REPIUBLIC OF KENYA OFFICE OF THE AUDTOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA TRANSPORT SECTOR SUPPORT PROJECT (IDA CREDIT NO. 4926-KE AND NO.5410-KE FOR THE YEAR ENDED 30 JUNE 2018 KENYA AIRPORTS AUTHORITY KENYA TRANSPOR SECTOR SUPPORT PROJECT (KTS'P) KENYA AIRPORTS AUTHORITY OF MINISTRY OF TRANSPORT INFRASTRUCTURE, HOUSING AND URBAN DEVELOPMENT CREDIT NUMBER No. 4926-KE and 5410-KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the linternational Public Sector AccoLnting Standards (IPSAS) KENYA AIRPORTq AUTffTJOEJ7VWORIjD ANK 1?UND PRO ECT ACCOUNTS (KENYA TFuAkNSPORT SECTOR SUPPOQ-RT PROJECT (KTSSP)) ANNUAL REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 ONTENT PAGE I. PROJECT INFORMATION AND OVERALL PERFORMANCE ..1-10 2 FUNDING SUMMARY...... 3. STATEMENT OF PROJECT MANAGEMENT RES PONSIBILITI ES . . . 4. AUDITOR'S REPOPRTO. 5. STATEMENT OF RECEIPTS AND PAYENNTTS.. 14 6. STATEMENT OF FINANCIAL ASSETS AND LJ\]TIES ... 15 7. STATEMENT OF CASH ROWS...... ........ LS......... 8. STATEMENT OF BJUDGET AND ACTUAL EXPENDITURE 7 9. SIGNIFICANTS ACCOUNTING POLICIES................. 18-19 10. NOTES TO THE FINANCIAL STATEIENTS..TS........ . I .. ..20-23 11. PROGRESS ON FOLLOWUP OF AUDITOR RECOM\flMENDATIONS ..... . .... 12. ANNEX I -VARIANCE EXPLANTONCMRIE BUDGET AND ACTUAL AMOUNTS. 25 AUTYA AItiRBOT-S A CVORITY WORLD BANIK FUNDEI) PROJECT ACCONTS(KEYYA TRANSPOPI'.S.ECTOR SUPPOR'F PAOJECT (jTSSp) ANNU L REPORTS AND INANCENTS FOR YEAR E E PROJECT INFORIMATIO A[D O\EORMAN-E 1.1 Name and Registered Office Project Name: Kenya Transport Sector Project (KTSSP) Objective: To enhance aviation safety and security to nicel international standards. . Addrcess: The address of registered office is: Kenya Airports Autliority!- Headcquarters Airport North Road P. 0. Box 19001-0050 i N AIR 013 Tel: 254-020-68221 1 /661 1000/6612000 Mobile: +254 722 205 061/2/3/4/5/6/7/8 Ein il:t~2U.~ oCT ej illfot@kaa._o.k:e .2 PROJECT INFORMvATIONv, 1.2.1 Project Start and End Date: The KeI'a Airports Atborjt:, (K,\A) compoien of rhe t is part of ie IDA fInancedC Kenya lralsport Sector Support Credit Nø 4926-'E (Support to Major Airports under category (C!) and Credit No 5410-Kl (Emergeney Avtivities at jKlA under categogy (C2) that the Govenment of Kenv signed on Ma, 23, 2011 (Origina! credd) and March 3 I 20 i' c(A dditional credit) for e purpo;se of financing develonient proiecs in the tien Roads & Transport Min istries. KA A is ane of the imlplemen tiggecs n t aaioseo. lý,-\Ai5ýoneof cAmlerenrng agencies in the aviation Sector. 1.22 Project Manager: The Project Ccordinator is Arch. Fred Odawo 1,2.3 Project Sjonsor: Tie program sponsors are tie Government of Kenya (GOK) and internatAnal Developiment Association (DA) KENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUAL REPORTS AND FINANCIAL STATEMENTCS FOR THE YEAR ENDED JUNE 30. 2018 PROJECT INFORMATION AND OVERALL PERFORMANCE 1.3 Project Overview Line Ministry Ministry of Transport. Infrastructure, flousing and Urban IDevelopment Pioject Niimber Credit No. 4926 and Credit No. 5410 Strategic goals of The strategic goals of the project are as follows: the project a) Reconstruction of of the runway at i International Airport b) Urgent restoration of the international passenger arrivals facilities at JK1 avoid interrupting the operations. Other Credit No. 4926 Important . a) Power supply upgrade Moi Intern. Airport to costs Kshs 656-million background b) Design and supervision of power upgrade to cost Kshs 170 million infoiration of c) Supervision of rehabilitation of runway and renediation of sink holes at the project MIA to cost Kshs 524 mtillion l) Design and supervision of water supply & reticulation at JICA and MIA to costs Kshs 0.54 imillion. e) Tiaining and capacity building to cosis Kshs 100 million Credit No. 5410- Emergency activities at JKIA a) Goods, Equipnent & Vehicles costs Kshs 1.797 bilion b) Works to cosis Kshs 4.3 billion c) Consultancy services to costs Kshs 203 mil1ion Project duration, 8 years from 201 i to 20 18 ACC X'z~IRPORSv AU1THORITY WORLD BANK FUNDED PROJECT ANNU S (1NYA TRANSPORT SECTOR SUPPORT PROYECT (XTSSY) ANNLJI, KUPORTS> AND,Y FINANCIAL STATEMENTS FOR TE Y EAR EINDED JUNE 30, 2018 PROJECT lNFORMATIorbi AND OVERALL PA-ERFOI',N - 1.4 Bankers The foowg are the bankers for the current year: a) Special Deposit A ccounts CBK/GO)K (K) TRANSPORT (CR. NO. 49260-KE) I & M Bank Ltd- Account No. 001005816712 i8 Ist Flir Kenyatta Avenue P.O.Box 30238-00100 GPO NAIROBI b) Local Project Accounts Kenya Airports Authority NJC Bank Limitec-Accoumi No. 1001206024 NIC House. Masaba Road P,O Box 44599-00100 Nairobi. Kenya Tel: ÷254-020-28882 I ' 1.5 independent Auditor Auditor Genera Office of the Auditor Genera! Ann iversar Toweis P. 0. Box 30084-00 i00 NAIROBI Tel: +25 1-20-3357 KENYA AIRP.ORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) ANNUAL REPORTS AND FINANCä1AL STATEMENTS FOR THE YEÅAR ENDED INE 30. 