world bank documentdocuments.worldbank.org/curated/en/689921490179326413/pdf/ea… · harmonization...

NDED 30™ JUN 2016

IDA GRANT NUMBER TF014974

February 2017

INN~~VEX ~"

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East African Community (EAC) Financial Statements for the Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 301h June 2016

TABLE OF CONTENTS

Organizational information

Report of the Secretary General

Statement of EAC Secretariat responsibilities

Declaration of Project Accountant

Report of the independent auditor

Statement of financial performance

Statement of financial position

Statement of cash flows

Statement of comparison of budgeted and actual expenditure

Special designated account activity

Notes to the financial statements

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PAGE

ii

1-8

9

10

11-12

13

14

15

16

17

18-32

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East African Community (EAC) Financial Statements for the Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 301h June 2016

ORGANISATION INFORMATION

CHIEF OFFICER Mr. Godfrey Magadu Project Coordinator

REGISTERED OFFICE East African Community P. 0 . Box 1096

AUDITORS

BANKERS

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EAC Headquarters Afrika Mashariki Road Arusha Tanzania

INNOVEX Auditors 8 Kilimani Road Ada Estate, Kinondoni P. 0. Box 75297 Dar es Salaam, Tanzan ia Email : [email protected] Website : www.innovexdc.com

Designated Bank Account Kenya Commercial Bank Ltd Account No. 3300705770 P.O Box 4605 Arusha, Tanzania

ii I P age

East African Community (EAC) Report of the Secretary General for the Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 30 1h

June 2016

1. Background of the project The East African Community is implementing a two year EAC - World Bank Public Financial Management Coordination and Harmonization Project in the Partner States wh ich was launched on 4th November 2013 in Arusha Tanzania .

The recipient has received a financial Grant to implement the East African Community Public Financial Management Coordination and Harmonization Project in the Partner States. The project is aimed at reforming the public procurement, public financial accounting/management and oversight practices in the EAC region , critical elements for a successful EAC Monetary Union.

The Grant is administered by the International Bank for Reconstruction and Development International Development Association ("the World Bank"), which is also a financial administrator of the Public Financial Management Coordination and Harmonization Project in the Partner States

The EAC PFM project has been created to assist African countries to respond to the varying public financial management structures at different levels of performances as measured by the Public Expenditure and Financial Accountability (PEFA) indicators

2. Project goal The overall aim of EAC-PFM project is to harmonize and coordinate the setting up of PFM standards amongst EAC Partner states to faci litate compliance with monetary and financial cooperation requirements in the EAC treaty as key aspect of becoming a Monetary Union

3. Project objectives The overall aim of EAC-PFM project is to harmonize and coordinate the setting up of PFM standards amongst EAC Partner states to facilitate compliance with monetary and financial cooperation requirements in the EAC treaty as key aspect of becoming a Monetary Union.

The project consists of setting of PFM standards and technical support to implement the standards.

4. PFM grant agreement The agreement of the EAC-Publ ic Financial Management Coordination and Harmonization in East African Community Countries project was signed between East African Community and International Bank for Reconstruction and Development (World Bank) on July 18, 2013.

5. Performance for the year The EAC - PFM Coordination and Harmonization in East African Community Countries Project results of the year are shown in the statement of financial performance and statement of financial position on page 13 & 14.

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June 2016

5. Performance for the year (Continued)

Financial position

i. Property and equipment The carrying value of the project's property and equipment as of June 30, 2016 increased to US$ 4,830 (2015: US$ 3,062). During the year ended 30th June 2016, there was an addition of office computer amounting to US$ 3,475

ii. Trade and other receivables The receivables stood at US$ 190,135 (2015 : US$ 304). VAT receivable increased by US$ 808 due to Value Added Tax charged to the purchase of an office computer for the project. While Capital revenue grant increased by US$ 189,022 due to the fact that most expenses incurred during the year were in credit and suppliers were not paid yet.

111. Cash and cash equivalents Cash and cash equivalents stood at US$ 187,857 (2015: US$ 205,405), the analysis of which is detailed in Note 7.

iv. Trade payables Trade payables stood at US$ 378,007 (2015: US$ 22,295). The increase was due to most of the consulting activities of the PFM unit, which became functional during this year, being undertaken during the year under review. Some of the consultants' billed work was still to be settled at the year end . Also the invoice amounting to US$ 4, 100 from Cyberworld for the purchase of computer equipment was settled after the year ended .

v. Deferred capital grant The balance stood at US$ 4,830 (2015; US$ 3,061 ). During the year ended 30th June 2016, there was an addition of office computer amounting to US$ 3,475 .

Financial performance

i. Revenue Grant income released to the income statement stood at US$ 604, 17 4 (2015; US $ 28,050). The actual grants received from World Bank amounted to US$ 233,506 (2015 US$ 71 ,897) as shown in Note 3 and Note .9(a).

ii. Training/workshops expenditure Training/workshops expenses increased by US$ 575,834 compared to the previous year that recorded US$ 26,634. This was due to increase in number of consultancy assignment activities due to the introduction of PFM unit. Consultancy being the major expenditure contributed to 96% of the total expenditure. The total costs of the consultancy expenses amounted to US$ 577,844.

111. Depreciation Depreciation expenses increased to US$ 1,706 from US$ 1,416 in 2015 due to the fact that there was an addition of an office computer amounted to US$ 3,475 .


East African Community (EAC) Report of the Secretary General for the Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 301h

June 2016

5. Achievements during the year During the financial year 2015/2016, the project finalised and commissioned the ten (10) consultants in the areas of Accounting and Financial Reporting ; Budget; Procurement harmonisation , Green and Electronic Procurement; Internal Audit; External Audit , Internal Audit ; Public Accounts Committees; Auditors Quality Control ; and Public Accounting Organisations.

