REPUBLIC OF KENYA FFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA ELECTRICITY EXPANSION PROJECT (IDA CR.4743-KE) FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018 STATE DEPARTMENT FOR ENERGY OFFICE OF THE AUDITOR GENERAL P. 0. Box 30084 - 00100, NAIROBI REGISTRY 2 0 DEC 2018 RECEIVED Project Name: KENYA ELECTRICITY EXPANSION PROJECT Implementing Entity: STATE DEPARTMENT OF ENERGY PROJECT CREDIT NUMBER: IDA CR. 4743-KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE NINE MONTHS PERIOD ENDED 31 MARCH 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 CONTENTS PAGE 1. PROJECT INFORMATION AND OVERALL PERFORMANCE.............................................................................ii 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES ..................................................................vii 3. REPORT OF THE AUDITOR-GENERAL ON THE KENYA ELECTRICITY EXPANSION PROJECT........ viii 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018 1 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 MARCH 2018 ........................................................................2 6. STATEMENT OF CASH FLOWS FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018...........................3 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS.........................................................4 8. NOTES TO THE FINANCIA L STATEM EN TS .......................................................................................................... 5 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS ..............................................................13 i Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project's official name is Kenya Electricity Expansion Project, Objective: The key objective of the project is to increase capacity, efficiency and quality of electricity supply and expand access to electricity in Urban, Peri-Urban and Rural Areas. Address: The project headquarters offices are Nairobi, Nairobi County, Kenya. The address of its registered office is: Kenya Electricity Expansion Project Nyayo House P. 0. Box 34942-00100 Nairobi Contacts: The following are the project contacts Telephone: (254) 33101112 E-mail: ps@energy.go.ke Website: www.energy.go.ke 1.2 Project Information Project Start Date: The project start date is 01 October 2010 Project End Date: The project end date is 31 December 2017 Project Manager: The project manager is Rodney Sultani Project Sponsor: The project sponsor is international Development Association, Which will continue 100% of project costs 1.3 Project Overview Line Ministry/State The project is under the supervision of the State Department of Energy. Department of the project Project number IDA CR. 4743KE Strategic goals of the The strategic goals of the project are as follows: project (i) To increase the capacity, efficiency and quality of electricity supply (ii) To expand access to electricity in urban, peri-urban and rural areas. Achievement of The project management aims to achieve the strategic goals through the strategic goals following means: 11 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 (i) Carrying out a range of institutional and policy in the energy Sector, including a cost of service study and regulatory support studies. (ii) State Department of Energy, Geothermal Development Company, Energy Regulatory Commission, Kenya Electricity Transmission Company and other sector stakeholders on a range of subjects, including environment and social management, project management and systems planning. (iii) Carrying out project implementation support activities such as monitoring and evaluation of the project. Other important The overall project is being implemented in conjunction KPLC, KENGEN, background REA, GDC and ERC information of the project Current situation that The project was formed to intervene in the following areas: the project was formed (i) Insufficient capacity, efficiency and quality of electricity supply. to intervene (ii) Limited access to electricity in urban, Peri-Urban and rural areas Project duration The project started on 1st October 2010 and was expected to run until 31 December 2017, but was closed on 31 March 2018. 1.4 Bankers The following are the bankers for the current year: (i) Special Account: Equity Bank of Kenya Ltd, Account No. 0810296013919 (ii) Project Account: Central Bank of Kenya Account No. 1000309539 1.5 Auditors The project is audited by the Auditor General Office of the Auditor - General Anniversary Towers, University Way P. 0. Box 30084 Nairobi 1.6 Roles and Responsibilities The Key Staff, who form the project coordinating team that is involved in the day to day management of the project and its implementation are: 111 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 Title Names Designation Qualifications Responsibilities Dr. Eng. Joseph Principal Eng. Njoroge holds a Bachelor of Accounting Officer Njoroge,CBS Secretary Science degree in electrical engineering and Master of Business Administration with a major in strategic management. He is a Chartered Electrical Engineer, a member of the Institution of Engineering and Technology, UK, a Registered Consulting Engineer, and is also a Fellow of the Institution