GOVERNMENT OF I,ESOTHO AUDIT REPORT ON THE ANNUAL FINANCIAL STATEMENTS OF SMALLHOLDER AGRICULTURE DEVELOPMENT PROJECT - IDA CREDIT 5017-LS; IFAD LOAN L-I-850-LS; IFAD GRANT G-I-DSF-8088-LS FOR THE YEAR ENDED 31 MARCH 2018 AUDITOR - GENERAL P.O. BOX 502 1IASERU 100 LESOTHO SMALLHOLDER AGRICULTURE DEVELOPEMNT PROJECT (SADP) PROJECT NAME : SADP IMPLEMENTING AGENCY MINISTY OF AGRICULTURE & FOOD SECURITY PROJECT NUMBER : P119432 WORLDBANK CREDIT No. 50170-LS IFAD LOAN No. : 1-850-LS IFAD GRANT No. : I-DSF-8088-LS ADDITIONAL FiNANCING 61440 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 1 of 50 TABLE OF CONTENTS CONTENTS APPROVAL OF THE FINANCIAL STATEMENTS.............................................................4 Project Inform ation and Perform anc ..............................................................................................5 K e y D atess...................................................... .............................................5 Background Information on the Project....................................................................................5-6 Institutio nal D etails/1nfo rm atio n ...........................................................................................7 P ro je ct C o sts ............................................................................................................................. 7 IMPLEMENTATION FINANCING (2017/18) ............................................................................. 8 Project Financingancin................................ - ..... ...................................................9-10 P M U Staff ................................................ Staff-10........................0.......................................... 10 SUMMARY OF PROJECT IMPLEMENTATIONPROGRESS.......................................................... 11 Physical Perform ance .................................................--....1...... ............................................. 11 5. Component 1: Increasing Agriculture Market Opportunities .............................................1 5.1: Sub-Component 1.1: Promotion of Innovative Agri-business Initiatives......................11 5.1.1: information Dissemination & Construction of Tunnels.............................................11 5.1.2: Enviromental Management Plans........................................................................11-12 5 .1.3 : T ech no lo gy transfe r...................................................................................................12 5 .1.4 : C lo se d p roje cts................................................. ..................................................12-14 5.2 Sub-Component 1.2: Market Linkages Development....................................................14 5 .2.1: M entoring Services .............................................................................................. 14-15 5 .2.2: T rade Fairs.....................................................,rs.15... ................ ......................... .15-16 5 .2 .3: Stu d y Touursrs.................................................. ................. ....................................... 16 5.2.4: Marketing Information Systems ...........................................................................16-17 6. Component 2: Increasing Market-Oriented Smallholder Agriculture Production..............17 6.1: Sub-Component 2.1: Preparation & Implementation of Agriculture Investment Plans17 6.1.1: Productive Investment Batch I & 2..................................................................................17 6.1.2: Productive Investment Batch 3 ..........................................................................17-19 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 2 of 50 6.1.3: Technology transfer under AlPs ...............................................................................19 6.1.3: Natural Resource Management .........................................................................20-23 6.1.4: Capacity Building ......................................................dn-..................................... 