THE FEDERAL GOVERNMENT OF SOMALIA PROJECT NAME: DOMESTIC REVENUE MOBILIZATION AND PUBLIC FINANCIAL MANAGEMENT CAPACITY STRENGTHENING PROJECT IMPLEMENTING ENTITY: MINISTRY OF FINANCE, PUNTLAND, MINISTRY OF FINANCE OF SOMALILAND HARGEISA, MINISTRY OF FINANCE FEDERAL GOVERNMENT OF SOMALIA PROJECT GRANT / CREDIT NUMBER: P151492 REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL REPORTING YEAR ENDED 31 DECEMBER 2022 PREPARED IN ACCORDANCE WITH THE CASH BASIS OF ACCOUNTING IN INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) 2019 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 Table of Contents 1. PROJECT INFORMATION AND OVERALL PERFORMANCE ......................................................... 4 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ................................................. 14 3. REPORT OF AUDITOR GENERAL .............................................................................................. 16 4. STATEMENT OF RECEIPTS AND PAYMENTS ............................................................................ 20 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 DECEMBER 2022 ............................................. 21 6. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 ............................ 22 7. STATEMENTS OF BUDGET COMPARISON WITH ACTUAL AMOUNTS ..................................... 23 8. STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS ................................ 25 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS ..................................................... 27 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ....................................................... 33 11. SUMMARY OF PROJECT PROPERTY AND EQUIPMENT REGISTER ........................................... 43 2 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 ACRONYMS AND ABBREVIATIONS DRM - Domestic Revenue Mobilization FY - Financial Year GBP - Great British Pound ICCD - Internal Control and Compliance Department IDA - International Development Association IESBA - International Ethics Standards Board for Accountants IPSAS - International Public Sector Accounting Standards MDA - Ministry, Department, Agency MPF - Multi-Partner Fund OAG - Office of Auditor General PARD - Public Sector Accounts and Reporting Department PFM - Public Financial Management SFMIS - Somalia Financial Management Information System USD - United States of America Dollars 3 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name The Project’s official name is Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project. Objective The key objective of the Project is to strengthen systems of domestic revenue mobilization, expenditure control and accountability in the Federal Government of Somalia, Puntland State of Somalia and Somaliland. Address Ministry of Finance, Mogadishu, Somalia Corso Somali Street, Shangani District, Mogadishu-Somalia The Project also has offices / branches in Garowe, Puntland, Hargeisa and Somaliland. Contacts Telephone: (+252) 618900336 E-mail: info@mof.gov.so Website: www.mof.gov.so/ Telephone: (+252) 618900336 E-mail:ahmed.eco33@gmail.com 1.2 Project Information Project Start Date The Project start date is 7 July 2015 Project End Date The Project end date is 30 June 2022 Project Coordinator Ahmed Abdi Mohamed Project Sponsor The Project is funded by World Bank, International Development Association (IDA), Multi-Partner Fund (MPF) 4 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.3 Project overview Ministry / Department The Project is under the supervision of the Ministry of Finance. Project number P151492 Strategic goals The strategic goals of the Project are as follows: a) Strengthening tax policy and Inland Revenue administration systems through improvements to organizational capacity for tax policy, systems for Inland Revenue administration, tax payer education and revenue bill support. b) Strengthening systems for public funds management transparency and accountability through support to key integrity pillars and the overall fiduciary environment. c) Introduction of a Rapid Response Facility, which will support the three governments - Federal Government of Somalia, Puntland State of Somalia and Somaliland and Finance Domestic Revenue Mobilization (DRM) and Public Financial Management (PFM) priorities. Achievement of The Project Management aims to achieve the goals through the strategic goals following means: a) Sustaining tax reform efforts through increases in the number of large and medium taxpayers automated processing and the number of analytical report dissemination. b) Enhancing transparency and accountability by improving information contained in the annual financial reports in line with Cash Basis of accounting in International Public Sector Accounting Standards (IPSAS) 2019 and the coverage and classification of in - year budget Reports and strengthening the implemented audit methods. c) Ensuring compliance with DRM and PFM policies by building the capacity of the respective Project Implementation Units in environmental and social safeguards through training. Other important The Project is designed an additional financing to cover the background financing gap, support the Project’s restructuring, improve other information aspects of the original Project and scale up and expand some carefully chosen Project activities. 5 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.3 Project overview (continued) Current situation The Project was formed to intervene in the following areas: that the Project was a) To address fiscal constraints, sustain the reform effort over formed to intervene. to help reach Heavily Indebted Poor Countries completion point. b) To increase the emphasis on and PFM institutional strengthening. Project duration The Project started on 1 June 2018 and ran up to 30 June 2022. 1.4 Banker The Central Bank of Somalia is the sole banker of the Project. 1.5 Auditors The Project is audited by the Office of the Auditor General, Federal Government of Somalia. 