KPMG Intergovernmental Authi-ty on Dvel ment IGADI Building Resilience to Disasters through Risk Management and Climate Change Adaptation (DRM) Project (Grant No. TFOA1090) Report and financial statements for the year ended 31 December 2018 June 2019 This report contains 15 pages Contents 1 Introduction 1 2 Statement of management responsibilities 4 3 Independent Auditors' Report to IGAD Project management 5 4 Fund accountability statement for the period 1 January 2018 to 31 December 2018 7 5 Notes to the financial statements for the period 1 January 2018 to 31 December 2018 8 Annex 1 - Statement of activity in the designated bank account for the year ended 31 December 2018 10 Annex 2 - A reconciliation of receipts from the Bank 11 Annex 3 - Summary of SOE withdrawal schedule, listing individual withdrawal applications 12 KPMG 1 Introduction 1.1 Background of the Organization - Intergovernmental Authority on Development The Intergovernmental Authority on Development (IGAD) is a regional establishment in the horn of Africa. It is one of the building blocks of African Union and contributes to the Continental development and economic integration agenda through a number of its programs undertaken by the three operational divisions of Economic cooperation, Peace and Security and Agriculture and Environmental Protection. IGAD's mission is to assist and complement the efforts of the Member States to achieve increased cooperation on food security and environmental protection; promotion and maintenance of peace and security and humanitarian affairs; and economic cooperation and integration and reinforcement of the Minimum Integration Plan (MIP) approved by the member states early part of 2012. IGAD is determined to face the challenge of self-improvement through a genuine institutional strengthening mechanism that will ultimately bring about tangible performance enhancement in the organization. This requires the concerted effort of the IGAD Secretariat, the Member States and Partners in Development to collectively facilitate the strengthening of IGAD governance, management and operational capacity so that they may better fulfil their mandate and functions. 1.2 Project Background and Administration Building Resilience to Disasters through Risk Management (DRM) and Climate Change Adaptation (CCA) project (DRM Project) became operational in 2016 although the agreement was signed on 18 November 2015. The project's implementation period is four years from 1 November 2015 to 31 August 2019. The primary objective of the project is to strengthen the capacity of IGAD in providing policy advice and support to its member states on disaster and climate risk management and promoting resilient development. The project consists of the following Components: - Component 1: Strengthening IGAD capacity to lead regional DRM and CCA agenda and of IGAD members to implement DRM and CCA interventions to improve resilience to natural hazards. - Component 2: Strengthening Disaster risk management and Climate Change Adaptation Coordination Capacity in the IGAD Region. - Component 3: Strengthening technical and implementation capacity of DRM unit. The period covered by this report is from 1 January 2018 to 31 December 2018. 1.3 Period This report covers the period 1 January 2018 to 31 December 2018. 1 1.4 Scope and objective of the engagement This report covers the audit of funds provided by the International Development Association (IDA) for the implementation of the Building Resilience to Disasters through Risk Management and Climate Change Adaptation (DRM) Project activities for the period 1 January 2018 to 31 December 2018. The objective is to audit the financial report for the period 1 January 2018 to 31 December 2018 as submitted to IDA and to express an audit opinion according to ISA 800/805 on whether the financial report of Building Resilience to Disasters through Risk Management and Climate Change Adaptation (DRM) Project is in accordance with the World Bank's instruction for financial reporting as stipulated in the Financing Agreement between IGAD and International Development Association (IDA). Our audit was conducted in accordance with International Standards on Auditing. 