All consultants have delivered their outputs as provided for in their contracts and the status as shown in Table1 below;

Table 1: Implementation status of EAC WB PFM Harmonisation Project

PFM Status of Expected Deliverables as at Harmonisation implementation as deliverables in 15th August, 2016 as Area at 15th August, January - August, per Contract

Procurement -Harmonisation (Mr. Rogati Anael Kayani)

Accounting & Financial Reporting (E& Y and Mr. Thomas Mueller)

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2016 2016 Contract signed (with Extension to August 2016); World Bank No objection given ; Introduction letters to EAC PSs sent; on 07/07/15 to introduce consultant commence assignment 2015

to project

July,

Contract signed (with Extension to August 2016) ; World Bank No objection given ; Introduction letters to EAC Partner States sent 22/10/2015

150 assignment July -2016);

days (within

August,

Deliverables as per TORs include -Comparison Report on Procurement Legislations; Baseline Indicators and Gap Analysis Report; Harmonized Procurement Standards; Regional Procurement Policy; and Draft Regional Procurement Leqislation . 150 days assignment (within July - June, 2016) ; Gap analysis questionnaires (Q1 -Accounting & Financial Reporting Legal Framework Analysis ; Q2-IPSAS & IFRS; Q3 - IPSAS & IFRS detailed Conversion)

Comparison Report on Procurement Legislations; Baseline Indicators and Gap Analysis Report; Harmonized Procurement Standards (21st March, 2016); EAC Procurement Policy; Draft EAC Procurement Legislation to be validated by relevant stakeholders;

Gap Analysis report GGE, TSOE, NTSOE delivered ; Draft Road Map for full implementation per Partner State was finalized on 30th August, 2016;

31 Page

I

East African Community (EAC) Report of the Secretary General for the Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 3Q 1h

June 2016


ProcurementContract Management; Curriculum Development; Code of Ethics (Mr. Julius Mulera)

Budget (Mr. Onesmus Ayaya)

Public Accounts Committees (Mr. Fred Mujuni)

ProcurementGreen & EProcurement (Mr. Rajesh Kumar)

Internal Audit (Mr. Richard M uteesaasi ra)

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2016 2016

Contract signed (with Extension to August, 2016); World Bank No

being administered in PSs using local E&Y teams) ; 45 days assignment (December, 2015 -April , 2016);

objection given ; Field work in all PSs Introduction letters to done with exception EAC PSs sent of Republic of 13/01 /2016 Burundi

150 days Contract signed (with Extension to August 2016);

assignment (November, 2015 -

No April , 2016); World Bank objection given ; Introduction letters to Field work in all PSs EAC PSs sent done. 20/11 /2015

150 days Contract signed (with Extension to August 2016);

assignment (November, 2015 -

No March, 2016); World Bank objection given ; Introduction letters to Field work in all PSs EAC PSs sent done. 22/11 /2015

Contract signed (with Extension to August 2016); World Bank No

40 days assignment (November, 2015 -March, 2016);

objection given ; Commenced PSs Introduction letters to data collection EAC PSs sent 20/02/2016. 13/01 /2016

EAC Harmonised Code of Ethics - 30th August, 2016 EAC Harmonised Curriculum - 30th August, 2016 Technical support on Contract Management (was provided during Auqust, 2016; Country Gap Analysis Reports per Partner State delivered on 15th August, 2016; Validation done in August, 2016. Technical support to PSs finalised on 30th August, 2016. Country Report was prepared and shared with the EAC on 15th August, 2016 ; validation was done on 30th September, 2016

Report on Guidelines on e-Procurement and Green Procurement was submitted on 15th August, 2016 and technical support on Contract Management was finalised on 30th September, 2016.

Contract signed (with Extension to August 2016);

150 days Report on gap analysis assignment Partner States to (November, 2015 - determine compliance

World Bank No April , 2016); with the International

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June 2016


2016 2016 objection given ; Introduction letters to Commences PSs EAC PSs sent data collection 13/01/2016 29/02/2016.

External Audit Contract signed (with 150 days (Mr. Prakash Extension to August assignment (July -Narismula) 2016) ; World Bank Dec 2015);

no objection was given and Commences PSs introduction letters to data collection EAC PSs were sent 07/03/2016 on 13/01 /2016.

Auditor Quality Contract signed (with 67 days assignment Control Extension to August (November, 2015 -

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Standards for Professional Practice of Internal Auditing issued by the International Internal Audit Standards Board of the Institute of Internal Auditors . Technical assistance was finalised on 30th September, 2016. Report on gap analysis of each of the Partner States with respect to compliance with International Standards of Supreme Audit Institutions (ISSAI) issued by INTOSAI submitted by 30th September, 2016 ; Roadmap/Action plan to support the SAi 's development based on the Institutional Capacity Development Framework was delivered on 30th September, 2016. Some of these reports were subject to correction as some deliverables were not in agreement with the requirements of the World Bank. The consultant is reviewing the reports for re-submission . The payment to the consultant has been withheld until he finishes the corrections. Report on EAC Quality Review Methodoloqv

51 Page


June 2016


2016 2016 (Protect-APartner & Marthie Claassens)

2016); Ms. World Bank

March, 2016); No

for Practicing Auditors and the report on EAC Audit Manual for Practicing Auditors were prepared but are yet to be validated . Technical support was provided to the PAOs on 30th August, 2016.

Professional Accounting Organisations (Mr. John Bosco Natngaare)

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objection given ; Commences PSs Introduction letters to data collection EAC PSs sent 01 /03/2016 13/01 /2016

Contract signed (with 90 days assignment Gap analysis Report on Extension to June (November, 2015 - each Partner State's 2016); March, 2016); compliance with World Bank No International Education objection given ; Yet to get schedule Standards for Introduction letters to of planned activities Professional EAC PSs sent from consultant. Accountants issued by 13/01/2016 IFAC was submitted on

30th August, 2016. Report on EAC Professional and Technician qualification syllabus framework aligned to IES was submitted on 30th August, 2016 ; Report on guidelines for Registered Training Office (RTO); a trainee guideline for use by PAOs; Regional Policy for Continuous Professional Development Regional Policy for issuance of Audit Practice Licenses and Re-admission of Practicing Auditors was submitted on 30th Auqust, 2016 .

6 ! Page


June 2016

6. Future plans The East African community plans to mobilize more funding in the financial year 2016/2017 from the World Bank and other development partners to implement the agreed standards towards fiscal harmonisation all geared towards the attainment of the EAC Monetary Union scheduled to be achieved by 2024.

7. Risk management and internal control The EAC Secretariat accepts final responsibility for the risk management and internal control system of the project. It is the task of management to ensure that adequate internal financial and operational control systems are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding :

• The effectiveness and efficiency of operations ; • The safeguarding of the project's assets; • Compliance with signed grant agreement and other applicable laws and

regulations; • The reliability of accounting records ; and • Responsible behaviors towards all stakeholders.

The efficiency of any internal control system is depended on the strict observance of prescribed measures. There is always a risk of non-compliance of such measures by staff. Whilst no system of internal control can provide absolute assurance against misstatement or losses, the project's system is designed to provide the EAC Secretariat with reasonable assurance that the procedures in place are operating effectively.