6 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.6 Roles and Responsibilities Name Title designation Role/Responsibilities Email Ministry of Finance Fatumo Farah Accountant General Fiduciary oversight fatumina.farah@gmail.com Saleiman Umar Director General Authorizing Officer dalkasom@gmail.com Ahmed Abdi Mohamed Project Coordinator Overall coordination ahmed.eco33@gmail.com Avv. Ahmed Isse Gutale Auditor General oag@oag.gov.so DRM Revenue component: Jafar Ahmed Director General Revenue Director General Revenue Jahmed.revenue@gmail.com Maxamed Osso DRM Supervisor DRM Advisor Maxamedosso@gmail.cim Najibullah Isak Head of DRM Revenue Department najiibsheekh@gmail.com Mohamed Somane Head of Tax Policy Unit Revenue Department Soomane11@gmail.com Ayan Isse Deputy Tax Policy Unit Revenue Department Aryanaser10@gmail.com Abdirahman Afrah Head of Audit Unit Revenue Department afraxbajmas@gmail.com Treasury component: Mohamed Hussein Treasury Director Treasury Department misse2021@gmail.com Robert Otala PFM Reforms Expert Treasury Department robert_otala@yahoo.com Anab Sabriye Accounting and Financial Management Treasury Department anab.sabriye@gmail.com Adam A. Adam SFMIS Director Treasury Department aadancade15@gmail.com Abdirizak Jimale Head of Cash Management Unit Treasury Department jimale19@gmail.com Integrity Pillar Component: Omar Nur Ali Director of Financial & Project Audits Auditor General omar.ali@oag.gov.so Department Procurement Component: Ismail Aweis Director of procurement Procurement Department ismailaweis1@gmail.com Samuel Akani Procurement Expert Technical Assistants Procurement Expert samuelakani31@gmail.com Ahmed Abdi Mohamed Project Coordinator Overall Coordination ahmed.eco33@gmail.com Leila Mohamed Monitoring and Evaluation Specialist Monitoring leilamohdd@gmail.com Abdi Fidow PFM Secretary abdisalamfidow@gmail.com 7 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.7 Funding summary The Project is for a duration of 7 years from July 2015 to June 2022 with an approved budget of United States of America Dollars (USD) 31,000,000.00 as highlighted in the table below: Source of funds Donor Amount Undrawn Commitment Received to Balance to 30/12/2022 30/12/2022 USD USD USD (A) (B) (A)-(B) Somalia MPF - World Bank 11,000,000.00 11,000,000.00 - International Development Association 20,000,000.00 11,262,780.01 8,737,219.99 31,000,000.00 22,262,780.01 8,737,219.99 1.8 Summary of overall Project performance The total approved budget for the fiscal year 2022 was USD 4,153,000 (Recurrent expenditure USD 3,353,000 and Capital expenditure USD 800,000). The DRM / PFM Project was approved on 7 July 2015 and has been effective since September 2015. Following the satisfactory implementation of the original Project, additional financing and restructuring to the original Project was provided as well as an extension of the Project closing date from June 2020 to June 2022 was granted, to allow for successful implementation of the Project’s original and new activities. The Project has achieved tangible results in a number of Project components. Some of the key achievements include: a) The drafting of the PFM Regulations to support the effective implementation of the new PFM Act, 2019. A consultative process with the inclusion of key stakeholders such as the Budget Directorate and Office of the Accountant General undertook the drafting and validation of the PFM Regulations. The team was supported by two Technical Assistants from African Development Bank for the Budget and PFM Technical Assistants for the Office of the Accountant General. The team completed the drafting and validation at the technical level. 8 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance (continued) b) In coordination with the Office of the Auditor General (OAG), the Project worked closely with senior officials in the OAG and Ministry of Finance to facilitate meetings on outstanding issues with regards to the preparation of accounts. Support was also provided to addressing the 2018 audit issues from both the statutory audit and the Ministry, Department, Agency (MDA) specific compliance audits. c) During the year, a number of capacity building activities were carried out and supported by the Project which included; (i) hands - on training of the Accounting and Reporting Department in the management of the audit process of the Federal Government of Somalia accounts for the Financial Year 2021 (ii) hand - holding the Public Sector Accounts and Reporting Department (PARD) staff in providing technical support to the MDAs in the preparation of their individual accounts and (iii) IPSAS re-enforcement training for the staff of externally funded Projects. d) The Physical construction of the new Ministry of Finance building has been completed and the building handed over to the Ministry. The Ministry is arranging for the offices to be furnished and occupied. e) Tax Policy capacity building workshops have been initiated. Federal Government of Somalia Tax Policy Unit has been established and a team of five staff is working in the unit. Two tax policy trainings have been conducted with 17 Federal Government of Somalia and Federal Member States officials in Addis Ababa and Garowe. As a result, revenue performance and forecasting capacity have been enhanced and support to senior Management has been improved. The tax policy trainings and capacity building activities are continuing for Federal Government of Somalia and Federal Member States on ‘learning by doing’ with on - line and the DRM team hopes to have in - person technical support once social distancing comes to an end. f) Reorganization of the Office of the Accountant General was a major activity that was undertaken in the Project to support the implementation of the new OAG structures and specifically the transformation of the PARD and operationalization of the new Internal Control and Compliance Department (ICCD) under the Office of the Accountant General. New staff were deployed to PARD and ICCD and various training initiatives are currently ongoing. The PARD has now commenced the provision of the necessary technical support to the MDAs to enable them to prepare and submit their individual accounts for the subsequent financial years. 