World Bank Documentdocuments.worldbank.org/curated/en/... · Rua Belmiro Obadias Muianga, N' 179...

Financial Statements

Ministry of State Administration and Public Service

Cities and Climatic Changes ProjectCredit number 5066 - MZ

31 December 2017

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MINISTRY OF STATE ADMINISTRATION AND PUBLIC SERVICE

CITIES AND CLIMATIC CHANGES PROJECT

CREDIT NUMBER 5066-MZ

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

INDEX PAGES

INDEPENDENT AUDITOR'S REPORT 1-5

STATEMENT OF INCOME AND EXPENDITURE 6

YEARLY AND CUMULATED STATEMENT OF RECEIPTS AND PAYMENTS 7

STATEMENT OF DESIGNATED ACCOUNT 8

NOTES TO THE FINANCIAL STATEMENTS 9-14

Ernst & Young Limitada Tel: +258 21 35 3000Rua Belmiro Obadias Muianga, N' 179 Fax: +258 21 32 1984Caixa Postal 366, EmaI: emst.young ey.conMaputo NUIT400 006 245

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INDEPENDENT AUDITOR'S REPORT

To the Management of

Ministry of State Administration and Public Services

Cities and Climate Changes Project

Report on the Audit of the Financial Statements

Qualifed Opinion

We have audit the financial statements of the Cities and Climate Changes Project - Credit Number

5066 - MZ, which comprise the Statement of Receipts and Payments, the Yearly and Cumulative

Statement of Receipts and Payments and the Statement, including a summary of significant

accounting policies.

In our opinion, except for the effects of the matter referred to in the section Basic for Qualified

Opinion bellow, the accompanying financial statement of cities and Climate Changes Project -

Credit Number 5066 - MZ are prepared, in all material respect, in accordance with the basis of

accounting disclosed on Note 2 of the Financial Statement and with the Donor's requirements.

Basis for Qualified Opinion

The Project is carrying out the review and reconciliation of the net difference of USD 356.425

arising from the comparison of the balance of USD 3.596.733 reported in the financial statements

relating to advances made to municipalities and the balances reflected in the financial statements

of the municipalities by the total amount of USD 3.240.308. As result of the aforementioned

ongoing process, at this date, we are unable to draw satisfactory conclusion on the existence and

accuracy of the referred difference as at 31 December 2017.

A memberfGrm of Emsl & YoungGobalLim:ted

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We conducted our audit in accordance with International Standards on Auditing (ISA). Our

responsibilities under those standards are further described in the Auditor's Responsibilities for the

Audit of the Financial Statements section of our report. We are independent of the Project in

accordance with the ethical requirements that are relevant to our audit of the financial statements

in Mozambique, and we have fulfilled our other ethical responsibilities in accordance with these

requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our qualified opinion.

Other Matters

We have been assigned by the management on 28 February 2018 to perform the audit of the Cities

and Climate Changes Project - Credit Number 5066 - MZ financial statements as at 31 December

2017, therefore, we have not audited the financial statements for the year ended 31 December

2016. These financial statements have been audited by another auditing firm, which issued a

qualified opinion dated 15 August 2017, in respect to the following matters:

* Unreconciled difference of USD 1.084.984 identified, between the confirmation received

from the National Directorate of Treasury, which reported a positive balance of the CUT

account as at 31 December 2017 of 1.637.896(equivalent to 74.524.296 Meticais) and the

negative balance of the aforementioned account in the financial statements of USD 552.912.

In respect to the audit for the year ended 31 December 2017, as mentioned in Note 3 the

Project Management has reviewed the financial statements for the period comprised

between years 2014 and 2016 and restated the opening balances for the year 2017. The

effect of this restatement represented an increase of bank balances by USD 2.155.915 and

a decrease of advances by USD 449.126. Therefore, this issue is currently resolved.

* Lack of external confirmation with regard to the Forex account balance of USD 175.000 as

at 31 December 2016. In respect to the audit of the year ended 31 December 2017, we

performed alternative audit procedures which allowed to draw satisfactory conclusion on the

existence of the aforementioned balance. Therefore, this issue is currently resolved.

Our opinion is not modified in respect of these matters.

2


Responsibilities of Management for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair

view in accordance with basis of accounting disclosed in Note 2 of the Financial Statements and

with the Donor's requirements, 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 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.

Management is responsible for overseeing the Project's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's

Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with ISA 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 ISA, we exercise professional judgment and maintain

professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Financial Statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.3

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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 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 Organization's ability

to continue as a going concern. If we conclude that a material uncertainty exists, we are

required to draw attention in our auditor's report to the related disclosures in the financial

statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions

are based on the audit evidence obtained up to the date of our auditor's report. However,

future events or conditions may cause the Organisation 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.