2018 PROJECT iNFORMATION AND OVERALL. PERFORifANCE I6-Project Governance The Project's governance framework requires the stakeholders to uphold the highest professional. ethical, moral and legal standards. This is achieved through effective segregation of duties \vith clear checks and balances as articulated in the Project Loan/Credit Agreement, the PFM Act, 2012, the Projcct Design Report the Implemenmation Manuai and the Finance and Procurement Mvanuals. 1. The Project Steering Committee (PSC) This Committee is responsible for overseeing the implementation 017 the Project, approving the annual work plan and budget, and ensuring that tc activities are in compliance with the donor and government policies. 2. World Bank These are the project sponsors. They are responsible for reviewing and approving the project s withdrawal applications, expendrie justifications. no objectioi requests. reviewing and approving the anr.ual work plan and budget, expenditure category reallocation requesp and participating in implementtion support missions. 3. The Parent iv,inistry The parent mmistr ensures that the Projects budget is capired -n iis development projects and disburses the governein counterpart funding. The ministry reviews and tracksc the Projelt's annual work plan and budgei: agains the set targets and makes the approvals. The parent ministry also oversees the ex.-ecuticn of the project coordinating team. 4. The Auditor The Suprerne Audit Institution in Kenya. that is, the Office of the Aucitor General, is manidated by the Constitution of Kenya Chapter 12. Part 6., and Article 229 which establishes the Office of the Auditor General. Chapter i5 Article 248, Section 3 and Artile 249. Section 2 (a) and (b) and section t. of the Public Audit Act, 2015 provide for the independence of the Of fe of the Aiditor General, The Aditor General is mandated to audit all national government ertities, which include governmirent development projects and present these statutory financial statements to the Parliament. This facilitates the subrission of the audited report to the project's sponsors by 31 December cach year. KENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP») ANNUAL REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 PROJECT INFORMATION AND OVERALL PERFORMANCE 5. Project Coordinating Team (PCT) This team is based in Nairobi and is responsible for the project management and coordination functions. The PCT comprises of the Project Coordinator and a team of Tcchnical OfFiceis. 'Fhe PCT is also supported by other administrative slaff. These kev staff. who form the projec coordinating team that is involvedl in the da 'to day management ofl he project and its implenientation are: . ame and Title Qualification Responsibilities contact details -Desination Postgraduate diploma in Arch. Fred Project Coordinator Airport Engineering Coordination of the Odawo Bachelors Degree in day to day activities fredciclawa@ Architecture of the Program. kaa.go. ke Corporate Mnember - Architectural Society of Kenya -__-_ Associate Arbitrator. Alex Gitari General Manager, MBA Finance. Aex.gitari@k Finance Bachelor of Commerce, Responsible for the aago.ke Accounting Option, finance functions of Certifiecd Public the Program. Accountant (CPA-K). Alumnae of Harvard Business School's Advanced Mlanagement Program Member of Institute of Certified Public Accountants of Kenya. Master's Degrec in Public Patrick General ýManager. Procure-jent Law & Policy Responsible for the Mvanjuki Pr'ocurlemlent a froml the Unliver-sity, of, mnagmcilent of the,1 Patrick.vanjuki Logisics Nottighani. Procurement @ka Bachelor of Law Degrece process of oods Bachelor of-Commerce and services, and Degrec in Finance safety of.the assets. Post Graduate Diploma in Purchasing and Supplies Mfanagement. Post Gradluate Diploma from the Kenya School of i Law 6 KENYA AIRPORTS AUTHORITY WORLD BANK U NDED PROJ ECT ACCOUNTS (KŒNYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNiAL REPORTS AND FINANCIAL STATEMENTS FOR TITE YEAR NDE UN 30 2 018 PROJECT INFORMATION AND OVERALL PERFORMANCE COMPONENTS The Kenya Air§ots Authority projet corponents comprise thie following: - a) Civil works b) Goods, Euipment & Vehices c) Consultancy and rining A) Cvil Works Power Supply Up-grade at Moi International Airport, Mombasa. The scope of pover supply up-grade includes bult is not limited to the followin a. Review loading of all tranusformers at substations A, B ancl C. b. Improve availability, reliability and stabilit