9 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance (continued) g) A Comprehensive Operating Procedures Manual for PFM was developed and formally disseminated. The leadership is working on compliance. h) The Project developed the Cash Advance function and Advance settlement function in the Somalia Financial Management Information System (SFMIS) to allow MDAs to create Travel and Emergency cash advances. Upon approval of Cash Advance voucher, the system will automatically create Journal Voucher to debit the Advance Asset Account and credit Payable Account. The Cash Advance will be settled by Advance Settlement Voucher where the system will automatically create a Journal Voucher to debit the Travel expense Account and credit the Advances Asset Account. i) The Project initiated training needs assessment exercise on taxation process to assess and identify training needs of Revenue staff and develop a training plan based on the identified gap. j) The Project registered notable success in tax education campaign through operationalization of tax law that was approved by the Parliament across all major cities of the country. The Project accomplishments during the year are provided in the table below. The Project Development Objective is to strengthen systems of domestic revenue mobilization, expenditure control and accountability in the Federal Government and Somaliland. Project level results indicators Indicator 2022 Target Progress on output indicator Final quarter Cumulative Instruments (both tax and Baseline: 0 Actual: 0 3 non-tax) with basic processes Target: 4 automated at the Federal Government of Somalia. MDA audits (including pro- Baseline: 0 Actual: - 98.% poor sectors) completed and Target:75% published. Appropriated expenditures Baseline: 25% Actual: 78% 78% processed through the Target: 60% commitment system. 10 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance (continued) Intermediate results indicators Component One: Strengthening Tax Policy and Inland Revenue Administration systems. Indicator 2022 Target Progress on output indicator Final quarter Cumulative Federal Government of Baseline: 25 Actual: 0 103% Somalia revenue Target: 200 administration capacity to administer tax based on modern principles measured by the number of large and medium taxpayers automated processing. Federal Government of Baseline: 0 Actual: 0 1% Somalia improved tax policy Target: 2 capacity measured by the number of analytical report dissemination. Component Two: Strengthening Systems for the PFM transparency and accountability. Outcome 2: Strengthened controls needed for fiscal discipline and promote transparency and accountability. Indicator 2022 Target Progress on output indicator Final quarter Cumulative Improvements in information Baseline: Actual: Implemented contained in annual financial Revenue and Implemented reports with regard to Expenditure reports application of IPSAS 2019. by organizational and economic classification. Target: Donor funds under the control of government and Register for moveable Property and Equipment is included. 11 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance (continued) Indicator 2022 Target Progress on output indicator Final quarter Cumulative Improved coverage and Baseline: Actual: Achieved Achieved classification of data in in-year Only approved budget reports. budget and actual disclosed. Target: Timely in year budget reports include expenditure both at commitment and at payment stage. Percentage of payments made Baseline: 25% Actual: 78% 78% directly to vendors. Target: 60% Indicator 2022 Target Progress on output indicator Final quarter Cumulative Strengthened audit methods Baseline: Actual: Implemented implemented. Audit procedures Implemented and methodology not aligned with International Organization of Supreme Audit Institutions Standards. Target: Improved regularity audit methods applied for Government Financial Statement Audits. 12 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 1.8 Summary of overall Project performance (continued) Component Four: PFM reform oversight, coordination and management. Outcome 3: Provide a mechanism for a structured approach to PFM institutional capacity strengthening. Indicator 2022 Target Progress on output indicator This quarter Cumulative Citizen engagement measured Baseline: 0 Actual: 0 1,300 by the number of taxpayers Target: 1,000 persons; consulted / (196 females, educated (gender 1,094 males. disaggregated). Female 15%, Male 85%). 1.9 Summary of Project compliance There are no issues of non - compliance with applicable laws and regulations and the Financing Agreement. 13 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Accountant General, the Director General (Authorizing Officer) for the Ministry of Finance and the Project Coordinator for the DRM / PFM Project are responsible for the preparation and presentation of the Project’s Financial Statements, which give a true and fair view of the state of affairs of the Project as at the end of the financial year ended on 31 December 2022. This responsibility includes: a) Maintaining adequate financial management arrangements and ensuring that these continue to be effective throughout the reporting year; b) Maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial transactions of the Project; c) Designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the Project Financial Statements, and ensuring that they are free from material misstatements, whether due to error or fraud; d) Safeguarding the assets of the Project; e) Selecting and applying appropriate accounting policies; and f) Making accounting estimates that are reasonable in the circumstances. The Accountant General, the Director General (Authorizing Officer) for the Ministry of Finance and the Project Coordinator accept responsibility for the Project’s Financial Statements, which have been prepared in accordance with Cash basis of accounting in IPSAS 2019, as required by the Accountant General. The Accountant General, the Director General (Authorizing Officer) for the Ministry of Finance and the Project Coordinator are of the opinion that the DRM / PFM Project’s Financial Statements give a true and fair view of the state of the Project’s transactions during the financial period ended 31 December 2022 and of the Project’s financial position as at that date. The Accountant General, the Director General (Authorizing Officer) for Ministry of Finance and the Project Coordinator for DRM / PFM Project further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project’s Financial Statements as well as the adequacy of the systems of internal financial control. 