3,24 2.7 Funding suniltlarY The Project is for duration of 5 years with on-year extelsiol perind from 2019 to 2024 with an approved budget of Euro 152,800,000, USD 13,000,000 and USD 850,700,000 equivalent to KShs 19,496,501,100, KSIs 1,406,600,637 and KSis 92,045,781,684.30 respectively as highlighted in the table below: viii и и и и ио N о° о и � о с о и о � оо с� � " .-; ,-i с� с� t� N �'-' � и и м о М � о м- ,-� ,-с о о о у. .� ^� �- �,' ,�� м м c�i о ri � � � �� ' � �:,�; ,� А о о � N °о Н А � '� � ' ° � �` � � � м W � °о � i� �r- '�t � �.: д �'��� �r сб � � � О �Л и ,� .� � Q � '�' Г-, .-� оо И с� rо� � '� � • й "1 .rй'уΡ С� �, V] � j� . 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BUDGET PERFORMANCE AGAINST ACTUAL AMOUNTS Budget Actual Absorption Budget Actual Absorption Ra te Rate GOK (counterpart Funding) 1,038,370,000 1,013,387,999 98% 3,872,031,203 2,606,736,750 67% IPF Credit 1,517,470,000 1,894,226,637 125% 5,211,270,000 2,787,644,634 53% Grant(AIA) 245,000,000 245,000,000 100% 1,867,669,200 1,805,347,417 97% Grant(Revenue) 68,000,000 67,288,846 99% 337,200,000 116,582,762 35% EEP 27,083,853,980 26,372,445,500 97% 86,299,364,907 80,896,855,180 94% TOTAL 29,952,693,980 29,592,348,982 99% 97,587,535,310 88,213,166,74 90% IMPLEMENTATION CHALLANGES I. Delay in exchequer releases: This has largely affected the implementation of GOK projected activities causing delays and crossover of activities meant for the previous financial year. This means that we have had to have less funds available to finance planned activities for the successive year as part of the allocation is applied to fund the previous year's activities. 2. Lack of KSEIP Budget Lines and Budget Management system: KSIEP is implemented by various units vithmn the SDSP but the entire KSIEP budget is however lumped into one for the entire State Department naking it difficult to monitor activities and spending at the individual unit's level. xfi Kena Social and Economic Inclusion Project State Deparitent for- Social Prolection (and( Senior Citizen, Affairs Annmal Report and Financial Satemntmsfor. the financial.vear endled June 30, 2024 3. Project Reporting Requirements: The project requires extensive reporting requirementS to monitor tihe project progress and remain fully compliant with the financial reporting to the World Bai. IFMIS is currently not capable to run these reports with the details and formats that are required. The SDSP is currently consiering using the data export capabilities of JFMIS, the data will be exported and a reporting applicatio n iluding a data analytical application with project reportS uSing the original ledger data and adding additional data points to ensure 100% compatibility with the reporting requirements. Project dashboards will be developed to monitor project financial results and day-to-day progress and to support the development of project reports. RECOMMENDATION 1. IPF Loan and gratt should be available for implementation of the programme to achieve the planned iilestones. 2. To have KSEIP budget lines for each implementing units to facilitate monitoring and spending at individual unit level. 3. Integration of IFMIS with project reporting templates to facilitate generation of reports with details and formats required by donor. 2.9 Sunuinaiy ofProject Compliance: The project has complied with applicable laws and regulations, and essential external financing agreements/covenants. xiii Kenya Social and Economic Inclusion Project State Departmentfor Social Protection and Senior Citizei Affairs Annmal Repoma and Fianicial Statemeids foir thefinancialypea- ended Jume 30, 2024 3. Statement of Performance against Project's Predetermined Objectives Initroduction The objective of the KSEIP is "to strengthen delivery systems for enhanced access to social and, economic inclusion services and shock-responsive safety nets for poor and vulnerable households". The Project supports the GoK to build upon the achievements made under the National Safety Net Program (NSNP) through putting in place credible delivery systems for social protection (SP) services. More specifically, the Project supports results in three areas: (i) enhancing institutional capacity and further strengthening of SP delivery systems, particularly the coverage and functionality of the existing single registry as well as to continue improving the efficiency of the payment and grievance management system; (ii) investing in scale-up of existing nutrition-sensitive safety net and testing of customized economic inclusion models as a complement to the sensitive safety net and testing of customized economic inclusion models as a complement to the regular cash transfers to improve human capital and self-sufficiency of the poor and vulnerable households; and (iii) improving shock responsiveness of the safety net system expanding its coverage as well as strengthening financing arrangements for timely support to the affected households to improve their resilience and coping with recurrent climate-induced droughts. Progress on attainment of strategic development objectives For purposes of implementing and cascading the above development objectives to specific sectors, all the development objectives were made specific, measurable, achievable, realistic and time-bound (SMART) and converted into development outcomes. Attendant indicators were identified for reasons of tracking progress and performance measurement xiv Keny Socal ii~lJ3coOIfJ11Ic111sion Project Stale Depaj(finentfol Social Protecion and Sen ded June 30, 2024 Annu fi-, Rport and1( Finanflcial St'atelntentsfor thiefiiucl eaeneJne3,24 Below, wc provide thie Progrcss 011 atlailling tile stated objectives: Blow, u n Progress in Status No Disbursement isur I DLIs as of Linked Dun 2s24 ndicatIo r June 2024 lndiato Ach ieved Ac-hieved. - Scope, la (i) - Design and implementation Achieved Ahieved. coverage, and arrangements for enhancements in SR Feb 2023 functionality tinalized - WB IDA - -UR 5-2m -June 2019 't Single la (ii) - Roll out of enhanced SR covers at Achieved Aclieved. Registry least 75% of targeted households in 2 June 2023 enhanced non-HSNP counties WB IDA - EUR 4.3m - June 2021 la (iii) Roll out of enhanced SR covers at Not Achieved least75%'frgeted house olds-in 17 Achieved AugUst 20 4 on HSNP counties -WB EDA UR 12.9m' -June 2022 .- la (iv) Roll óut'of énhanced SR covers at Not Data least 75% of targeted households in 39 ach eved collection, in non-HSNP counties,- WB IDA TEUR 12.9mn t ie (US$ 14m) -June2023 - remaini i '-~~ ~ ~ 12 countbes. ongomg ib (i) - Re-registration exercise in the four Achieved Achieved original HSNP counties completed and July 2022 beneficiary list updated accordingly - WB IDA - EUR 3.5m - DFID - US$ 0.5m -June 2020 _ _ - - -- - - - - lb (H) - Registration of households in the Achieved in Achieved. four expansion HSNP counties compete May 2023 WB IDA - EUR 4.3m DFID - US$ 0.5m - June 2021 - -e---¯ 2¯¯ - 60o¯ of beneficiaries receiving Achteved in Achieved. Jamii c payments through the new payment May 2022 Payment mechanism - WB IDA EUR 7.8m - June Mechanism 2020- h for ~ : the b.'100% ofbnfcaisreceivin No thr h tene pamnt Ache Setem` NSNP cash paymýe.nts ug 2024m tAheel,1,.ý. pe r transfer mechanism.' ID AEUR 4.3m (US$ 4.7m) - Junie,2021- XV KenYa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year eiided June 30, 2024 programs is rolled out 3 Integrated 3a - G&CM mechanism is functional at all Achieved Achieved G&CM levels for four NSNP programs in 47 September mechanism is counties - IDA EUR 8.65m -June 2020 2022 strengthened 3b - Enhanced G&CM mechanism Not, To be and rolled out functional in all KSEIP counties as per achieved achieved by at revised design and implementation . Dec 2024 decentralized arrangements IDA EUR 8.65m (US$ level 9.4m) -June 2022 4 Increased 4a (i) - 1,700 households receiving Achieved Achieved. access to nutrition-sensitive cash transfer IDA EUR July 2022 social 1.2m- June 2020 inclusion 4a (ii) - 8,300 households receiving Achieved Achieved. interventions nutrition-sensitive cash transfer - IDA EUR July 2022 4.6m- June 2021 4a (iii) - 13,800 households receiving Achieved Achieved. nutrition-sensitive cash transfer - IDA EUR June 2024 3.8m -June 2022 4a (iv) 19,400 .households receiving Not- Achieved nutrition-sensitive cash transfer- IDA EUR 'Achieved September 3.9m (US$ 4.2m) -:June 2023. 