of power distribution system (e.g. Provide adeqrate redundancy of the system'). c. Replace all I KV ring cables. d. Replace all LV switchgear and sub-main cables. e. Evaluate status of all LV boards. f Design new 33 I KV substation. g. Design a well-integrated change-over system for the incoming feeders and the backtip generators \;th consideration ofthe worst scenarios on the distribution, h. Expand exisfing AGL SCADA system to incorporate power distribtion, srandby power, and terminalighting energy management (inkcldmg extension of fibre cable backbone), i Rehqabilitate all th substations and thei associated drainage vorks j. Review the i IKV electrical installations and upclate urawings. k. Provision falt localion institiments for .V system. l. For both power supply and AGL to carry out a complete survey and mappng of the airport syste.n KENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUA L REPORTS AND FINANCIAL STA-TEMENTS FOR THE YEAR ENDED -JUME 30, 20i8 PROJECT INFORMATION AND OVERALL PERFORMANCE ( B) Consultancy and Training Design and Supervision of power upgrade for MIA 1. The scope involves design consultancy and to provide project management and cuality assurance during rehabilitation 2. Supervision of Rehabilitation of Runway and Remediation of Sink Holes at MIA The consu1tant is to provide projeci managemenwt and quality assurance duiing rehabilitation. 3. . Design and Supervision of Water Supply and Reticulation at JKIA and MIA Th.e scope comprises of preparation of tender documents. attendance of tendering. and works supervision. 4. Training and Capacity Buildng The training conponenti is to enhance capacity buiilcling in project nanagenent, security operations. engincering servces, procurement and financial management. SUPPORT TO EMERGENCY ACTIVITIES AT JKIA UNDER CATEGORY C2 A) Civil Works 1. Design, Supply and Installa tion of pre-fabricatecd; a) Level I Departure and Transit Lounge at Terminal ID (formerly T3) b) Arrival facil ity next to Terminal ID and other related services The contract was awardecl to M/S Roder at the contract sum of^ US S 22million. This has since been completed. 2. Construction of Permanent Arrival Facility to serve Termina IA (Formerly T4) The construction of Terminal IA arrials (Package 3A) is to cater for international arrivals a[ JKIA. The contraci was awarded to China Aero Technology International Corporation (CA TIC, on 26t1 June 2014 at contract sin of Kshs 2,1-46.007.993.64.The project is expected to take 15 XINYA ARPORTS AUTHORITY WORLXD BAN FjNDED PROJECI ACCOUNIS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUAL REPORTS AND FINANCIAL ST.TEMENTS FGR THE YEAR ENDED .JUNE 30, 2013 PROJECT INFORMATION AND OVERALL P-ERFORMANCE 3. gtrengthening Environmental Management Capacity (Solid W lste Management) This will enable the Anthority to come up wåih an environmental management system on dealing with slid waste managenient procure nose, water and soil measurement equipment as wlvvell as be able to manage noise pollution. BI) Goods, Eq uipmert and Vehieles 1. upply & Install Baggage Handling System (BHS) at the. Parking Garage Following the fire incident at JKIA, The World Bank agreed to fund tei Installation of BIS. The contract was awarded to NS Vanderlande at a contract sun of Euros 1.209.830.69. The project is corplete. 2. Supply & Instal! BHS and Assorted Equipment for Arrival Facility Next to Terminal 1D (Formerly Terminal 3) and arrival at Ternänal 1A. This entails delivery and installation of check in counters inclun g weighing and injeetion belts colleetor and transfer and conveyor lines, carousels. sorter system and software control. 3. Supply and Install integrated Security Management System (IS S) for Arrival Next to Terminal 11. The system is intended to enhance security and safety of the Airport and their users. This is a direct contract. Negotiations with the supplier are in progress. 4. Supply and Install Information and Technology System (IIS). This was included in the scope and draft contract is awaiting cIenrance by the Bank. 5:Supply of Airside Buses The buses are intended to facilitate movement of passengers N% ithin the airside. 6. Supply of Fire Tenders (Airside) This entaiis the supply of two airside fire tenders and one landside turntable at Jomo Kenyatta linternatioiial A irport to help enhance fire and "rescue cover. 7. Supply of Disaster Manageniuit & Emnergency Response Equipment Purchase oftle equipmen!. is awaiting completion of study by M/S Egis on JKIA operational Standard Operaring Procedures kSOPO) KENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECr (KTSSP)) ANNUAL REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDEI) TUNE 30, 2018 PROJECT INFORMATION AND OVERALL PERFORMANCE C) Consultancy and Training 1. Consultancy Services for Supervision of Pre-fabricated Installation (works) The consultancy is to provide project management and quality assurance during the undertaking of the works. This is ongoing. 