REPUBLIC OF KENYA FFICE OF THE AUDITOR-GENERAL REPORT THE WORLD BANK RECEIVED IN CD'S OFFICE Received by ............................................ D ate ......... . T .. ........ O F Action by ................................................ CC ............................................................ THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT (IDA CREDIT NO.5526-KE) FOR THE YEAR ENDED 30 JUNE 2016 THE NATIONAL TREASURY WFFJE O~THE AIUDITORk, Cp. P P Q,Box 30084-00100 NAIRO' 30 SEP 2016 THE NATIONAL TREASURY KENYA PETROLEUM TECHNICAL ASSISTANCE (KEPTAP) PROJECT IDA CREDIT NUMBER 55260 - KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2016 Prepared in accordance with the Cash Basis of Accounting Method of the International Public Sector Accounting Standards (IPSAS) KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS 1. PROJECT INFORMATION AND OVERALL PERFORMANCE....................................................... 3 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES.............................................. 10 3. REPORT OF THE INDEPENDENT AUDITORS ON THE KENYA PETROLEUM TECHNICAL ASSISTANCE (KEPTAP) PROJECT ............................................................................ 11 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE, 2016.. 13 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE, 2016............... 14 6. STATEMENT OF CASHFLOW FOR THE YEAR ENDED 30TH JUNE, 2016 ............................... 15 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS.................................. 16 8. NOTES TO THE FINANCIAL STATEM ENTS .................................................................................. 17 2 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office The official name of the project isKenya Petroleum Technical Assistance (KEPTAP)Project. The project is located at: Anniversary Towers, North Tower 7 Floor, University Way/Monrovia Street NAIROBI Objective The project development objective (PDO) is to strengthen the capacity of the Government of Kenya to manage its petroleum sector and wealth for sustainable development impacts. Address: The National Treasury Anniversary Towers, North Tower 7T Floor, University Way/ Monrovia Street Nairobi KENYA. The address of its registered office is: P.O.BOX 30007-00100 NAIROBI Tel: 020 -2122271/4 Email: info@piu.go.ke Contacts: Telephone: (254) 020-2210271/4 E-mail: info@piu.go.ke 3 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 1.2 Project Information Project Start Date: The project start date is 246-1October, 2014 Project End Date: The Project end date is 280 February, 2021 Project Manager: The project manager is Mr. Ray Charles Musau Project Sponsor: The project sponsor is International Development Association (IDA) 1.3 Project Overview Kenya Petroleum Technical Assistance (KEPTAP) Project development objective is to strengthen the capacity of the Government of Kenya to manage its petroleum sector and wealth for the sustainable development. KEPTAP Project has three (3) main components, each with multiple sub-components, plus a separate component for project implementation: i. Component A: Petroleum Sector Reforms and Capacity Building. The component will be implemented under the Ministry of Energy and Petroleum. ii. Component B: Revenue and Investment Management/Reforms and Capacity Building. The component will be implemented under the National Treasury. iii. Component C: Sustainable Impact of Oil and Gas Industry/Reforms and Capacity Building. The component will be implemented under the Ministry of Industrialization and Enterprise Development. The objective of Component B (Revenue and Investment Management) is to support strengthening GoK's capacity to manage revenue streams from the petroleum sector for sustainable development impacts, including:- i. Revenue Management ii. Transparency and Accountability iii. Public Investment Management iv. Sustainable Impact of Oil and Gas Industry v. Strengthen Upward and Downward Linkages vi. Education and Skills Development The Project Implementation Unit (PIU) at the National Treasury assists in administrative responsibility for the day to day operations under Component B of the Kenya Petroleum Technical Assistance (KEPTAP) Project. The PIU which is also currently implementing the Infrastructure Finance and Public Private Partnerships (IFPPP) and the Financial Sector Support