2024 4a (v) 23,500 households receiving Not Achieved nutrition-sensitive cash transfer - IDA EUR Achieved September 2.9m (US$,3.2m) - December:2023 2024 4b (i) - Tools designed and formal Achieved Achieved. agreement between the SDSP, MoH and April 2023 NHIF in place to operationalize systematic enrolment of NSNP beneficiaries into the NHIF - IDA EUR 3.4m -June 2020 4b (ii) - 40% of NSNP beneficiaries Achieved Achieved. enrolled in the NHIF with enrolment May 2023 information available in the SR - IDA EUR 4.3m -June 2021 4b (iii) -, 75% of NSNP- beneficiaries. Not Cancelled enrolled in the NHIF with enrolment achieved information available in the SR.- IDA EUR . 5.2m(US$ 5.6m) -June,2022 5 Increased Sa (i) - 10,000 new HSNP households Achieved Achieved. coverage and enrolled and paid for through the GoK's June 2023 xvi Kenpa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year ended June 30, 2024 GoK financing budget in 2 expansion counties - IDA EUR of HSNP 12m -June 2022 hieved 5a (ii) - 22,000 new HSNP households Achieved Acleved. enrolled and paid for through the GoK's June 2023 budget in 4 expansion counties - IDA EUR 13m -June 2023 5b - 100% of existing HSNP households in Achieved. Achieved. the original four counties financed by the GoK by July 2019 - IDA EUR 13m - DFID US$ 9.6m -July 2019 6 HSNP 6a (i) - Financing plan for HSNP scalability Achieved. Achieved. scalability and for FY19/20 adopted and financed - IDA financing EUR 0.865m -June 2019 arrangements 6a (ii) Emergency payments made in Achieved. Achieved. enhanced FY18/19 for 100% of the total number of households triggered in 4 counties where HSNP is functional IDA EUR 3.5m DFID US$ 6.9m - June 2019 6a (iii) Emergency payments made in Achieved. Achieved. FY19/20 for 100% of the total number of households triggered in 4 counties where HSNP is functional and financing plan for FY20/21 updated - IDA EUR 1.7m - DFID US$ 11.5m -June 2020 6a (iv) Emergency payments made in Achieved. Achieved. FY20/21 for 100% of the total number of households triggered in 4 counties where HSNP is functional and financing plan for FY21/22 updated - IDA EUR 1.7m - DFID US$ 11m-June 2021 xvii Kenya Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year en(ded June 30, 2024 4. Environmental and Sustainability Reporting 1. Sustainability strategy and profile The GoK commitment to the proposed interventions and the alignment with its policy commitment for SP and the Bottom Up Economic Transformation Agenda 'BETA' is a prerequisite for sustainability beyond the life of the project. First, the GoK expanded the NSNP at a larger scale than originally expected (under the NSNP P for R operation), demonstrating its commitment. Second, the GoK continues to invest in SP delivery systems, including consolidation of the MIS, improved payment system, citizen's engagement and shock-responsiveness. Third, the proposed KSEIP is the culmination of nearly two years of in-depth consultations and consensus building within the GoK on the need for integrated SP services to strengthen resilience and enable self-sufficiency of poor and vulnerable households. A technical working group prepared a 'Comprehensive and Integrated SP Program,' which enjoyed high-level political backing of the Permanent Secretary, as well as the Cabinet Secretary for the MLSP. The project will be implemented through GoK entities, further ensuring the continuity and sustainability of interventions. Project design therefore builds upon existing institutional structures such as CHWs. 2. Environmental performance The project has been screened for short and long-term climate change and disaster risks. The climate vulnerability of the project was identified, and climate adaptation measures considered in the project design. The proposed project would improve the shock- responsiveness of the safety net system in the ASAL areas, which are most affected by droughts occasioned by climate change. The enhanced SR would contribute to a system more responsive to shocks through better identification and categorization of beneficiaries. The expanded coverage of potential beneficiaries would also enable identification for other SP programs beyond the NSNP, including social and economic inclusion services, contributing to improved resilience of poor and vulnerable households. Institutional capacity for project implementation, coordination, and M&E, as well as enhancement of capacity and implementation of the BOS can all be considered to contribute to climate change adaptation. Particularly, Component 3 of KSEIP addresses some of the climate related challenges in the xviii Ken Va Social aid Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year en(ded June 30, 2024 project areas to reduce the impact and vulnerability of drought and food insecurity in counties and communities. The project would monitor progress toward shock- responsiveness and resilience to counter climate change through the outcome indicator on risk financing strategy for HSNP scalability. An assessment of the project activities. was undertaken by the World Bank's Climate Change Group, which estimated the total climate co-benefits in this project to amount to US$ 59.75 million (or 24% of the IDA contribution). The assessment found that adaptation co-benefits can be assigned for: (i) enhancing the scope and coverage of the single registry, since it will enable timely identification of households affected by climate-related emergencies; (ii) expanding the nutrition-sensitive safety net, since food insecurity has been linked to droughts and (iii) improving the shock responsiveness of the safety net system, since it will enhance the resilience of beneficiaries to the droughts induced by climate change. 3. Employee welfare The project has not yet employed staff of it owns but relies on personnel deployed by the State Department for Social Protection. However, in realization that the employees are an important stakeholder and asset in the realization of the Project's mandate, the Project sponsored some of the officers for training programmes. The Project also held team building forum for both the employees and the Trustees with an aim of enhancing their morale hence more productivity at work. In addition, the Project ensures maintenance of occupational health and safety at workplace. 4. Market place practices The Project is involved in the following in relation to responsible market place practices. a) Responsible Supply chain and supplier relations The Project maintains good business practices through open tendering which is the recommended procurement approach and the use of other alternative procurement methods where applicable according to the World Bank Procurement Regulations for IPF Borrowers 2020 and Public Procurement and Asset Disposal Act 2015 and Regulations 2020. xix KenyVa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year emded June 30, 2024 On the treatment of its suppliers responsibly, the department makes timely payments upon receipt of relevant documents from the suppliers and relevant approvals. b) Responsible ethical practices This is achieved through the Project maintaining the minimum set standards. This is achieved by ensuring that there is uniform treatment of its clients and stakeholders, as well as corrupt malpractices are not entertained in the organization. c) Regulatoiy impact assessment By ensuring service standards, the Project undertook its mandate to safeguard consumer rights and interests. Any deviation to the expected standards was addressed and corrected. 