We communicate with Management regarding, among other matters, the planned scope and timing

of the audit and significant audit findings, including any significant deficiencies in internal control

that we identify during our audit.

We also provide the Management with a statement that we 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 our independence, and where applicable,

related safeguards.

4


From the matters communicated with management, we 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.

The engagement partner on the audit resulting in this independent auditor's report is Manuel

Relvas.

ERNST & YOUNG, LDA

Certified Auditors Firm

Represented by:

Manuel Marques Pelvas (Certified Auditor NO 5)

Maputo, 26 October 2018

5


NATIONAL DIRECTORATE OF MUNICIPAL DEVELOPMENT

CITIES AND CLIMATE CHANGE PROJECT


STATEMENT OF INCOME AND EXPENDITURE - FOR THE YEAR ENDED 31 DECEMBER 2017

(Amounts expressed in USD)

Notes 2017

OPENING BALANCE AS AT 1 JANUARYBank and advances 7 9.260.894

9.260.894

RECEIPTSDisbursments from IDA 4 2.806.781

TOTAL RECEIPTS 2.806.781

TOTAL RECEIPTS AND OPENING BALANCE 12.067.675

PAYMENTSGoods, works, consultant sefvices, non-consultantservices, training and operating costs (1) 5 2.856.501

Municipal Performance Grant (3) 6 1.524.306

TOTAL PAYMENTS 4.380.807

CLOSING BALANCE AS AT 31 DECEMBER 7.686.868

The Project Financial Manager e ct Coordinator

LAt 6





YEARLY AND CUMULATIVE STATEMENT OF RECEIPTS AND PAYMENTS

CUMULATIVE FROM 6 DECEMBER 2011 TO 31 DECEMBER 2017


2011 up 2016 2011 up 2016

Notes 2017 Restated Cumulative to date Reported

OPENING BALANCE AS AT 4 JANUARY 2017Bank and Advances 7 9.260.894

9,260.894

RECEIPTSDisbursements fon IDA 4 2.806.781 28.886.592 31.693.373 28.665.546

TOTAL RECEIPTS 2.806.781 28.886.592 31.693.37 3 28.665.546

TOTAL RECEIPTS AND OPENING BALANCE 12,067.675 28.886.592 31.693.373 28.665.546

PAYMENTSGoods, works, consultant services, non-consultant 5 2.856.501 12.576.536 15.433.037 13.276.240

services, training and operating costs (1)

Municipal Perfrmance Grant (3) 6 1.524.306 7.049.162 8.573.468 7.835.201

TOTAL PAYMENTS 4.380.807 19,625.698 24,006.505 21.111.441

CLOSING BALANCE AS AT 31 DECEMBER 7.686.868 9.260.894 7.686.868 7.554.105

The Project Financial Manager Project Coordinator

o7





STATEMENT OF DESIGNATED ACCOUNT - FOR THE YEAR ENDED 31 DECEMBER 2017


Notes 2017

OPENING BALANCE AS AT 1 JANUARYBank and advances 7 9.260.894

9.260.894

RECEIPTSDisbursements torn IDA 4 2.806.781

TOTAL RECEIPTS 2.808.781

TOTAL RECEIPTS AND OPENING BALANCE 12.087.675

PAYMENTSGoods, works, consultant services, non-consultant ser ices, training and operaing costs (1) 5 2.856.501

Municipal Performance Grant (3) 6 1.524.306

TOTAL PAYMENTS 4.380.807

CLOSING BALANCE AS AT 31 DECEMBER 7.686.868

The Project Financial Manager e Pro t Coordinator

(7 8





NOTES TO THE FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2017


I. Introduction

On 04 May 2012 a credit was signed between Republic of Mozambique and International Development Association (IDA) to finance the

Cities and Climate Changes Project in an amount not exceeding USD 35 000 000.

The overall objective of the Project is to strengthen municipal capacity for sustainable urban infrastructure provision and environmental

management which enhance resiliency to climate related risks.

The project consists of the following parts:

Part A: Strengthening of the Municipal sector

Increase municipal capacity to sustainably plan, manage and finance climate resilient urban development, including through to

strengthening of the Recipient's institutions underpinning its municipal system in order to improve sustainable decentralized financing

and management of the urban environment and infrastructure.