2. Consultancy Services for Assessing Structural integrity of Terminal 113 (Formerly Terminal 1) and Arrival Building The purpose is to carry out an assessment of the damage caused by the fire at JKIA. This has been completed. IENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUCAL REPORTS AND FINANCIAL STATEMENTS FOR T YeAR ENDED 3UNE 30 2018 FUNDING SUINMMARYV The Projeci is for a duration of 8 years from 2011 to 2018 Nvith an approv ed bdiciget 31f USS 78.04 equivalentto Kshs 6.8 billion as highlighied in the table below: Below is the funding suimmar: Source of funds Donor Commitmen t Amount received to Undrawn balance to date - (30' June date 201.8) (30' Juie 2018) In "Millions" Donor Kshs Donor Kshs Donor Kshs currencvUSS Currenc currency (B (A)-(B1) (A')-(B') (i) Energency Activities i) Grants from! World Bank 63 5,520 4 6 ~4,064 224 1456 4 i) Counter Part fund ing L3i) 3 3,200 97 970 223 2:230 (iii)Original credit Loan frorn World Bk 320 13.8 1 198 Total 110 10,038 2 5,53 59 4,885 Sum namry of Overall Project Performance During the year under review, the Project received KShs 378 12832 and-incurred a cumulative expenditure of KShs 395,908.606 Receipts Utilization The project received Kshs 378 122.832 agaist a final budget of Kshs 1,328,245.000. This represents utilization of 28%. Payment Utilization The project paid Kshs 395.908.606 against a final budget of Kshs 1.328,245.000. This represents utilization of 30%. Suinmary, of Project Complianc The Program has ensured that all its activities carried out are within the laws of the Republic of Kenya and that all regulations and procedures have been followed. Among the regulations inciude the Environmental and Socia! impact Assessmaent (ESIA) for which authority was issued for the implementation of the project. in cases of inconsistenc between the GOK Regulations and those of the donors, the latter have been applied. YA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) A.NNUAL REPORTS AND FINANCIAL STATEMENTS FOR THE YAR ENDI}D JUNE 30, 2018 STATEMEITTOV PRO~XCT MANAGEMENT RESPONSIBLITJES 1he Board of Directors of the Kenya Airports Authorit and the Project Coordinator for Kcnya Tiansport Sector Support Projent KTSSP)» are responsible for the preparation and presentation of tbie Piojects fnancial 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 Jne 30, 2018. This responsibility ietuces: (i) mainming adequate financial management alTangement and ensuring that these e nue to be effeetive thuroghout the reporting period; (ii) mainining proper accotning reeords, wli ch disclose with reasonable accuracy at any time the Financial position of Ile Project; (iii) designing. implenenting and maintaining internal controls relevant to the prep)aration and fair presentation of the financial statement. and ensuring that they are frec from materal ni sstatements whether due to error or fraud; (iv) safeguarding the assets of the Prjet; (v) selectirig and applying appropriate accounting policies and (vi) niaking accounting estimates that are reasonable in the circumstances. The Board of Directors of the Kenya Airports Authority and the Project Coordinator for Kenya Transport Sector &ipport Project (KTSSP) accepts responsibility for the Project's financial sM,temls which have been preparecl i accordance with the Cash Basis method of Accounting nder the limernational Public Sceror Accounting Standard (IPSAS). Hoxvever Kenya Airports Authoritv financial stateens re prepared Ao sing appropriate accoweing policies in accorclance witi International Financial Reporting Standa p rus.n The Board of Directors of the Kenya Airports Authority and the Project Coorcinator for KCnya minport Senor Support Proeic (KTSSP) are of the opinion that the ProjecCs financial stateneris give a true and fair view of the state of Projects nrinsaetions dsring the financial yarteded iune 30, 201 7,. and of the Projets financeil posrtio as at tat daun. The Board o Diears for Kenya A,ii-pris Authoritv fnrtlier c nfiprni te conpletrss of The accoriing recoids maintained for the ProJecr. w-,hich hae been reied opton i the fryacction of ig rjet financial statements as wefl as the adeqtiacy of the systems of iternal financial conr. The. Board of Directors of Kenya Airports Authority and the Project Coordinator for Kc-a Transport Sector support Projecc KTci'SSP) confirn that the Prqject has coniplied fully with applicable Governnient Reg Lations and the terms of external financing