customer care lines - world bank...federal government of nigeria on behalf of lagos state government...

LAGOS WATER CORPORATION "E c04

Water House. ljora P. 0. Box 555, Lagos. NigeriaTel: (01) 774 3013, 474 6040-1 4[

Customer Care Lines: 07045973012, 07045973013Toll Free: 0800-lagoswater (0800-52467-92837)

www.lagoswater.orgSC 6 .27/Vfl 12/094 June 7 2017

The Task Team Lcader,The World Bank Oflice,102, Yakubu Gowon Crescent,Asokoro District,Abuja.

Attention: Mrs Osakwe

FINANCIAL STATEMENT FOR SECOND NATIONAL URBAN WATER SECTORREFORM PROJECT - INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA)CWR. NO. 4086

Rclrence to the above, please find enclosed:

1. Audited \ccount for Year 2016

2. Management Letter for Year 2016 account

3. Response to the Management Letter

Thandk youd.

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LAGOS WATER CORPORATION

Water House, ljora P 0. Box 555, Lagos, NigeriaTel: (01) 774 3013, 474 6040-1 i

Customer Care Lines: 07045973012, 07045973013Toll Free: 0800-lagoswater (0800-52467-92837)

SC.65/S.27/Vol. 12/092 www.agoswater.org June 6, 2017Ref: ....

The Task Team Leader.The World Bank Office.101. Yak ubu Gowon Crescent.Asokoro District.Ahuja.

Attention: Mrs Osakwc

RESPONSE TO YEAR 2016 AUDITED ACCOUNT ON SECOND NATIONAL URBANWATER SECTOR REFORM PROJECT

INTERNATIONAL I)EVELOPMENT ASSOCIATION (IDA) CR. NO. 4086

1. U SE OF I)EDICATEI) ACCOUNTING PACKAGE FOR THE PROJECT

We wish to state that the utility uses the Sun-Accounting Module licensed by System-Specs Nig.ltd for its accounting inormation processes and all transactions on the projects were capturedinto the sun accounting package. however the system has not been linked to generate theaccounts electronically unlike for the utility.

The Project will start discussion with System Specs with a view to enabling the project togenerate the accounts electronicallv.

Ihank VOu

reArourntetmPr. ct Account t

LAGOS WATER CORPORATIONSECOND NATIONAL URBAN WATER SECTOR REFORM PROJECTINTERNATIONAL DEVELOPMENT ASSOCIATIONSPECIAL PURPOSE PROJECT FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2016(CREDIT NUMBER - 4086-UNI)

IMPLEMENTED BY LAGOS WATER CORPORATION

SPECIAL PURPOSE FINANCIAL STATEMENTS

INDEPENDENT AUDITORS' REPORT.

ORTHEYEAR ENDED31, 2016

EXTERNAL AUDITORS

OLABISI FAYOMBO AND COMPANY

(CHARTERED ACCOUNTANTS)

152, OBAFEMI AWOLOWO WAY

IKEJA, LAGOS STATE


Table of Contents

General Information 2

Objectives of the Project 3

Summary of Significant Accounting Policies 3-5

Auditors' Independent Opinion 6-7

Statement of Financial Position 8

Statement of Income & Expenditure 9

Statement Cash Flow 10

Accumulated Contract Costs 11

Statement of Cash Position 12

Notes to the Accounts 13

Special Account Statement 14

Inflow Withdrawal Schedule 15

1


1. General Information

1.1 The ProjectThe letter Agreement No. CREDIT NUMBER - 4086-UNI was concluded on July 15, 2005between the Ministry of Finance of the Federal Republic of Nigeria on behalf of Lagos StateGovernment and International Development Association, according to which IDA, acting asadministrator of the grant funds under the rehabilitation and network expansion of piped waternetwork in Lagos State.

The grant is provided for the purpose of implementation to improve the reliability of watersupply produced by the water treatment works in Lagos State.

The closing date of the financing under IDA CREDIT NUMBER - 4086-UNI was September30, 2016. As of the closing date of the Project, IDA Special Account read a balance ofUSD42,125.86 (gross). While after transferring a sum of $38,616.11 to World Bank throughIDA Special Account 1771482779; leaving behind a sum of $3,393.89 (after deductingcharges), the balance sum meant for external audit fee; the project was said to be closed inaccordance with the Project facility agreement.

Lagos State Government has no contribution towards this Credit facility on payments underthe projects.