The EAC Secretariat assessed the internal control systems throughout the financial year that ended 30 June 2016, and is of the opinion that they met the accepted criteria .

8. Management structure The Public Financial Management Unit has not been operationalised . The project has only designated the Project Coordinator and is currently utilising the support functions of the EAC Secretariat in terms of finance and procurement.

9. Employees· welfare

Management - Employees' Relationship The project is run by Mr. Godfrey Magadu, the Project Coordinator. As the level of activity of the PFM project is still low at this point in time, the support functions of Finance and Procurement of the EAC Secretariat are being utilized to operationalize the project. The EAC Secretariat is an equal opportunity employer. It gives equal access to employment opportunities and ensures that the best available person is appointed to any given position free from discrimination of any kind and without regard to factors like gender, marital status, tribes, religion , nationality and disability which does not impair ability to discharge duties.

Medical assistance The Project Coordinator is a fulltime staff of the EAC Secretariat who is already entitled to those facilit ies under his current EAC contract


I


June 2016

10. Employees' welfare (continued) Persons with disability The recruitment policy of the EAC Secretariat does not discriminate against persons with disabilities, rather the ability to discharge their responsibility.

Employee benefit plan The Project Coordinator is a fulltime staff of the EAC Secretariat who is already entitled to employment benefits under his current EAC contract.

10. Gender parity The project is coordinated by Mr. Godfrey Magadu, one male project staff. There are no other staffs apart from him.

11. Related party transactions Transactions with related parties are disclosed under Note 13 to the financial statements.

12. Accounting policies A summary of key accounting policies is in Note 2 to the financial statements and were consistently applied during the year under review.

13. Environmental control programme The East Africa Community (EAC) preserves the environment through tree planting within and outside its offices and is committed to making sure that all internal and external surroundings of its offices are clean .

14. Political and charitable donations The PFM Coordination and Harmonisation in East African Countries project did not make any political and charitable donations during the year under review.

15. Prejudicial issues In the opinion of the EAC Secretariat, there are no serious unfavourable matters that can affect the project.

16. Corporate social responsibilities The EAC encourages employees' initiatives on participating in corporate social responsibilities activities. However, during the period under review the project employees did not engage in any corporate social responsibility activities.

17. Independent auditors M/s INNOVEX Auditors were appointed to carry out the audit of the EAC - PFM project for the period ended 30 June, 2016. The Auditors have expressed willingness to continue in office.

Signed by

Amb Liberat Mfumukeko Secretary General

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10/03/~,1 Date: ............................. .

SI Page

East African Community (EAC) Project - Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 301

h June 2016

STATEMENT OF EAC SECRET ARIA T'S RESPONSIBILITIES

The EAC Secretariat is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position and performance of the project and which enable them to ensure that the financial statements comply with the International Public Accounting Standards. This includes the maintenance of adequate accounting records and internal controls , the selection and application of accounting policies, and safeguarding of the assets of the project. They are also responsible for safeguarding the assets of the project and hence for taking reasonable steps for the prevention and detection of fraud , error and other irregularities.

The EAC Secretariat confirms that suitable accounting policies have been used and applied consistently, and reasonable and prudent judgment and estimates have been made in the preparation of the financial statements for the period from 151 July 2015 to 30 June 2016. The EAC Secretariat also confirms that the International Public Sector Accounting Standards have been followed and that the financial statements have been prepared on the going concern basis.

Nothing has come to the attention of the management to indicate that the project will not remain a going concern for at least the nep tw ve months from the date of this

statement. / l

Approved by the EAC Secretariat on ...... .. { ~ .. ~~- .. ?.!?.! .. .!. ............ .. .. on their behalf by;

Amb Liberat Mfumukeko Secretary General

Mr. Godfrey Magadu Project Coordinator

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East African Community (EAC) Project - Public Financial Management (PFM) Coordination and Harmonization Project in East African Community Countries for the year ended 301h June 2016

DECLARATION OF THE PROJECT ACCOUNTANT OF EAST AFRICAN COMMUNITY-PUBLIC FINANCIAL MANAGEMENT COORDINATION AND HARMONIZATION PROJECT

The National Board of Accountants and Auditors (NBAA) according to the power conferred , under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a declaration issued by the Head of Finance/Accounting responsible for the preparation of financial statements of the entity concerned .

It is the duty of a Professional Accountant to assist the EAC Secretariat to discharge the responsibility of preparing financial statements of an entity showing true and fair view of the entity position and performance in accordance with applicable International Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the EAC Secretariat as under EAC Secretariat responsibility statement on an earlier page.

l .............. .. ........................ ...... ..... ... .. ...... being the project accountant of East African Community-Public Financial Management Coordination and Harmonization Project hereby acknowledge my responsibility of ensuring that financial statements for the year ended 301h June 2016 have been prepared in compliance with applicable accounting standards and statutory requirements .

I thus confirm that the financial statements give a true and fair view position of East African Community-Public Financial Management Coordination and Harmonization Project as on that date and that they have been prepared based on properly maintained financial recor~

Signed by \\\ J'®,~L~~ {;.q ~~'1 l'M "'1\D\,\ Position: .~\~.V\~£.~~NM.\>.M).~

::t:.~e1;1;;7ii>;:~~.~ ... Q~~C\ ... .. .

INNOVEX ©2017 10 j Page

INN~~VEX ~~~

The EAC Secretary General East Africa Community EAC Headquarters, Afrika Mashariki Road P. 0 . Box 1096 Arusha Tanzania

INNOVEX Auditors 8 Kilimani Road , Ada Estate, Kinondoni fNear the French Embassy] PO Box 75297 Dar es Salaam, Tanzania Mobile: +255 715 540949 Landline: +255 22 2664099 Fax: +255 22 2664098 Email :admin innovexdc.com Website : www.innovex c.com

REPORT OF THE INDEPENDENT AUDITOR ON THE PROJECT FINANCIAL STATEMENTS

We have audited the accompanying project financial statements and the special designated account for the PFM Coordination and Harmonization Project implemented by East African Community (EAC) Secretariat, for the period from p t July 2015 to 30 June 2016 , which comprises of the statement of financial position . statement of financial performance, statement designated account and statement of cash flows and the explanatory notes set on pages 13 to 32 of this report .