covenants. and that Project funds reeckied duriig Iie financial ear Luider audit were used for the eliible pwposs r hich iey weire imtene and weire properly accounttec for. Approval of the Project financial statements The Project financial statenents were approved by the Board of D' and Ii Pr Coordinator for Kenya Transport Sector Support Project (KTSSP) on _ector 20 8 and sined by them. PROJECT COORDINATOR GENERAL MANAGER F5ANCE FRED ODvvO ALEX GCITARI AAN RECTO JONtr~ ANDER SEN IrPr, RPUBLIC OF ENYA Telephone+2S4-20-342330 a +24-20-31 1482 P.O. Box 30084-00J o Li-mand a:g@osheya.go.ke * Website: wwo.Iroogo.keNAIROBI OFFICE OF THE AUDITOR-GENEAL REPORT OF THE AUDITOR-GENERAL ON KENYA TRANSPORT SECTOR SUPPORT PROJECT (IDA CREDIT NO. 4926-KE AND NO.5410-KE FOR THE YEAR ENDED 30 JUNE 2018 - KENYA AIRPORTS AUTHORITY REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Transport Sector Support project- Kenya Airports Authority set out on pages 14 to 25, which comprise the statement of financial assets and liabilities as at 30 June 2018, and the statement of receipts and payments, the statement of cash flows and statement of comparison of 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 and Section 35 of the Public Audit Act, 2015 and the amended and restated Financing Agreement for credit No 4926-KE and No. 5410-KE dated 31 March, 2014 between the International Development Association (IDA) and the Government of Kenya (GoK). I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Project as at 30 June, 2018, 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. 4926 and 5410-KE dated 31 March, 2014. In addition, the special Accounts Statement presents fairly the special accounts transaction and the closing balances has been reconciled with the books of account Basis for Opinion The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of the Kenya Airports Authority Management in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Report q/th di t Plor-Generat ), !fhe rn ueno t t Y'Kena b Projeci the Pub ic cdit Nogot:~4conaiit oro ubi ei, Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current year. There were no Key Audit Matters to report in the year under review. REPORT ON COMPLIANCE WITH LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC MONEY As required by Article 229(6) of the Constitution, based on the procedures performed, I confirm that, nothing has come to my attention to cause me to believe that public money has not been applied lawfully and in an effective way. REPORT ON INTERNAL CONTROLS EFFECTIVENESS, GOVERNANCE AND RISK MANAGEMENT As required by Section 7(1) (a) of the Public Audit Act, 2015, based on the procedures performed, I confirm that, nothing has come to my attention to cause me to believe that internal controls, risk management and overall governance were not effective. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for 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. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as to sustain services, disclosing, as applicable, matters related to sustainability of services and using the going concern basis of accounting unless the management either intends to liquidate the Project's or to cease operations, or have no realistic alternative but to do so. 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 Act, 2015. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor-General's Responsibilities for the Audit of the Financial Statements The audit objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in Repori o/te Auditor-General on the Financial Statements ofKenya Transport Sector Support Project (DA Credit No. 4926-KE and No.5410-KE fr rhe year endd 30 June 20/8 - Kenra Airports Athority 2 compliance with Article 229(7) of the Constitution. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement and weakness 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 ISSAls, I exercise professional judgement and maintain professional skepticism throughout the audit. I also: o 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 my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances and for the purpose of giving an assurance on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material .uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue to sustain its services. If I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the Project's to cease to continue to sustain its services. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information and business activities of the Project's to express an opinion on the financial statements. * Perform such other procedures as I consider necessary in the circumstances. I communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. Report of the AUditor-General on the Financial Staltments qf Kenya Transtiport S-ctor Sutpport Pr(?