2


1.2 Project Objectives

The objectives of the project are as follows as established in the Project Underlining Agreement:1. To improve the reliability of water supply produced by the water treatment works in Lagos State.2. To increase access to piped water network in the state3. To improve the commercial viability of the urban utilities in the state

The project consists of the following parts:

A. Rehabilitation and Network expansion

B. Public Private Partnership Development

C. Service Sustainability and Project Management

D. Policy Reform and Institutional

1.3 Project Budget and Financing

The Project is being financed 100% by International Development Association inclusive oftaxes.

1.4 Project Implementation

The Project is being implemented by Lagos State Water Corporation under Lagos StateGovernment.

The Address of LSWC is Water House, Ijora Police, Ijora, Lagos.

2.0 Summary of Significant Accounting Policies

2.1 Preparation and Presentation of Financial Statements

The Special-Purpose Financial Statements are prepared in accordance with the International

Public Sector Accounting Standards: Financial Reporting Under the Cash Basis of Accounting

(IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards(IPSASB) within the International Federation of Accountants (IFAC) and presented inaccordance with Financial Manual for World Bank Financed Investment Operations (March

2010): RM 3 - Financial Reporting and Auditing.The principal accounting policies applied in the preparation of these Special Purpose Financial

Statements are as set out below. These policies have been consistently applied to all the

periods presented.

3


2.2 Cash Basis of Accounting

Project financing is recognised as a source of project funds when the cash is received. Projectexpenditures are recognised as a use of funds when the payments are made.

2.3 Reporting Currency

2.3.1 Functional and presentation currency

The reporting currency of these Special-Purpose Financial Statements is Nigeria Naira (N).Except as otherwise indicated, financial information presented in Nigeria Naira (N) has beenrounded to the nearest thousand.

2.3.2 Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchangerates at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation of monetary assets and liabilitiesdenominated in foreign currencies at year end exchange rates are generally recognised in gainor loss.

Transfers to Drawdown account and expenditures are converted into Nigeria Naira based onthe exchange rate defined by the Central Bank of Nigeria at the dates of the transactions.

The effect of exchange rate changes on cash held on local currency is reported as separate lineitem in the statement of cash receipts and payments.

2.4 Taxes

Taxes are paid in accordance with the tax regulations of the Federal Republic of Nigeria.

2.5 Budget

Expenditure is created based on actual accumulated expenditures for the last period plusupdated procurement plans for the reporting period.

3.0 Income

This represents net amount of Interest Income on IDA Special Accounts and gross amountreceived from sale of bid documents.

4


4.0 Accumulated Contract CostsAccumulated contract costs represent costs incurred to date on civil construction andrehabilitation work, material and equipments including fees of consulting services provided bythe Consultants employed for the purpose of the Project.Expenditures are summarised by actual for the period and accumulated to date.

5

Olabisi Fayombo & Co.(CHARTERED ACCOUNTANTS, LAWYERS, AND TAX PRACTIONERS)

152, Awolowo Way, Ikeja, Lagos, Nigeria.

08083144777, 08035153254, 09082576007, 09082576003, 017454630.

INDEPENDENT AUDITORS'REPORT

FOR THE YEAR ENDED DECEMBER 31, 2016

To the Management of Lagos Water Corporation

We have audited the accompanying special purpose financial statements of the Second national Urban

Water Sector Reform Project (Hereafter: the International Development Association) financed by

IDA CREDIT NUMBER - 4086-UNI and implemented by Lagos State Water Corporation, which

comprise the statement of cash receipts and payments, and statement of uses of funds by project

activity for the year ended December 31, 2016 and a summary of significant accounting policies and

other explanatory notes.

Management's Responsibility for the Special Purpose Financial Statements

The Management of Lagos Water Corporation is responsible for the preparation and fair presentation

of these Special Purpose Financial Statements in accordance with International Public Sector

Accounting Standards: Financial Reporting Under Cash Basis of Accounting, (IPSAS-Cash Basis)

issued by the International Public Sector Accounting Standards Board (IPSASB) within the

International Federation of Accountants (IFAC), and Financial Management Manual for World Bank

Financed Investment Operations (WB Guidelines), and for such internal control as management

determines is necessary to enable the preparation of these Special Purpose Financial Statements that

are free from material misstatements, whether due to fraud or error.

Auditor's ResponsibilityOur responsibility is to express an opinion on these Financial Statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing that is generally

accepted. Those standards require that we comply with ethical requirements and plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free from material

misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the Financial Statements. The procedures selected depend on the auditors' 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 of Financial Statements that give a true and fair view 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 the Project Implementation Committee, as well as

evaluating the overall presentation of the Financial Statements.