Project. The implementing agencies under this component include the National Treasury, Office of the Auditor General, Commission for Revenue Allocation (CRA) and the Kenya Revenue Authority (KRA). The progress of project implementation as at 30th June, 2016 is as indicatedbelow: 4 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCLU YEAR ENDED JUNE 30, 2016 The project is in YR2 and the follow ing achievements are in reference to the YR2 targets as documented in the Project Appraisal Document. (i) Indicator 2 - Repor- Published, and made publicly available, in accordance with Internationally recognized transparency principles and operational. YR 2Target-. No Reporting Achievement - Working group to prepare report to be established later in this YRE. (ii) Indicator 2- Sovereign Wealth Fund established, in accordance with internationally accepted principles and operational. YR 2 Target- Policy Options for SWF prepared Achievement- The preparation of Policy options for the SI/F to begin in YR3 of the Project. Component B (i) Indicator I- Fiscal policy rule in place for transfer of oil/gas revenue to the annual budget. YR 2 Target- Fiscal policy rule in place Achievement - Training on Fiscal rule was approved for YR1 period, and now to be undertaken in YR2, latest by Octobei 2076. Process of putting Fiscal rule in place to begin in YR3 and continued into YR3. In addition, further capacity building in designing fiscal framework to be organized. (ii) Indicator 2- Multi-year perspective in fiscal planning, expenditure policy and budgeting. YR 2 Target-Multi-year budget formulation in place but no clear process of investment project selection and recurrent cost budgeting. Achievement - . No clear process of investment project selection as of yet, but rules on investment selection to be developed in YR3 of the Project. (ii) Indicator 3- Legal and Institutional framework for resource revenue management (including laws of resource taxation, revenue sharing, stabilization fund(s) and system for revenue forecasting) in place. YR 2 Target- No Achievement- This is an ongoing annual exercise over the life of the Project, and the National Council for Law Reporting to be co-opted later after YR3. however, a draft SWF Bill has been developed by the National Treasury and submitted to the Office of the Attorney General for legal reviewing. The Bill is due for another round of revision with a view to finalizing it. Stabilization Component (Fund) is one of the components the SVT Bill and in implementation phase of the legislation as well. Oil and gas taxation is part of Finance Act, and mining and petroleum sector laws have been updated. (ii) Indicator 4- The Score of Public Expenditure and Financial Accountability (PEFA) Performance Indicator (PI) 6 (Comprehensiveness of information included in the budget information) improved. 5 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 YR 2 Target- C Achievement- This is an annual target during the life of the Project and shall be initiated in the current YR2 and updated annually. ii) Indicator 5- Number of staff trained at Treasury and KRA to forecast, collect and manage oil revenues. YR 2 Target- 6 Achievement- A total of 16 officers from the National Treasury and KRA were trained in economic modeling and forecasting (fiscal analysis for resource industries - petroleum revenue) during FY2015/2016. The training was held in Naivasha, Kenya, in June 2016, and KEPTAP managed to cost-effectively train more (additional officers from the CBK, CRA and OAG participated) government officers than was initially planned. 1.4 Bankers The following are the bankers for the current year: Central Bank of Kenya Haile Selassie NAIROBI. 1.5 Auditors Office of the Auditor General Anniversary Towers University Way/ Monrovia Street NAIROBI. 