/ect (IDA Credit No. 4926-KE and No.5410-KEbr ihe year ended 30 .hine 20/8 - Kenyl-ia.1ir-portss Autthor-ity 3 I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS As required by International Development Association I report based on my audit, that: i. 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; ii. in my opinion, adequate accounting records have been kept by the , so far as appears from the examination of those records; and, iii. The financial statements are in agreement with the accounting records and returns. FCPA Edward R. 0. Ouko, CBS AU DITOR-GENERAL Nairobi 21 December 2018 Report of the A udilor-General on the Financial Statemnents of Keniya Transport Sector Support Project (MA Credit No. 4926-KE and No.54/ 0-KE.for the y!ear- ended 30 June 2018 - Kenya Airports Authorify 4 KE?NSi \ AlrnPRTs ~ QRtin~ iEN . Tr.iN$OT SEC'TOR SUP'ORT PROJE,C, (:TS) NN:ALREPCORTSANDI NANCIALSTATEMENtS FOR THEDYEARES F ENDED 30THJ11UNT E 2018 RECEIPTS 2'cs 20 171201 2016/2017 Receipis and rzeceiin nud Reccipis :Id Pnymen Reccipils and Pl ylenIs Pnvpien15 c3li1nt0lled by the Pavn ents Made conirolled by the Mide by th ird Etlity by third paries Entify Il-fies CUINIM ULATIVE Ks s'000 X11h'000 Klsls000 Ksh!,000 Kshs 000 Rec211,s rll conl£lm,rt i dill- 79.037 40.499 971.001 1 Gram Fri DeveIlpmnci Pr 7r A 27 ,9 0 170.364 5.31 4.063.752 lln rrom t em l os opmIe i P;u i:i , 22,-157 0 119.942 IIicrC "" llcle I .426 1.8068 976 Total Receipt 212.669 45,331 -5,163,671 PA YM E NTS Bank charges/con-miision 4 9 7 Purchase of goods and services 6 201 860 200.899 707.9 Trainin2 cost 0 Acquisition of non-financial Asse 9 194.04 i 0 45.33 1 4,381,516 total expenditure 395,910 0 233,067 45,331 5,139,272 DEFICIT/SURPLUS FOR TH vwÅ _7 0 -20,398 0 4,399 The accounting policies and explanator. notes to these financial statemenis fon an integral part of the financial statemnlents. The financial statements were approved on ....... .d 201 signed by: Project Coordinator. Fred Odawo General Vlanager-Fiiance Alex Gitari Manag ig Direcor Joil nl/Andei`sei RPcNYA ASRPORTS A UTHORITY KENYA T USCTPR SUPP,ORT PROJECT (KTSSP) ANNUALM REPOR'TS AND FINIANCIAL STATEMENt S FOR THE YEA ENDED 30THJUN 20e. STATEM1ENT OF FNANCIAr ASSETS A\ÑD LIABILrIS AS AT 3OTH JUN 2018 FINANCIA f A SSETS 2017/2018 2016/2017 Cash and cash Equivalert NKsrs'000 Kshsr000 Bank balance 52 4.~ 6.0 KAA Refund ro Project aIceouni 8 1585 0 TOTAL FfNANCIAL, ASSETS 6.280 47,3364.922 REPRESENTED BY: Fund B3alance BI-011."lt Forward 106492 8,1 Surplus/ ( deficit )i for the Year 064.922 85,317 NET FINANCIAL POSITION :17.788 _ -2 The accounting po mies and cxpanarn staem nt. hefian ia stteansiercaprve one'!n [nimil anl nltegrl. par,t ofj the 1*inancial slatcllen 's, ThC flii a U c ap i oved on .................... 8 and si neld b" : Projcect coord'nato Pret COaw iwtGeneral Maniager-Finanice ,Fred 0dawo Aex Gitar1 n ÍDirector in y dersen AIRPORTS A UTHO TY XŒNK'Y TRANSPOR' SECTOR SU T P RO.JECT (KTSS) -- ANN UAL REPORTS AND~ FINAN~CIAL STATEMENTS FOR THE YEAR EIDED 30TH JUNE 2018 STATEMENT OF CASH FLOWS FOR THE PERIOD 30TH TUNE 2018 2017/2018 2016/2017 Kshs000 Kshs'000 Receipt for operating income Transfer from couterparts funlds 79.037 - 40,499 Interest Incone 1426 1.806 Payment for operating expenses Purchase of goods and services (201.860) (200899) Training Expenses - (32,161) Bank charges (9) (7) Net cash. flow operating activities (121,405) (190,762) Cash flows from investing activities Acquisition ofNon Financial Assets (194.041) (45.331) Net flows fro.m investing activities (194,041) (45.331) Cash flows from Financing activities Proceeds from Loans/Grants Borro\wings 297,659 215.695 Inerease in \Working Capital (1.260) (20) Net cash flow from financing activities 296,399 215,675 Net increase in cash and cash cquivalent (19,047) (20.415) Cash and cash cquivalent at the beginning of vear 64,902 85,317 Cash and cash ecquivalent at the end of ear 45,855 64,902 The accouiniting policies and explanatory notes to these hnancial statements form an integrai part of the financial statements. The financia! statements were approved on ...................... 2018 and signed by: Project Coordinator General Manager-Fin-nce Fred OdawIo Alex Gitari Manacqhy D ir ctor Jonn/Ande.ren AJNN UAL KlAYUR APJU M Al L FOR THE YEAR EN DED 30T11 JUNE 2018 STATEMENT OF COMIPARATIVE BUDGET AND ACTUALAMOUNTS Oríginal Comparative Utiliz.ation Budger Adjustnieurs Final Bdget Basis våriancc % of A B) C + b D E7=c-d F=d/% lKsh'00(0 lsLli000 1s'S000 Wr1ince RECEIPTS Couiterpart funding from KAA 542,3d. 542,343 79,037 4(63.308 0.15 Procceds from .oan anld Grant - 765,900 765.900 297,659 468,24 1 0.39 Training . 