5. Community Engagements KSEIP design incorporates Kenya-specific gender considerations. First, the project builds on the NSNP cash transfer programs which have demonstrated positive impact on gender outcomes. Program targeting of both the CT-OVC and HSNP recognizes the vulnerability of female-headed households: most recipients are women, although they are not explicitly targeted as the main beneficiaries. This has been reported to enable women to increase control of household budgets and participation in income-generating activities. Analysis of the HSNP has indicated spill over effects on more balanced household decision-making. Evaluations have found that the cash transfer programs reduced the likelihood of young women becoming pregnant and improved mental health outcomes, such as lower rates of depression, greater belief in self-agency and self-efficacy, and more positive views of the future. Second, the KSEIP supports positive gender outcomes through interventions specifically targeted to women. NICHE supports PLW and mothers to make better dietary decisions for their children and enhance existing impacts on household decision making through the provision of a top-up transfer. The KSEIP M&E framework includes gender- disaggregated indicators on proposed project beneficiaries. Project surveys would collect XX Keni'a Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year emded June 30, 2024 data on gender dimensions of program implementation and outcomes. Lastly, the SR would be leveraged to collect and monitor gender specific data. KSEIP uses the citizen's engagement mechanism already in place for the NSNP, namely the G&CM mechanism. This mechanism has been established at the national level with adequate staff and established procedures for receiving, recording, and acting on complaints along with a feedback mechanism to close the loop. It includes service charters to guide program engagement with beneficiaries, as well as MIS modules for tracking complaints and hotlines for receiving them. Community-level structures, such as, the Constituency Social Assistance Committees and Beneficiary Welfare Committees (BWCs), have been established to raise awareness of the rights and entitlements of the beneficiaries, as well as to complement program officers and serve as an additional conduit for engaging with the beneficiaries and stakeholders. Work is ongoing to further strengthen this system by fully automating and decentralizing the G&CM mechanism as well as by rolling out Beneficiary Outreach Strategy (BOS) to increase beneficiary awareness of their rights and entitlements as well as the procedures for G&CM. The project further enhances the G&CM mechanism and beneficiary outreach to ensure that a consolidated and coherent citizen's engagement system is established to address complaints and grievances and facilitate community feedback on KSEIP activities in a structured manner. xxi Kenpa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Aniual Report aid Financial Statements for the financial year enided June 30, 2024 5. Statement of Project Management Responsibilities The Principal Secretary for State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project are responsible for the preparation and presentation of the Project's financial statements, which give a tUie and fair view of the state of affairs of the Project for and as at the end of the financial year ended on June 30, 2024. This responsibility includes (i) Maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period, (ii)Maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the project, (iii)Designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, aid ensuring that they are free from material misstatements, whether due to error or fraud,(iv) safeguarding the assets of the project, (v)Selecting and applying appropriate accounting policies and (v)Making accounting estimates that are reasonable in the circumstances. The Principal Secretary for State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project accept responsibility for the Project's financial statements, which have been prepared on the Cash Basis Method of Financial Reporting, using appropriate accounting policies in accordance with International Public Sector Accounting Standards. The Principal Secretary for State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project are of the opinion that the Project's financial statements give a true and fair view of the state of Project's transactions during the financial year ended June 30, 2024, and of the Project's Financial position as at that date. The Principal Secretary for State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project financial statements as well as the adequacy of the systems of internal financial control. xxii Kenypa Social and Economic Inclusion Project State Deartment for Social Protection and Senior Citizen Affairs Annual Report and Financial Statenents for the financial year entded June 30, 2024 The Principal Secretary for State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project confirn! that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project Financial Statements The Project financial statements were approved by the Principal Secrelaqy for the State Department for Social Protection and Senior Citizen Affairs and the Project Coordinator for Kenya Social and Economic Inclusion Project on 2024 and signed by: ~IK Joseph M. Motari, MBS Jane Muyanga CPA Benard M. Sabivanii Priicipal Secretary Project Coordinator Deputy Accountant General ICPAK Member No. 18274 XXIii REPUBLIC OF KENYA HEADQUARTER Telephone: +254-(20) 3214000 Anniversary Towe Email: info@oagkenya.go.ke A 1 .... Monrovia Stre bsite:www.oagkenya.go.ke P.0 Box 3oo84-oolc OFFICE OF THE AUDITOR-GENERAL NAIRO Enhancing AcCoulntability REPORT OF THE AUDITOR-GENERAL ON KENYA SOCIAL AND ECONOMIC INCLUSION PROJECT CREDIT NUMBER 6348-KE FOR THE YEAR ENDED 30 JUNE, 2024 - STATE DEPARTMENT FOR SOCIAL PROTECTION AND SENIOR CITIZEN AFFAIRS PREAMBLE I draw your attention to the contents of my report which is in three parts: A. Report on the Financial Statements that considers whether the financial statements are fairly presented in accordance with the applicable financial reporting framework, accounting standards and the relevant laws and regulations that have a direct effect on the financial statements; B. Report on the Lawfulness and Effectiveness in Use of Public Resources which considers compliance with applicable laws, regulations, policies, gazette notices, circulars, guidelines and manuals and whether public resources are applied in a prudent, efficient, economic, transparent and accountable manner to ensure the Government achieves value for money and that such funds are applied for the intended purpose; and, C. Report on the Effectiveness of Internal Controls, Risk Management and Governance which considers how the entity has instituted checks and balances to guide internal operations. This responds to the effectiveness of the governance structure, risk management environment and internal controls, developed and implemented by those charged with governance for orderly, efficient and effective operations of the entity. An unmodified opinion does not necessarily mean that an entity has complied with all relevant laws and regulations, is effective in the use of resources, or that its internal control, risk management and governance systems are properly designed and were working effectively in the financial year under review. The three parts of the report are aimed at addressing the statutory roles and responsibilities of the Auditor-General as provided by Article 229 of the Constitution, the Public