6 KENYA PETROLEUIV TECHNIC AL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 1.6 Roles and Responsibilities Names Title Key qualification Responsibilities designation Eng. Stanley Director, PPPU * Engineering Degree Project Kamau Coordination at the National Treasury Mr. Ray Charles Project Manager Project Musau Management Mr. Maurice 0. Financial * MBA( Finance Option) Project financial Pedo Management * Bachelor of Commerce management Specialist (Finance Option) * CPA(K) Ms. Danae N. Procurement * Bachelor of Commerce Procurement Ottaro Specialist ( Business Management Administration) * MCIPS (UK) Ms. Gaudencia N. Assistant Project * Bachelor of Commerce Provide Mukisu Accountant (Finance Option) Management, * CPA(K) Financial and Accounting Support to the Project. Ms. Norah M. Ngei Office Manager * Bachelor of Commerce Office (Marketing Option) Administration 1.7 Funding summary The Project is for a duration of 7(seven) years from 24thJuly 2014 to 281 February, 2021. Component B has an approved budget of US$ 6.65 Million equivalent to KShs665 Million as highlighted in the table below: at- 30h .30hJn, 206 (i) Grant (ii) Loan International 6.65 Million 665 0.602 60.2 6.05 6( Development Million Million Million Million Mil] Association- IDA Total 6.65 665 0.602 60.2 6.05 6( Million Million Million Million Million Mill 7 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 1.8 Summary of Overall Project Performance: The overall objective of Component B (Revenue and Investment Management: Reforms and Capacity Building) is to support strengthening GoK's capacity to manage revenue streams from petroleum sector for sustainable development. A summary of capacity building activities implemented during FY 2015/2016 are summarized in the table below: TITLE OF DURATION TRAINING NO AGENCY TRAINING INSTITUTION OFFICERS TRAINED 1. Lead Auditor for 5 days PetroSkills, UK 2 Office of the Auditor Health & Safety General (IOSH) and Environment 2. Overview of 5days IHRDC,USA 15 National Treasury International Kenya Revenue Petroleum Business Authority, Commission on Revenue Allocation and Office of the Auditor General 3. Petroleum Law 5days IHRDC,USA 9 National Treasury, Kenya Revenue Authority, Commission on Revenue Allocation & Office of the Auditor General 4. Expanded Petroleum 5days PetroSkills, UK 3 Office of the Auditor Economics General & National Treasury 5. Petroleum Risk and 5days PetroSkills, UK 2 National Treasury Decision Analysis 6. Taxation of Oil & Gas 5days Strathmore 3 Commission on University Revenue Allocation 7. Contract 5days World Bank 2 National Treasury Management 8. Economic Modelling 7days IMF 25 National Treasury, and Forecasting: Fiscal Kenya Revenue Analysis for Resource Authority &Central Industries Bank of Kenya TOTAL NO 61 TRAINED 8 KENYA PETROLEUM TEC-NICAL ASSISTANCE PRCJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 B. Benchmarking/Study Placements and Workshops TITLE OF WHEN DURATION DESTINATION PARTICIPATI AGENCY WORKSHOP PLANNED ON/NO OFFICERS 1. Benchmark May, 2016 5days Australia 5(Five) Officers Commission Study/study, on Revenue placement to Allocation Australia. 2. Benchmark May & June, 5days Uganda and India 3(Three) Office of the Study to Uganda 2016 Officers Auditor and India General 3. Oil & Gas March, 2016 4days Kisumu Cluster 46(Forty Six) Commission Cluster Officers on Revenue workshop Allocation 4. Oil & Gas August, 2015 4days Mombasa Cluster 45( Forty Five) Commission Cluster Officers on Revenue workshop Allocation 1.9 Summary of Project Compliance There are no indications of non-compliance of the KEPTAP Project on the overall project performance. 9 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the National Treasury and the Project Coordinator for Kenya Petroleum Technical Assistance (KEPTAP) 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 for and as at the end of the financial year ended on June 30, 2016. 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, and 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 (vi) making accounting estimates that are reasonable in the circumstances. The Principal Secretary for the National Treasury and the Project Coordinator for Kenya Petroleum Technical Assistance (KEPTAP)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 the National Treasury and the Project Coordinator for Kenya Petroleum Technical Assistance (KEPTAP) 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, 2016, and of the Project's financial position as at that date. The Principal Secretary for the National Treasury and Project Coordinator for Kenya Petroleum Technical Assistance (KEPTAP) 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. The Principal Secretary for the National Treasury and the ProjectCoordinator for Kenya Petroleum Technical Assistance (KEPTAP) Project confirm 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 Secretary for the National Treasury and the Project Coordina(or f Kenya Petroleum Technical Assistance (KEPTAP) Project on 2016 and