Report No: FIN-2019-52 (E) 30 June 2019 PUBLIC FINANCIAL MANAGEMENT SYSTEMS STRENGTHENING PROJECT MINISTRY OF FINANCE FINANCIAL YEAR 2018 TABLE OF CONTENTS Auditor General's Report 1 Financial Statement Statement of Receipts and Payments.... .,..4 Notes to the financial statement ........... 5 6)[)''/ 6 *.11. tuBIT0B lrti4 .ar- Eff{tfttlT arfiffi "il & AUDITOR GENERAL'S REPORT TA THW MINISTRY OV YINA}{,CE ON THE FINANCIAL STATEMENT OF PUBLIC . WYNA}4CTALWANAGEMWWTfrYSTWMSTH&NG|TVTEI{INGPR:AJV,CT Opinion We have audited the Project's financial statement of Public Financial Management System Strengthening Project financed by the World Bank/International Development Association (IDA). This financial statement comprises of the Statement of Receipts and Payments for the financial year ended 3l December 2018 and notes to the financial statement, which includes a summary of significant accounting policies and other explanatory information set out in pages 4 to 7. In our opinion, the accompanying financial statements presents fairly, in all material respects, the cash receipts and cash payments for the financial year ended 31 December 2018 and cash balances as at the year then ended in accordance with International Public Sector Accounting Standard: Financial Reporting under the Cash Basis of Accounting. In addition, we can provide assurance that: (a) The funds provided under the Grant have been utilised for the purposes for which they were provided; (b) The Special Account transactions and its balance as at 3 l't December 2018 have been presented truly and fairly on the financial statement, in accordance with International Public Sector Accounting Standard: Financial Reporting under the Cash-Bosis of Accounting, and the cash balance as at 3 l't December 2018 shown on the Statement of Receipts and Payments reflects the cash balance which is reconciled to that of the Special Account; (c) The Financial Monitoring Reports furnished to the World Bank could be fairly relied upon to support the applications for withdrawals in accordance with the requirements specified in the Grant Agreement; and adequate supporting documentation have been maintained to support claims made to the IDA, for reimbursement of expenditures incurred and which expenditures are eligible for financing under the Grant Agreement, and (d) The Procurement guidelines of the World Bank have been complied with in the procurement of goods and services under the project. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Auditor General's Office I Ghaazee Building I Ameer Ahmed Magu I Male'. Republic of Maldives +960 332 3939 inlo'a.:auclit.gor'.nrr ] u *ri'.audil.sor .mv -1- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the management and those charged with governance for the financial statements The Management is responsible for the preparation and fair presentation of this financial statement in accordance with the International Public Sector Accounting Standard (IPSAS): Financial Reporting under the Cash Basis of Accounting. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statement that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Those charged with governance of the project is responsible for overseeing the Project's financial reporting process. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: . Identi& 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 conffol. o 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. o Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. o 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. We communicate with those charged with governance of the project 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 identiff during our audit. Auditor General's Office I Ghaazee Building I Amecr Ahmed Magu I Male', Republic of Maldives +9 60 332 393 9 | i n fu iirraLr d it. gov. nt v I rvrv r.ri. autl i I' gor .nlv -l- Review of the Project's Progress Without qualifiing our opinion, we draw attention to the following management issues observed from our review of the project's progress. The table below shows the actions agreed in the Review Mission (December 2018). # Agreed Action Target Current Status Date 0ngoing. Work with Auditor General's Office to Develop a phased multi-year action Septem ber 1 received from EY plan towards accrual accounting 2018 NPC' consultancy's first phase is complete. Share with Bank an English version (or abridged translation) of draft October 2 Second phase is Accounting Cadre 201 8 expected to commence 201 I PIIVA recommendations to October ? lnclude large public investment projects into MTFF be addressed prior to 2018 including these projects to MTFF Not required at this lncorporate changes in budget classification in the chart of accounts (SAP time. FAD will request 4 ECC) to harmonize the budget codes to make this change if needed. Carry out an audit to reconcile establishment register in Civil Service Employee register 5 Commission (CSC) with the SAP HR payroll on a monthly basis portalwas launched in June 2019. TOR for new lnternal auditor is being N ovember finalized. Procurement 6 Complete pilot internal audits 8 process is expected to commence in late June 20'19. 