23-24 6.2: Sub-component 2.2: Technology Packages for Smallholder Farmers..........................24 6.2.1 Contracts to NGO's...................................................2..........................................24-26 7. Component 3: Project Management..................................................................................26 7.1: Sub Component 3.0 Project Managemena te......................................................................... 26 7.1.1 : C ap acity Bu ild ing .................................................................................................26-2 7 7.1.2: Baseline Survey Sub-component ............................................................................. 27 7 .2 .3 : LA S A P .......................................................................................................................... 2 7 7 .6 .4 : D ata C o llectio n ...................................................................................................... 27-28 8. Component 4: Contingent Emergency Response Component (CERC)...............................28 8 .1.1: Irrigatio n System s........................................................................................................28-29 8.1.2: Construction of Galvanised Tunnel ........................................................................... 29-30 8 .1.3 : FA O ............................................-.-........-. -. --... --..... -.-.-.......................................................1 3 3 0 Report of the Auditor Genera 1.................................................................................................. 31-34 Financial Statements for the period ending 31st March 2018...........................................34-41 ADDITIONAL INFORMATION TO THE FINANCIAL STATEMENTS............................. _...41-46 NOTES TO THE FINANCIAL STATEMENTS for the period ending 31st March 2018...............46-50 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 3 of 50 The attached Financial Statements set out on Pages 34 to 50 were approved by the Project Management on the 2 -hSeptember 2018 and signed on its behalf by: PRINCIPAL SECRETARY PR NAGER MINISTRY OF AGRICULTURE SMALLHOLDER AGRICULTURE & FOOD SECURITY DEVELOPMENT PROJECT PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 4 of 50 OFFIE O TH AU TR C GN RA P 9 G. X52, MAS R ~~U 100~ REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF SMALLHOLDER AGRICULTURE DEVELOPMENT PROJECT- MINISTRY OF AGRICULTURE AND FOOD SECURITY- GOVERNMENT OF LESOTHO - IDA CREDIT NO.5017-LS; IFAD LOAN NO. L-I 850-LS; IFAD GRAND G-I-DSF-8088-LS; FOR THE YEAR ENDED 31ST MARCH 2018 Qualified Opinion I have audited the financial statements of Smallholder Agriculture Development Project ("the Project") funded by -IDA CREDIT NO. 5017-LS; IFAD LOAN NO. L-I 850-LS; IFAD GRAND G-I DSF-8088-LS and the Government of Lesotho, which comprise statement receipts and payments, statement of comparison of budget and actual for the year ended 31 March 2018, and a summary of significant accounting policies and other explanatory notes as set out on pages 35 to 50. In my opinion, except the for possible effect of the matter described in the basis for qualified opinion paragraph, the accompanying financial statements present fairly, in all material respects, the financial position of the project as at 31 March 2018 and its financial performance for the year then ended in accordance with International Public Sector Accounting Standards (IPSASs). Basis for Opinion The project has failed to assess beneficiary contributions (in cash and in kind) and as such the contributions have been omitted in the financial statements since 2011/12. I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the 4.h i ..High .Cou t , M.u Leso.ho ethical requirements that are relevant to my audit of the financial statements in Lesotho, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. 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 that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. The following key matters were identified during the course of audit; Misappropriation of funds The Competitive Grands Projects(CGPs) and Agriculture investments Projects (AIPs) have misappropriated funds of the project estimated at M340,500.00 and M124,000.00 respectively. Funds not accounted for Funds of the project estimated at M700,500.00 were not accounted for by CGPs beneficiaries. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSASs, 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 a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements of the project as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs 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 ISSAls, I exercise professional judgment and maintain professional skepticism throughout the audit. I 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 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, but not for the purpose of expressing an opinion 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 management. * Conclude on the appropriateness of 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 as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my audit 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 to cease to continue as a going concern. * 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. I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. I also provide those charged with governance 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. From the matters communicated with those charged with governance, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my audit report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. LUCY L. LIPHAFA (MRS) TE AUDITOR-GENERAL AUDITOR-GENERAL AUDTOR GENERALR 2 8 SEP 2018 Financial Statements for the period ending 31st March 2018 TABLE 4 STATEMENT OF RECEIPTS AND PAYMENTS - for the year ending 31st March 2018 ****CONSOLIDATED BY CATEGORY*** NOTE GOL IFAD/IDA TOTAL CUMMULATIVE M M M M Opening Cash Balances IDA Special A/c Table 12 1,078,905 1,078,905 1IDA LocalI A/c Table 12 534,558 534,558 IFAD Special A/c Table 12 5,718,401 5,718,401 IFAD Local A/c Table 12 2,113,517 2,113,517 GOL A/c Table 12 295,662 295,662 295,662 9,445,381 9,741,043 0 Sources of Funds Initial Advance IDA Table 10 4,763,320 Initial Advance IFAD Table 10 5,035,200 Direct Payments - IDA Direct Payments - [FAD Grant Table 10 1,960,153 Direct Payments - IFAD Loan Table 10 1,960,153 IDA Credit Table 11 19,690,083 19,690,083 104,062,049 IFAD Grant Table 11 5,450,994 5,450,994 44,727,095 IFAD Loan Table 11 5,450,994 5,450,994 44,712,681 IDA Additional Financing Table 11 15,119,642 15,119,642 15,119.642 GOL Counterpart Fund Table 14 3,901,822 3,901,822 24,872,134 Beneficiary Contribution Sub - Total 3,901,822 45,711,713 49,613,535 247,212,427 Foreign Exchange Difference (1,866,180) (1,866,181) Uses of Funds by Category Category 1 3,746,507 5,918,925 9,665,432 51,326,432 Category 2 377,544 2,007,387 2,384,931 15,074,041 Category 3 3,294,237 3,294,237 29,488,678 PPA & IFAD Offset 9,619,314 Category 5 8,437,743 8,437,743 11,209,777 Sub - Total 4,124,051 19,658,292 23,782,343 116,718,242 Advance to CGP Beneficiaries 6,261,659 6,261,659 82,275,378 Advance to AlP Beneficiaries 5,819,665 5,819,665 17,730,976 Advance to FAO (1,350,085) (1,350,085) 6,422,240 Staff Working Advance (89,419) (34,034) (123,453) 593,171 Sub - Total 10,697,205 10,607,786 107,021,765 Total Expenditures 4,034,632 30,355,497 34,390,129 223,740,009 Closing Cash Balances IDA Special A/c Table 13 1 19,891,736 19,891,736 IDA Local A/c Table 13 17,137 17,137 IFAD Special A/c Table 13 2,026,765 2,026,765 IFAD Local A/c Table 13 999,778 999,778 GOL A/c Table 13 162,852 162,852 Total Closing Cash Balances 162,852 22,935,416 23,098,268 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 35 of 50 TABLE 5 STATEMENT OF RECEIPTS AMD PAYMENTS - for the year ending 31st March 2018 "**CONSOLIDATED BY COMPONENT*** NOTE GOL IFAD/IDA TOTAL CUMMULATIVE M M M M -Opening Cash Balances JDA Special A/c Table 12 1,078,905 1,078,905 IDA Local A/c Table 12 534,558 534,558 IFAD Special A/c Table 12 5,718,401 5,718,401 IFAD Local A/c Table 12 2,113,517 2,113,517 GOL A/c Table 12 295,662 295,662 295,662 9,445,381 9,741,043 0 Sources of Funds Initial Advance IDA Table 10 4,763,320 Initial Advance IFAD Table 10 5,035,200 