Part B: Enhancing resilience of strategic municipalities in coastal cities

Enhancement of selected municipalities, including those in Beira, Nacala and Maputo metropolitan area, for sustainable resilience to

whether - related environmental threats.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The following paragraphs describe the main accounting policies applied consistently by the project

a) Accounting conversation

The financial statements are prepared on a cash basis of accounting under the historical cost convention.

b) Currencies

The books account of the Project are maintained in United States Dollars (USD). The financial statements are also expressed in United

States Dollars (USD) unless otherwise stated. The transactions in other currencies are translated to USD at the official exchange rate

ruling at the date of the transactions. Closing balances in other currencies are translated at the exchange rate ruling at period end date.

c) Fixed assets

Fixed assets acquired by the Project are expensed in the year of purchase.

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d) Funds received

Funds received comprise disbursements from International Development Association (IDA) and are recorded on receipt of the funds

into the designated account.

3. Changes In previous period financial statements

During the year ended 31 December 2017 and 2016 there have been no changes in accounting policies that may have an effect on the

balances of these periods.

However, during in 2017, the Project Management has identified the need for adjusting the financial statements for the period comprised

between 2014 and 2016, to correct the exchange rate applied on the conversion of expenditure incurred in local currency (Meticals) to

the reporting currency (US dollar). The financial statements for the aforementioned period were prepared by applying an administrative

exchange rate and this procedure impacted negatively the bank balances at the end of each financial year. The Project Management

based on available information, understand that such procedure represented an error, therefore has retrospectively adjusted the financial

statements, by applying the average rate arising from the bank conversion of the amounts received in US dollar to Meticals.

The effect of these adjustments at the beginning of the year 2017 represented an increase of bank balances by USD 2.155.915 and a

decrease of advances by USD 449.126, as result of decrease of prior period payments by USD 1.485.743 and an increase of receipts

by USD 221.046, as follows:

2011 up 2018 2011 up 2016

Note Reported Adjustment Restated

RECEIPTS

Dibursemens from DA 28.665.546 221.046 28.886.592

PAYMENTS

Goods, works, consulantservkes, non-consultanservices, trabny and opefaing cosb (1) 13.276.240 (699.704) 12.576.636

Munkipal Perfomance Grant (3) 7.835.201 (786039) 7.049.162

TOTAL PAYMENTS 21.111,441 (1.485.743) 19.62&698

CLOSING BALANCE AS AT31 DECEMBER 7.554.105 1.708,789 9.260.894

Bank 7 4.356.080 2,155.915 6,511.995

Adv ances 7 3.198.025 (449,126) 2.748.899

CLOSING BALANCE AS AT 31 DECEMBER 7.554.105 1.706.789 9,260,894

10







4. Funds receive

Transfers from International Development Association Fund during 2017, are detailed as follows:

Note 2017

20 M arch 2017 868.548

21 June 2017 299.625

02 Ocluber 2017 791.616

06 December 2017 846.998

4.1 2,806.786

4.1 Disbursements to designated account

The disbursements from IDA to designated account are detailed as follows:

Application number Category 2017 2017USD SOR

74 1 1.308.561 957.180

80 1 461.108 332.803

86 1 898.684 635.768

93 1 1U046.127 738.937

Subtotal 3.714.481 2.614.688

74 3 1.125.057 822.951

80 3 307.016 221,588

8 3 256.262 181.291

93 3 531.265 375.261

Subbial 2.219.599 1.601.091

74 DA (1.565.070) (1.144.810)

8o DA (468.499) (338.137)

86 DA (383.330) (257.036)

93 DA (730.394) (515.917)

subbt (3.127.294) (2.255.900)

Total replenishments fr 1he year 2.806786 2.009.879

11







5. Goods, works, consultant services, non-consultant services, training and operating cost (Category 1)

Expenditures incurred in this category are analysed as follows:

Note 2017

Employees' expenses 5.1 68.055

Goods 5.2 57.483

Services 5.3 2.730.9632.856.501

5.1 Employee's expenses

Employee's expenses include the following:

2017

Local allowance 68.05568.055

5.2 Goods

Goods include the following:

2017

Fuel and lubricants 27.820

Ofice material 21.148

01iers 8.515

57.483

5.3 Services

Services include are detailed as follows:

2017

Communicaton 10.388

Travel expenses 97.008

Repairs and maintenance 4.474

Insurance 319

Consultancies 2.329.718

Olihers 289.056

2.730.963

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6. Municipal Performance Grant (Category 3)

The Municipal Performance is detailed as follows:

Balance as at Balance as at Disbursed by Balance as at31-Dec-2018 31-Dec.2016 PMC Expenditure 31Dec-2017

(Reported) (Restated)

Calandica 40.144 34.623 42,066 28.936 47.753

Chibut 37.478 5.907 45.398 4.262 47.043

Chimolo City 816.599 799.578 210.329 275.590 734.317

Chokw6 67.973 3,044 76.251 128.346 (49.051)

