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REPUBLIC OF KENYA
KENYA NATIONAL AUDIT OFFICE
REPORT OF
THE AUDITOR-GENERAL
ON
EAST AFRICA AGRICULTURAL PRODUCTIVITY
PROJECT (IDA CREDIT NO. 4568-KE)
FOR THE YEAR ENDED 30 JUNE 2014
MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHERIES
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Telephone: +254-20-342330 fa,; -254-20-311482 E-Mail· oaga oagkenya.go.ke
\.\ ebsite: '"'" .kenao.go.ke
REPUBLIC OF KENYA
P.O. Box 30084-00 I 00 NAIROBI
KENYA NATIONAL AUDIT OFFICE REPORT OF THE AUDITOR-GENERAL ON EAST AFRICA AGRICULTURAL PRODUCTIVITY PROJECT (IDA CREDIT NO. 4568-KE) FOR THE YEAR ENDED 30 JUNE 2014 - MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHERIES
REPORT ON FINANCIAL STATEMENTS
I have audited the accompanying financial statements of East Africa Agricultural Productivity Project set out on pages 1 to 16 which comprise the statement of receipts and payments as at 30 June 2014 and the statement of financial assets and liabilities; statement of cash flows and the statement of comparative budget and actual amounts for the year then ended and a summary of significant accounting policies and other explanatory information, in accordance with the Provisions of Article 229 of the Constitution of Kenya, Section 8 of the Public Audit Act,2003 and Schedule 2 Section 118 (3) of the Financing Agreement No. 4568-KE dated 14 August 2009 between the International Development Association IDA) and the Government of Kenya (GOK). I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit.
Management's Responsibility for the Financial Statements
The National Treasury, the Accounting Officer - Ministry of Agriculture, Livestock and Fisheries and the Project Co-ordinator are responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (cash basis) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
The management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 7 of the Public Audit Act, 2003.
Auditor-General's Responsibility
My responsibility is to express an opinion on these financial statements based on the audit and report in accordance with the provisions of Section 9 of the Public Audit Act. 2003. The audit was conducted in accordance with International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
Promo/Ing lcco1mtab1/11} m the P11b/1c Sector
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.
I believe that the audit e,vidence obtained is sufficient and appropriate to provide a basis for my audit opinion:
Basis for qualified Opinion
Special Accounts Balances
The special accounts bank balance as at 30 June 2014 is given as US$.3,448,163.09 whereas in the statement of special (designated) accounts reconciliation the same is given as US$.4, 167,828.1, resulting to unexplained difference of US$ 719,665.01 or equivalent to Kshs.62,577,751 . It was therefore not possible to confirm the accuracy and completeness of the cash and bank balance of Kshs.393,533,064 as at 30 June 2014.
Qualified Opinion
In my opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Project as at 30 June 2014, and of its financial performance and its cash flows for the year ended, in accordance with International Public Sector Accounting Standards (cash basis) and comply with the terms of the Financing Agreement (IDA Credit No. 4568-KE.)
In addition, the special accounts statement presents fairly, transactions for the year and the ending balance has been reconciled with the books of account, except as reported in the basis of qualified opinion on special accounts balances.
Edward R .0 Ouko, CBS AUDITOR-GENERAL
Nairobi
11 December 2014
2
'\
SPECIAL ACCOUNT STATEMENT
Account Activity
For period ending Account No. Depository Bank Address Related Loan Credit Agreement Currency
Beginning balance of 1 ST July, 2013 as per C.B.K. Ledger Account
Add:
Total Amount deposited by ADB
Total Interest earnings if deposited in account
Total amount refunded to cover ineligible expenditure
Deduct:
Total amount withdrawn
Total service charges if not included above in amount withdrawn
Ending balance on 30th June,2014
AUTHORISED REPRESENTATIVE CENTRAL BANK OF KENYA
AUTHORISED REPRESENTATIVE EXTERNAL RESOURCES DEPARTMENT~REASURY
30th JUNE, 2014 1-111/000290 NIC BANK NAIROBI NIC HOUSE BRANCH, MASABA RD, NAIROBI.
E. A. AGRI. PrQductivity Project NO. 4568-KE USO
·----------- -------------~-·-~~~t~-~~:Q~_
SIGNATURE:
DATE
SIGNATURE:
DATE
NOTE: The ending balance as per Central Bank of Kenya Ledger Account and the off-shore Special Account as at 30th June,2014 have been reconciled arid a copy of the supporting Reconciliation Statement is attached.
.. J
CENTRAL GANK OF KENYA - RECONCILIATION
OFF-SHORE A/ C NO:
OH AILS
U1DO DEBITS /\JOT IN NR!3
3 LESS CREDITS NOT IN NRll
13.06 20 14
1111000290
CURRENCY
STATEMENT AS AT :
G.L A/ C NO :
. 30/06/201<1
10001341129 EASTERN AFRICA AGRICULTURAL
AMOUNTS REMARKS ACTION TAKEN
4, 167,828. 10 · ...........