Direct Payments - IDA Direct Payments - IFAD Grant Table 10 1,960,153 Direct Payments - IFAD Loan Table 10 1,960,153 IDA Credit Table 11 19,690,083 19,690,083 104,062,049 IFAD Grant Table 11 5,450,994 5,450,994 44,727,095 IFAD Loan Table 11 5,450,994 5,450,994 44,712,681 IDA Additional Financing Table 11 15,119,642 15,119,642 GOL Counterpart Fund Table 14 3,901,822 1 3,901,822 24,872,134 Beneficiary Contribution Sub - Total 3,901,822 45,711,713 49,613,535 247,212,428 Foreign Exchange Difference (1,866,180) (1,866,181) Uses of Funds by Project Component Agriculture Market Opportunities 25,000 2,368,459 2,393,459 18,041,642 Smallholder Market Oriented Production 3,071,835 3,071,835 27,484,621 Project Management and M &E 4,099,051 5,780,255 9,879,306 50,356,964 PPA & IFAD Offset 9,619,314 Contingent Emergency Response Component 8,437,743 8,437,743 11,215,702 Sub - Total 4,124,051 19,658,292 23,782,343 116,718,243 Advance to CGP Beneficiaries 6,261,659 6,261,659 82,275,378 Advance to AlP Beneficiaries 5,819,665 5,819,665 17,730,976 Staff Working Advance (89,419) (34,034) (123,453) 593,171 Advance to FAO (1,350,085) (1,350,085) 6,422,240 Sub - Total 10,697,205 10,607,786 107,021,766 Total Expenditures 4,034,632 30,355,497 34,390,129 223,740,009 Closing Cash Balances IDA Special A/c Table 13 19,891,736 19,891,736 IDA Local A/c Table 13 17,137 17,137 IFAD Special A/c Table 13 2,026,765 2,026,765 IFAD Local A/c Table 13 999,778 999,778 GOL A/c Table 13 162,852 162,852 Total Closing Cash Balances 295,662 22,935,416 23,098,268 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 36 of 50 TABLE 6 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL - for the year ended 31s" March 2018 DONOR: GOVERNMENT OF LESOTHO APPROVED BUDGET ACTUALS VARIANCE % BUDGET CODE LSM LSM LSM Funding from GOL 4,165,050.00 3,901,822.00 263,228.00 93.68% EXPENDITURE Compensation of Employees 3,252,050.00 3,633,654.70 (381,604.70) 111.73% Training and Workshops 160,000.00 160,237.17 (237.17) 100.15% Travel and transport 150,000.00 146,602.49 3,397.51 97.77% Other Operating Costs 603,000.00 183,556.65 419,443.35 30.44% Fixed Assets GRANT TOTAL 4,165,050.00 4,124,051.01 40,998.99 99.02% SURPLUS/DEFICIT (222,229.01) PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 37 of 50 TABLE 7 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL - for the year ended 31st March 2018 DONOR: IFAD/IDA and BENEFICIARIES (US dollars) APPROVED Component BUDGET ACTUALS VARIANCE % USD USD USD Funding from Donors 7,165,147 3,656,908 3,508,239 51.04% EXPENDITURE 1. Increasing Agricultural Market Opportunities Sub-total 3,464,653 680,003 2,784,650 19.63% 2. Increasing Smallholder Market-oriented Production Sub-total 3,123,190 702,666 2,420,524 22.50% 3. Project Management Sub-total 577,302 442,411 134,891 76.63% 4. Project Preparation Advance Sub-total 0 0 0 0.00% 5. Contingency & Emergency Response Component Sub Total 601,405 (601,405) TOTAL IFAD & IDA FINANCING BUDGET 7,165,147 2,426,485 4,738,662 33.86% Beneficiary Contribution GRANT TOTAL 7,165,147 2,426,485 4,738,662 33.86% SURPLUS/(DEFICIT) 1,230,423 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 38 of 50 TABLE 8 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL - for the year ended 31st March 2018 DONOR IFAD/IDA and BENEFICIARIES (Maloti) APPROVED APPROVED BUDGET Component BUDGET @M10.50 ACTUALS VARIANCE % USD LSM L5M LSM Funding from Donors 7,165,147 75,234,040 45,711,713 29,522,327 60.76% EXPENDITURE 1. Increasing Agricultural Market Opportunities Sub-total 3,464,653 36,378,860 8,630,118 27,748,741 2372% 2. Increasing Smaliholder Market-oriented Production Sub-total 3,123,190 32,793,500 8,891,500 23,902,000 27.11% 3. Project Management Sub-total 577,302 6,061,680 5,746,221 315,459 94.80% 4. Project Preparation Advance Sub-total 0 0 0 0 0.00% 5. Contingency Emergency Response Component Sub Total 7,087,658 (7,087,658) TOTAL IFAD & IDA FINANCING BUDGET 7,165,147 75,234,040 30,355,497 44,878,604 40,35% Beneficiary Contribution GRANT TOTAL 7,165,147 75,234,040 30,355,497 44,878,604 40.35% SURPLUS/(DEFICIT) 15,356,216 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 39 of 50 ADDITIONAL