14 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES (continued) The Accountant General, the Director General for Ministry of Finance and the Project Coordinator for DRM / PFM Project confirm that the Project has complied fully with applicable laws, regulations, procedures and the terms of external financing covenants, and that the Project’s funds received during the 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 Accountant General, the Director General (Authorizing Officer) for the Ministry of Finance and the Project Coordinator for the DRM / PFM Project on 2024 and signed by them as here below: Ahmed A. Mohamed Suleiman S. Umar Fatuma Farah Project Coordinator Director General Accountant General DRM / PFM Project Ministry of Finance Ministry of Finance 15 3. REPORT OF AUDITOR GENERAL INDEPENDENT AUDITOR’S REPORT TO THE PROJECT IMPLEMENTATION UNIT FOR DOMESTIC REVENUE MOBILIZATION AND PUBLIC FINANCIAL MANAGEMENT CAPACITY STRENGTHENING PROJECT NUMBER P151492 Unmodified opinion We have audited the accompanying financial statements of Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project, Project Number P151492 funded by International Development Association, which comprise the Statement of Receipts and Payments, Statement of Financial Assets as at 31 December 2022, Statement of Cash Flows, Statement of Budget Comparison and Actual amounts for the year then ended and notes to the Financial Statements as set out on pages 20 to 42. The Financial Statements have been prepared by the Project Management in accordance with the accounting policies described in Note 9.1 to the Financial Statements. In our opinion, the accompanying Financial Statements present fairly the cash and receipts and payments of the Project during the year ended 31 December 2022 in accordance with Cash Basis of accounting in International Public Sector Accounting Standards and in accordance with the accounting policies described in Note 9.1 to the Financial Statements and comply with the related Financing Agreement. Basis for opinion We conducted the audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for Audit of the Financial Statements section of our Report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants’ (IESBA) Code of Ethics for Professional Accountants and the ethical requirements relevant to the audit of the Financial Statements. We have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence We have obtained is sufficient and appropriate to provide a basis for our opinion. 16 3. REPORT OF AUDITOR GENERAL (CONTINUED) Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use Without modifying our opinion, we draw your attention to Note 9.1 of the Financial Statements which describes the basis for accounting. The Financial Statements are prepared to assist Federal Government of Somalia comply with specific financial reporting requirements of the International Development Association. As a result, the Financial Statements may not be suitable for any other purpose. Our Report is intended solely for the information, distribution and use by the International Development Association and the Federal Government of Somalia. Other Information The Management of the Project is responsible for the other information. Other information comprises Project Information and Overall Performance included in the Report but does not include the Financial Statements and our Auditor’s Report thereon. Our opinion on the Financial Statements does not cover the other information and We do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work We have performed on the other information, we conclude that there is a material misstatement of this other information, We are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and those charged with governance for the Financial Statements The Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the financial reporting process. 17 3. REPORT OF AUDITOR GENERAL (CONTINUED) Auditor’s responsibilities for the audit of the Financial Statements our objective was 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing 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. As part of an audit in accordance with International Standards on Auditing, We exercise professional judgment and maintain professional scepticism throughout the audit. We also: a) 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. b) 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 Project's internal control. c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. d) Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the financial statements represented the underlying transactions and events in a manner that achieves fair presentation. 18 3. REPORT OF AUDITOR GENERAL (CONTINUED) Auditor’s responsibilities for the audit of the financial statements (continued) We communicate with 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 We identified during our audit. H.E. Avv. Ahmed Isse Gutale Auditor General Federal Republic of Somalia Mogadishu, Somalia 29 March, 2024 The matters raised in this report are only those that came to our attention during the course of our audit and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. You should assess recommendations for improvements for their full impact before they are implemented. This report has been prepared solely for your use as project management and should not be quoted in whole or in part without our prior written consent. No responsibility to any third party is accepted as the report has not been prepared and is not intended for any other purpose. 