2 PROJECT MANAGEMENT Executive Secretary H.E. Amb. Eng. Mahboub M. Maalim Director Administration and Finance Josephat Onyari ICPAC Director Dr Guleid Artan Programme Manager Keflemariam Sebhatu Physical office and address C/O Kenya Meteorological Department Dagoretti Corner, Ngong Road PO Box 10304-00100 Nairobi Kenya Auditors KPMG Kenya 8th Floor, ABC Towers Waiyaki Way PO Box 40612 00100 Nairobi GPO Bankers Co Operative bank of Kenya PO Box 195 555- 00202 NBC Branch Nairobi Kenya 3 2 Statement of project management responsibilities Project management (Management) is responsible for the preparation of the financial statements of the Building Resilience to Disasters trough Risk Management and Climate Change Adaptation (DRM) Project (the Project) for the year 1 January 2018 to 31 December 2018 comprising the fund accountability statement and notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, on the basis of accounting described in Note 5.1. Management's responsibility includes: determining that the basis of accounting described in Note 5.1 is an acceptable basis for preparing the financial statements of the Project in the circumstances, preparation of the financial statements in accordance with accounting policies of the Project, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error. Management accepts responsibility for the financial statements of the Project, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with the accounting policies and requirements of the Project. In addition, management is responsible for ensuring compliance with the terms of the grant agreement between IGAD and the World Bank (the Agreement) with respect to use of funds provided under the Agreement and financial reporting in accordance with requirements of World Bank. Management is of the opinion that the special purpose financial statements of the Project have been prepared, in all material respects, in accordance with the basis of accounting described in Note 5.1 and in accordance with the requirements of the Agreement. Management further accepts responsibility for the maintenance of accounting records, which may be relied upon in the preparation of the special purpose financial statements, as well as adequate systems of internal financial control. Approval of the special purpose financial statements of the project The special purpose financial statements of the Project, as indicated above, were approved by management on and are signed on its behalf by: H.E. Amb. Eng. Mahboub M. Maalim Josephat dhyari Executive Secretary Director Administration and Finance IGAD IGAD 4 KPMG KPMG Kenya Telephone +254 20 2806000 Certified Public Accountants Email info@kpmg.co-ke 8th Floor, ABC Towers Website www kpmg.com/eastafrica Waiyaki Way PO Box 40612 00100 GPO Nairobi, Kenya 3 Independent Auditors' Report to IGAD Project management Opinion We have audited the special purpose financial statements of the Building Resilience to Disasters trough Risk Management and Climate Change Adaptation (DRM) Project (the Project) implemented by IGAD for the period 1 January 2018 to 31 December 2018, which comprise the fund accountability statement, and notes to the special purpose financial statements comprising significant accounting policies and other explanatory information. In our opinion, the special purpose financial statements of the Building Resilience to Disasters trough Risk Management and Climate Change Adaptation Project for the year ended 31 December 2018 are prepared, in all material respects, in accordance with the basis of accounting set out in Note 5.1 and in conformity with the requirements of the grant agreement between IGAD and the World Bank (the Agreement). 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 Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of IGAD in accordance with International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter - Basis of accounting and restriction on use and distribution We draw attention to Note 5.1 of the special purpose financial statements which describes the basis of accounting. The special purpose financial statements are prepared to assist project management of IGAD comply with the financial reporting provisions of the Agreement. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for IGAD and IDA and should not be used by or distributed to parties other than IGAD or IDA. Our opinion is not modified in respect of this matter. Other Information Project management (Management) is responsible for the other information. The other information comprises the Project Background and Administration. Our opinion on the financial statements of the Project does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Project, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Project or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. KPMG Kenya is registered partnership and a member of the Partners BE Aholi AM Mbai KPMG network of independent member firms affiliated with (British*) BC DSouza JL Mwaura KPMG International Cooperative ("KPMG International"), a JM Gathecha BM Ndung'u Swiss entity JI Kariuki JM Ndunyu Pl Kinuthia AW P5gle* 3 Independent Auditors' Report to IGAD Project management (Continued) Management's responsibilities for the special purpose financial statements of the Project As stated on page 4, Management is responsible for the preparation of the financial statements of the Project in accordance with the basis of accounting described in Note 5.1 and in conformity with the requirements of the Agreement, 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. Auditors' responsibilities for the audit of the financial statements of the Project Our objectives are to obtain reasonable assurance about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the project 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 organization's internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with management, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. The Engagement Partner responsible for the audit resulting in this independent auditors 'report is CPA John Ndunyu - P/2100. Date: ;L- Jvrs(c 4 Fund accountability statement for the period 1 January 2018 to 31 December 2018 2018 Budget 2018 US$ Actual Note US$ Income Opening balance 5.2 - 117,717 Project income 5.3 2.018.897 1,345,221 Total Income 2,018,897 1,462,938 Expenditure Project expenditure 5.4 2,018,897 1,537,771 Total expenditure 2,018,897 1,537,771 Deficit 5.5 - 74,833) Represented by: Cash and bank balances 5.6 18,027 Receivables 5.7 4,111 Creditors and payables 5.8 - (96,971) The financial statements of the project set out on pages 7 to 9 were approved by management on and are signed on its behalf by: H.E. Amb. Eng. Mahboub M. Maalim Josephat Onyari Executive Secretary Director Administration and Finance IGAD IGAD The notes set out on pages 8 to 9 form an integral part of these financial statements. 7 KPMG 5 Notes to the financial statements for the period 1 January 2018 to 31 December 2018 5.1 Basis of preparation The financial statements of the Project have been prepared based on World Banks's instructions for financial reporting stipulated in the Grant Agreement between IGAD and World Bank dated 18 November 2015. The main accounting policies relevant to the preparation of the financial statements of the project are as follows: (a) Accounting convention The financial statements of the Project have been prepared under the historical cost convention. (b) Income Income is recognized when funds are received. Any unspent funds at the end of the project are refundable to the donor. (c) Expenditure Expenditure is accounted for on cash basis, modified to accrue for outstanding obligations, if any, at period end. (d) Receivables Receivables are recognized in the financial statements when cash payments are made to third parties as advances for project implementation. The balance at the year-end reflects advances that have not yet been accounted for at year end. (e) Fixed assets Assets purchased using project funds are expensed in full on the date of acquisition. (f) Translation of foreign currency Transactions in other foreign currencies are translated to US dollars at rates of exchange prevailing at the date of the transaction. 5.2 Opening balance This relates to excess of income over expenditure for the period 1 January 2017 to 31 December 2017 and was the closing fund balance per the audit report for this period. 