EAC Secretariat's responsibility for the financial statements The EAC Secretariat is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (IPSAS). This responsibility includes designing , implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibility Our responsib ility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISAs). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the project financial statements and the special designated account are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

INNOVEX ©2017 111 Page

REPORT OF THE INDEPENDENT AUDITOR ON THE PROJECT FINANCIAL STATEMENTS

The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion .

Unqualified opinion In our opinion, the financial statements and the special designated account presents fairly , in all material respects , the credit received and the expenses incurred by the Project for the period from 1 July 2015 to 30 June 2016 and its financial position as at the end of the period in accordance with the International Public Sector Accounting Standards.

Key internal control weaknesses • Inadequate financial close process as audit adjustments for the year ended 30 June

2015 were not processed in the accounting system; and • Delay in procurement of PFM consultants and subsequent delay in completion of the

assignments for PFM standards harmonization .

Report on other legal and regulatory requirements In our opinion , proper accounting records for the project have been kept by the East African Community and the financial statement referred to the preceding paragraph are in agreement with the accounting records and have generally complied with the terms of the financing agreement with International Development Association (IDA) . There were no internal control weaknesses that came to our attention during the audit.

INNOVEX Auditors Certified Public Accountants Dar es Salaam Christopher Mageka, CPA-PP


East African Community (EAC) Project - Public Financial Management (PFM) Coordination and Harmonization in East African Community Countries

STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD ENDED JQTH JUNE 2016

REVENUE

Revenue from non-exchange transactions

EXPENDITURE

Training/workshop expenditure

Depreciation expense

Notes 2015/16

3

4

5

USO

604,174

602,468 1,706

604,174

Restated 2014/15

USD

28,050

26,634

1,416

28,050

32 form an integral part of these financial statements. The financial

b Liberat Mfum Secretary General The independent au

INNOVEX ©2017

17 were approved by the EAC Secretariat ~ its behalf by:

eport is on pages 11

131 Page


STATEMENT OF FINANCIAL POSITION AS AT 301h JUNE 2016

Notes 2015/16 Restated 2014/15

ASSETS Non-current assets Property and equipment

Current assets Accounts receivable Cash and cash equivalents

Total assets

LIABILITIES Deferred revenue grant

Deferred capital grant Trade and other payables

Total liabilities

5

6 7

8 9 10

USD

4,830

190,150 187,857

378,007

382,837

4,830 378,007

382,837

USO

3,062

304 205 ,405

205,709

208,771

183,415

3,061

22,295

208,771

32 form an integral part of these financial st tements. The fi ncial 17 were approved by the EAC Secretar'

n1::1r,11d#, its behalf by:

The independent audito s · report is on pages 11 and 12

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I

I


STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED JQTH JUNE 2016

CASHFLOW FROM OPERATIONG ACTIVITIES

Surplus of income over expenditure

Depreciation

Adjusted for movements in working capital: (lncrease)/decrease in account receivable

lncrease/(decrease) in deferred revenue grant

lncrease/(decrease) in deferred capital grant

Increase in trade and other payables

Net cash generated from operating activities

Cash flow from investing activities Purchase of property and equipment

Cash generated from investing activities

Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of period

Cash and cash equivalents at end of period

The independent auditors· eport is on pages 11 and 12

INNOVEX ©2017

Notes

7

2015/16 USO

1,706

(189,845) (183,415)

1,769 355,712 (14,073)

{3,475} (3,475}

(17,548)

205,405

187,857

Restated 2014/15

USO

1,416

45,261 (1,416)

14,427

59,689

59,689

145,716

205 ,405

cial

151 Page


STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE PERIOD ENDED JOTH JUNE 2016

Original Final Actual Budget Activity Budget Budget amount Difference Utilization

USD USD USD USD % Notes

Receipts Grant Income Total grant available for expenditure

Payments Hiring of conference facilities Air ticket EAC-staff including mileage DSA full or 1 /4-Staff DSA full or 1 /4- delegates & consultants Contracted professional services-consultancy fees Bank service charges (e.g. interest, commissions Computer equipment Total expenditure Deficit or the year

{A} {B} {C} {C-B}

779,195 779,195 779,195 779,195

1,033 1,033 8,999 8,999 2,625 2,625

11 ,200 11 ,200 750,438 750,438

400 400 4,500 4,500

779,195 779,195

438 ,911 438,911

1,017 8,999 2,625

11 ,200 577 ,844

783 4,100

606,568 (167,657)

340 ,284 340,284

16

172,594 (383)

400 172,627

(167,657)

56% 56%

98% 100% 100% 100% 77%

196% 91 % 78%

14

14

12

o 32 form an integral part of these financial state h-..ft'l';:~c,:';-,a::;il statements on pages 13 to 17 were exrilllfkcretariat on.. ... .. ... ... .... .... ... ... ... ... ..... 2017 an \A.t:a~l'Cfic...,..,,,n on its behalf by:

A Secretary Gener The independent audit rs· report is on pages 11 and 12



STATEMENT OF SPECIAL (DESIGNATED) ACCOUNT ACTIVITY FOR THE YEAR ENDED 3QTH JUNE 2016

Opening balance as at 1st July 2015

Total amount deposited by World Bank

Total amount deposited of unspent imprest

Deduct:

Total amount withdrawn including bank charges

Closing balance per bank statement as at 30 June 2015

Unpresented cheques issued out which cleared after year end

Closi g balance per cash book as at June 2016

Note

9(a)

7

2015/16 Cumulative

US$ US$

208,405 208,405

233,506 441,911

1,800 443,711

443,711 443,711

(248,920) (248,920)

194,791 194,791

6,934 6,934

187,857 187,857

o 32 form an integral part of these financial statement 17 were approved by the EAC Secretar' t

its behalf by:

The independent audit rs· report is on pages 11 and 12



NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JQTH JUNE 2016

1. GENERAL INFORMATION The East African Community (EAC) is a regional inter-governmental organization of the five Partner States, namely: the Republic of Kenya , the Republic of Uganda, the Republic of Burundi , the Republic of Rwanda and the United Republic of Tanzania. The East African Community is currently implementing a regional project on Public Financial Management (PFM) coordination and harmonization . The registered office is EAC Headquarters, Afrika Mashariki Road , P.O. Box 1096, Arusha , Tanzania.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented , unless otherwise stated.

a. Statement of Compliance The financial statements have been prepared in accordance with International Public Sector Accounting Standards.