signed by them. Principal SeGiv Projhct Coordinator 10 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND F.NANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 3. REPORT OF THE INDEPENDENT AUDITORS ON THE KENYA PETROLEUM TECIFINICAL ASSISTANCE (KEPTAP) PROJECT REPUBLIC OF KENYA felephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 E-mail: oag@oagkenya.go.ke NAIROBI Website: www.kenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT (IDA CREDIT NO.5526 KE) FOR THE YEAR ENDED 30 JUNE 2016 - THE NATIONAL TREASURY REPORT ON THE FINANCIAL STATEMENTS I have audited the accompanying financial statements of Kenya Petroleum Technical Assistance Project set out on pages 13 to 22, which comprise the statement of financial assets as at 30 June 2016, and the statement of receipts and payments, statement of cash flows and the statement of comparative budget and actual amounts for the year then ended and a summary of significant accounting policies and other explanatory information in accordance with the provisions of Article 229 of the Constitution of Kenya, Section 35 of the Public Audit Act, 2015 and the Financing Agreement No.5526KE between the International Development Association (IDA) and the Republic of Kenya dated 14 August 2014. 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. Management's Responsibility for Financial Statements The Principal Secretary- National Treasury and Project Coordinator are responsible for the preparation and fair presentation of these 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. The management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit, 2015. Auditor - General's Responsibility My responsibility is to express an opinion on these financial statements based on the audit and report in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. The audit was conducted in accordance with International Standards of Supreme Audit Institutions. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's Kenya Petroleum Technical Assistance Project (IDA CREDIT NO.5526 KE) - Annual Report and Financial Statements for the year Ended 30 June 2016 Promoting Accountability in the Public Sector judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my qualified audit opinion. Basis for Qualified Opinion Bank Balance The statement of financial assets reflects a bank balance of Kshs.12,745,464.00 as at 30 June 2016 which differs with bank's certificate of balance of Kshs.14,817,131.10 and the cash book bank balance of Kshs.11,956,622.40 as at the same date. The differences between the three set of records have not been reconciled or explained casting doubt on the accuracy of the financial statements. Opinion In my opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Kenya Petroleum Technical Assistance Project as at 30 June 2016 and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Financing Agreement No.5526KE dated 14 August 2014. In addition, the special account statement presents fairly, transactions for the year, and the closing balance has been reconciled with the books of account. FCPA Edward R. 0. Ouko, CBS AUDITOR - GENERAL Nairobi 28 December 2016 Kenya Petroleum Technical Assistance Project (IDA CREDIT NO.5526 KE) - Annual Report and Financial Statements for the year Ended 30 June 2016 2 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 REPORT ON PROJECT PERFORMANCE AND VALUE FOR MONEY ACHIEVEMENT 12 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30TH JUNE, 2016 Note 2015/16 2014/15 Cumulati to - D KShs,. KShs. KS RECEIPTS Loan from external 8.3 25,750,200 20,000,000 45,750,: development partners TOTAL RECEIPTS 25,750,200 20,000,000 45,750,: PAYMENTS ------------------- --- - --- Purchase of goods and 8.4 32,840,036 164,700 33,004, Services TOTAL PAYMENTS 32,840,036 164,700 33,004, SURPLUS FOR THE YEAR (7,089,836) 19,835,300 12,745,4 The accounting policies ad explanatory notes to these financial statements are an integral part of the financial statements. Principal See Project Coordinator Date Date 13 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE, 2016 Notes 2015/16 2014/15 KSh. KSh. FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8.2 12,745,464 19,835,300 TOTAL FINANCIAL ASSETS 12,745,464 19,835,300 REPRESENTED BY: Cash and cash equivalents 8.2 19,835,300 - b/fwd Surplus/Deficit for the year 4 (7,089,836) 19,835,300 NET FINANCIAL POSITION 12,745,464 19,835,300 The