of Engineers of Kenya. He is also Chairman of the MBA Chapter of University of Nairobi Alumni Association. He also holds a PhD from University of Nairobi's School of Business. Rodney Sultani Project MSc. Project Management, BSc Coordination of the Coordinator Civil Engineering. day to day activities of the Program. Eng. Isaac Bondet Power BSc. Mechanical Engineering Technical Advisor on Engineering civil matters Consultant Eng. Richard Power MSc. Electrical Engineering, BSc Technical Advisor on Muiru Engineering Electrical Engineering electrical matters Consultant William Mbaka SD/Director of He holds a MBA in Finance from Preparation of budget Budget Birmingham University (UK), A for the Project degree in Business Studies from Kenyatta University and an ACCA qualification. Jedidah A.N. Head of B. Coin (Accounting Option) Management of Macharia Accounting Degree, CPA (K) accounting function Unit of the Project 1.7 Funding summary The Project was for duration of Seven (7) from years from 2010 to 2017 with an originally approved budget of US$ 11,500,000, Equivalent to Kshs. 1.2 billion, which was restructured and reallocations made during the FY2015/16. The restructuring was completed in April 29, 2016 with a new restructured red budget of US$5.7m (Equivalent to Kshs.575.7 million) for Ministry of energy component. iv Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 Below is the funding Summary: SouceofAmunt received to Undrawn balance to date1 funds Donor Commitment- date ( 30 0612018)0 ..218 1)$KksUSKsm S Kshs (A (')(B) (B) (A)-(B) ('-B') (i) Loan International Development 5,700,000 575,700,000 5,700,000 575,700,000 0 0 Association Total 5,700,000 575,700,000 5,700,000 575,700,000 0 0 1.8 Summary of Overall Project Performance: 1.8.1 Budget performance against actual amounts During the year under review, the Project received total amount of Kshs.92,670,608 against a budget of Kshs.244,532,561, representing 38% Utilization and spent Kshs.92,,802,451 against a budget of Kshs.244,532,561, representing 38% budgetary utilization. The Project's cumulative receipts and payments as at 31 March 2018 were Kshs.617,384,643 and Kshs.613,999,218 respectively. 1.8.2 Physical progress based on outputs, outcomes and impacts since project commencement, All of the planned activities under component DI, institutional development studies have already been completed. Two studies were added to this sub-component namely: mini grid regulation, revenue & technical requirements study, and the pre-feasibility study of private sector for renewable energy mini- grid, which were also completed in FY2016/17. Some capacity building initiatives were carried out before the project close-out in December 2017. Training and project implementation support and Monitoring & Evaluation under components D2 and D3 respectively were also completed during the year. 1.8.3 Achievements of the Project * Implementation of 21 consultancy contracts, 18 supply of goods contracts, 12 works contracts. * 26 power substations have been built while 11,055km of distribution lines have been constructed/rehabilitated to strengthen KPLC power distribution system in urban and per-urban areas. * 1,058 priority loads (public facilities) and 15,511 business premises connected to the national grid in rural areas. * A total of 5,487,708 Kenyans have been provided with access to electricity. V Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 H A total of 280 megawatts(MW) generating capacity has been installed and commissioned at KenGen's Olkaria 1 and IV power plants, with a capacity of generating a total of 202OGWh annually. * A total of 328 km out of a targeted 334KV transmission power lines have been constructed. * A total of 1,289,055 meters for slum electrification and 57,667 connections for slum electrification have been done under both KEEP and KEEP Additional Financing. 1.8.4 Implementation Challenges and Way Forward * The main challenge has been that the original cost estimates planned for the studies and consultancies exceeded the actual cost of execution. As such, the expenditures under the sub- component generally appears low. * Delays by the National Treasury in releasing project moneys to the project account once the donors disburse the same. * The National Treasury should be releasing project funds promptly once the donors disburse the same. 1.8.5 Summary of Project Compliance: The Project is in compliant with the existing tax rules and financial law and regulations, together with the financing agreement. vi Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Principal Secretary for the Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion 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 nine months period ended on 31 March, 2018. 