Goa 41.467 35685 66.207 23.954 77.938

Gorogosa (1.722) (2.665) 30.931 - 28.286

Inhambane City 99735 82.151 127.323 39.221 170.253

Macla Vfllage 39.844 34.190 30.931 62.926 12.195

Mandlakazi 59 (13.515) 30.931 - 17.416

Mlanh.a 210.059 199.688 109.766 73.790 235.664

Manica 84.715 81.346 35. 299 49.541 67.104

Massinga 74393 92.996 42.066 42.287 92.775

Mava City 1.050.746 845.420 420.657 439.051 827.026

Maxixe Ciy 82.260 58.379 212.680 20.020 251,039

Moa5ze 72.042 61.871 76.072 3.568 134.375

Namaacha 47 6.283 30.931 - 37.214

Tele City 170.329 181i.025 223.988 131.846 253.167

Ungue 64.518 16.372 30.931 34.134 13.169

Vilankuo 119.061 96.299 26.711 32.973 90.037

Xai-Xai City 136.886 98.036 166.338 68.938 195.438

Praia Biene - 30.931 31.093 (162)

Boane - 96.789 4,790 91.999

Nhametanda - - 72.911 34.425 38.486

Qussico - - 46.025 2.905 43.120

Sussudenga - 15465 1.708 13.757

Nhamayab.e - 61.815 - 61.815

Oher 2.392 - -

Exchange diferences - 52.184 12.396 - 64.580

3.195.025 2.748.899 2.372.138 1.524.304 3.596.733

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7. Bank and advances

This category is analysed as follows:

31-Dec.2016 31-Dec-2016

Note 31-Dec-2017 Restated Reported

Bank 4.090.135 6.511.995 4.356.080

Balance of advances to Municipalifes 6 3.596.733 2.748.899 3.198.025

7.86.868 9.260.894 7.554,105

Bank balances is analysed as follows:

31-Dec-2016 31-Dec.2016

31-Dec-2017 Restated Reported

Banco de MPAambique - Designated account in USD 2514.313 4.736.992 4.738.992

Natonal (recbate of tie Treasury - Forex account in USD 10.000 176.000 175,000

Naonal [Yrecloa of tie Treasury - CUT account in MZN 1.585.822 1.480,003 (565.912)

Nafonal D:reclorale of the Treasury - CUT account in USO 120.000 -

4.090.135 6.511.995 4.356.030

8 Taxation

According to Tax legislation, there exists a possibility of fiscal authorities reviewing the tax position of the Project for a period of up to

ten years, which may results in eventual adjustments due to different interpretation and/or non-compliance with the applicable

legislation, namely: personal income tax, withholding tax and VAT - Value added tax, Management believes that eventual adjustment

on the tax returns, as a result of those revisions, will not have a significant impact on the Financial Statement.

9. Subsequent events

After the reporting period, unfit the date on which the financial statement were authorised o ance, there have been no favourable

or unfavourable events for Cities and Climate Changes Project (Credit No. 5066-MZ), that ffect ese financial statements or require

disclosure therein.

The Project Financial Manager Ject Coordinator

14

REPÚBLICA DE MOÇAMBIQUEMINISTÉRIO DA ADMINISTRAÇÃO ESTATAL E FUNÇAO PÚBLICADIRECÇÃO NACIONAL DE DESENVOLVIMENTO AUTARQUICO

Projecto de Cidades e Mudanças Climáticas - PCMCUnidade de Gestão do Projecto

(Crédito - 5066 MZ)

AOEldio Mapoissa - Especialista em gestão Financeira.Banco MundialAv: Kenneth Kaunda, N 0 1224

Maputo

N/Refa.26 3/UGP/PCMC/2018 Maputo, o1 de Novembro de 2018

ASSUNTO: ENVIO DO RELATÓRIO DE AUDITORIA DO

MAEFP - DNDA

Exmo. Sr. Eldio Mapoissa,

De acordo com o assunto em referência, enviamos em anexo por forma a

tomar conhecimento Banco Mundial, o Relatório Final de Auditoria

do Ministério de Administração Estatal e Função Pública -

MAEFP - DNDA referente ao exercício económico do ano de 2017.

Sem mais subscrevemo-nos com elevid consideração.

repêtp tLlisa Maria(A Gestora Financeiri do PCMC)

PCMC -- Project Cidades & Modanças Climáticas, Av. Guerra Popular, Edifício do CPD, 7° Andar porta N 7 1,Tel,: +258 21305720,+258 21305724, +258 823080364, +258 823080366

Maputo Moçambique

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