accounting policies and explanatory notes to these financial statements form an integral part of the fin cial atements. The Project's financial statements were approved on 2016 and signed by: Principal Secqi- Project Coordinator Date Date 14 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 6. STATEMENT OF CASHFLOW FOR THE YEAR ENDED 30TH JUNE 2016 Notes 2015/16 2014/15 KShs. KShs. Receipts for operating income Receipts for operating income Payments for operating expenses Purchase of goods and services 8.4 (32,840,036) (164,700) (32,840,036) (164,700) Net cash flow from operating activities (32,840,036) (164,700) CASHFLOW FROM FINANCING ACTIVITIES Proceeds from external development partners 8.3 25,750,200 20,000,000 Net cashflow from financing activities 25,750,200 20,000,000 NET INCREASE IN CASH AND CASH EQUIVALENT (7,089,836) 19,835,300 Cash and Cash Equivalent at the BEGINNING of the year 19,835,300 Cash and Cash Equivalent at the END of the year 12745,464 19,835,300 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The project's financial statements were approved on 2016 and signed by: Principal SeU y Project Coordinator Date Date 15 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Original Approved Variance Budget Adjustment Budget Actual KShs. KShs. KShs. KShs. KShs. RECEIPTS External Assistance: Proceeds from borrowings IDA Loan TOTAL RECEIPTS PAYMENTS Purchase of goods & services 200,000,000 100,000,000 100,000,000 32,840,036 67,159,964 33.0' TOTAL PAYMENTS 200,000,000 100,000,000 100,000,000 32,840,036 67,159,964 SURPLUS FOR THE YEAR (100,000,000) (32,840,036) NOTES: i. The deficit of actual expenditure over the budget is KSh. 67,159,964 (67.0% under budget).The lower than projected expenditure is largely attributable to the delayed commencement of the consultancy services within KEPTAP thereby only capacity building activities were implemented during the year; ii. Reduced level of Project activities due to delay in commencement of the Institutional Review( IR) exercise that aims at assessing the level of training needs for the beneficiary agencies; iii. No significant budget utilisation/ performance differences has been realised by the Project to be disclosed in these financial statements. Principal e y Project Coordinator Date Date 16 KENYA PETROLEUM TECHNICAL ASS ISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 8. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1 Statement of compliance and basis of preparation The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and conform to the form of presentation prescribed by the Accounting Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project and all values are rounded to the nearest one Shilling. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognizes transactions and events only when cash is received or paid out by the Project. i. Recognition of revenue and expenses The Project recognizes all revenues from the various sources when the event occurs and the related cash has actually been received by the Project. In addition, the Project recognizes all expenses when the event occurs and the related cash has actually been paid out by the Project. ii. In-kind donations In-kind donations are contributions 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 of in-kind donations can be reliably determined, the Project includes such value in the statement of receipts and payments both as revenue and as an expense in equal and opposite amounts; otherwise, the donation is not recorded. iii.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 17 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 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 authorized public officers and/or institutions which had not been surrendered or accounted for at the end of the financial year. iv.Pending bills Pending bills consist of unpaid liabilities at the end of the financial year arising from contracted goods or services during the year. Pending bills do not involve the payment of cash in the reporting period and have simply been disclosed in the notes to the financial statements. v.Budget The budget is developed on the same accounting basis (cash basis), the same accounts classification 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. A high-level assessment of the Project's actual performance against the comparable budget for the financial year under review has been included in an annex to these financial statements. vi.