Finance Management Act, 2012 and the Public Audit Act, 2015. The three parts of the report when read together constitute the report of the Auditor-General. REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Social and Economic Inclusion Project Credit Number 6348-KE set out on pages 1 to 34, which comprise of the statement of financial assets and liabilities as at 30 June, 2024 and the statement of receipts and payments, statement of cash flows and the statement of comparison of Report of the Auditor-General on Kenya Social and Economic Inclusion Project Credit No. 6348 for the year ended 30 June 2024- Slate Department for Socio Protection and Senior Citizen AJfairs budget and actual amounts for the year then ended, and a summary of si nificant accounting policies and other explanatory information in accordance with the pr Visions of Article 229 of the Constitution of Kenya and Section 35 of the Public Audit Act 2015. I have obtained all the information and explanations which, to the best of my kn, wledge and belief, were necessary for the purpose of the audit. In my opinion, the financial statements present fairly, in all material respects, the irnancial position of Kenya Social and Economic Inclusion Project as at 30 June, 2024 a d of its financial performance and its cash flows for the year then ended, in accordar cb with International Public Sector Accounting Standards (Cash Basis) and comply 1vith the Public Finance Management Act, 2012 and the Credit Agreement No.63487KE dated 31 January, 2019 between the International Development Association and the Republic of Kenya. Basis for Opinion The audit was conducted in accordance with the International Standards for Slu reme Audit Institutions (ISSAls). I am independent of the Kenya Social and Economic Iri clusion Project Management in accordance with ISSAI 130 on the Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance wih other ethical requirements applicable to performing audits of financial statements, in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate io provide a basis for my opinion. Emphasis of Matter 1. Budgetary Control and Performance 1.1 Budget Under Expenditure The statement of comparison of budget and actual amounts reflects final total payments budget and actual on comparable basis of Kshs.29,952,693,980 and Kshs.28,519,249,967 respectively resulting to an under expendit re of Kshs.1,433,444,013 or 5% of the budget. The under expenditure affected the planned activities and may have impacted neatively on service delivery to the public. 2. Pending Accounts Payables Note 12 to the financial statements on other disclosures and as further disclosed ir Annex 4a discloses pending accounts payable of Kshs.56,013,859 that was outsta'ndi'as at closure of the financial year. Management has not rendered explanations for f ildre to settle the bills. Failure to settle bills during the year to which they relate to distorts the fin ancial statements and adversely affects the budgetary provisions for the subsequent ear as they form a first charge. My opinion is not modified in respect of these matters. Report of the Auditor-General on Kenya Social and Econonic Inclusion Project Credit No. 6348 for the, ca, ended 30 June, 2024 - State Departnent for Socio Protection and Senior Citizen Affairs 2 Key Audit Matters Key audit matters are those matters that, in my professional judgment, are of most si nificance in the audit of the financial statements. There were no key audit matters to report in the year under review. Ot er Matter U resolved Prior Year Matters In the audit report of the previous year, several issues were raised under the Report on the Financial Statements, Report on Lawfulness and Effectiveness in Use of Public Resources and Report on Effectiveness of Internal controls, Risk management and goernance. However, the Management has not resolved the issues as at 30 June,2024. Oter Information Conclusion Th)e Project Management is responsible for the Other Information set out on page iv to xxII which comprise of Project Information and Overall Performance, Statement of Performance Against the Project's Predetermined Objectives and Statement of Project Management Responsibilities. The Other Information does not include the financial statements and my audit report thereon. Basis for Conclusion Low Budget Absorption and Undrawn Fund Balances Section 2.8 on summary overall project performance reflects overall 90% budget performance as at 30 June, 2024. However, the GOK counterpart funding, IPF Credit and Grant Revenue reflect absorption rates of 67%, 53% and 35% respectively six months to the Project end date. Further Section 2.7A of project information and overall performance on source of funds reilects total commitment of Kshs.1 12,948,883,421. However, as at 30 June, 2024, only Kshs.80,040,650,823 was drawn resulting to undrawn balance of Kshs.32,908,232,598 or 29% of total commitment. There was no satisfactory explanation provided for the slow drawn down of the funds. In the circumstances, the Project may not achieve its goals and objectives closure. In connection with my audit on the Project financial statements, my responsibility is to read the Other Information and in doing so, consider whether the Other Information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work I have performed, I conclude that there is a material misstatement of this Other Information, I am required to report that fact. In my opinion, except for the matter described in the Basis for Conclusion, Ic nfirm that it is not materially inconsistent with the financial statements. Re ort of the Auditor-General on Kenya Social and Economic Inclusion Project Credit No. 6348 for the year ended 30 June, 2024 - State Department for Socio Protection and Senior Citizen Affairs 3 REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the audit procedures performed, except for the matters described in the Basis for Conclusion on the La fulness and Effectiveness in Use of Public Resources section of my report, I confirm that nothing else has come to my attention to cause me to believe that public resources have not been applied lawfully and in an effective way. Basis for Conclusion 1. Irregular Recruitment of Employees The statement of receipts and payments and as disclosed in Note 5 to the financial statements reflects compensation of employee costs of Kshs.31,967,440. Review of documents revealed that 193 casuals and 161 mentors and supervisors were recruited in April 2024. However, adverts of the vacant positions, minutes supporting the shortlisting and interviews reports were not provided for audit verification contrary to Section B4(1) and (2) of Public Service Human Resource Policies and Procedure Manual, 2016. In the circumstances, Management was in breach of the law. 2. Failure to Deduct and Remit Statutory Deductions The statement of receipts and payments and as disclosed in Note 5 to the financial statements reflects compensation to employees of Kshs.31,967,440. However, an amount of Kshs.4,998,455 comprising of Kshs.3,035,542, Kshs.930,500 and Kshs.1,032,412 on account of NSSF, NHIF and Housing Levy Fund respectively was not deducted from employees' salaries for remittance to the statutory bodies contrary to Section 20 of the National Social Security Fund Act, 2013 and Section 16(3) of National Health Insurance Fund Act. In the circumstances, Management was in breach of the law. 2. Procurement of Hospitality Supplies and Services from Non-Prequalified Providers The statement of receipts and payments and as disclosed in Note 6 to the financial statements reflects purchase of goods and services of Kshs.843,528,896 which includes hospitality supplies and services of Kshs.48,993,241. Included in hospitality supplies and services expenditure are payments amounting Kshs.24,945,600 for which the conference facilities were