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 Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion 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 Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion 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 nine months period ended 31 March, 2018, and of the Project's financial position as at that date. The Principal Secretary for the Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion 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 Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion 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 period 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 Ministry of Energy and the Project Coordinator for Kenya Electricity Expansion Project on 23 November, 2018 and signed by them. Principal Secretary Project Coordinator Project Accountant Dr. Eng. Joseph K. Njoroge, CBS Rodney I. Sultani Jedidah A.N. Macharia ICPAK Member No. 8805 vii REPUBLIC OF KENYA Telephone: +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 ELECTRICITY EXPANSION PROJECT (IDA CR. NO. 4743-KE) FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018 - STATE DEPARTMENT FOR ENERGY REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of Kenya Electricity Expansion Project (IDA Cr. No. 4743-KE) set out on pages 1 to 15, which comprise the statement of financial assets as at 31 March 2018, and the statement of receipts and payments, statement of cash flows and statement of comparative budget and actual amounts for the period 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 Financing Agreement No. 4743-KE dated 5 July 2010, between the International Development Association (IDA) and the Republic of Kenya. 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 addition, the accompanying special/designated account statement presents fairly, in all material respects, the funds received into and disbursements made from the special/designated account of the project during the period ended 31 March 2018. In my opinion, the financial statements present fairly, in all material respects, the financial position of Kenya Electricity Expansion Project as at 31 March, 2018, and of its financial performance and cash flows for the period then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and comply with the Financing Agreement No. 4743-KE of 5 July 2010. Basis for Opinion The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Kenya Electricity Expansion Project 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 audit 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. Key Audit Matters Key audit matters are those matters which, in my professional judgment, were of most significance in the audit of the financial statements. There were no Key Audit Matters to report in the period under review. Report ofthe Auditor-General on the Financial Statements ofKenya Electricity Expansion Project (IDA Cr. No. 4743- KE) for the 9 months'period ended 31 March 2018 - State Department for Energy Promoting Accountability in the Public Sector I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Responsibilities of Management and those Charged with Governance 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 maintaining effective internal control as management determines is necessary to enable the preparation of financial statements which are free from material misstatement, whether due to fraud or error, and for assessment of the effectiveness of the internal control. In preparing the financial statements, management is responsible for assessing the Project's ability 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 terminate the Project, 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. In addition to the responsibility for the preparation and presentation of the financial statements described above, management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them, and that public money is applied in an effective manner. Those charged with governance are responsible for overseeing the Project's financial reporting process, reviewing the effectiveness of management's systems for monitoring compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems to address key roles and responsibilities in relation to governance and risk management, are in place, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit 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 which includes my opinion 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 of Kenya. 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. Report ofthe Auditor-General on the Financial Statements ofKenya Electricity Expansion Project (IDA Cr. No. 4743- KE) for the 9 months' period ended 31 March 2018 - State Department for Energy 3 of my audit report. However, future events or conditions may cause the Project to cease sustaining 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 which achieves fair presentation. * Obtain sufficient appropriate audit evidence regarding the financial information and business activities of the Project 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 which are identified during the audit. I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters which may reasonably be thought to bear on my independence, and where applicable, related safeguards. FCPA Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 27 December 2018 Report ofthe Auditor-General on the Financial Statements ofKenya Electricity Expansion Project (IDA Cr. No. 4743- KE) for the 9 months'period ended 31 March 2018 - State Department for Energy 5 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018 payX0d8 , P 1t6ce5pta8 Pa 246yment cont Poled -mai 162,503,83 s