b. Basis of preparation The accompanying financial statements have been presented on an accrual basis of accounting while the budget has been prepared using cash basis of accounting . Accrual basis means a basis of accounting under which transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid) . Therefore, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate . Accrual accounting allows for revenue to be recognized when earned and expenses to be recognized when goods or services are received, without regard to the receipt or payment of cash. Budgetary accounting allows for compliance with the requirements for and controls over the use of Development Partners budgeted funds .

c. Significant accounting policies The financial statements have been prepared on a going concern basis, they also comply with International Public Sector Accounting Standards for the accrual basis of accounting in as far as the IPSASs so far adopted are concerned ; otherwise IASs/lFRSs are still applicable". The following IPSASs which are applicable to the EAC have been adopted :

IPSAS 1: Preparation of financial statements ; IPSAS 2: Cash flow statements; IPSAS 3: Accounting policies, changes in accounting estimates and errors ; IPSAS 4: The effects of foreign exchange rates ; IPSAS 9: Revenue from exchange transactions; IPSAS 12: Inventories; IPSAS 17: Property and equipment; I PSAS 19: Provisions, contingent liabilities and contingent assets; IPSAS 20: Related party disclosures ; IPSAS 23: Revenue from Non-Exchange Transactions;


East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 3QTH JUNE 2016

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Significant accounting policies (continued)

IPSAS 24: Presentation of budget information in financial statements; IPSAS 31 : Intangible assets; and IPSAS 25 (Employee Benefits) has not been complied with in full because of the need to streamline the current policy on plan assets and obligations and the need to change the policy on the accounting treatment on interest earned on gratuity. The accounting policies have been applied consistently throughout the period .

d. Adoption of new and revised international public sector accounting standards

(i) New and revised IPSASs effective for the year ended 30 June 2016

The following new and revised IPSASs have been applied in the current year and had no material impact on the amounts reported in these financial statements.

(ii) New IPSASs in issue but not yet effective for the period ended 30 June 2016

Improvements to IPSASs 2015 The IPSAS Improvements to IPSASs 2015 was issued on 18 April 2016. This is the first IPSASB Improvements project to consider broader improvements resulting from the Conceptual Framework and alignment with government finance statistics, in addition to amendments arising from maintaining convergence with International Financial Reporting Standards (IFRS). Amendments of IPSAS shall be applied for annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged .

The Applicability of IPSASs The Applicability of IPSASs was issued on 21 April 2016. The objective of this is to remove the Government Business Enterprise (GBE) definition in IPSAS 1 Presentation of Financial Statements and propose consequential amendments in IPSASs and RPGs. The effective date of the standard is January 1, 2018 and earlier application is encouraged. The revised Preface to IPSASs is effective immediately.

Consultation Paper (CP) Public Sector Specific Financial Instruments The Consultation Paper Public Sector Specific Financial Instruments was issued end of July 2016. The Consultation Paper considers the issues related to public sector specific financial instruments such as currency in circulation, monetary gold , the IMF quota subscription , Special Drawing Rights (SOR) Holdings and SOR Allocations and proposes approaches to accounting for them. Comments relating to this Consultation Paper can be provided to the IPSASB until 31 December 2016.


East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED JQTH JUNE 2016


d. Adoption of new and revised international public sector accounting standards (continued)

(ii) New IPSASs in issue but not yet effective for the period ended 30 June 2016 The Project has not applied the following new and IPSAS that have been issued but are not yet effective. The Project will apply these standards, if applicable, when they become effective.

IPSAS 34 Separate Financial Statements IPSAS 35 Consolidated Financial Statements IPSAS 36 Investments in Associates and Joint Ventures IPSAS 37 Joint Arranqements IPSAS 38 Disclosure of Interests in Other Entities IPSAS 39 Employee benefits

IPSAS 34 Separate Financial Statements IPSAS 34 prescribes the accounting and disclosure requirements for investments in controlled entities, joint ventures and associates when an entity prepares separate financial statements. It requires an entity that prepares and presents financial statements under the accrual basis of accounting to apply this Standard in accounting for investments in controlled entities, joint ventures and associates when it elects, or is required by regulations , to present separate financial statements. However, this Standard does not mandate which entities produce separate financial statements. It applies when an entity prepares separate financial statements that comply with International Public Sector Accounting Standards (IPSASs) . This Standard applies to all public sector entities other than Government Business Enterprises (GBEs).

An entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged . If an entity applies this Standard for a period beginning before January 1, 2017, it shall disclose that fact and apply IPSAS 35, IPSAS 36, IPSAS 37, and IPSAS 38 at the same time.

This Standard applies to all public sector entities other than Government Business Enterprises (GBEs).

The EAC Secretariat is of the opinion that the standard will not be applicable for the Project.

IPSAS 35 Consolidated Financial Statements The Standard establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. It requires an entity (the controlling entity) that controls one or more other entities (controlled entities) to present consolidated financial statements. It defines the principle of control , and establishes control as the basis for consolidation and sets out how to apply the principle of control to identify whether an entity controls another entity and therefore must consolidate that entity. It also sets out the accounting requirements for the preparation of consolidated financial statements; and defines an investment entity and sets out an exception to consolidating particular controlled entities of an investment entity. This Standard does not deal with the accounting requirements for public sector combinations and their effect on consolidation , including goodwill arising on a public sector combination.

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East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30TH JUNE 2016




IPSAS 35 Consolidated Financial Statements (continued) An entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged . If an entity applies this Standard for a period beginning before January 1, 2017, it shall disclose that fact and apply I PSAS 34, Separate Financial Statements, IPSAS 36, IPSAS 37, and IPSAS 38 at the same time.

This Standard applies to all public sector entities other than Government Business Enterprises (GBEs) .


IPSAS 36 Investments in Associates and Joint Ventures IPSAS 36 prescribes the accounting for investments in associates and joint ventures and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. It shall be applied by all entities that are investors with significant influence over, or joint control of, an investee where the investment leads to the holding of a quantifiable ownership interest.

The Standard provides the basis for accounting for ownership interests in associates and joint ventures that is , the investment in the other entity confers on the entity the risks and rewards incidental to an ownership interest. This includes ownership interests arising from investments in the formal equity structure of another entity. A formal equity structure means share capital or an equivalent form of capital , such as units in a property trust. Quantifiable ownership interests may also include ownership interests arising from other investments in which the entity's ownership interest can be measured reliably (for example, interests in a partnership) . Where the equity structure of the other entity is poorly defined, it may not be possible to obtain a reliable measure of the ownership interest.

An entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged . If an entity applies this Standard for a period beginning before January 1, 2017, it shall disclose that fact and apply IPSAS 34, IPSAS 35, IPSAS 37, and IPSAS 38, Disclosure of Interests in Other Entities, at the same time.



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IPSAS 37 Joint Arrangements The standard establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (i.e. joint arrangements) . It requires an entity that is a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and to account for those rights and obligations in accordance with that type of joint arrangement. The standard shall be applied by all entities that are a party to a joint arrangement.

An entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2017. Earlier application is encouraged. If an entity applies this Standard for a period beginning before January 1, 2017, it shall disclose that fact and apply IPSAS 34, IPSAS 35, IPSAS 36 and IPSAS 38, Disclosure of Interests in Other Entities , at the same time.



/PSAS 38 Disclosure of Interests in Other Entities The standard requires an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with , its interests in controlled entities, unconsolidated controlled entities, joint arrangements and associates, and structured entities that are not consolidated ; and the effects of those interests on its financial position, financial performance and cash flows . This Standard shall be applied by an entity that has an interest in controlled entities; joint arrangements (i .e. joint operations or joint ventures) ; associates; or structured entities that are not consolidated. This Standard does not apply to the following :

a) Post-employment benefit plans or other long-term employee benefit plans to which IPSAS 25;

b) Employee Benefits applies and an entity's separate financial statements to which IPSAS 34, Separate Financial Statements, applies;

c) An interest held by an entity that participates in , but does not have joint control of, a joint arrangement unless that interest results in significant influence over the arrangement or is an interest in a structured entity; and

d) An interest in another entity that is accounted for in accordance with IPSAS 29, Financial Instruments: Recognition and Measurement.

An entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2017 . Earlier application is encouraged.



I






IPSAS 39 Employee Benefits IPSAS 39 reflects amendments made by the IASB to IAS 19 Employee Benefits, up to December 2015. The main differences between IPSAS 39 and IPSAS 25 are the removal of an option that allowed an entity to defer the recognition of changes in the net defined benefit liability (so-called "corridor approach"), the introduction of the net interest approach for defined benefit plans and amendments of certain disclosure requirements for defined benefit plans and multi-employer plans. IPSAS 39 also addresses a number of other issues raised (e.g. accounting for the risk-sharing features of defined benefit plans, the classification of employee benefits , recognition and measurement of other long-term employee benefits, the point in time when termination benefits are recognized) .

I PSAS 39 - Employee Benefits will replace I PSAS 25 Employee Benefits on January 1, 2018, with earlier adoption encouraged .



e. Use of estimates The financial statements in conformity with IPSAS 3 - Accounting Policies, Changes in Accounting Estimates and Errors, requires management to make estimates and assumptions that, affect the reported amounts of assets and liabilities and the disclosure of the reported amounts of revenues and expenses during the reporting period . Actual results could differ from these estimates.

f. Donations and grants The financial statements in conformity with IPSAS 23 - Revenue from Non-Exchange Transactions, require management to recognize liabilities from transfers with restrictions (conditions) over the period of which economic benefits will be received from such transfers , with disclosure of such restricted contributions from Development Partners. Most of the assistance given to the Project by the Development Partners is in relation to specific projects or programmes. Hence, they are considered as restricted contributions. Restricted contributions are recognized as Revenue over the periods necessary to match them with the related costs, which they are intended to compensate on a systematic basis. Grants related to assets are presented in the statement of financial position as deferred revenue, which is recognized as revenue on a systematic and rational basis over the useful life of the asset.


I

East African Community (EAC ) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED JQTH JUNE 2016

2. SUMMARY OF SIGNIFICANT ACCOUNTI NG POLICIES (continued)

g. Foreign currency transactions The financial statements are prepared in conformity with IPSAS 4 - The Effects of Changes in Foreign Exchange Rates that requires management to disclose effects of foreign currency transactions in their financial statements. In accordance with IPSAS 4 and related definition , the presentation currency of the Project, currency in which its financial statements are prepared , is the United States Dollar.

The Project has its Presentation currency, the United States Dollar, and Tanzanian shillings as its functional currency and hence uses the following procedure to translate its foreign currency transactions into the Presentation currency for reporting purpose;

i. monetary assets/liabilities are translated at current exchange rate ii . Non-monetary assets/liabilities measured at historical cost are translated at historical

exchange rate iii. Non-monetary assets/liabilities measured at current value are translated at the exchange

rate at the date when the current value was determined. Owners' interest accounts are translated at historical exchange rate

Revenues/expenses other than those expenses related to non-monetary items (as in (a) (b) above) are translated at the exchange rate that existed when transactions took place (for practical reasons, average rates may be used) (b) expenses related to non-monetary assets, such as depreciation (fixed assets) and amortization (intangible assets) are translated at the exchange rate used to translate the related assets. This procedure above is descriptive of the Temporal Method of translating foreign exchange transactions where the exchange translation adjustment gains/losses are shown in the financial statements usually under the Operating Income/Expenses or Non-operating Income/ Expenses section of the Statement of the financial Performance.

h. Interest earned The financial statements are prepared in conformity with IPSAS 9 - Revenue from Exchange Transactions, requires management to treat such revenue as revenue for the year. Such interest comprises mainly interest from banks, for operating accounts and fixed deposits .

i. Property, plant and equipment The financial statements in conformity with I PSAS 17 - Property, Plant, and Equipment, requires management to treat the assets of the Project as follows - Property and equipment are initially recorded at purchase cost plus direct attributable cost. Where an item of property and equipment comprises major components having different useful lives, they are accounted for separately.

Subsequent expenditures are capitalized only when they increase the current economic benefits and meet the recognition criteria . Expenditu re incurred to replace a component of an item of property and equipment is accounted for separately and capitalized whi le the major replaced component is derecognized. All other expenditure items, wh ich do not meet recognition criteria, are recognized in the statement of financial performance as expenses as they are incurred . Property and equipment are derecognized when no economic benefits are expected from its use or disposal. The disposal methods applied include; sale, or scrapping .

INNOVEX ©2017 24 1 Page

I I



i. Property, plant and equipment (Continued) Gains or losses on disposal of property, plant and equipment are determined by comparing net disposal proceeds, if any, with the carrying amount. These gains or losses are not considered in arriving at the operating surplus or deficit for the year, instead they are taken to the statement of changes in net assets/equity for the reporting period .