19 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 4. STATEMENT OF RECEIPTS AND PAYMENTS Notes 31 December 31 December Cumulative Cumulative 2022 2021 Project Project Balances Balances 31 December 31 December 2022 2021 A B C=A+D D USD USD USD USD Receipts External Assistance Grants 10.2 1,970,619.02 3,980,813.41 22,258,750.41 20,288,131.39 Other receipts -Refunds 10.3 - - 4,321.17 4,321.17 Total receipts 1,970,619.02 3,980,813.41 22,263,071.58 20,292,452.56 Payments Compensation of employees 10.4 6,000.00 15,000.00 28,200.00 22,200.00 Use of goods and services 10.5 1,848,512.41 3,952,410.24 17,332,572.95 15,484,060.54 Capital expenditure 10.6 172,936.00 208,230.00 4,766,401.33 4,593,465.33 Non-financial private enterprises 10.7 3,340.00 5,644.00 8,984.00 5,644.00 Total payments 2,030,788.41 4,181,284.24 22,136,158.28 20,105,369.87 (Deficit) / surplus for the year 10.9 (60,169.39) (200,470.83) 126,913.30 187,082.69 20 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 DECEMBER 2022 31 December 31 December Notes 2022 2021 USD USD Financial assets Cash and cash equivalents 10.8 126,913.30 187,082.69 Total financial assets 126,913.30 187,082.69 Represented by: Accumulated surplus from the previous year 10.9 187,082.69 387,553.52 Net deficit for the current year 10.9 (60,169.39) (200,470.83) Fund balance 126,913.30 187,082.69 The Financial Statements were approved by the Project Management on _____________2024 and signed on its behalf by: Abdullahi Abdirahman Ahmed Ahmed A. Mohamed Suleiman S. Umar Project Accountant Project Coordinator Authorizing Officer DRM / PFM Project DRM / PFM Project Ministry of Finance The accounting policies and explanatory notes to these Financial Statements on pages 27 to 42 form an integral part of the financial statements. 21 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 6. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 31 31 Notes December December 2022 2021 USD USD Cash flow from operating activities Receipts External Assistance Grants 10.2 1,970,619.02 3,980,813.41 Total Receipts 1,970,619.02 3,980,813.41 Payments Compensation of employees 10.4 6,000.00 15,000.00 Use of goods and services 10.5 1,848,512.41 3,952,410.24 To non-financial private enterprises 10.7 3,340.00 5,644.00 Total Expenses 1,857,852.41 3,973,054.24 Net cash flows from operating activities 112,766.79 7,759.17 Cash flows from investing activities Acquisition of Property and Equipment 10.6 (172,936.00) (208,230.00) Net cash flows from investing activities (172,936.00) (208,230.00) Net decrease in cash and cash equivalents (60,169.39) (200,470.83) Cash and cash equivalents at beginning of the year 187,082.69 387,553.52 Cash and cash equivalents at the end of the year 10.8 126,913.30 187,082.69 22 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 7. STATEMENTS OF BUDGET COMPARISON WITH ACTUAL AMOUNTS a) Statement of Budget Comparison with Actual amounts for the financial year ended 31 December 2022 Notes Final Budget Percentage Original budget Revisions Actual budget variance Variance Receipts USD USD USD USD USD % External assistance - grants 10.2 4,153,000.00 - 4,153,000.00 1,970,619.02 2,182,380.98 52.55% Other cash receipts 10.3 - - - - - - Total receipts 4,153,000.00 - 4,153,000.00 1,970,619.02 2,182,380.98 52.54% Recurrent expenses Compensation of employees 10.4 20,000.00 - 20,000.00 6,000.00 14,000.00 70.00% Use of goods and services 10.5 3,333,000.00 - 3,333,000.00 1,848,512.41 1,484,487.59 44.54% Non-financial private enterprises 10.7 50,000.00 - 50,000.00 3,340.00 (46,660.00 93.32% Total recurrent expenditure 3,403,000.00 - 3,403,000.00 1,857,852.41 1,545,147.59 45.40% Capital expenditure Capital 10.6 750,000.00 - 750,000.00 172,936.00 577,064.00 76.94% Total capital expenditure 750,000.00 - 750,000.00 172,936.00 577,064.00 76.94% Total expenditure 4,153,000.00 - 4,153,000.00 2,030,788.41 2,122,211.59 51.10% Deficit - - - (60,169.39) 60,169.39 23 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 b) Statement of Budget Comparison with Actual -Project inception to date (Based on Economic Classification) Notes Original Revisions Final Actual Budget % budget Budget variance variance Receipts USD USD USD USD USD % External Assistance - Grants 10.2 31,000,000.00 - 31,000,000.00 22,258,750.41 8,741,249.59 28.20% Total cash receipts 31,000,000.00 - 31,000,000.00 22,258,750.41 8,741,249.59 28.20% Recurrent expenses Compensation of employees 10.4 50,000.00 - 50,000.00 28,200.00 21,800.00 43.60% Use of goods and services 10.5 24,850,000.00 - 24,850,000.00 17,332,572.95 7,517,427.05 30.25% To non-financial private enterprises 10.7 300,000.00 - 300,000.00 8,984.00 291,016.00 97.01% Total Recurrent Expenditure 25,200,000.00 - 25,200,000.00 17,369,756.95 7,830,243.05 31.07% Capital expenditure Capital - Vehicles 10.6 5,800,000.00 - 5,800,000.00 4,766,401.33 1,033,598.67 17.82% Total capital expenditure 5,800,000.00 - 5,800,000.00 4,766,401.33 1,033,598.67 17.82% Total expenditure 31,000,000.00 - 31,000,000.00 22,136,158.28 8,863,841.72 28.59% Surplus / (deficit) - - - 122,592.13 (122,592.13) Refunds 10.3 - - - 4,321.17 (4,321.17) Surplus / (deficit) - - - 126,913.30 (126,913.30) 24 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 8. STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS Previous years Current Current Current Cumulative 2015 – 2021 financial year financial year financial year – Inception to date Previous Reporting Cumulative Quarters Quarter 2022 USD USD USD USD USD Sources of Funds A B C D=B+C E=A+D Somalia MPF – World Bank 11,000,000.00 - - - 11,000,000.00 International Development Association – World Bank 9,288,131.39 1,949,610.62 21,008.40 1,970,619.02 11,258,750.41 Total Sources of Funds (A) 20,288,131.39 1,949,610.62 21,008.40 1,970,619.02 22,258,750.41 Expenditure By Sub - component (Activities) MPF PFM Reform Oversight 2,182,729.89 - - - 2,182,729.89 Somalia Financial Management Information System 1,985,132.78 - - - 1,985,132.78 Expenditure Control, Procurement, Accounting and Reporting 283,298.11 - - - 283,298.11 Macro-fiscal policy, planning and budget prep. 1,455,940.00 - - - 1,455,940.00 Treasury management, budget execution, procurement, accounting 3,835,030.02 - - - 3,835,030.02 Strengthening the integrity pillars 126,476.95 - - - 126,476.95 PFM professionalization 316,679.26 - - - 316,679.26 Project oversight, coordination and management 217,274.63 - - - 217,274.63 Strengthening systems for the Public Funds Management, Transparency 264,834.09 - - - 264,834.09 PFM reform oversight, coordination and management 380,025.00 - - - 380,025.00 International Development Association Improving organizational capacity for tax policy 410,979.80 - - - 410,979.80 Improving systems for inland revenue administration - Office / Modernization 1,494,841.63 413,020.31 25,038.00 438,058.31 1,932,899.94 Taxpayer education and facilitation to promote voluntary compliance 79,425.00 - - - 79,425.00 Sub – total carried forward 13,032,667.16 413,020.31 25,038.00 438,058.31 13,470,725.47 25 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 8. STATEMENT OF USES AND APPLICATION OF FUNDS BY COMPONENTS/PROGRAMS (continued) Previous years Current Current Current Cumulative 2015 – 2021 financial year financial year financial year – Inception to date Previous Reporting Cumulative Quarters Quarter 2022 USD USD USD USD USD A B C D=B+C E=A+D Sub – total brought forward 13,032,667.16 413,020.31 25,038.00 438,058.31 13,470,725.47 Supporting the Revenue Bill consultations and bridging operationalization 155,540.00 - - - 155,540.00 Treasury management, budget execution, Procurement, and reporting 2,676,537.91 - - - 2,676,537.91 Strengthening the Integrity Pillars 1,126,446.01 1,170,452.34 - 1,170,452.34 2,296,898.35 PFM Professionalization 5,644.00 - - - 5,644.00 Construction of the Ministry of Finance, second phase) 1,228,550.00 - - - 1,228,550.00 Project reform Oversight, coordination and Management 1,879,984.79 422,277.76 - 422,277.76 2,302,262.55 Total Expenditure by Sub - Comp.