mad by thes to co tementd b a tby thire Proet part es: t Project parties Kshs Kshs Kshs Kshs Kshs RECEIPTS Transfer from No.68805 Government entities Loa frm eteral8.3 92,670,608 - 50,000,000 - 575,700,000 development partners TOTAL RECEIPTS 92,670,608 - 50,000,000 - 617,384,643 PAYMENTS Pucaeo. od n 8.4 51,548,472 - 162,503,838 - 524,361,136 services Acuiitonofno-8.5 41,253,979 - - - 89,638,082 financial assets TOTAL PAYMENTS 92,802,451 - 162,503,838 - 613,999,218 SURPLUS/(DEFICIT) (131,843) - (112,503,838) - 3,385,425 The accounting policies and explanatory notes to these financial statements are an integral part of the financial statements. The Project financial statements were approved on 23 November, 2018 and signed by: Principal Secretary Project Coordinator Project Accountant Dr. Eng. Joseph K. Njoroge, CBS Rodney I. Sultani Jedidah A.N. Macharia ICPAK Member No. 8805 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 5. STATEMENT OF FINANCIAL ASSETS AS AT 31 MARCH 2018 FINANCIAL ASSETS Cash and Cash Equivalents Bank balances 8.6 A 3,385,425 3,517,268 Total Cash and Cash Equivalents 8.6 3,385,425 3,517,268 Accounts receivables - imprest and advances - 16,202,062 TOTAL FINANCIAL ASSETS 3,385,425 19,719,330 REPRESENTED BY Fund balance b/fwd 8.7 19,719,330 117,474,901 Deficit for the year (131,843) (97,719,572) Prior year adjustments 8.8 (16,202,062) - NET FINANCIAL POSITION 3,385,425 19,719,330 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 23 November, 2018 and Principal Secretary Project Coordinator Project Accountant Dr. Eng. Joseph K. Njoroge, CBS Rodney I. Sultani Jedidah A.N. Macharia ICPAK Member No. 8805 2 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 6. STATEMENT OF CASH FLOWS FOR THE 9 MONTHS PERIOD ENDED 31 MARCH 2018 Not 2071018 Z016/2017 CASH FLOWS FROM OPERATING ACTIVITIES Payments for operating activities Purchase of goods and services 8.4 (51,548,472) (99,371,468) Adjusted for: Change in Imprests & Advances 16,202,061 (16,202,061) Prior year adjustment 8.8 (16,202,062) Net cash flow from operating activities (51,548,473) (115,573,529) CASHFLOW FROM INVESTING ACTIVITIES Acquisition of non-financial Assets 8.5 (41,253,979) (48,384,103) Net cash flows from Investing Activities (41,253,979) (48,384,103) CASHFLOW FROM BORROWING ACTIVITIES Loan from external development partners 8.3 92,670,609 50,000,000 Net cash flow from financing activities 92,670,609 50,000,000 NET INCREASE IN CASH AND CASH EQUIVALENT (131,843) (113,957,633) Cash and cash equivalent at BEGINNING of the year 3,517,268 117,474,901 Cash and cash equivalent at END of the year 3,385,425 3,517,268 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The Project financial statements were approved on 23 November, 2018 and signed by: Principal Secretary Project Coordinator Project Accountant Dr. Eng. Joseph K. Njoroge, CBS Rodney I. Sultani Jedidah A.N. Macharia ICPAK Member No. 8805 3 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Actual on Budget .%of a- b ca+ d e=c-d f-d/c Kshs Kshs Kshs Kshs Kshs Receipts Transfers from 20,000,000 20,000,000 - 20,000,000 0% government entities Loan from external 226,000,000 (1,467,439) 224,532,561 92,670,608 131,861,953 41% development partners Total Receipts 246,000,000 (1,467,439) 244,532,561 92,670,608 151,861,953 38% Payments Purchase of goods 114,000,000 - 114,000,000 51,548,472 62,451,528 45% and services Acquisition of non- 132,000,000 (1,467,439) 130,532,561 41,253,979 89,278,582 32% financial assets Total Payments 246,000,000 (1,467,439) 244,532,561 92,802,451 151,730,110 38% Note: The significant budget utilisation/performance differences in the last column are explained in Annex 1 to these financial statements. Principal Secretary Project Coordinator Project Accountant Dr. Eng. Joseph K. Njoroge, CBS Rodney I. Sultani Jedidah A.N. Macharia ICPAK Member No. 8805 4 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 8. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1. Basis of Preparation 8.1.1. Statement of compliance and basis of preparation The financial statements have been prepared in accordance with Cash-basis IPSAS financial reporting under the cash basis of Accounting, as prescribed by the Public Sector Accounting Standards Board (PSASB) and set out in the accounting policy note below. This cash basis of accounting has been supplemented with accounting for; a) receivables that include imprests and salary advances and b) payables that include deposits and retentions. The financial statements comply with and conform to the form of presentation prescribed by the PSASB. The accounting policies adopted have been consistently applied to all the years presented. 8.1.2. Reporting entity The financial statements are for the Kenya Electricity Expansion Project under National Government of Kenya. The financial statements encompass the reporting entity as specified in the relevant legislation Public Finance Management Act (PFM) Act, 2012. 8.1.3. Reporting currency The financial statements are presented in Kenya Shillings (Kshs), which is the functional and reporting currency of the Project and all values are rounded to the nearest Kenya Shilling. 