INFORMATION TO FINANCIAL STATEMENTS TABLE 9: STATEMENT OF SPECIAL ACCOUNT ACTIVITIES for the year ending 31st March 2018 DONORS IFAD & IDA ACCOUNT NUMBER :100008-USD-9405-92 DONOR : IDA ACCOUNT NUMBER 100008-USD-9405-94 DONOR: IFAD BANK: CENTRAL BANK OF LESOTHO LOCAL LOCAL USD CURRENCY USD CURRENCY IDA IFAD Opening Balance 80,275.70 1,078,905.41 425,476.26 5,718,400.93 Initial Advance IDA Credit 600,000.00 4,764,507.00 IFAD Loan 300,000.00 2,475,450,00 IFAD Grant 300,000.00 2,475,450.00 600,000.00 4,764,507.00 600,000.00 4,950,900.00 Add: Replenishment IDA 1,572,136.69 19,690,082.53 IDA Additional Financing 1,273,233.02 15,119,642.11 I FAD 811,537.86 10,901,987.60 2,845,369.71 34,809,724.64 811,537.86 10,901,987.60 Add: Exchange gain/Loss 0.00 (961,275.80 0.00 (904,903.64) Exchange gain/loss 0.00 (961,275.80) 0.00 (904,903.64) Less: Transfers to Local Account IFAD Special Account 1,064,625.50 13,678,482.95 IDA Special Account 654,342.15 8,117,146.02 654,342.15 8,117,146.02 1,064,625.50 13,678,482.95 Less: Other Payments International Consultants 36,201.40 483,776.27 Bank Charges 960.03 12,455.58 791.72 10,236.64 Other Payments 550,000.00 6,422,240.00 587,161.43 6,918,472.25 791.72 10,236.64 NET CASH AVAILABLE 1,684,141.83 19,891,735.98 171,596.90 2,026,765.30 Closing Balance as at 31st March 2015 as per cash book balances Designated Account 1,684,14183 19,891,735.98 171,596.90 2,026,765.30 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 40 of 50 TABLE 10 Special Account reconciliation for the year ending 31st March 2018 (Report denominated in Maloti - LSM & USD) yACCOUNT NUMBER : 100008-USD-9405-92 IDA ACCOUNT NUMBER 100008-USD-9405-94 IFAD BANK CENTRAL BANK OF LESOTHO ADDRESS Cnr Airport & Moshoeshoe Road P.O. Box 1184 Maseru 100 LINE USD LSM USD LSM IDA IFAD Initial Deposit 1 600,000.00 4,764,507.00 600,000.00 4,950,900.( Additional advance 2 2,173,233.02 27,688,142.11 900,000.00 12,345,300.1 Less Amount(s) recovered 3 0.00 0.00 0.00 0.1 Outstanding Amount Advanced 4 2,773,233.02 32,452,649.11 1,500,000.00 17,296,200.1 Represented by: Special Account balance as at 31st March 2018 5 1,788,203.21 21,120,825.75 113,271.93 1,337,877., Balance from Local Accounts as at 31st March 2018 6 6,396.74 75,553.21 157,914.56 1,865,160., Plus: Amounts claimed but not yet credited as at 31st March 2018 7 81,877.06 971,4301 Plus: Amounts withdrawn but not yet claimed at 31st March 2018 8 1,060,510.13 12,892,553.25 467,688.01 6,040,662. Less: Interest earned and/or plus bank charges (if included in the Special Account) 8 81,877.06 971,430.38 Gain/Loss on exchange rate 9 (664,852.72) (1,734,938.9 Total Special Account Advanced as at 31st March 2018 10 2,773,233.02 32,452,649.11 820,751.56 8,480,191. Difference between line 4 and line 10 11 - 679,248.44 8,816,008.1 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 41 of 50 TABLE 11 SOE's - WITHDRAWAL APPLICATION STATEMENT 2011/12 USD LSM IDA Initial Advance 250,000.00 1,672,325.00 Designated A/C & documentation - WAO2 105,206.31 703,229.21 Designated A/C & documentation - WAO3 106,707.79 711,218.12 Designated A/C & documentation - WAO4 110,970.01 739,718.22 Designated A/C & documentation - WADS 173,533.10 1,382,860.09 TOTAL 496,417.21 3,537,025,64 TOTAL FOR 2011/12 2012/13 IDA Initial Advance top up 350,000.00 3,097,045.00 tFAD initial Advance (Grant & Loan) 600,000.00 5,035,200.00 IFAD Grant - PPA Set off 241,865.48 1,960,152.91 IFAD Loan - PPA Set off 241,865.48 1,960,152.91 TOTAL FOR 2012/13 1,433,730.96 12,052,550.82 2013/14 IDA Designated A/C & documentation - WAO6 2011/12 201,652.57 1,976,840.47 Designated A/C & documentation - WAO2 2012/13 126,226.92 1,257,712.41 Designated A/C & documentation - WA03 2012/13 176,251.05 1,940,524.06 504,130.54 5,175,076.94 IFAD LOAN & GRANT Designated A/C & documentation - WAO2 2012/13 92,726.30 911,304.80 Designated A/C & documentation - WAO2A 2012/13 33,500.62 346,051.36 Designated A/C & documentation - WAO3 2012/13 176,251.04 1,934,645.98 302,477.96 3,192,002.14 TOTAL FOR 2013/14 806,608.50 8,367,079.08 2014/15 IDA Designated A/C & documentation - WA004 2013-14 261,105.70 2,750,069.67 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 