{719.665.01).-
6.UALANCt AS PER COK l.EOGER ·3,448,163.09 3,448,163.09 /
~ ,f":/1tx{-L-> PrenMed Gy: NGURF. Checked by: . Approved By: __ -_. __ ' -..,..---
D-~ tc : \If\ 7 \\If O~te:_i_lf I_~_\ Y....._' Dat e: 10.07 .2014
PROJECT NAME: EAST AFRICAN AGRIC. PRODUCTIVITY PROJECT (EAAPP) AND NUMBER: IDA LOAN NO 4568.KE
STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30TH JUNE 2014
PART B: ACCOUNT RECONCILIATION STATEMENT
Credit No. 4568 KE Bank Account No: ICA 1-111-000290 Held with NIC BANK LIMITED
I.
2.
3.
4.
5.
6.
7.
8.
NOTES
Amount advanced b.)', World Bank Less Total amount recovered by World Bank
Outstanding Amount advanced to Special Account Balance
Represented by:
Ending Special Account Balance at 30 June, 20 l 4
Amount c laimed and credited as at 30 June, 2014
Amount withdrawn and not claimed
Service charges (if not included in 5 & 6 above) Less Interest earning (if included in Special Account)
US$
21,139,957.19
14,163,610.34
6,976,346.85
4, 167,828.10
0.00
2,808,518. 75
0.00
0.00
9. Total advance to Special Account year ended (June 30, 14) 6,976,346.85
Discrepancy between total appearing on lines 3 and 9
Notes: I. Explain any discrepancy between totals appearing on lines 3 and 9 above (e.g.
Amount due to be refunded to cover ineligible expenditures paid from the Special/Designated Account)
2. Indicate if amount appearing on Line 6 are eligible for financing by the World Bank and provide reasons for not claiming the expenditures.
The amounts appearing on line 6 are eligible for financing by the World Bank and it is the responsibility of the implementing agents to document for what they have received and seek replenishment.
~ e<t(r tf DATE: ................... .
,,
J J
J
I
I
J , 1 1 i - NAt";ttJ'!)licrme
P. o. Box 30084 - 00100, t\AlROBl.
2 2 DEC 20'14
Project Name: EASTERN AFRICA AGRICULTURAL PRODUCTIVITY PROJECT (EAAPP)
Implementing Entity: MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHERIES STATE DEPARTMENT OF AGRICULTURE
PROJECT CREDIT NUMBER: IDA CREDIT N0.45680-KE PROJECT ID. NO. Pl12688
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED JUNE 30, 2014
Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSA
l Telephone:+254-20-342330 Fax: +254-20-311482 E-Mail: [email protected] Website: www.kenao.go.ke
REPUBLIC OF KENYA
,,
P.O. Box 30084-00100 NAIROBI
c~~ f rn H~ilAl KENYA NATIONAL AUDIT OFFICE
Ref: EAAPP/2013-2014/(2)
The Accounting Officer, Ministry of Agriculture, Livestock and Fisheries, P.o.Box 30028-00100, NAIROBI.
Dear Sir /Madam
28 October 2014
,~.:.ftlWD,.,.,M~ .....,, ~...,.....,._.,.~~r
. EASFHi\I AFRICA f\GPICUl.TJiiAt I
PBOOUCTl\iiTY PROJECT I <tD...C..} f
~ 3 1 OCT 2014 I I ~ E c..: E ~ "v.' tE::. L'") ~ s.1gn: ........... ., ........ " .............. t'ti•,.~· .. ••11•$->) ~nrct~·--............... ~~-,~·-~
FINAL AUDIT REPORT FOR EASTERN AFRICA AGRICULTURAL PRODUCTIVITY PROJECT (EAAPP) 2013/2014
1:0 INTRODUCTION
1:1 The audit of East Africa Agricultural Productivity Proj ect (EAAPP) for th e
year ended 3 0 J une 2 014 has been com pleted . The a u d it was conducted in
accordance with the intern ational standa rds on Auditin g (ISA) a n d
inter national organization of Su preme Audit Institu t ion (INTOSAI) stan dards.
Those Stan dards requ ire that we pla n a n d conduct the audit with a view to
obtaining reasona ble assurance th at th ere is an a dequate system of inte:rnal
control that can prevent a n d detect errors a n d irregula rities which may cause
material misstatem en ts in th e finan cial s tatem en ts.
1:2 However, it is the responsibility of th e m anagemen t to apply adequ a te
internal con trol system s to prevent a nd/ or detect errors a n d p rovides
accurate financia l s tatements wh ich refl ect tru e and fair view of affairs of th e
project. Ou r report is design ed to include, th e observations made during the
1
Promoting Accountability in the Public Sector
audit exercise the likely risks or implication s which may arise if not corrected
in time an d possible recommenda tions which may not be conclus ive but may
help in address ing the issu es r aised and also improve the opera tions of t he
project.