20,000 2'0,000 - 20,000 - Interest Income - -1426 (1,A26) •L00 Total Receipt - 328,245 1,328,245 378,123 950,123 0.28 PAYMIENT Purclse ofgoods &Service - .007.830 1.007.830 201.860 805,970 0.20 Payment for Works 300. 15 300,415 194.041 106,374 0.65 Paymcnt for Training - 20.000 20,000 20.000 - Bank chnrgces/ Commision and Wx -. 9 (9) - L00 Total Payrnent - 1,328,245 1,328,245 395,909 932,335 30% The accounting policise and expnnatory notes to these rnincial sietemis form ain integral part of the fink nial santements. The Financial stacnteen vere appoved on .208 and signcci by: Project Coordinator General Managei Finance Fred Odawo Alex Gitari .i~t............. Managå g Dii-ec oi Jonny Ändersenl ENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT ACCOUNTS (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUAL REPORTS AND FINANCIAL STATEMEITS FOR TiE YEAR ENDED 30TH1- JUNE 2018 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below: Statement of compliance and basis of preparation The financial statements have been prepared in accordance with the Cash Basis method of Accounting under the International Public Sector Accounting Standard (IPSAS). However Kenya Airports Authority financial statements are prepared using appropriate, accounting policies in accordance with International Financial Reporting Standards (IFRS). 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 i. Recogni'don of revenue and expenses The Project recognises 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 recognises 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 riay 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. M0. 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 arnounts of cash and are subject to insignificant risk of changes in value Bank account balances include amounts held at various commercial banks at the end of the financial year/period. KENYA AIRPORTS AUTHFORITY WORLD BANK FUNDED PROJECT ACCOUNT (KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP)) ANNUAL REPORTS AN D FINANCIAL STAtMETS FOR THE YEAR ENDED 30TH JUNE 2018 SIGNIFICANT AC"OUNTING POLICIES (Continued) iv. Pending bills Pending bills consist of unpaid liabilities at the end of the financial year/perl(d arising from contracted goods or services during the year/period or in past years/periods. As pending bills do not involve the payment of cash in the reporting. period, they are simply disclosed as an Annex to the financial statements. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. v.Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year/period are converted into 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 recognised in the statements of receipts and payments. vi. Comparative figures Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to. conform to the required changes in financial statement presentation. vii. Subsequent events There have been no events subsequent to the financial year/period end with a significant impact on the financial statements for the year ended June 30, 2018. ENYA AIRPORTS AUTHOR[TY KENYA TRANSPORT SECTOR SUPPOPT PROJECT (iWTSSPQ ANNUAL REPORTS AND FINANCIAL STATErvENTS FOR THE YEAR ENDED 30TH JUNE 2018 NOTES TO THE FINANCIAL STAETMENTS lRceipts fro m Con~erpa F j,uling The receipIs rrom c,)untcipart fiinding we:e as follows 2017/2018 2016/2017 Ksis'000 lihs'000 Counerpat fndin . 7,037 4.499 RORT AUTHORITY KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) ANNUAL REPORTS A.ND FINANICIAL STATEiKENTS FOR THE YEAR ENDED 30TH JUNE 2018 NOT ES TO THE FINANCL L ST ATEM ES 2 (A) Grant Frim Developnet Grans received [rm dc clopment pairtinc durinng hic Nea 2017/2018 2016/2017 I5 di-ec Tolal ;mott1 1mt l l U cG ivn Receied pylimts in ('shis KsIs Amnotlt in Irlani Name of Donor iDare Rereived Ucrc 'SS 1(' lin sh kshs '000 N.hsI' 000 sh'000 Xhs' 000 I Iii Mmi ~~~13 Ms00 j(ai'(0 World Banki 30. 1.201 1.49 l53A5 _53A5 World Bank 30. !. 2017 4.0 443.89 World Bank 30.1 ,2017 26.13 2,_6_9_8_,2 6 2,698.26 I World Bank 30.1 1.2017 70.08 | 7,235,55 7,235 55 World Bank 1310 .2018 l03.85 ,10,552.46 0,55246 Word Bank 3L1.)2018 60A86 j 6,463.79 61,463.79 i Worl Bank 22.02.2018 854.34 86,6S.72 86,688.72 5 694.93 Woldý Bankl ý22.02.2019 53,9.62 55,705.51 55-, 7 05 .