42 of 50 Designated A/C & documentation - WA004A 2013-14 37,406.98 390,633.61 Designated A/C & documentation - WA005 2013-14 16,087.65 170,408.43 Designated A/C & documentation - WA006 2013-14 14,290.27 151,369.68 Designated A/C & documentation - WA007 2013-14 245,587.62 2,748,248.26 Designated A/C & documentation - WA008 2014-15 142,968.38 1,581,058.72 Designated A/C & documentation - WA009 2014-15 184,086.42 2,046,304.64 Designated A/C & documentation - WA010 2014-15 158,930.86 1,755,486.71 Designated A/C & documentation - WA011 2014/15 122,258.76 1,488,145.85 1,182,722.64 13,081,725.57 IFAD Designated A/C & documentation - WA004 2013-14 261,105.70 2,741,505.40 Designated A/C & documentation - WA004A 2013-14 37,406.98 391,112.42 Designated A/C & documentation - WA007 2013-14 245,587.62 2,764,985.06 Designated A/C & documentation - WA008 2014/15 142,968.36 1,606,220.94 Designated A/C & documentation - WA009 2014/15 184,086.42 2,066,204.38 Designated A/C & documentation - WA010 2014/15 158,930.86 1,764,879.52 Designated A/C & documentation - WA004A 2013/14 37,406.98 396,233.44 Designated A/C & documentation - WA005 2013-14 16,087.64 170,408.32 Designated A/C & documentation - WA006 2013-14 14,290.28 151,369.80 1,097,870.84 12,052,919.28 TOTAL FOR 2014/15 2,280,593.48 25,134,644.85 2015/16 IDA Designated A/C & documentation - WA2014-15RESUB 55,935.83 701,312.25 Designated A/C & documentation - WA012 2015-16 127,389.96 1,631,559.65 Designated A/C & documentation - WA013 2015-16 144,956.05 2,003,770.97 Designated A/C & documentation - WA014 2015-16 110,711.16 1,559,001.34 Designated A/C & documentation - WA015 2015-16 234,715.33 3,370,981.57 Designated A/C & documentation - WA016 2015-16 179,584.29 2,747,944.93 Designated A/C & documentation - WA017 2015-16 111,305.90 1,721,368.01 964,598.52 13,735,938.72 IFAD Designated A/C & documentation - WA011 2015-16 122,258.76 1,440,244.88 Designated A/C & documentation - WA2014-15RESUB 55,935.83 723,524.24 Designated A/C & documentation - WA012 2015-16 127,389.96 1,646,247.72 Designated A/C & documentation - WA013 2015-16 144,956.05 1,967,082.18 Designated A/C & documentation - WA014 2015-16 110,711.16 1,593,078.24 Designated A/C & documentation - WA015 2015-16 234,715.33 3,577,531.22 Designated A/C & documentation - WA016 2015-16 179,584.29 2,733,847.42 Designated A/C & documentation - WA017 2015-16 111,30590 1,703,414.66 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 43 of 50 1086,857.28 15,384,970.56 TOTAL FOR 2015/16 2,051,455.80 29,120,909.28 2016/17 IDA Designated A/C & documentation - WAO18 2016-17 304,585.81 4,571,863.47 Designated A/C & documentation - WA019 2016-17 155,748.00 2,218,334.34 Designated A/C & documentation - WAO20 2016-17 102,697.13 1,531,553.11 Designated A/C & documentation - WAO21 2016-17 236,835.03 3,514,679.21 Designated A/C & documentation - WA022 2016-17 149,784.44 2,052,151.68 Designated A/C & documentation - WA023 2016-17 139,165.79 2,002,874.06 Designated A/C & documentation - WA024 2016-17 68,289.52 942,634.39 Designated A/C & documentation - WA025 2016-17 295,158.33 4,107,393.80 Designated A/C & documentation - WA026 2016-17 200,685.76 2,722,382.61 Designated A/C & documentation - WA027 2016-17 224,931.54 3,097,307.31 Designated A/C & documentation - WA028 2016-17 (Advance) 900,000.00 12,568,500.00 Designated A/C & documentation - WA029 2016-17 702,572.00 9,223,224.70 3,480,453.35 48,552,898.67 ]FAD Designated A/C & documentation - WA018 2016-17 304,585.80 4,481,157.66 Designated A/C & documentation - WA019 2016-17 155,748.84 2,291,984.36 Designated A/C & documentation - WAO20 2016-17 102,697.12 1,564,118.22 Designated A/C & documentation - WAO21 2016-17 236,835.02 3,460,207.00 Designated A/C & documentation - WA022 2016-17 149,784.44 2,119,374.94 Designated A/C & documentation - WA023 2016-17 139,165.80 1,946,400.72 Designated A/C & documentation - WA024 2016-17 68,289.52 930,861.28 Designated A/C & documentation - WA025 2016-17 295,158.34 4,059,283.14 Designated A/C & documentation - WA026 2016-17 200,685.76 2,879,399.14 Designated A/C & documentation - WA027 2016-17 224,931.54 3,178,620.06 Designated A/C & documentation - WA028 2016-17 (Advance) 900,000.00 12,345,300.00 Designated A/C & documentation - WA029 2016-17 702,572.00 8,651,190.58 3,480,454.18 47,907,897.10 TOTAL FOR 2016/17 6,960,907.53 96,460,795.77 2017/18 IDA Designated A/C & documentation - WAO30 2016-17 244,291.10 3,112,327.06 Designated A/C & documentation - WAO30B 2016-17 378,802.00 5,349,366.08 Designated A/C & documentation - WAO31 2017-18 75,113.89 982,204.18 Designated A/C & documentation - WAO32A 2017-18 81,87706 959,943.03 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 44 of 50 Designated A/C & documentation - WA033 2017-18 792,057.64 9,286,242.18 1,572,136.69 19,690,082.53 IDA ADDITIONAL FINANCING Designated A/C Advance - WA001 2017-18 1,273,233.02 15,119,642.11 1,273,233.02 15,119,642.11 IFAD Designated A/C & documentation - WA030 2016-17 244,291.10 3,160,112.76 Designated A/C & documentation - WA030B 2016-17 410,255.82 5,793,550.64 Designated A/C & documentation - WA031 2017-18 75,113.90 976,893.82 Designated A/C & documentation - WA032A 2017-18 81,877.06 971,430.38 811,537.86 10,901,987.60 GRANT TOTAL 17,936,621.04 222,340,294.09 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 45 of 50 NOTES TO THE FINANCIAL STATEMENTS for the year ending 31st March 2018 These financial statements relate to the project's third year of implementation phase of the Smallholder Agriculture Development Project implemented under the Ministry of Agriculture and Food Security. The Project was declared effective in March 2012 and the implementation is intended to run for six years from March 2012 to March 2018. The financial statements presented in this report are therefore aligning to the notes detailed below: i. Accounting Policies These financial statements for the period ending 31" March 2018 (April 2017 to March 2018) are prepared and reported under the historic cost convention ii. Method of Accounting The accounting policies adopted in the preparation of these financial statements are as set below: A. Basis of preparation: the financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) with emphasis on the Cash Basis of Accounting B. Cash Basis of accounting recognises transactions when cash is received or paid. iii. Reporting Entity The financial statements are for the Public Sector Entity - Smallholder Agriculture Development Project operating under the Ministry of Agriculture and Food Security as the implementing Agency. The entity is governed by both the GOL National laws and regulations and the World Bank disbursement guidelines. It utilises the Government counterpart funds partly through the IFMIS for transfer of funds into the Local Account at the commercial bank and also reports Donor disbursements into IFMIS for a consolidated project financial performance. iv. Reporting Currency The reporting currency is Maloti (LSM) but IDA & IFAD expenses, receipts and budget are denominated in both maloti and US Dollars. v. Opening balances for the year 2017/18 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 46 of 50 TABLE 12 OPENING BALANCES PER BANK STATEMENTS & CASH BOOK BANK CASH BOOK RECONCILING ITEM STATEMENT SPECIAL ACCOUNT IDA (USD) 162,085.31 80,275.70 81,809.61 SPECIAL ACCOUNT IDA (LSM) 2,178,426.56 1,078,905.41 1,099,521.15 SPECIAL ACCOUNT IFAD (USD) 905,699.39 425,476.26 480,223.13 SPECIAL ACCOUNT IFAD (LSM) 12,172,599.80 5,718,400.93 6,454,198.87 LOCAL ACCOUNT IDA (LSM) 616,405.11 534,558.39 81,846.72 LOCAL ACCOUNT IDA (USD) 45,971.22 39,867.13 6,104.09 LOCAL ACCOUNT IFAD (LSM) 304,009.91 2,113,517.28 (44,504.31) LOCAL ACCOUNT IFAD (USD) 58,835.61 37,377.93 (3,201.75) LOCAL ACCOUNT GOL (LSM) 407,606.02 295,661.91 111,944.11 LOCAL ACCOUNT GOL (USD) 31,414.72 22,787.05 8,627.67 vi. Treatment of Foreign Currency Cash receipts and payments arising from transactions in a foreign currency are recorded in Maloti applying the actual historical exchange rate at the conversion rate from special account to the local account. Where part of the expenditures has to be met from the proceeds of the subsequent draw from special account, conversion should be done using weighted average of former withdrawal and current one. The amount of exchange difference is