The financial statements in conformity with IPSAS 1 - Presentation of Financial Statement and IPSAS 17 - Property, Plant and Equipment recognize depreciation in the Statement of Financial Performance. Management charges depreciation to the Statement of Financial Performance on a straight-line basis to write off the cost of property, plant and equipment to their residual values over their expected useful lives. No depreciation is provided on the land . Depreciation for Property and Equipment purchased during the year is apportioned proportionately to the remaining period of the year. Property and equipment acquired during the year is depreciated from the date when it is available for use and cease to be depreciated at earlier of the date that the asset is derecognized .

Annual depreciation rates applied during the financial year are as follows : Computer equipment Telecommunication equipment Office equipment Office furniture

j. Taxation

33.33% 33.33% 25.00% 12.50%

Article 4 Section ( 1) subsection ( d) of the Headquarters Agreement between East African Community and the United Republic of Tanzania states that: "The Secretariat, its property, assets, income and transactions shall be exempt from all direct taxation including sales tax and from Customs Duties and prohibitions, restrictions on imports and exports in respect of articles imported or exported by Secretariat for its official use. The Secretariat shall also be exempt from any obligation relating to payments, withholding or collection of any tax or duty provided that such assets and other property shall not be sold within the United Republic of Tanzania except in accordance with conditions agreed to with the Government". The same treatment is expected to be accorded to property, assets, income and transactions of Projects implemented by EAC.

k. Presentation of the budget information The financial statements in conformity with IPSAS 24 requires management of a public sector entity to show comparison of budget amounts arising from execution of the budget to be included in the financial statements of the entity which are required to, or elect to, make publicly available their approved budget for which they are, therefore, held publicly accountable. The Project prepares its financial statements clearly indicating the actual expenditure in comparison with the approved budgetary provisions and in so doing fully complies with this Standard . The statement of comparison of budgeted and actual amounts has been presented using accrual basis of accounting .

I. Employee benefits Employment contracts provided for gratuity benefit at a rate of 25% of the basic total salaries for the term of employment. The gratuity benefit is charged to the statement of financial performance on accrual basis.

INNOVEX ©2017 25 I P age



m. Cash and cash equivalents Cash and cash equivalents as referred to in the cash flow statement comprises, cash deposited at banks.

3. REVENUE FROM NON-EXCHANGE TRANSACTIONS

Amount released from deferred revenue grant to statement of financial performance (Note 8) Recycled from capital grant (Note 9)

4. TRAINING/WORKSHOPS EXPENDITURE

Hiring of conference facilities Air ticket EAC-staff including mileage OSA Full or 1/4-Staff OSA full or 1/4- delegates & consultants Contracted professional services Advertising and publicity Bank charges

5. PROPERTY AND EQUIPMENT Office

2015/16 USO

602,469 1,706

604,174

2015/16 USO

1,017 8,999 2,625

11 ,200 577,844

783 602,468

Computer

Restated 2014/15

USO

26,634 1,416

28,050

Restated 2014/15

USO

889

2,800 19, 175 3,770

26,634

furniture Equipment Total 2015/16 Cost At start of year Additions At end of year

Depreciation At start of year Charge for the year At end of year Net book value 30/6/2016

INNOVEX ©2017

USO

360

360

45 45 90

270

USO USO

4,118 4,478 3,475 3,475 7,593 7,952

1,371 1,416 1,661 1,706 3,032 3,122 4,561 4,830

261 Page

East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 3orH JUNE 2016

5. PROPERTY AND EQUIPMENT (Continued)

Office Computer furniture Equipment Total

2014/15 Cost At start of year Additions At end of year Depreciation At start of year Charge for the year At end of year Net book value 30/6/2015

6. ACCOUNTS RECEIVABLE VAT receivables Charlestone World Bank (Note 8) Total

7. CASH AND CASH EQUIVALENTS

KCB bank balance

8. DEFERRED REVENUE GRANT Balance as at 1 July Amount received from World Bank (Note 9a)

USO

360

360

45 45

315

USO USO

4, 118 4,478

4, 118 4,478

1,371 1,416 1,371 1,416 2,747 3,062

1, 113 304 15

(189,022} 190,150 304

Restated 2015/16 2014/15

USO USO 187,857 205,405

183,416 138,153 230,031 71,897

Amount released to the statement of financial performance (Note 3) Balance as at 30 June

(602,469} (189,022}

(26,634} 183,416

9. DEFERRED CAPITAL GRANT Balance as at 1 July Addition during the year (Note 9a) Depreciation recycled to statement of financial performance Balance as at 30 June

9 (a) CASH RECEIPTS FROM WORLD BANK

1st Instalment 2nd Instalment 3rd Instalment 4th Instalment

Purchase of equipment

INNOVEX ©2017

Date received 7-Jun-16 24-May-16 30-Mar-16 24-Feb-16

30-June-16

3,061 4,478 3,475

(1,706} (1,417} 4,830

117,033 16,166 50,205 46,627

230,031

3,475 233,506

271 Page

3,061

71 ,897

71 ,897

71 ,897

East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 3orH JUNE 2016

10. TRADE PAYABLES

One off suppliers Uganda Travel Bureau 2004 Ltd Audit fee Cyberworld National Media Group Limited Other payables The Standard Group Ernst & Young

2015/16 USO

200,201 7,078 3,000 4,100

974 1,154

161,500 378,007

Restated 2014/15

USO 16, 175

390 3,000

602 974

1, 154

22,295

11. NOTE OF RECONCILIATION OF STATEMENT OF BUDGETARY COMPARISON AND STATEMENT OF FINANCIAL PERFORMANCE

(a) The financial statements are prepared on an accruals basis using a classification based on the nature of expenses in the statement of financial performance, whereas the budget is prepared on a cash basis. As required by IPSAS-24, a reconciliation is provided between the actual amounts on a comparable basis with the budget as presented in statement of budget performance and the actual amounts in the statement financial performance accounts identifying separately any basis, timing and entity differences.

Basis differences include the full recognition of employee benefit costs, allowances and provisions. Entity differences represent the inclusion in project's financial statements, which are not included in the Budget. Presentation differences where applicable may represent the treatment of acquisitions of equipment as investing activities in financial statements rather than as expenses in budget statement. A comparison of budget and actual amounts, prepared on a comparable basis to the approved budget, is then presented in the statement of comparison of budget and actual amounts. In addition to the basis difference, adjustments to amounts in the financial statements are also made for differences in the formats and classification schemes adopted for the presentation of the financial statements and the approved budget.