1:3 Set out below are some of the findings , all of which h ave been discu ssed !
with Project managem en t during the course of the audit a nd in th e exit
meeting h eld on 27 October, 2013 a t the Project's Conferen ce room .
1:4 We will a pprecia te to receive your comments on th e issu es ra ised h erein
on or before Wednesday November 5, 2 014.
2:0 PRESENTATIONS OF FINANCIAL STATEMENTS
2: 1 Observations
2:1 :1 Compliance with the Reporting Framework
The sta tement of complia n ce a nd basis of prepa ra tion of the financia l
statemen ts as sta ted in n ote 8 - 1 to the fina n cial statem en ts indicate that the
financial s ta tements h ave been prepared in accordan ce with and comply with
Internation al Public Sector Accounting Standa rds (IPSAS) under th e cash
basis of Accounting. Several observations a s listed below were made t hat are
n ot in conformity with the IPSAS (cash ba sis) presenta tion requirem ent.
a. Purchase of goods and services
Note 8 .7 to t he fina ncia l statemen ts (purchase of good s a n d services) include
purchase of non-fina ncial assets which include payments for th e con struction
of civil works, Laboratory equipmen t office Equipm ents a n d transfer to other
Governmen t entit ies.
b. Classification of components
IPSAS (cash basis) provide for th e itemization of the pu rchase of goods and
services componen t in to several sub-items . Note 8 -7 to th e Draft Fin ancia l
2
statemen ts has not adhered to this requirement as the expenditure ha s been
lumped together.
2:2 Risks/Implications
a) The figure for purchase of goods and services 1s over sta ted by the
exp enditure incurred on the purch a se of non-financial Asse ts and transfers
ma de to oth er Government Entities.
b) The presentation requir~ment for purchase of services has not been
adequ ate.
2:3 Recommendations
(_ a) The figure for purchase of good s and services should be corrected by
tra n sferring out amounts relating to acquisition of non-finan cia l Assets a nd
transfers to other Government Entities.
b) Th e presenta tion a nd disclosure r equirements as per IPSAS (cash ba sis)
sh ould be observed.
3:0 NON-FINANCIAL ASSETS
3 : 1 Observations
Non -Fina n cia l assets reported dur ing the year includes a figure of
Ksh s . l 0 7 ,59 1,802 in respect of construction of r esource cen tr e, milk
processing unit and a garage at Kari Na ivash a . The contract commen ced on
03/06/20 13 a nd wa s due for completion on 09/06/ 2014 a t a cont ract sum of
Kshs202, 256,816. It was however noted tha t as at 30 June 2014 the work
h a d not been completed as sch eduled. According to valua tion certificate
n umber 5 d a ted 18 June 20 14 th e valu e of work done a nd m a teria ls on s ite
wa s valued a t Ksh s .111 ,993,884 which is a ppropriately 55% of the contract
pnce.
3
3:2 Risk/ implication
The EAAPP project was scheduled to be implemented over a period of 5 year
ending in February 2015 and delay to complete the contract will have a
negative impact on the project.
3 :3 Recommendation
The management should ensure that the project components are implemented
without any further delay.
4:0 CASH AND CASH EQUIVALENT
4: 1 Observations
A review of the bank recon cilia tion statement for the m onth of June 20 14
reveal that some of the reconciling items which date back to 20 10/20 11
financial year have not be cleared. The outstanding items a re in respect of
payments in the cash book not affected in the bank statement totaling to
Kshs.853, 823.
4:2 Risk/Implication
The balance reflected in the financial statements may be understated. • I
4:3 Recommendation
The management should liase with the ba nk to make the n ecessary
adjustmen ts to clear th e outstanding items.
5:0 IMPRESTS AND ADVANCES
5 : 1 Observations
The imprests and advances balance as at 30th June 2014 of Kshs. l , 163 ,006
as reflected in note 8. 12D to the draft financial statements include balances
4
(
(
that a re long outstanding and which the Management has been unable to
recover from the beneficiaries. These a re analyzed as below:
Name of Officer Date of Issue Warrant No.
Benard Kagunza 16/9/20 13
Lucy Kariuki 21/2 /2014
1674432
1828432
Due date
20/1/2014
11/3/2014
Amount
80,600
87,250
Kshs. 167.850
5 :2 Risk/Implication
Non recovery of the outstanding imprests m ay result to loss of Public funds.
5:3 Recommendation
The Management should trace the Officers who are reportedly still m the
Public Service with a view of recovering the outstanding impres ts .
6:0 CONCLUSION
We would like to thank the Project management and staff for the cooperation
given to the audit team during th e Audit. We look forward to similar
cooperation as we strive to Account for th e project funds.
Yours faithfully,
H(£ifl:i FOR: AUDITOR GENERAL
Copy to:-
The Project Coordinator, ../ Eastern Africa Agricultural Productivity Project, 5th Avenue Office Suites, P.O. Box 30028-00100, Nairobi.
5