(B) 20,105,369.87 2,005,750.41 25,038.00 2,030,788.41 22,136,158.28 Fund Source (A - B) 182,761.52 (56,139.79) (4,029.60) (60,169.39) 122,592.13 Refund 4,321.17 - - - 4,321.17 Fund balance 187,082.69 (56,139.79) (4,029.60) (60,169.39) 126,913.30 26 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS 9.1 Significant Accounting Policies These are the specific principles, bases, conventions, rules and practices adopted by the Project in preparing and presenting the financial statements. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all transactions unless otherwise stated. The specific policies applied are described in the notes below: 9.1.1 Statement of Compliance and Basis of preparation of the accounts The financial statements have been prepared in accordance with PFM Act (2019), PFM Regulations (2020) and related legal framework and Cash Basis of accounting in IPSAS (2019). Pursuant to Paragraph (1) and in accordance with article (43) (2) of the PFM Act (2019) and Article 94 (1), (2) and (a) and (h) of the PFM Regulations (2020), the Financial Statements have been prepared using IPSAS, financial reporting under the Cash Basis of accounting (2019) (as issued by the IPSAS Board of the International Federation of Accountants) and as set out in the accounting policy note below. The Cash Basis of accounting has been supplemented with appropriate disclosures as required under Article 103 (2) of the PFM Regulations (2020). The Accounting policies adopted have been applied consistently throughout. 9.1.2 Reporting entity These financial statements are for DRM / PFM Project under the Federal Government of Somalia and encompass the reporting entity as specified in the PFM Act (2019) and Appropriation Act, 2020. 9.1.3 Reporting currency The functional currency of the Federal Government of Somalia is the USD because: a) Government revenues and expenditures are made in that currency; b) Most of the financing is provided in that currency; and c) Bank transactions and balances are principally in USD. 27 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.4 Reporting year The DRM / PFM Project reporting year is for the year ended 31 December 2022 for financial year that runs from 1 January to 31 December, the calendar year. These financial statements are therefore for the year 1 January 2022 to 31 December 2022. The comparative figures reflect the 12 months ended 31 December 2021. 9.1.5 Payments by third parties The DRM / PFM Project may also benefit from goods and services purchased on its behalf as a result of cash payments made to third parties during the year. Requests for third party payments are processed through the use of country systems and at the request of the entity, the donor makes payment directly to a third party (such asb supplier, contractor and consultant) for eligible expenditures. An example is the direct payments processed by the World Bank upon requests from the Federal Government of Somalia which are formally advised and verified by the Government and are included in the financial statements. On the other hand and through Direct Execution, third parties including donors may make payments to external suppliers outside the country systems and provide goods and services including in-kind donations e.g. food aid, big contract of works, vehicles, equipment, technical assistance or personnel services. The payments made by the third parties outside the country systems do not constitute cash receipts or payments managed by the Recurrent DRM / PFM Project even though the entity does benefit from such payments. Such payments are therefore not included in the Statement of Receipts and Payments but are reported and disclosed accordingly where the financial value of the goods and services received can be reliably verified and determined by DRM / PFM Project. During the reporting year, there were no third party payments. 9.1.6 Recognition of receipts The Project recognises all receipts from the various sources when the event occurs, and the related cash has actually been received by the Government. a) Transfers from the Treasury and Other General Government Units/Entities Where transfers are received from the Treasury and/or other General Government Units/Entities, these are recognized in the Project books of account when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity (Project). 28 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.6 Recognition of receipts (continued) b) Other receipts These include receipts such as proceeds from disposal of assets and refunds. These are recognised in the financial statements the time associated cash is received. c) External Assistance External assistance is received through grants and loans from multilateral and bilateral development partners. Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity (Project) or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowing Includes external loans acquired by the Project and is treated on cash basis and recognized as a receipt during the year they were received. Undrawn external assistance These are loans and grants at reporting date as 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. An analysis of the Project’s undrawn external assistance is shown in the funding summary and in Note 10.2 under Section 10 of these Financial Statements. 