included as reconciling items between opening and closing balances for the period. vii. Closing balances The closing balances as at 311t March 2018 are presented below as per the reconciled cash book and bank statements. Closing Balances in the Local Account are converted at the actual historic rate and Special Accounts at the rate as at 31st March 2018 of M11.8112 The opening balance for GOL account was adjusted to show the true picture as the balance that was being carried forward from year to year was incorrect (not reconciled amount) PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 47 of 50 TABLE 13 CLOSING BALANCES PER BANK STATEMENTS & CASH BOOK BANK CASH BOOK RECONCILING ITEM STATEMENT SPECIAL ACCOUNT IDA (USD) 1,788,820.21 1,684,141.83 104,678.38 SPECIAL ACCOUNT IDA (LSM) 21,120,825.75 19,891,735.98 1,229,089 77 SPECIAL ACCOUNT IFAD (USD) 113,271.93 171,596.90 (58,324.97) SPECIAL ACCOUNT IFAD (LSM) 1,337,877.42 2,026,765.30 (688,887.88) LOCAL ACCOUNT IDA (LSM) 75,553.21 17,137.42 58,415.79 LOCAL ACCOUNT IDA (USD) 5,498.18 1,247.13 4,251.05 LOCAL ACCOUNT IFAD (LSM) 1,865,160.43 999,777.86 865,382.57 LOCAL ACCOUNT IFAD (USD) 155,657.04 83,436.50 72,220.54 LOCAL ACCOUNT GOL (LSM) 1,956,651.13 162,851.90 1,793,799.23 LOCAL ACCOUNT GOL (USD) 165,660.66 13,787.92 151,872.74 viii. Government Counterpart Funds The approved budget for the Government Counterpart Funds was M4,165,050.00. The amount was disbursed from GOL Treasury as detailed below: TABLE 14 TRANSFERS TO GOL LOCAL ACCOUNT DATE DESRIPTION AMOUNT LSM 23/06/2017 Transfer from Treasury - GOL Counterpart 435,245.00 25/07/2017 Transfer from Treasury - GOL Counterpart 435,245.00 08/11/2017 Transfer from Treasury - GOL Counterpart 665,412.00 13/02/2018 Transfer from Treasury - GOL Counterpart 228,271.00 13/02/2018 Transfer from Treasury - GOL Counterpart 200,296.00 29/03/2018 Transfer from Treasury - GOL Counterpart 225,303.00 29/03/2018 Transfer from Treasury - GOL Counterpart 1,712,050.00 TOTAL 3,901,822.00 PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 48 of 50 ix. Schedule for Non - Current Assets Fixed Assets are classified as capital costs and written off to the receipts and payments statement in the year of disbursement. The fixed assets consist of Motor Vehicles, Office furniture and equipment and Other Structures Constructed by Government. The Schedule below included only assets acquired during the 2017/18 Implementation year TABLE 15 Schedule of Non - Current Assets ITEM PROCUREMENT COST (LSM) CUMMULATIVE METHOD (LSM) Motor Vehicles NCB 0.00 4,794,555.74 Office Equipment Shopping 1,629,122.99 Office Furniture Shopping 400,766.14 PABX System & Internet Shopping 348,384.47 Connection & Other Assets Other Structures Constructed by NCB 606,896.10 1,469,619.50 Govt. Civil works Livestock Training NCB 19,173.81 1,040,204.12 Centre TOTAL 626,069.91 9,682,652.96 x. Methods of Procurement Used All procurement to be financed under the Project (IDA and IFAD funds) will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011 and "Guidelines: Selection and Employment of consultants by World Bank Borrowers" dated January 2011, and the provisions stipulated in the Legal Agreement. All Procurement of goods and works will be done using the Bank's Standard Bidding Documents. All consultant's selection undertaken for the firms will be done using the Banks's Standard Requests for Proposals. The Project will carry out implementation in accordance with the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants" dated October 15, 2006 and revised January 2011 (the Anti-Corruption Guidelines). PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 49 of 50 For the Implementation phase, all goods and services procured were done through "Post Review" process with the exception for engagement of consultants which still had to be done through the "Prior review process" and the following procurement methods were adopted. a) ICB - International Competitive Bidding b) CQS - Selection based on consultants' Qualifications c) QBS - Quality Based Selection d) NCB - National Competitive Bidding PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018 Page 50 of 50