ýI Wor011d Ba 3lJ2.207 -.4 | 4 49.982.72 WVorld-Bank 31.12.2017 i . __ __-______ World Bank 29.01.2018 Total 2.692.99 1 274.924.36 274,92436 215.694.93 2 (B) Lon recived from developniCt pines duing ithe year. 217/2018 2016i2017 _Lonns Reucived Toal i 11s diricl TotIal amo niu it in iont inl: Loin Reccived pnins in lslh Nshs Nameoono Dell Recved c1ri-ncy U5S 0uo' lil Casl RS '000 shs' 000 iNhs' (00 sls' 000 Vorld Bank 31.0l.201 s 64 6.523 G,523 Worl Bank 3 LOL20!86.2 i16,212 2___12,_ l__ 1___ 2 2 ___ ______ KENYA\ ATRPORTS AUrOITY KENYA TIkNSPORT SECTOR SUPPORT PROJECT (KTSSP') ANNUAL REPORIS AND FINANCI AL STATEMENTS FOR TIHE VEAR ENDED 30THJUNE 2018 NOTES TO FINANCIAL STATEMENTS 3 INTEREST INCOMIE 2017/2018 2016/2017 Kshs'000 Kshs000 31 7/2017 141 136 31/8/2017 141 140 30/9/2017 137 135 31/1012017 141 134 30/1112017 137 66 3l1/2/20l7 99 58 3l/0l/208 • 45 58 28/02/2018 129 61 31/03/2018 129 121 30/4/2018 131 165 31/5/2018 100 314 30/06/2018 96 418 Totil interest Incomle 1.426 1,2.6 4 BANK CHARGES 2017/2018 2016/2017 Kshs'000 Klis000 Tolal Bank clarges 9 7 _ _ 9 7 5.1 BANK ACCOUNTS 2017/2018 2016/2017 Speeill Accont MNoVernent Schedulc USS USS I & M Bank Ltd- Account No. 00100581671218 Opening balance 280.355 59.316 Total amount deposited in tie account 218.515 Interest Received 2.527 Total amount witlidrawni ( As per statecinit-of Receipts and Palymeils) Bank Charges (3) Closing balance (As per SDA bank account reconciliation atltaeled) 280,355 280,355 5.2 Cash ul Cash Equivalents 2017/2018 2016/2017 Ws1s'000 Kshs000 Bink Inlance 45.855 64.902 NIC Bank Limited-.\ccount No. 1001206024 T1ta1 Bank Bnlaice 45.855 64,902 KENYA AIRPORTS AUTHORITY WORLD BANK FUNDED PROJECT (KTSSP) ANNUA L REPORT AND FINANCIAL, STATEMENTS FOR THE YEAR ENDED 30TH J UNE 2018 NOTES TO TH E FINANCIAL STATEIENTS WORLD) BANK KAA 2017/2018 2016/2017 Total Total shs'00 Ks5000 500 ,shs000 Klsis'000 6 PUIRCH1ASE OF GOODS AND SERVICES 164.472 37.388 201L860 200.899 64,472 37,388 2018(0 ¯ 200.899 2017/2018 2016/2017 WORLD BANK KAA Total To(al Ksls000 Kshs'000 Kshis'000 Kshs'000 7 TRAINING EXPENSES 32.161 - - 32161 2017/2018 2016/2017 shs'0001 Kshs'000 8 KAA REFUND TO PROJECT ACCO:UT 20 Balance Brotigit Forward L260 20 This is refund due io Projeci acco ti 1,0 2800~~-~~~~~ ~ -~ ~ 0 9 ACQUIS1TION OF NON FENANCIALS 2017/2018 2016/2017 WORLD BANK KAA Toita Total Kis'000 Kshs'000 Kshs'0(0 Kshs'000 52.392 41.649 (94.041 45331 152,392 41,649 191041 45.,331 2017/2 (8 2016/2017 Total Total Ksh1s'000 Kslis'000 10 Fuid Balance Biotilt Forward _64 285317 64922 85,317 KENYA AIRPORTS AUTHORITY KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSP) ANNUAL REPORTS AND FINANCIAL STATEIENTS FOR THE YEAR ENDED 30TH JUNE 2018 OGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS¯ The following is the summary of issues raised by the external amditor. and tbc management comments that w ere provided to tc auditor. Wc have norminated focal persons to resolve te various issues as shown below with tbc associated time framc within which wc expect the issues to be resolved. o, on the Foeal point person Tiniefranime: (Put exterl n a to resolve the issue Status: date when you (Name and Resolved/Not expect the i5ssue __ t Auditor LInagmcrnt Response Designition) Resolved to be resolved The special reconciliation IThe amounit of Kshs 170,381.982 statement prepared by the vas received throughi National Tteasury for audit reimbuiitrsements from the World reflect Nil withdrawals during Bank direcily citcr to the project the vear while the project's account or through KAA bank financial statements reflccts accounts. Tc rembursernents receipts amounting to Kshs kwere not given thr11lough1, the 1(a) 170,381,982 (USD 1,707.000) xchaquer Patrick Chonde Resolved an Project Coordinator Jön An~6en Fred Odawo D-str.... ..... ..... .. ... ........ D nte....f ' t KENYA AIRPORTS A UTHORITY KENYA TRANSPORT SECTOR SUPPORT PROJECT (KTSSI) ANNUAL REPORTS AND FINANCIA L STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2018 .E\ 1-VA RIANCE~ EX PLANATIONSCO VI~-#\1J¯{V [UDGET AND) A CTUAL..U NTS ¯ --__ Actuni on Conparative Utilization Final Budget gas varinnce % orVariance RE_CEIPTS Ks'000 Ksh '000 Ksh'000 Variance Counterpart funding from KAA ¯542345 79.037 463.308 Proceeds from Domnesi.ic anF0% Inadequae project Pgd mD n Gr6ts 765.900 2T 61% Implernentation capacity coupled witlh procurenct delays Loan fron External Develo 0contributed to low Funds Interest Income P n20 20.000 P00% absortion rates otal Receipt 1328245 26 - 12626) I1 3&245 378,1231 _50,123 7 __%1__ _- - -- --_ - PAYMENT PurchIase of goods& sevices 007830 201.860 805,970 _ _ _ Payment for Works 0% Pay'ment for Training 3 0000 79404 V 10.000 65% 20.000 06000 % Bank clharges/ Commision and Wtax\ i 91 -9 1 On _____ Totl - -nient 1,328,245 395,910 932,335 3 Te accOnlin polici s and explanatorN nos to hese inanci ents form an integral pat of the Onancla statements. The inancial stateinents Nvere aljprov'ed on ........2018 ..20I and siEnýied by: a alO h iaca ttnet.i1k - i Project Coord nator Fred Od,w'o .. .... ... . ,eneral Mai ger iac angh ie Mex Gitar i MiannAng Direcor* kJlnny Anderre