5.3 Period receipts During the period, IGAD received project funds from the World Bank towards the implementation of the project activities as detailed below: Borrower Beneficiary Beneficiary Amount Date received Reference Name Account US$ 22 February 2018 WA 11 IGAD - ICPAC 02128075401200 179,975 6 April 2018 WA 13 IGAD - ICPAC 02128075401200 100,000 26 April 2018 WA 14 KRCS 01020130222215 100,000 3 May 2018 WA 16 IGAD - ICPAC 02128075401200 201,227 14 June 2018 WA 18 IGAD-ICPAC 02128075401200 138,151 23 July 2018 WA 20 IGAD - ICPAC 02128075401200 245,438 24 August 2018 WA 22 IGAD - ICPAC 02128075401200 209,115 2 November 2018 WA 24 IGAD-ICPAC 02128075401200 171,315 8 5.4 Project expenditure Expenditure categorized by project components US$ Component 1: Strengthening capacity of IGAD in DRM and CCA agenda to improve resilience to natural hazards 452,162 Component 2: Strengthening Disaster Risk Management and Climate Change Adaptation Coordination Capacity in the IGAD region. 636,569 Component 3: Project Administration costs 417,952 Administrative costs 7% 31,088 Total expenditure 15371 5.5 Deficit The deficit for the period relates to deficit of income over expenditure for the year ended 31 December 2018. Project management indicated that they received money from world bank in different tranches in 2019. 5.6 Cash and bank balances US$ Co-operative Bank (US dollar account) 16,849 Co-operative Bank (KShs account) 5.7 Receivables Amount US$ Mission advances 3,794 Receivable from implementing partner (Kenya Red Cross) 317 Total 5.8 Payables Amount US$ Payables and other accruals 96 Total NAM 5.9 Currency The financial statements of the project are presented in US dollars. 9 Annex 1 - Statement of activity in the designated bank account for the year ended 31 December 2018 Account number: 02128075401200 Account name: ICPAC DRM ACCOUNT (USD) Bank: Co-operative Bank NBC Branch Amount US$ Opening balance as at 1 January 2018 112,846 Transfers from the donor directly to IGAD during the period 1 January 2018 to 31 December 2018 1,245,221 Total 13506 Add: Payments to KRCS partner 100,000 Payables for the year ended 31 December 2018 96,971 Receivables for the year ended 31 December 2017 4,871 Less: Payments out of designated bank account (1,537,771) Receivables for the year ended 31 December 2018 ( 4,111) Closing balance as at 31 December 2018 18-027 10 kPG Annex 2 - A reconciliation of receipts from the Bank USD Amounts disbursed by the bank 1,345,221 Amounts received by IGAD (through the special account) (1,245,221) Payments to KRCS partner 100,000) Variance - 11 71A-a1 Annex 3 - Summary of SOE withdrawal schedule, listing individual withdrawal applications # Date of withdrawal application Loan/Grant Number Amount US$ 1 22 February 2018 IGAD ICPAC - WA 11 179,975 2 6 April 2018 IGAD ICPAC - WA 13 100,000 3 26 April 2018 KRCS - WA 14 100,000 4 3 May 2018 IGAD ICPAC - WA 16 201,228 5 14 June 2018 IGAD ICPAC - WA 18 138,151 6 23 July 2018 IGAD ICPAC - WA 20 245,438 7 24 August 2018 IGAD ICPAC - WA 22 209,115 8 2 November 2018 IGAD ICPAC - WA 24 171,315 Total 12 N � � � � � Or0 fиD � п " I (-� _ _ = 2 = ~ �• � � � N й спл й й й й � � _Q � � � G� G� G� G� °о о ц � �_ т ,� со о о� о о °о c.�s, � и � i ( � � � � � р 1 -- � _п о о о о о о о о о -iгQ �� � с cD � � � � � � � � � � 3 � � С� О с> п С� с� С� С� О ��'-': D сс � л и 'о о 'о 'о 'о 'о о о 'о С� � � и о о � о о� о о о о о о �р � � � � � д7 �D и D с� О D С� D С) D с) D с) D с) D С) О л � о ло � ио ло ло ло ио ло � а� и' � � � л � 3 � � � Э � 3 � 3 � � л о � � и"о о и'л ' и"в и"о и"о и"а и'о CD !С RD � и с и с'и с и с и с и с и с � � о т г.. т от д °т'от'°т °т от от � .� О •� с •� , •-, , •� •� •� •-, с й ц� �• й v'й �'й � й р� й� й v_о• -t� Q Э Q �'' c�i Q п�. а� '''' т т � � � �р � � � и � 2 � = r г- r r r � р �. � �� о � � � � � � � й � �_' �� л � о о о о о О '= �-r �' и о и т п о о � -' � � -I --1 -� � д7 г! � �'� � � � � � � D О � � т -� -о° �° -� -� D °, о =� т о ш ш ш ш ш и �* � �• р � �-� � -о -о ш � т о о о о о и '�7 'а 'в '�7 'а v � w о сл � л � � � � � -п � � � С 3 г•г � � � � � � � � � � А � w iv iv iv iv iv iv D оо оо о � ' � � � � �' д р о о о � � � .� � о сл и ш о о о о о оо =. � N N N 'N N N N 'N N и О О О 'О О О о О О ^j О � � � � � � � � � � -ь, � � о о � � � о о � rv w iv � � � � � � .л С 'а С� и =• о й °о � rn о о о о о � �� rt о о оо и о о о о о � л �'л � -о и л �� л л � л � т ° � слi оо � сиi = � -, и т о о о Q.� о .� •о с � �' О � �• с • � � о v � � �р � � � � D р ш 3 � � й т � д7 � о � � о и. -, � � г+ � � � � 0 'к � � т � � � w � �