procured from suppliers not listed in the list of registered suppliers' contrary to Section 95(3) of Public Procurement and Asset Disposal Act, 2015 which states that a procuring entity shall invite tenders from only the approved persons who have been pre- qualified. In the circumstances, Management was in breach of the law. Report of the Auditor-General on Kenya Social and Economic Inclusion Project Credit No. 6348 for the year ended 30 June, 2024 - State Department for Socio Protection and Senior Citizen Affairs 4 4. Other Operating Payments The statement of receipts and payments and as disclosed in Note 6 to the financial statements reflects purchase of goods and services of Kshs.843,528,896 which includes other operating payments of Kshs.428,662,548. The following unsatisfactory matters were however noted: 4.1 Delay in Implementation of Procurement of Data Room Upgrades and IT Infrastructure Builds for Management Information System Contract Included in other operating payments is Kshs.73,885,042 paid to a consultant for the procurement of two data room upgrades and two IT infrastructure builds for Enhanced Single Registry and Consolidated Cash Transfer Programme Management Information System under Contract No. KE-NSPS-279055-NC-RFB.The contract agreement was signed on 3 July, 2023 with a contract period of six months. As at the time of audit in October, 2024 the contract implementation was incomplete. 4.2 Delay in Implementation of Procurement of Provision of Technical Assistance to Support Implementation of Economic Inclusion Intervention Included also in other operating payments is Kshs.51,440,746 being payments to a consultant for delivery of phase v deliverables under provision of technical assistance to support implementation of economic inclusion intervention. The State Department contracted the consultant in a consortium to offer consultancy services for provision of technical assistance to support implementation of economic inclusion intervention under the Project. The contract agreement contract no. ICB NO:KE-NSPS-91656-CS- QCBS/2018-2019 was signed on 16 November, 2020 which was also the commencement date. The contract period was 36 months with end date of 15 November, 2023. However, as at the time of audit in October, 2024 the support was incomplete. 4.3 Delay in Implementation of Procurement of a Third-Party Firm Quality Assurance Service Provider Included also in other operating payments is Kshs.197,168,893 paid to a consultant for procurement of a third-party firm quality assurance phase II for households' registration towards enhanced single registry under the Project contract No. KE-NSPS-283362-CS- QCBS.The contract agreement was signed on 17 August, 2023 with a contract period of five months. However, as at the time of audit in October, 2024 the contract was incomplete. In the circumstances, the Project objectives and goals may not have been met and may not be of benefit to the targeted citizens. 5. Lack of Fixed Asset register The statement of receipts and payments and as disclosed in Note 7 reflects acquisition of non-financial assets of Kshs.260,029,475. However, Annex 5 to the financial statements on fixed asset register reflects assets valued at Kshs.242,663,883 indicating under booking of assets value at Kshs.17,365,592. Further, the fixed asset register was Report of the Auditor-General on Kenya Social and Economic Inclusion Project Credit No. 6348 for the year ended 30 June, 2024- State Department for Socio Protection and Senior Citizen Affairs 5 not provided for audit verification contrary to Regulation 143 (1) of Public Finance Management (National Government) Regulations, 2015. In the circumstances, the controls over the management of fixed assets are weak while Management was in breach of the law. The audit was conducted in arrrinore with ISSAIs 3000 and 4000. The Standards requires that I comply with ethical requirements and plan and perform the audit to obtain assurance about whether the activities, financial transactions and information reflected in - -- the-financial-statements-comply-in-alLmateriatrespects, with the authorities that govern---- - them. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT AND GOVERNANCE Conclusion As required by Section 7(1)(a) of the Public Audit Act, 2015, based on the audit procedures performed, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. Basis for Conclusion The audit was conducted in accordance with the ISSAIs 2315 and 2330. The Standards require that I plan and perform the audit to obtain assurance about whether effective processes and systems of internal controls, risk management and overall governance were operating effectively in all material respects. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Conclusion As required by the International Development Association, I report based on my audit that I have obtained all the information and explanations which to the best of my knowledge and belief, were necessary for the purpose of the audit. In my opinion: i. Information given in the Management report on pages iv to xxiii is consistent with the financial statements; ii. Adequate accounting records have been kept by the Project, so far as appears from the examination of those records; and iii. The Project's financial statements are in agreement with the accounting records and returns. Basis for Conclusion The International Development Association requires that I report on the legal or regulatory requirements, or on performance information disclosed. These matters require Report qf the Auclitor-General on Kenya Social and Economic Inclusion Project Credit No. 6348 for the year ended 30 June, 2024 - State Department for Socio Protection and Senior Citizen Affairs 6 expressing a separate opinion as to the Projects' compliance with laws and regulations. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Responsibilities of Management and those Charged with Governance The Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for maintaining effective internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether Clue to fraud or error and for its assessment of the effectiveness of internal controls, risk management and overall governance. In preparing the financial statements, Management is responsible for assessing the Project's ability to continue to sustain its services, disclosing, as applicable, matters related to sustainability of services and using the applicable basis of accounting unless Management is aware of the intention to terminate the Project or to cease operations. Management is also responsible for the submission of the financial statements to the t-\Liditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. In addition to the responsibility for the preparation and presentation of the financial statements described above, Management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements comply with the authorities which govern them and that public resources are applied in an effective way. Those charged with governance are responsible for overseeing the Project's financial reporting process, reviewing the effectiveness of how Management monitors compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in relation to governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit My responsibility is to conduct an audit of the financial statements in accordance with Article 229(4) of the Constitution, Section 35 of the Public Audit Act, 2015 and the INTOSAI Framework of Professional Pronouncements (IFPP). The Framework requires that, in conducting the audit, I obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements, whether clue to fraud or error and to issue an auditor's report that includes my opinion in accordance with Section 48 of the Public Audit Act, 2015. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with IFPP 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. Report of the Auditor-General on Kenya Social and Economic Inclusion Project Credit No. 6348Jor the year ended 30 June, 2024 - State Department for Socio Protection and Senior Citizen Affairs 7 In conducting the audit, Article 229(6) of the Constitution also requires that I express a conclusion on whether or not in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities that govern them and that public resources are applied in an effective way. In addition, I also I consider the entity's control environment in order to give an assurance on the effectiveness of internal controls, risk management and governance processes and systems in accordance with the provisions of Section / (1)(a) of the Public MLiit Act, 201 . Further, I am required to submit the audit report in accordance with Article 229(7) of the Constitution. Detailed description of my responsibilities for the audit is located at the Office of the Auditor-General's website at: resoonsibilities-for-audlit/. This description forms part of my auditor's report. FCPA XaI hfGBS AUDITOR-GENERAL Nairobi 13 November, 2024 Report of the A uditor-General on Kenya Social and Econoinic InClSion Project Credit No. 6348 for the year ended 30 June, 2024- State Department for Socio Protection and Senior Citizen Affairs 8 �� �� ��-'{��о т огг � `<°O а.о �� � ° � д � й �о � .G <. л � `< iv Г"'i л р У-у л (<➢ й � 'б : � �. fD �С м-�+ л . л� о�-о � с� о о с� . ° � � и� Р� О' и л и р� й г' р � о л�� ��-у � � г-�г гТj �b О � а' `' � ,��, гD Я � �G � СиD О UQ о. �, G ''�' у ({� О г-r � � CD b0 ~ i: �п '� о ,_�r и ,иу w N � р О � ti��i � Q' О С1. о л �� � О .=й ° rJ FJ � "� й � и � � Sv ц' � �' � .-г � 'v 3.Z. д. � v' ~ и и `р � я. � лJ � � � О л й � �� О й О (�D � �. � .... г� s� СО �1 01 lЛ -Р W N '-' О � � О� л р д �-.. .�, t� ы \i � �'* Р' � �'jJ R. ",, � г�л �7 V^ ь-. 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I �W � � '�� N о <р о � � а• � о � � о � . �' � � � � о � I U� ц О � � .�' � N i ы °� О '�j � 'А �г О , ~ ' � � о � � V1 W .-h �.. � FO «ц а� ы-г � � : � ( 1 � р w � � � � � о �р о у р о ( t� А � ° , о � О R. р„ N ь.. � ",.�р' 'je � ,,,., V, 's '"г h.a си 1° � rr � С р и и °� й� � ( � � � ~ г� � и w 00 р � ; � ,., � .� � i ,�,, �, . � :� •- W � ,, �, �, � й С ,о`о ( owo � о � I+ � � о и и О L• i � 1 1 � Keiýj,a Social and Economic Inclusion Pi-ojed State Departmentfor Social Pi-otection and Senior Citizen Affairs Annual Rel)ort and Financial Stafementsjor thefinancialyear ended June 30, 2024 8,Statenient of Financial Assets and Liabilities asat 30111 June 2024 Financial Assets Cash and Cash equivalents 10 1,295,538,220 215,487,903 Total Financial Assets (A) 1,295,538,220 215,487,903 Net Financial Assets (A 1,295,538,220 215,487,903 Represented By Fund Balance B/fwd. il 215,487,903 230,179,868 Surplus/ffieficit) for the, i Year 1,080,050,317 -14,690,965 Net Financial Assets J 1,295,538,220 215,487,903 Tlie accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. Tlie financial statements were approved on 2024 and signed by: ........................... Joseph M. Motari, MBS i ie Muyan a CPA Benard M. Sabwaiiii: Principal Seeretai-y Projert Coordinator Deputy Aceountant Genei-al ICPAK Member No. 18274 3 Keiny'a Social and Economic Inclusion Projeel State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for thefinancial year ended June 30, 2024 9.Statenent of Cash flows for the year ended 30*" June 2024 Receipts Transfer from government entities 1 27,353,449,499 13,963,869,422 P'roceeds from domestie and foreign grants 2 312,288,846 493,400,000 Miseellaneous receipts 4 7,136,902 - Total reccipts 27,672,875,247 14,457,269,422 Paynents Compensation of employees 5 31,967,440 157,053,722 Pui-chase of goods and services 6 843,528,896 723,666,131 Transfers to other government entities 8 27,354,566,585 13,387,289,481 Other grants and transfers 9 277,384,000 757,366,500 Total Payments 28,507,446,921 15,025,375,834 Net receipts/(paymncuts) - 834,571,674 - 568,106,412 Net cash flow from operating activities 834,571,674 - 568,106,412 Cashflow from investing activities Acquisition of non-financial assets 7 11,803,046 43,146,097 Net cash flows from investing activities 11,803,046 - 43,146,097 Cash flow from financing activities Proceeds from foreign borrowings 3 1,926,425,037 596,561,544 Net cash flow from financing activities 1,926,425,037 596,561,544 Net inci case in cash and cash equivalents 1,080,050,317 - 14,690,965 Cash &cash equivalent at beginning of the 10 230,178,868 year 215,487,903 Casil and cash equivalent at end of the year 10 1,295,538,220 2 1 5 ,4 8 7 ,9 0 3 4 ,. :< „� �,�,, � � �"''У�� 1'� � о о о о о о о о о �-.�Эit' л �. 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И . . _ и �t N rt •-+ г+� с� и оо и cn N о О � [� c�i ш t�� rn •-� м' --� v� г�� о� о и � N о� м�t .� и г� .-г оо N м м и и оо м �i и о к t� [л г� оо �-+ у� �i N N cv � � е�• ¢ N о о о о о о о о о о о ,� N rn о о й о � й rn о й • а� м' о' о м �� v с� м о' м ' � р �� о t� rn о �t N о о� � �� о �r �? и `? гл r� о �о •сд у.� , и нi' [�� t� cV гл vi ш c�i �гi tV и � � t� м о� й � м � t й аИ.� С1, р ц+ .� о� t�� о� N �д� С�`1 N N N .... � 0 '� с�б N � � О � � 4� � � a�i о ° о и °о °о � � оо ° ° о � ос;� о оо" о о � ;,_, � ;и � � о � °о о � °о N c�v � о о и о и 4� i'' й � м r оо о й °о й '.� И •N �4�i ср � �� cV м н �t о �f У гл� N vi' N ' � Cf �• и ° n �i r и � � � � �� н ; � � ,r � � � � � jн � � •N �V О О О о О О О О О О О � (н � �v � О О О О О � И О О О н И О О И О 00 И О И г~` � � N �О . О N � �U 01 N О N � � v � � 00 О l� И О д' 00 О И ��.�� �� ,� �О О д' .-г о0 м М �О О � �� '�() �� е� � м' [�� й ш� г�� � v'� о й i� оо оо N о� о N � оо .--� а� сб � д' (�1 Q� �О .-• И .ч д� •д' �О� .�� о � � ° м ° м � о � `ti с� `С А., � � � �Q, � � � bA � й .0 � � О V '� � U р� р и и ?р г� рч � F"., '+=• й � G •�, ,b р •� � � �., v-i и U_ _ � Qi •� ,и 1 •� '� � и °� 1.. � � Т1 � о о а � � ьл �, �, •� � � � � С7 .~ � U � и р и 't"�' у iS� ° о� о � •3 а я. � w w о � :� о ',� b�« � чU, о о о� °' и� а � �s �'' с� � р� � О � 'гJ .i� � � � о .D � � 't7 р � ! � � о � ��� �� а, о ьл � о о � а� д' ол V� С�'i � с0 �� Ч-oti.,. a0i U и •� 4ч0 U р О � � �, •:й д,, и О и 'r�' ?� О' v О Q� � • v� �„ и ь и � с� � � � �'� s. f�,� � и r Й � •v �-+ � А, Ч�: � � a�i 0.�г � N `� `л •й уа? и оп L1ч � , �, С А � � �;�� 'а� и и г а� � � г1. .С id •� й.�' +- _ � � С �• � сб л � � • а. �+-• � � �' N ��� и д" г` � г° °°*-' о~ с са о� о ��•� У о� +-� ��л � ° q �" С.4 Е-� rs, ч° �?, � Е� а, U а� и Q Е-� и О Е-� и��� Z Keiwa Social wid Ecoiioinic Inclusion Project State DepartineWfor Social Protectioti and SeWor Cilizeil Affairs Attitual Rej)ort atid Pitaticial Stateinentsfor thefittaiicialjYear etuted Juiie 30, 2024 1I.Significant Accounting Policies The principal accounting policies adopted in the preparation of these financial statenients are set out below: a) Statertient of conipliance and basis of preparation The financial staternents have been prepared in accordance with Cash-basis IPSAS financial reporting Under the cash basis of accounting, as prescribed by the PSASB and set out in tile aCCOLInting policy note below. This cash basis of accounting has been supplemented with accounting for a) receivables that inclUde iniprests and salary advances *and b) payables that include deposits and retentions. Tile financial statements comply with and conforill to the form of presentation prescribed by tile PSASB. The accounting policies adopted have been consistently applied to all the years presented. b) Reporting entity The financial statements are for the Kenya Social and Economic IIICILISiOll PI'OjCCt Under the State Department of Social Protection and Senior Citizen Affairs. Tile financial statements are for the reporting entity as required by Section 81 of the PFM Act, 2012 . c) Reporting currency The financial staternents are presented in Kenya Shillings (Kslis), the project's functional and reporting CUrrency and all ValUes are rounded to the nearest Kenya Shilling. d) Recognition of receipts Tile Kenya Social and Econornic Inclusion Project recognizes all receipts from various sources when an event occurs, and the related cash is received. i) Transfers from the Exchequer Transfers frorn the ExcheqUer are recognized in tile books of accounts when cash is received. Cash is considered received when a payment inStrUCtiOn is issued to the batik and the receiving entity is notified. 