(b) Timing differences occur when the budget period differs from the reporting period reflected in the financial statements. There are no timing differences for EAC-PFM project.

(c) Project's differences occur when the budget omits programs/ activity or an entity that are part of the entity for which the financial statements are prepared.

(d) A reconciliation between the actual amounts on a comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the Statement of Financial Performance for the year ended 30th June 2016 is presented below.

Actual amount on comparable basis as presented in the budget and actual

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Operating Financing Investing Total USO USO USO USO

604 ,174 604 , 174

28 JP age


Operating Financing Investing Total USO USO USO USO

amounts comparative statement Basis differences Timing differences Project differences Actual amount in the statement of cash flows

1,706

602 ,468

Total expenditure per statement of budget and actual expenditure Total expenditure per statement of financial performance Difference

602,469 (604,174)

(1,706)

1,706

602,468

26,634 (28,050)

(1,416)

The accompanying financial statements have been presented on an accrual basis of accounting , while the budget has been prepared using cash basis of accounting. The difference between the budget performance and statement of financial performance is made up the depreciation charge during the year which is a non-cash item.

12. RECONCILIATION OF PROJECT PERFOMANCE TO STATEMENT OF BUDGET AND ACTUAL STATEMENT The financial statements are prepared on an accruals basis using a classification based on the nature of expenses in the statement of financial performance, whereas the budget is prepared on a cash basis. This note saves the reconciliation of the deficiUsurplus as shown in the statements of comparison of budget and actual versus the project operations during the year (i.e . project financing and expenditure) .

Opening bank balance Grant received during the period

Total available for expenditure

Purchase of computer equipment Total expenditure per statement of financial performance

Grant balance/(deficit)

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2015/16 USO

205,405 233,506 438,911

(4,100) (602,469) (167,657)

291 Page

2014/15

USO 145,716

71 ,897

217,613

(26,634)

190,979


13. RELATED PARTY TRANSACTIONS The related parties are the key management of the project and the members of the Project Steering Committee. There were no transactions and outstanding balances with related parties during the year under review. 14. EXPLANATION OF VARIANCE BETWEEN BUDGET AND ACTUAL INCOME AND

EXPENDITURE Annual Actual to Budget 30th June

Description of Activity Amount 2016 Variance Explanation USO USO USD

Receipt

Grant received 779, 195

Expenditure Hiring of Conference Facil ities 1,034 Airticket EAC-Staff/lncl

8,999 Mileage DSA Full or 1 /4-Staff 2,625 DSA Full or 1/4- Delegates &

11 ,200 Consultants

Contracted Professional 750,438

Services-Consultancy Fees

Bank Service Charges (e.g. 400

Interest, commissions) Computer Equipment 4,500

15. PRIOR PERIOD ADJUSTMENTS

438,911

1,017

8,999

2,625

11 ,200

577,844

783

4,100

340,284

16

172,594

(383)

400

Not all the budgeted income was disbursed by the World Bank during the year

Some of the consultancy assignments were executed after the year ended

Prior period adjustment relates to correction of an error relating to consulting work amounting to USO 16, 175 done by Rogati Anael Kayani , the consultant for Harmonization of EAC procurement systems, during the year ended 301

h June 2015 which was not recognised as expenditure in the books of account thereby understating reported expenses and accruals by the same amount. The following tables summarises the impacts in the financial statements of this error:

Statement of Income and Expenditure Expenses Consultancy expenses Amount released from deferred income

Statement of financial position One off suppliers Deferred current grant

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As previously

reported USD

3,000 (11 ,876)

(8,876)

(1 99,591) (199,591)

As Adjustment adjusted

USD USD

16, 175 19, 175 (16,175) (28,051)

(8 ,876)

(16,175) (16,175) 16, 175 (183,416)

(199 ,591)

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16. COMMITMENTS The Project had some ongoing project activities which were not completed as at 30 June 2016 amounting to USO 750,006 . The details of the activities have been explained under Note 19.

17. CONTINGENT LIABILITIES There were no contingent liabilities nor contingent assets reported during the year.

18. COMPARATIVES Wherever considered necessary, comparative figures have been reclassified to conform to changes in presentation in the current year.

19. EVENTS AFTER REPORTING DATE As at 301h June 2016 , some activities were not yet implemented. These were conducted after the reporting date and are listed below:

• Draft Road Map for full implementation per Partner State which was finalized on 30th August, 2016;

• EAC harmonised code of ethics were submitted on 30th August, 2016; • Technical support on (For consultancy assignment in procurement contract

management: Curriculum Development: Code of ethics) contract management was provided on 30th August, 2016;

• Country gap analysis reports per partner states were delivered on 15th August, 2016; Validation of the same was done in August, 2016. Technical support to partner states was finalised on 30th August, 2016;

• Country report was prepared and shared with the EAC on 15th August, 2016 and was validated on 30th September, 2016;

• Report on Guidelines on e-procurement and green procurement was submitted on 15th August, 2016;

• Technical support (For Green & E-Procurement) on contract management finalised on 30th September, 2016;

• Report on gap analysis partner states to determine compliance with the International Standards for Professional Practice of Internal Auditing issued by the International Internal Audit Standards Board of the Institute of Internal Auditors; Technical assistance finalised on 30th September, 2016

• Report on gap analysis of each of the partner states with respect to compliance with International Standards of Supreme Audit Institutions (ISSAI) issued by INTOSAI submitted on 30th September, 2016;

• Roadmap/Action plan to support the SAi's development based on the Institutional Capacity Development Framework was delivered on 30th September, 2016;

• Report on EAC quality review methodology for practicing auditors and the report on EAC audit manual for practicing auditors were prepared but are yet to be validated . Technical support was provided to the PAOs on 30th August , 2016 ;

• Gap analysis report on each partner state's compliance with International Education Standards for Professional Accountants issued by IFAC was submitted on 30th August , 2016;

• Report on EAC Professional and Technician qualification syllabus framework aligned to IES was submitted on 30th August , 2016; and

• Report on guidelines for Registered Training Office (RTO), a trainee guideline for use by PAOs, Regional Policy for Continuous Professional Development Regional Policy for

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East African Community (EAC) Project - PFM Coordination and Harmonization in East African Community Countries NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED JOTH JUNE 2016

19 EVENTS AFTER REPORTING DATE (Continued)

• issuance of Audit Practice Licenses and Re-admission of Practicing Auditors was delivered on 30th August, 2016.

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