8.2. Significant Accounting Policies a) Recognition of receipts The Project recognises all receipts from the various sources when the event occurs and the related cash has actually been received by the Government. * Transfers from the Exchequer Transfer from Exchequer is be recognized in the books of accounts when cash is received. Cash is considered as received when payment instruction is issued to the bank and notified to the receiving entity. * External Assistance External assistance is received through grants and loans from multilateral and bilateral development partners. 5 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 Donations and grants Grants and donations shall be recognized in the books of accounts when cash is received. Cash is considered as received when a payment advice is received by the recipient entity or by the beneficiary. In case of grant/donation in kind, such grants are recorded upon receipt of the grant item and upon determination of the value. The date of the transaction is the value date indicated on the payment advice. Proceeds from borrowing Borrowing includes Treasury bill, treasury bonds, corporate bonds, sovereign bonds and external loans acquired by the Project or any other debt the Project may take on will be treated on cash basis and recognized as a receipt during the year they were received. Undrawn external assistance These are loans and grants at reporting date as specified in a binding agreement and relate to finding for the Project currently under development where conditions have been satisfied or their ongoing satisfaction is highly likely and the project is anticipated to continue to completion. An analysis of the Project's undrawn external assistance is shown in the funding summary Other receipts These include Appropriation-in-Aid and relates to receipts such as proceeds from disposal of assets and sale of tender documents. These are recognised in the financial statements the time associated cash is received. b) Recognition of payments The Project recognises all payments when the event occurs and the related cash has actually been paid out by the Project. * Purchase of goods and services Goods and services are recognized as payments in the period when the goods/services are consumed and paid for. If not paid for during the period where goods/services are consumed, they shall be disclosed as pending bills. * Acquisition of non-financial assets The payment on acquisition of property plant and equipment items is not capitalized. The cost of acquisition and proceeds from disposal of these items are treated as payments and receipts items respectively. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration and the fair value of the asset can be reliably established, a contra transaction is recorded as receipt and as a payment. A fixed asset register is maintained by each public entity and a summary provided for purposes of consolidation. This summary is disclosed as an annexure to the consolidated financial statements. 6 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 g) Budget The budget is developed on a comparable accounting basis (cash basis), the same accounts classification basis (except for accounts receivable - outstanding imprest and clearance accounts and accounts payable - deposits, which are accounted for on an accrual 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. The Development Projects are budgeted for under the MDAs but receive budgeted funds as transfers and account for them separately. These transfers are recognized as inter-entity transfers and are eliminated upon consolidation. A high-level assessment of the Project's actual performance against the comparable budget for the financial year/period under review has been included in an annex to these financial statements. h) Third party payments Included in the receipts and payments, are payments made on its behalf by third parties in form of loans and grants. These payments do not constitute cash receipts and payments and are disclosed in the payment to third parties' column in the statement of receipts and payments. During the period no loan disbursements were received in form of direct payments from third parties. i) 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 recognized in the statements of receipts and payments. j) 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. k) Subsequent events There have been no events subsequent to the period end with a significant impact on the financial statements for the period ended 31 March 2018. 8 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 1) Errors Material prior period errors shall be corrected retrospectively in the first set of financial statements authorized for issue after their discovery by: i. Restating the comparative amounts for prior period(s) presented in which the error occurred; or ii. If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. 