6

PATNRS 01bs Faob MB,FA FC1A11,L LL OgnoaOuiaAAAT,F,IAI-'THN.'E' CF,AC,tE,B nve

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion. As follows:

Opinion

In our opinion,

1. The Special Purpose Financial Statements present fairly in all material respects the cashreceipt and payments of the project for the year ended December 31, 2016 in accordance withIPSAS-Cash Basis and World Bank related guidelines

2. Funds have been used in accordance with the conditions of the IDA CREDIT NUMBER -4086-UNI dated July 15, 2005 between the International Development Association andFederal Government of Nigeria on behalf of Lagos State Government for the implementationof Lagos Water Corporation, and International Development Association related guidelines,with due attention to economy and efficiency, and only for the purposes for which thefinancing was provided

3. Supporting documents, records and accounts have been maintained to support claims forreimbursement of expenditures incurred. Expenditures included in the withdrawal applicationsand reimbursed against are eligible for financing under the credit agreement

4. The designated accounts used have been maintained in accordance with the provision ofCREDIT NUMBER - 4086-UNI and International Development Association relatedguidelines

May 24, Olabisi'Fafambo & Co.2017 Chartered Accountants

ICAN0002550

116925

7

PAtES Olbiiyob IB,C,CIANMB,LBgnoaluiaC,CICECSAHDE, FCF,AC,ACN Kinvie

LAGOS WATER CORPORATIONSECOND NATIONAL URBAN WATER SECTOR REFORM PROJECTINTERNATIONAL DEVELOPMENT ASSOCIATIONCREDIT NUMBER 4086-UNISPECIAL-PURPOSE PROJECT FINANCIAL STATEMENTSFOR THE YEAR ENDED 31ST DECEMBER, 2016

STATEMENT OF FINANCIAL POSITION

2016 2015Non Current Assets NOTES =N= 000 =N= 000Accumulated Contract Costs 1 17,885,356 17,867,710

17,885,356 17,867,710Current Assets

IDA Special Account 2 1,035 28,684Interest Special Account 2 1,995 1,284Counterpart Fund Account 2 22 22Drawdown Account 4 568 114

3,620 30,104

Total Assets 17,888,976 17,897,814

Capital Funds

World Bank Fund 5 19,837,574 19,849,342Counterpart Fund 6 7,000 7,000Accumulated Fund 7 (1,955,598) (1,958,528)

17,888,976 17,897,814

The Financial Statements and notes on pages 11-13 were approved by theProject Implementation Committee on , 2017 and signed onits behalf by:

. ........................... Managing Director/C.E.O.Engr. Muminu Badmus

..... Project AccountantMr.ro Ibrahee

The accounting policies on page 7 and notes on pages 11-13 form an integralpart of these Financial Statements.

8


STATEMENT OF INCOME AND EXPENDITURE

2016 2015=N= 000 =N= 000

Income

Interest Income 103 1,191

Exchange Gains 5,184 189

Other Income 968 -

6,255 1,380

Less: Operatina ExpensesBank Charges 40 410

Training Study Tours, Workshop/Semi - 17,703

Incremental Operating Costs 3,274 14,346

Critical Treatmeny Plant Inputs .

Other Reimbursable Expenses 445

Withholding Tax on Interest Income 11 119

Exchange Loss . _ - 10,7353,325 43,758

Surplus/(Deficit) for the Year 2,930 (42,378)


9


SECOND NATIONAL URBAN WATER SECTOR REFORM PROJECTCREDIT NUMBER 4086-UNI

INTERNATIONAL DEVELOPMENT ASSOCIATIONSPECIAL-PURPOSE PROJECT FINANCIAL STATEMENTSFOR THE YEAR ENDED 31ST DECEMBER, 2016

CASH FLOW STATEMENT

2016 2015=N= =N=

Cash flow from operating activitiesSurplu/(Deficit) for the Year 2,930 (42,378)Operating income before working capitalchanges 2,930 (42,378)

Cash-flow From Financing ActivitiesProject Expenditure (17,646) (538,028)World Bank Replenishments (11,768) 303,571Changes in Cash & Cash Equivalent (26,484) (276,835)

Cash & Cash Equivalent at the Beginningof the period 30,104 306,939Changes in Cash & Cash equivalent (26,484) (276,835)Cash & cash Equivalent at the end of theperiod 3,620 30,104

Represented BY:Cash at Bank as at the end of the year 3,620 30,104


10


NOTES TO THE ACCOUNTS

NOTE 1 ACCUMULATED CONTRACT COST

CONSULTANCYGOODS SERVICES TOTAL

= N= = N= = N= = N=Cost at 1st January, 2016 15,099,386 701,679 2,066,645 17,867,710

Addition during the year 13,748 - 3,898 17,646

Cost at 31st December, 2016 15,113,134 701,679 2,070,543 17,885,356

Balance at 31st December, 2016 15,113,134 701,679 2,070,543 17,885,356

Balance at 31st December, 2015 15,099,386 701,679 2,066,645 17,867,710

Accumulated contract costs represent costs incurred to date on civil construction and rehabilitation work,material and including fees of consulting services provided by the Consultants employed forthe purpose of the Project. Expenditures are summarised by actual for the period andaccumulated to date.