6 Kenpa Social and Economic Inclusion Project State Deartment for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year ended June 30, 2024 Significant Accounting Policies (continued) ii) External Assistance External assistance is monies received through grants and loans fi-om multilateral and bilateral development partners. iii) Other receipts This includes Appropriation-in-Aid and relates to receipts such as proceeds from the disposal of assets and the sale of tender documents. These are recognized in the financial statements when associated cash is received. iv) Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when payment advice is received by the recipient entity or:by the beneficiary. In the case of a grant/donation in kind, such grants are recorded upon receipt of the grant item and its value determined. The transaction date is the value date indicated on the payment advice. v) Proceeds from borrowing. Borrowing includes external loans acquired by the Project or any other debt the Projectmay take and will be treated on cash basis and recognized as a receipt during the year they were received. vi) Undrawn external assistance These are loans and grants at the reporting date specified in a binding agreement and relate to funding for the Project currently under development, where conditions have been satisfied, or their ongoing satisfaction is highly likely, and the project is anticipated to continue to completion. The funding summary analyzes the Project's undrawn external assistance. 7 Kenya Social and Economic Inclusion Project State Department for Social Protection anmd Senior Citizen Affairs Annual Report and Financial Statemets for thefinancial year ended Junle 30, 2024 Significant Accounting Policies (continued) e) Recognition of payments The Project recognises all payments when the event occurs, and the related cash has been paid out by the Project. i) Compensation to employees Salaries, wages, Allowances, and Statutory Contributions for employees are recognized when the compensation is paid. ii) Use of goods anI services Goods and services are recognized as payments when the goods/services are consumed and paid for. If not paid for when goods/services are consumed, they shall be disclosed as pending bills. iii) Interest on borrowing Borrowing costs that include interest are recognized as payment in the period in which they incur and paid for. iv) Repayment of borrowing (principal amount) Repayment of the principal amount of borrowing is recognized as payment in the period in which the repayment is made. The debt stock is disclosed as an annexure to the consolidated financial statements. 8 KenYa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year ended June 30, 2024 Significant Accounting Policies (continued) v) Acquisition of fixed assets The payment on the acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of these items are treated as payments and receipts items, respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as a receipt and as a payment. A fixed asset register is maintained by each public entity, and a summary is provided for consolidation purposes. This summary is disclosed as an annexure to the consolidated financial statements. f) In-kind donations In-kind contributions are donations made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment, or personnel services. Where the financial value received for in-kind contributions can be reliably determined, the Project includes such value in the statement of receipts and payments both as receipts and as payments in equal and opposite amounts; otherwise, the contribution is not recorded. g) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks at the end of the financial year. For the purposes. of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year. 9 Kenpa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year enfded June 30, 2024 Significant Accounting Policies (Continued) h1) Restriction on cash Restricted cash represents amounts that are limited/restricted from being used to settle a liability for at least twelve months after the reporting period. This cash is limited for direct use as required by stipulation. Amounts maintained in deposit bank accounts are restricted for use in refunding third part deposits. i) Imprests and Advances For the purposes of these financial statements, imprests and advances to authorised public officers and/or institutions which were not surrendered or accounted for at the end of the financial year is treated as receivables. This is in recognition of the government practice where the imprest payments are recognized as payments when fully accounted for by the imprest or AIE holders. This is an enhancement to the cash accounting policy. Other accounts receivables are disclosed in the financial statements. j) Contingent Liabilities A contingent liability is: a) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or b) A present obligation that arises from past events but is not recognised because: i) It is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or ii) The amount of the obligation cannot be measured with sufficient reliability. Some of contingent liabilities may arise from: litigation in progress, guarantees, indemnities. Letters of comfort/ support, insurance, Public-Private Partnerships, The Entity does not recognize a contingent liability but discloses details of any contingencies in tle notes to the financial statements unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. Annex 6 of this financial statement is a register of the contingent liabilities in the year. 10 Ken ia Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year eided June 30, 2024 Significant Accounting Policies (Continued) k() Contingent Assets The Entity does not recognize a contingent asset, but discloses details of a possible asset whose existence is contingent on the occurrence oi 11o11-uCtiIUnCe Of one or more uncertain future events not wholly within the control of The Entity in the notes to the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset's value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs. 1) Pending bills Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year or in past years. As pending bills do not involve the payment of cash in the reporting period, they are recorded as 'memorandum' or 'off- balance.' When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. n) Budget The budget is developed on a comparable accounting basis (cash basis), the same accounts classification basis (except for accounts receivable - outstanding imprest and clearance accounts and accounts payable - deposits, which are accounted for on an accrual basis), and for the same period as the financial statements. The Project's budget was approved as required by Law and National Treasury Regulations, as well as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. The Development Projects are budgeted for under the MDAs but receive budgeted funds as transfers and account for them separately. These transfers are recognised as inter- entity transfers and are eliminated upon consolidation. A high-level assessment of the Project's actual performance against the comparable budget for the financial year/period under review has been included in an anex to these financial statements. 