29 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.6 Recognition of receipts (continued) d) Other Assistance Relates to resources received from Non - Governmental Organisations and other assistance that is voluntarily provided by, for example, individuals, private entities and charitable and other organizations. During the reporting year, only external assistance grants were received by the Project. 9.1.7 Recognition of payments Payments represent outlays of cash made by the entity or other agencies for and on behalf of the Project. All payments are recognised and included in the Financial Statements when cash is paid out. a) Compensation of employees Salaries and Wages, Allowances, Statutory Contribution for employees are recognized in the period when the compensation is paid. b) Use of goods and services Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they are included in the Statement of Financial Assets as financial liabilities with supporting schedules. 9.1.8 Property, Plant and Equipment and other non-current assets Non - current assets principally comprise land, buildings, plant, vehicles, equipment and any other capital assets controlled by the DRM / PFM Project. Purchases of property, plant, equipment and other non - current assets have been expensed fully in the year of purchase. However, these assets are recorded in Property and Equipment Registers at historical cost as a memorandum record. 30 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.9 Comparative figures for previous year Comparative figures are disclosed for all numerical information disclosed in these financial statements as required. 9.1.10 Foreign currency transactions and foreign operations Foreign currency transactions denominated in foreign currencies would be recorded into USD and incorporated in the Statement of Receipts and Payments at the exchange rate ruling on the date of the transaction. Cash balances denominated in foreign currency at the year - end would be translated at the closing rate of exchange with the resulting exchange gains / (losses) dealt with as a reconciling item between the opening and closing cash balances for the financial year. 9.1.11 Cash and cash equivalents Cash and cash equivalents comprise cash and bank. Bank account balances include amounts held at Central Bank of Somalia at the end of the financial year. 9.1.12 Refunds of previous year receipts and expenditures Receipts refunded from the previous years are recorded as expenditures in the current year. Expenditures refunded from previous years are recorded as receipts in the current year. 9.1.13 Employee benefits Employee benefits include salaries, allowances and other related - employment costs and these have been recognized in the Financial Statements only when actual payments are made. 9.1.14 Contingencies Contingent liabilities are recorded and disclosed when the contingency becomes evident. Contingent assets are neither recognized nor disclosed. 31 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 9. ACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS (CONTINUED) 9.1.15 Original and final approved budget and comparison of actual and budget amounts The approved budget is developed on the same accounting basis (cash basis), same classification basis (Government Finance Statistics, 2014 economic classification), and for the same year (1 January 2022 to 31 December 2022) as for the Financial Statements. This year’s original budget approved is USD 4,153,000.00 that was approved 30 June 2022. The Project budget has not revised downwards. The original budget objectives and policies, the subsequent revisions and the material differences between the budget and actual amounts, are explained more fully under Section 7 of these Financial Statements. A commitment control system is in place and is implemented through the SFMIS with adequate system of controls to ensure that no expenditure can be incurred in excess of the approved budget as may be revised. 9.1.16 Authorization date The Financial Statements of the DRM / PFM Project were authorized for publication on __________________by the Accountant General of the Federal Government of Somalia. 32 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS 10.1 Exchange rates All monetary amounts in the financial statements are expressed in USD, the transaction and Project reporting currency. The USD closing rates for major currencies were as per the table below: Actual Actual 31 December2022 31 December 2021 USD USD Somali Shilling (SOS / USD) 22,500 22,500 British Pound (GBP / USD) 0.64158 0.81757 Euro (Euro / USD) 0.82574 0.97890 10.2 External assistance External assistance was received in the form of grants from multilateral donor agencies under agreements specifying the purposes for which the assistance will be utilized. The amounts in the statement of receipts and payments are only recognized when received by and are under the control of the Federal Government of Somalia. The amount of external assistance received in the year ended 31 December 2022 consists of the following: 33 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.2 External assistance (continued) Current FY Current FY 2022- 2022 – Current Cumulative balances (Project- Year balances Previous Reporting to-date) Quarter Quarter 4 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Grants received during the year: World bank - IDA 1,970,619.02 - 1,970,619.02 3,980,813.41 11,258,750.41 9,288,131.39 Somalia MPF - World Bank - - - - 11,000,000.00 11,000,000.00 1,970,619.02 - 1,970,619.02 3,980,813.41 22,258,750.41 20,288,131.39 34 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.2 External assistance (continued) Analysis of the purpose for which the external assistance was received is as follows: Current FY Current FY 2022 - 2022 – Current Cumulative balances (Project-to- Year balances Previous Reporting date) Quarter Quarter 31 December 31 December 31 December 31 December 2022 2021 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Grants received during the year: IDA 1,970,619.02 - 1,970,619.02 3,980,813.41 22,258,750.41 20,288,131.39 1,970,619.02 - 1,970,619.02 3,980,813.41 22,258,750.41 20,288,131.39 35 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.2 External assistance (continued) Non – compliance with significant terms and conditions There have been no instances of non-compliance with terms and conditions about loan or grant agreements or guarantees which have resulted in cancellation of the assistance or have given rise to an obligation to return the assistance previously given. Undrawn external assistance - grants The undrawn grant facilities available to fund future operations under binding agreements and where the terms and conditions are to be met consist of: 31 December 31 December 2022 2021 USD USD World Bank - IDA 8,741,249.59 10,711,868.61 8,741,249.59 10,711,868.61 Undrawn grant facilities include an amount of USD 8,741,249.59 from World Bank - IDA and none from Somalia MPF – World Bank which is stipulated for use as development assistance. The respective financing agreements provide for the details of the restrictions and / or criteria for the eligible expenditures. 