8.3. LOAN FROM EXTERNAL DEVELOPMENT PARTNERS During the 9 months to 31 March 2018 we received funding from development partners in form of loans negotiated by the National Treasury donors as detailed in the table below: Loans (International Organisations) International Development 31/10/2017 898,072 92,670,608 - 92,670,608 50,000,000 Association (IDA) Total 898,072 92,670,608 - 92,670,608 50,000,000 9 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 8.4. PURCHASE OF GOODS AND SERVICES aymnt Pyment Training payments 51,548,472 - 51,548,472 79,285,243 334,007,063 Other operating - -- 20,086,226 193,935,892 payments Total 51,548,472 51,548,472 99,371,469 527,942,955 8.5. ACQUISITION OF NON-FINANCIAL ASSETS 272018: 2016/2017 Cm -dat mado by, made by' Kshs Kshs Kshs Kshs Kshs Research, feasibility studies, project preparation, design 41,253,979 0 41,253,979 48,384,103 90,171,531 & supervision Total 41,253,979 0 41,253,979 48,384,103 97,301,655 8.6. CASH AND CASH EQUIVALENTS CARRIED FORWARD Bank accounts (Note 8.6A) 3,385,425 3,517,268 Total 3,385,425 3,517,268 The project has one project account within the project implementation area as listed below: 10 Kenya Electricity Expansion Project Reports and Financial Statements For the nine months period ended 31 March 2018 8.6A Bank Accounts Project Bank Account 2017/2018, 2016/2017 Kshs Kshs Local Currency Account Central Bank of Kenya [A/c no. 1000309539] 3,385,425 3,517,268 Total bank account balances 3,385,425 3,517,268 Special Deposit Accounts The balances in the Project's Special Deposit Account(s) as at 30th June 2018 are not included in the Statement of Financial Assets since they are below the line items and are yet to be drawn into the Exchequer Account as a voted provision. Below is the Special Deposit Account (SDA) movement schedule which shows the flow of funds that were voted in the year. These funds have been reported as loans/grants received in the year under the Statement of Receipts and Payments. Special Deposit Accounts Movement Schedule 2017/2018 2016/2017 Kshs Kshs (i) A/C Name [Alc No. 0810296013919] Opening balance 93,052,782 139,255,736 Total amount deposited in the account 0 0 Total amount withdrawn (as per Statement of Receipts & (92,670,608) (50,000,000) Payments) Closing balance (as per SDA bank account reconciliation attached) 3,41 93,052,782 The Special Deposit Account reconciliation statement has been attached as Annex 3 to support this closing balance. 8.7 FUND BALANCE BROUGHT FORWARD 2017/2018 2016/2017 Kshs Kshs Bank balances 3,517,268 117,474,901 Accounts receivables - imprest and advances 16,202,062- Total 19,719,330 117,474,901 L 11 г �. 7 � �.._-.... � N и � � й г,-<� .; . , и � О .� � � � �: 'С3 �, � � U � � � к" � � о � ` Z � � 3 i � � � .> � � _ о 3 a�i д, � 1 � •� о � � .� °' С� � � � � и � �'"у,�" 4'' N (�- Ф N О "С] 1 � . � +� й � � � � +'' N ^ � "" s. О "С3 � 'л•U сб о ... � � Ч--� п3 � ' U � � �; . 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W � W � w Е о U � � W н� и N 1l •'�' � О UW I�� �'м I � � и � � � Q � W � О с, ^' � � � �. � � � � ьл о ?� ш а, •� Гг, � 0.�, �,� �„�: v� о� о Еу ч� '� ... � е '" и и wz � 0, � ', ��' ���:�� (~ у� и Z о О� О ру v1 '" � ,V � •� cV г`� "'�' � � � � �i W й ,� и � �.1 � � р и � � � . �Ё ; W `�-' �+' '-' � � � . � '� W Q� � � -- CS Z� W '. :�` V и о U Е"� � v � 'i�� � (у � v' О � о � Z f У `. � .• G�т � о ~ О е� � °r � Г� О � �, ': � 4� F-� �1 � Е+ f� Ci, � Г� U Е� гл '� � ��w � `- �-� � _; SPECIAL ACCOUNT STATEMENT For period ending 30th JUNE, 2018 Account No. 810296013919 Depository Bank EQUITY BANK Address Related Loan KENYA ELECTRIC EXPANSION PJT A: MOE Credit Agreement KE-C6 Currency USD Part A - Account Activity Beginning balance of 1 st July, 2017 as per C. B. K. Ledger Account 898,106.19 --------------- -------- ------- ---------- Add: Total Amount deposited by World Bank -------------------------------- ----------------- Total Interest earnings if deposited in account --------------------------- ------------------------- ------------ Total amount refunded to cover ineligible expenditure ------- ------------ Deduct: Total amount withdrawn 898,072.40 --------------------------- ------- I -------- ------------------------------------------------------------------ Total service charges if not included above in ----------------------------------------------------- ------------ amount withdrawn --------------------------------------- -- ----------------------- Ending balance on 30th June,2018 -------------------------------------------- 33.79 AUTHORISED REPRESENTATIVE SIGNATURE: CENTRAL BANK OF KENYA DATE - ------- ---- --- ------ ---------- -k - ----------------- 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,2018 have been reconciled and a copy of the supporting Reconciliation Statement is attached. KENYA ELECTRICITY EXPANSION PROJECT (MOE) STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 JUNE 2018 Credit No.: IDA LOAN NO. CREDIT NO.4743-KE DA-A Bank Account No.: 0810296013919 Held with EQUITY BANK NAIROBI NOTES AMOUNT AMOUNT USD USD I Arnount advanced by IDA 6,429,877.09 Less: 2 Total amount documented 6,429,877.09 -3 Outstanding amount to be documented - Represented by: 4 Ending Special account Balance as as 30 June 2018 33.79 5 Amounts claimed but not credited as at 30 June 2018 - 6 Amounts withdrawn and not claimed (33.79) 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 2018 - 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 fion 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 AUTIIORISED REPRESENTATIVE RESOURCE MOBILISATION DEPARTMENT DATE: THE NATIONAL TREASURY