11 Keunya Social and Economic Inclusioni Project State Department for Social Protection and Senior Citizen Affairs Aninual Report and Financial Statements for the financial .year ended June 30, 2024 Significant Accounting Policies (Continued) n) Third-party payments Included in the receipts and payments, are payments made on its behalf by to third parties in form of loans and grants. These payments do not constitute cash receipts and payments. and are disclosed in the payment to third parties' column in the statement of receipts and payments. o) Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates (Kenya Shillings). Transactions in foreign currencies during the year/period are converted into functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of receipts and payments. p) Comparative figures Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to conform to the required changes in financial statement presentation. q) Subsequent events There have been no events subsequent to the financial year/period end with a significant impact on the financial statements for the year ended June 30, 2024. r) Prior period adjustments Prior period adjustments relate to errors and other adjustments noted arising from previous year(s). 12 Kenya Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year ended June 30, 2024 12.Notes to the Financial Statements 1. Transfers from Government entities iese represen counepa ffunding and other reccipts from the government as follo"'s Counterpartfunding through Minist:), Cash Transfer-NICHE 124,971,500 18,849,000 221,937,500 Cash Transfer-OVC 6,712,586,000 6,564,496,000 26,993,646,000 Cash Transfer-Older Persons 18,489,254,000 5,613,944,480 35,920,671,160 Cash Transfer -PWD 1,013,250,000 1,190,000,000 3,883,310,000 Exchequer Receipts - Operations 1,013,387,999 576,579,942 2,514,565,966 Total 27,353,449,499 13,963,869,422 69,534,130,626 13 Kenya Social and Econonic Inclusion Project State Departmentfor Social Protection and Senior Cilizen Affairs Annual Report and Financial Statements for the financial year ended June 30, 2024 Notes to the Financial Statements (Continued) 2. Proceeds From Domestic and Foreign Grants During the financial period to 30 June 2024, we received grants from donors as detailed in the table below DFID 26-Mar- Grant 24 499,975 67,288,846 - 67,288,846 140,688,846 Revenue DFID 14-Jun- Grant 24 245,000,000 - 245,000,000 493,400,000 1,170,000,000.00 AIA Total 499,975 67,288,846 245,000,000 - 312,288,846 493,400,000 1,310,688,846 14 KLeny'a Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affai's Annual Report and Financial Statements for the financial year emded June 30, 2024 Notes to the Financial Statements (Continued) 3. Loan from External Development Partners During the financial period to 30 June 2024, we received funding from development partners in the form of loans negotiated by the National Treasury, as detailed in the table below: IDA Credit (World Bank) 18-Jan-24 2,399,672 418,095,056 418,095,056 596,561,544 3,27.5,191,3 3 IDA Credit (World Bank) 19-Mar-24 1,752,678 266,949,989 - 266,949,989 IDA Credit (World Bank 03-Jun-241,241,379,992 1,24 1,379,992 4,152,349 1,926,425,037 - 1,926,425,037 596,561,544 3,275,191,353 15 Kenya Social and Econoinic incliusionl Projec, State Depariment for Social Protecdon and Senior Citizen Affairs Annual Report and Financial Statements for thefinancialyear ended June 30, 2024 Notes to the Financial Statenents (Contfinued) 4. Miscellaneous receipts Kslis Kshs Ksis Kshs Kslis Tender Fee - IDA Credit i,000 1,000 1,000 Tender Fee - Grant 20,000 - 20,000 - 20,000 Unspenit Inprest 184,600 184,600 184,600 Other receipts (Refund - Grant) 6,931,302 6,931,302 6,931,302 Total 7,136,902 - 7,136,902 - 7,136,902 16 Kenypa Social and Economic Inclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the financial year enided Jaune 30, 2024 Notes to the Financial Statements (Continued) 5. Compensation to Employees Kshs Kshs Kshs Kshs Kshs Basic wages of temporary 31,967,440 31,967,440 157,053,722 195,560,5' em lo ees Total 31,967,440 31,967,440 157,053,722 195,560,562 17 i �� �, � ' t�� м оо ш � о� и � � •�,, �г, r1 о [� j� i � r.�_ t� и с�� t� � й о о �< �� � . � '? о � о �' � `° °°' а, �; `а rn � ; _ � f'r :' � ,� t� �о �r о� .-� оо .� `д � . ��.'; ��. � и (� .-� N l� и и vi� у х N �`� м N � 1 1 �'�р л,�еr � '-' � `,4t.ыi�19! .;j'� г� � � е т� ,� I t1 л; � .i �:� е . ,� . .f �, . 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'r` оо о rn k ° � и • г.� t.� � �;�� �ч� . �а о о ;�4г r 1r�� •_�� 1 � г ( � I с Keiya Social and Economic Inclusion Pi-oject State Depai-Imentfoi- Social Protection and Senioi- Citizen Affah-s Ammal Repoi-I and Fbiancial Statementsfoi- the finan cial yew- ended June 30, 2024, Notes to the Financial Statements (Continued) ME xternal Assistance External assistance received as grants. 67,288,846 External assistance received as loans 1,926,425,037 596,561i'544 External assistance received in kind- as payment by third parties 245,000,000 493,4005 000 Total 2,238,713,883 1,089,961,544 q). Extemal assistance relating to loam and gi-ants "i, External assistance received as loans 1,926,425,037 596,561, 544 External assistance received as grants 67,288,846 - Total 1,993,713,883 596,561, 544 25 Kenya Social and Economic Inclusion Project State Departmentfor Social Protection and Senior Citizen Affairs Alnnual Report and Financial Statements for the financial year ended June 30, 2024 b) Undravn exlernal assistance Uindrawn external assistance - grants Undrwn xtenalassstace grnts95,91I1,791 408,200,637 Total Total_ 11,637,961,531 14,345,135,421 c) Classes ofproviders of external assistance International assistance organization 2,238,713,883 1,0$9,961,544 Toal2,238,713,883 1,089,961,544 26 l 1 1 1 Kenya Social and Economic hIclusion Project State Department for Social Protection and Senior Citizen Affairs Annual Report and Financial Statements for the finaincial y'ear ended June 30, 2024 Other Important Disclosures (Continued) d). Externaf A ssistance paid by third parties on behalf of (the Ezilj) by Source International assistance organization 245,000,000 493,400,000 Total 5000 245,0,0 43,400,000 8. Related Party Disclosures Related party disclosure is encouraged under non-mandatory section of the Cash Basis IPSAS. The comprise of related parties to the Project. i) Key management personnel, including the program director/manager ii) The implementing entity/ministry/ County department iii) Other Ministries and Departments. iv) The National /County Treasury Related party transactions: Compeinsation to Key Management Compensation to the program manager/ director Key Management Compensation others (specify) Total Compensation to Key Management Transfers to related parties Transfers to other government entities 27,354,566,585.35 13,963,869,423.00 Other Gränts and Transfers 277,384,000.00 757,366,500.00 Total Transfers to related parties 27,631,950,585.35 14,721,235,923.00 Transfers from related parties Transfers from the State Department Payments made on behalf of the project by other govt. 27,354,566,585.35 13,963,869,423.00 entities 2 3 , 4. Other grants, transfers and payments 277,384,000.00 757,366,500.00 Total Transfers from related parties 27,631,950,585.35 14,721,235,923.00 27 i � � О � 1 и � i s.o. � � � � '. ,� у рд +' -Су � N О � � и -р � � ~ � � � У У� � � Q � л � о '� �s-, О Ф 4-� U о сд V о г-� с� +� � � с�б �; о' v ''' � л N сд -о .� а�., о 3 � � � о � b � о .� � � N • so. .� и � � a,-i! � � U �. ° ry � о v о +--' а�-� Я N с,._, � � � � � у � о '� � о ч=• ° ' � о � а� bд � � а� л а� а� � � `У° > '� � " � °и n. � }., � b� � °�' '� и •� � �^ � • � -� • �' � о 'С! С � сб � V Q л,� и +' � л а� � .�L � � и N �'' .�.б � � сб 00 7у. 4�i � . � � � � � о � � О � и N _ о а� И �,� � 0.� .� °о, о >, а� � � �° � ;� � � е� и� О � '�С и +-�., =д и "о s. 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