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 are converted into the 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. vii.Comparative figures Where necessary comparative figures for the previous financial year have been amended or reconfigured to conform to the required changes in financial statement presentation. viii.Subsequent events There have been no events subsequent to the financial year end with a significant impact on the financial statements for the year ended June 30, 2016. 18 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCLAL YEAR ENDED JUNE 30, 2016 8.2 CASH BALANCES 2015/16 2014/15 KSH. KSH. Central Bank of Kenya KEPTAP AC:.NO.1000221518 12,745,464 19,835,300 i. Cash comprises cash on haid, demand deposits and cash equivalents. Demand deposits and cash equivalents consist of balances with banks, advances given out pending submission of accountability documents, outstanding temporary finprests, prepayments and investments in short-term money market instrum ents. ii. The Project Special (Designated) Deposits Bank Account is maintained with Central Bank of Kenya (Account No. 1000221445. 19 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2016 8.3 LOAN FROM EXTERNAL DEVELOPMENT PARTNERS During the 12 months to 30 June 2016 the Project received funding from development partners in form of loans negotiated by the National Treasury Donors as detailed in the table below: Name of Donor Date Amount Loans Loans, Total amunt inKS received in loan received received curr ency in cash as direct payment F Y 2015/16 F Y 2014/ Loans Received from Multilateral. Donors (International Organizations) International 17.03.2016 120,000 12,154,800 - 12,154,800 20,000,0C Development 14.09.2015 130,000 13,595,400 13,595,400 Association Total 250,000 25,750,200 -25,750,200 20,000,0( 8.4 PURCHASE OF GOODS AND SERVICES 2015/16 2014/15 KShs. KShs. TRAINING & WORKSHOPS Capacity Building: Training , Conferences & Workshops 32,840,036 164,700 32,_840,036 164,700 8,CPENDING BILLS There were no pending bills as of 30th June, 2016. 20 SPECIAL ACCOUNT STATEMENT For period ending 30th JUNE, 2016 Account No. 1000221445 Depository Bank CENTRAL BANK OF KENYA Address HAILE SELASSIE Related Loan (K) PET TECH.ASS PRJ 5526-TNT Credit Agreement 5526-KE Currency USD Account Activity Beginning balance of 1st July, 2015 as per C.B.K. Ledger Account 133,005.02 Add: Total Amount deposited by World Bank 246,405.49 Total Interest earnings if deposited in account Total amount refunded to cover ineligible expenditure 0 Deduct: Total amount withdrawn 250,000.00 Total service charges if not included above in amount withdrawn Ending balance on 30th June,2016 129,410.51 AUTHORISED REPRESENTATIVE SIGNATURE: CENTRAL BANK OF KENYA DATE AUTHORISED REPRESENTATIVE EXTERNAL RESOURCES SIGNATURE: DEPARTMENT-TREASURY DATE NOTE:The ending balance as per Central Bank of Kenya Ledger Account and the off-shore Special Account as at 30th June,2016 have been reconciled and a copy of the supporting Reconciliation Statement is attached. P 4 KENYA PETROLEUM TECHNICAL ASSISTANCE PROJECT (NT) STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION JOR THE YEAR ENDED 30 JUNE 2016 Credit No.: IDA LOAN CREDIT NO.5526-KE Bank Account No.: 1000221445 Held with CENTRAL BANK OF KENYA NOTES AMOUNT AMOUNT USD USD 1 Amount advanced by IDA 350,000.00 Less: 2 Total amount documented 3 Outstanding amount to be documented 350,000.00 Represented by: 4 Ending Special account Balance as as 30 June 2016 129,410.51 5 Amounts claimed but not credited as at 30th June 2016 6 Amounts withdrawn and not claimed 220,589.49 7 Service Charges (if not included in lines 5 and 6 above) 8 Interest earned (if included in Special Account) 9 Total advance to Special Account Year ended 30 June 2016 350,000.00 Discrepancy between total appearing on line 3 and 9 Notes: I Explain the discrepancy between totals appearing on lines 3 and 9 above (e.g amount due to be refunded to cover ineligible expenditures paid fron the Special/Designated Account) 2 Indicate if amount appearing on line 6 is eligible for financiang by IDA and provide reasons for not claiming the expenditures The amount appearing on line 6 is eligible for financing by World Bank and shall be documented in subsequent IFRs AUTHORISED REPRESENTATIVE RESOURCE MOBILISATION DEPARTMENT DATE: \ THE NATIONAL TREASURY