36 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.3 Other cash receipts Other cash receipts represent any revenues collected by the Project other than Transfers from other Government units. These comprise of the following: Current FY Current FY Year balances Cumulative balances (Project- 2022 - Previous 2022 - Current to-date) Quarter Reporting Quarter 31 December 31 December 31 December 31 December 2022 2021 2022 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Refunds - - - - 4,321.17 4,321.17 - - - - 4,321.17 4,321.17 37 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.4 Compensation of employees Principally comprise of: Current FY Cumulative balances (Project- Year balances Current FY 2022 – Current to-date) 2022- Previous Reporting 31 December 31 December 31 December 31 December Quarter Quarter 2022 2021 2022 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Salaries and allowances 6,000.00 - 6,000.00 15,000.00 28,200.00 22,200.00 6,000.00 - 6,000.00 15,000.00 28,200.00 22,200.00 38 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.5 Use of goods and services These are mainly: Cumulative balances (Project-to- Year balances Current FY date) 2022 – Current 31 Current FY 2022- Reporting December 31 December 31 December 31 December Previous Quarter Quarter 2 2022 2021 2022 2021 A B C = A+B D E= C + F F USD USD USD USD USD USD Audit fees 363,830.99 - 363,830.99 644,875.61 1,132,527.90 768,696.91 Bank commissions 14,738.87 - 14,738.87 20,653.06 96,492.71 81,753.84 Consulting and professional 929,134.16 25,038.00 954,172.16 2,692,723.06 11,690,343.31 10,736,171.15 Education expenses - - - - 1,328,397.26 1,328,397.26 Fuel and lubricant 4,421.74 - 4,421.74 7,195.00 45,158.54 40,736.80 Office materials and other 43,272.70 - 43,272.70 64,855.25 425,822.81 382,550.11 Repairs and maintenance 5,442.00 - 5,442.00 15,600.00 89,253.00 83,811.00 Training expenses 298,439.59 - 298,439.59 312,069.88 1,466,187.22 1,167,747.63 Travel expenses 115,924.36 - 115,924.36 103,363.38 621,041.68 505,117.32 Utilities 48,270.00 - 48,270.00 91,075.00 437,348.52 389,078.52 1,848,512.41 25,038.00 1,848,512.41 3,952,410.24 17,332,572.95 15,484,060.54 39 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.6 Capital expenditure – consumption of non-current assets As explained in accounting policy, all non-current assets purchased during the reporting year are expensed during the year of purchase. The value of capital expenditure acquired during the financial reporting period and expenses comprise: Current FY Cumulative balances Year balances Current FY 2022 – (Project-to-date) 2022- Current 31 31 Previous Reporting 31 December December 31 December December Quarter Quarter 2 2022 2021 2022 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Buildings and structures - - - - 1,228,550.00 1,228,550.00 Information and Communication Technology 64,436.00 - 64,436.00 3,490.00 2,383,746.63 2,317,310.63 Other Property and Equipment 38,000.00 - 38,000.00 - 873,224.70 835,224.70 Machinery, furniture and equipment 70,500.00 - 70,500.00 204,740.00 280,880.00 72,390.00 172,936.00 - 172,936.00 208,230.00 4,766,401.33 4,453,475.33 40 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and financial statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.7 To non-financial private enterprises The Government will pay to non-financial private enterprises during the year to the following: Current FY Current FY 2022 Cumulative balances Year balances 2022- – Current (Project-to-date) Previous Reporting 31 December 31 December 31 December 31 December Quarter Quarter 2 2022 2021 2022 2021 A B C = A+B D E= C+F F USD USD USD USD USD USD Non-financial private enterprises 3,340.00 - 3,340.00 5,644.00 8,984.00 5,644.00 3,340.00 - 3,340.00 5,644.00 8,984.00 5,644.00 41 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 10. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS (continued) 10.8 Cash and Cash equivalents Cash and cash equivalents comprise bank balances of all bank accounts operated by the Project which are held at the Central Bank of Somalia and are part of Treasury Single Account. 31 December 31 2022 December 2021 USD USD Project Designated Account - 1080 126,913.27 187,082.69 Rounding differences 0.03 - 126,913.30 187,082.69 The Bank Statement of the Designated Account has a balance of USD 126,913.30. The amount is restricted to eligible expenditures of the Project in line with the Financing Agreements. 10.9 Accumulated Funds (Fund balance / surplus) The accumulated (deficit) as at the reporting year-end was as follows: 31 December 31 December 2022 2021 USD USD At beginning of the year, 1 January 2022 187,082.69 387,553.52 Deficit for the reporting year (60,169.42) (200,470.83) Rounding differences 0.03 - Fund balance at end of the year, 31 December 2022 126,913.30 187,082.69 42 Federal Government of Somalia Domestic Revenue Mobilization and Public Financial Management Capacity Strengthening Project Report and Financial Statements For the year ended 31 December 2022 11. SUMMARY OF PROJECT PROPERTY AND EQUIPMENT REGISTER Historical cost Additions Disposals Historical cost brought during the during the carried forward forward 2022 year 2022 year 2022 2022 USD USD USD USD Buildings and structures 1,228,550.00 - - 1,228,550.00 Information and Communication Technology 2,317,310.63 64,436.00 - 2,381,746.63 Other Property and Equipment 835,224.70 38,000.00 - 873,224.70 Machinery, furniture and equipment 72,390.00 70,500.00 - 142,890.00 4,453,475.33 172,936.00 - 4,626,411.33 43