11


NOTES TO THE ACCOUNTS (Continued)

NOTE 2 STATEMENT OF CASH POSITION

IDA SPECIAL INTEREST DRAW COUNTERPARTACCOUNT SPECIAL DOWN FUNDACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL1771482778 1771514124 1770366814

=N=000 =N=000 =N=000 =N=000 =N=000Balance as at January 1, 2016 28,684 1,284 114 22 30,104

Add World Bank ReplenishmentsDeposit from IDA - - .Refund to World Bank through IDASpecial Account on 30/09/2016 (11,768) (11,768)LWC IGR

Total Interest Earnings 99 4 103Exchange Gain 4,476 708 5,184Other Income 563 405 968

22,054 1,996 519 22 24,591

DEDUCT

Direct Payments ForWorks 13,748 13,748

Consultants Services 3,901 (3) 3,898

Training, Study Tours, Workshop/Seminars .

Incremental Operating Costs 3,321 (47) 3,274

Total Service ChargesWithholding Tax on Credit Interest 10 1 11

Bank Charges 39 1 4021,019 1 (50) 1 20,971

Balance at 31st December, 2016 1,035 1,995 569 21 3,620

NoteI Project payments have been compared and agreed to Bank Financing shown in the Project Financial Statements

2 Special Account has been treated as part of the Project Financial Statements since it is the Bank Account of the Project

12


SECOND NATIONAL URBAN WATER SECTOR REFORM PROJECTINTERNATIONAL DEVELOPMENT ASSOCIATIONCREDIT NUMBER 4086-UNI

SPECIAL-PURPOSE PROJECT FINANCIAL STATEMENTSFOR THE YEAR ENDED 31ST DECEMBER, 2016

NOTES TO THE ACCOUNTS (Continued)

US$ 2016 2015NOTE

=N=000 =N=0003 RECONCILIATION OF PROJECT SPECIAL ACCOUNT

Balance at January 1, 2016 145,976 28,684 307,777

World Bank Replenishments - - 303,571Total Interest Earnings 99 1,188Other Receipts - 563 -Exgange Gain 440 4,476 -

146,416 33,822 612,536Less

Transfer to Withdrwal Account 41,477 8,254 199,943Direct Payments to Contractors and Consultants 103,367 24,484 371,873Transfer to Insterest Special Account . - 781Bank Charges 169 49 520Exchange Difference - 10,735

145,013 32,787 583,852

Balance as at December 31, 2015 1,403 1,035 28,684

4 Drawdown Account

The balance in this account represents amount left-over from stalecheques write-back into the account during the year

5 World Bank Fund

Balance As At January 1, 2016 19,849,342 19,545,771World Bank Replenishments through IDA Special Account - 303,571Refund to World Bank through IDA Special Account on 30/09/2016 (11,768) -Balance as at December 31, 2016 19,837,574 19,849,342

6 Counterpart Fund

Balance As At January 1, 2016 7,000 7,000Lagos State Government Replenishment

Balance as at December 31, 2016 7,000 7,000

7 Accumulated FundBalance brought forward (1,958,528) (1,916,150)Surplu/(Deficit) for the Year 2,930 (42,378)Balance carried forward (1,955,598) (1,958,528)

13


STATEMENT OF SPECIAL ACCOUNTDepository Bank The World Bank

Address Nigeria Country Office, Asokoro, Abuja, FCT

Related Loan/Credit 4086-UNI

Currency Converted to Naira

IDA SPECIALACCOUNTACCOUNT1771482778

=N=000Balance as at January 1, 2016 28,684Add World Bank Replenishments

Deposit from IDARefund to World Bank through IDA SpecialAccount on 30/09/2016 (11,768)LWC IGR

Total Interest Earnings 99Exchange Gain 4,476Other Income 563

22,054DEDUCT

Direct Payments ForWorks

13,748

Consultants Services 3,901

Incremental Operating Costs 3,321

Total Service ChargesWithholding Tax on Credit Interest 10

Bank Charges 3921,019

Balance at 31st December, 2016 1,035

Note1 Project payments have been compared and agreed to Bank Financing shown in the Project Financial

Statements2 Special Account has been treated as part of the Project Financial Statements since it is the Bank Account

of the Project 14

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