3Oth June 2019 -tl-^qr.l Hassan Ziyath Auditor General Auditor General's OfIce I Ghaazee Building I Ameer Ahmed Magu I Male', Republic of Maldives +960 332 3939 | info'ir,audit.gov.mv rv*'u'.audit.sor.ml -3- MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT SYSTEM STRENGHTHENING PROJECT (PFMSS) STATEMENT OF' RECEIPTS AND PAYMENTS FOR THE YEAR Ol JANUARY 2018 TO 3l DECEMBER 2018 2018 2018 2018 2017 2017 2017 Receipts Note USD USD USD USD USD USD World GONT Total World GONI Total Bank Bank Funds received fiom World Bank 3 1,333,752 1,333,752 1,483.724 1,483,724 Funds received fiom 67,410 67,410 J Govemment Total Receipts 1,333,,752 1,333,752 1,483,121 61,410 1,551,134 Payments Strengthening the PFM 30,145 4 168,244 168,244 30,1 45 Environment Strengthening Budget Execution 5 730,070 730,070 2,462,620 67,410 2,s30,030 Project Management 6 155,557 155,557 141,561 141,561 Total Payments 1,053,871 1,053,871 2,634,326 67,410 2,634,326 Increase/(Decrease) in Cash 279,880 279,880 (1,150,602) Cash at beginning of the 110,728 1,261,329 period Increase/(Decrease) in Cash 279,880 (1,150,602) Cash at end of the period 390,608 110.728 Management of the Project is responsible for the preparation and presentation of the financial statement. The Statement of Receipts and Payments was approved by PMU on 30ftJune 2019. Signed for and on behalfofthe Project: Mr Hassan Nadheema Yoosuf Project Financial Management Associate The accountingpolicies and notes on pages 5 through 7 form an integral part of the Statement of Receipts and Pavments. MinistryofFinance, Ameenee Magu, Mal6, Maldives Tel: +(960) 3349244, Fax: +(960) 3324432 4 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT SYSTEM STRENGHTHENING PROJECT (PFMSS) NOTDS TO THE FINANCIAL STATEMENTS 1. PROJECT INFORMATION 1.1 PROJECT TITLE: Maldives Public Finance Management System Strengthening (PFMSS) 1.2 STARTED DATE: 17-08-2014 1.3 CLOSING DATE: 31-07-2019 1.4 PROJECT DURATION: 5 years 1.5 APPROVED BUDGET: US$ 6,500,000 (Six Million Five Hundred Thousand U.S. Dollars) (As per SDR rate 1.53 @ l7rh August 2014) 1.6 FUNDED BY: International Development Association (tDA) 1.7 TRUST FUND MANAGER: World Bank 1.8 Objective The objective of the project is to enhance budget credibility, transparency and financial reporting of central government finances. The project comprises of three main components; Component 1: Strengthening the PFM Environment (US$ 1,450,000) The objective of this component is to set the foundation and create an enabling environment for a sound PFM system. Component 2: Strengthening Budget Execution (US$ 4,400,000) The objective of this component is to improve the efficiency of the resource utilization and the credibility, comprehensiveness, and timeliness of financial reporting. Component 3: Project Management (US$ 550,000) The objective of this component is to provide support to MOFT for coordination, monitoring, administration, communications, change management, financial management, and procurement ofthe proposed project required for successful implementation of the project activities. ,tNrt'\' Ministry of Finance, Ameenee Magu, Mal6, Maldives. Tel: +(960) 3349244, Fax' *(960) 3324432 ) MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT SYSTEM STRENGHTHENING PROJECT 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 2.1Basis of preparation The Statement of Receipts and Payments are prepared in accordance with the International Public Sector Accounting Standard: Financial Reporting under the Cash-Basis of Accounting. 2.2 Recognition of Receipts and Payments Receipts and payments are accounted for on cash basis. Receipts are recognised when the Govemment of Maldives (GOM) receives the funds from World Bank. Payments are recognised at the time of outflow of cash from the bank account. 2.3 Presentation Currency The Statement of Receipts and Payments has been presented using the United States Dollars (USD). All figures have been rounded to the nearest Dollar. 2.4 Foreign Currency Translation Receipts and payments in currencies other than the reporting currency (USD) are converted at the MMA's exchange rate existing between the transaction curency and USD at the time of the receipt/payment. Cash balances in currencies other than USD as at the end of the reporting period are shown in the financial statement at the exchange rate that was prevailing at the last day of the reporting period. 2.5 Reporting Period Financial statement is generally prepared for one year (Calendar year) with the exception of commencement and/or closure of the project. Depending on the date of commencement or closure, a period shorter or longer than one year may be covered. Period for which financial statement is prepared is disclosed on the face of financial statement 2.6 Comparatives In addition to the figures for the year ending 31 December 2018, the financial statement shows the figures for the financial year ending 31 December 2017 as well. ,I{fR Ministry of Finance, Ameenee Magu, Ma16, Maldives. Tel: *(960) 3349244, Fax {960) 3324432 6 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT SYSTEM STRENGHTHENING PROJECT (PFMSS) 3. Disbursements/Receipts 2018 2018 2018 2017 2017 2017 USD USD USD USD USD USD World GOM Total World GOM Total Bank Bank Funds received from World Bank 1,t7 5,478 1,175,478 1,483,724 1,483,724 Funds received from Government 67,410 67,410 Reimbursement (spent from 158,273 158,273 Government Budget Total 1,175,479 158,273 1,333,752 1,483,724 671410 1,551,134 4. Component 1: Strengthening the PFM Environment 2018 2018 20r8 2017 2017 2017 USD USD USD USD USD USD World GONI Total \Yorld GOM Total Bank Bank Consultant fees (Project Account) 9,971 9,977 30,145 30,745 Training room (Reimbursment) 158,273 158,273 Total 168,244 168,244 30,145 30,1 45 5. Component 2: Strengthening Budget Execution 2018 2018 2018 2017 2017 2017 USD USD USD USD USD USD World GOM Total \Yorld GOM Total Bank Bank 212,657 1,729,173 1,129,173 Consultant fees (Proiect Account) Software maintenance fees 410,199 217,386 67,410 278,796 (Project Account) 7,042,343 ICT Equipment 1,042,343 Training fees 46,614 79,118 79,118 Total 730,070 2,462,620 67,410 2,530,030 6. Component 3: Project Management 2018 2018 2018 20t7 2017 2017 USD USD USD USD USD USD World GOM Total World GOM Total Bank Bank 121,924 Salaries (Project Account) 97,521 91,521 Training fees (Project Account) 21,208 74,999 14,999 Operating costs (Project Account) 6,425 29,041 29,041 155,557 l4l,56l Ministry of Finance, Ameenee Magu, Ma16, Ir/aldives. Tel: *(960) 3349244, Fax +(960) 3324432 '7