Public Disclosure Authorized BANK OF TANZANIA
HOUSING FINANCE PROJECT UNDER INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) CREDIT N0.4712-TA AND 5590-TZ PROJECT FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2018 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
Table of Contents Page
Report of Project Management 1-9
Statement of Project Management's Responsibilities 10
Declaration of Finance Management Specialist 11
Independent Auditors' Report 12-14
Financial Statements:
Statement of Comprehensive Income 15
Statement of Financial Position 16
Statement of Changes in Accumulated Fund 17
Statement of Cash Flows 18
Notes to the Financial Statement 19-48 BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
GLOSSARY OF TERMS
Acronym Description
HFP Housing Finance Project
HMFF Housing Microfinance Fund
IDA International Development Association
FSSP Financial Sector Support Project
FIRST Financial Sector Reform and Strengthening Initiative
TMRC Tanzania Mortgage Refinance Company
NHC National Housing Corporation
NHBRA National Housing Building and Research Agency
PML Primary Mortgage Lenders
MLHHSD Ministry of Lands, Housing and Human Settlements Developments
MOF Ministry of Finance
PIU Project Implementation Unit
PCC Project Coordinating Committee
SRA Spread Reduction Account
MFI Microfinance Institutions
URT United Republic of Tanzania BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
PROJECT INFORMATION
Name of the Project: Housing Finance Project (H FP)
Borrower: United Republic of Tanzania (URT) through the Ministry of Finance
Funder: World Bank through the International Development Association
Co-funder: United Republic of Tanzania (URT)
Project Implementing Agent: Bank of Tanzania (BOT)
Project Beneficiaries: Tanzania Mortgage Refinance Company Limited (TMRC), Watumishi Housing Company Limited (WHC), National Housing Corporation (NHC), National Housing Building and Research Agency (NHBRA), Ministry of Lands, Housing and Human Settlements Developments (MLHHSD).
Auditors: Controller and Auditor General (CAG). BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
REPORT OF PROJECT MANAGEMENT
1. INTRODUCTION The Project Implementing Agent (the BOT) presents this report together with the audited financial statements for the year ended 30 June 2018, which disclose the state of financial affairs of the Housing Finance Project (HFP).
During the year, the BOT continued to implement the project in accordance with Subsidiary Loan Agreement between the Government of Tanzania through the Ministry of Finance and Planning and the BOT which was signed on 29th May 2015. Both main and intermediate objectives of the project are well provided in the Project Finance Agreement between the United Republic of Tanzania and the World Bank which was signed on 12th March 2015.
PROJECT ESTABLISHMENT
HFP was established in March 2010 when the Government signed a USD 40 million Credit Agreement with the International Development Association (IDA) for the Housing Finance Project (HFP) and mandated the Bank of Tanzania (BOT) to be an implementing agent. The Government contribution (in kind) to the project was valued at USD 2.0 million. Originally, the HFP was a five-year project with expected closing date of 31 March 2015.This was extended for two years to 31 March 2017. Parallel to this, on 12 March 2015, the Government signed a USD 60.0 million Credit Agreement with the International Development Association (IDA) for the HFP Additional Financing (HFP-AF), mainly with a view of enhancing the scope of the original project. The HFP-AF expired on 31 March 2018 and was extended up to 28th June 2019.
The HFP builds on analytical work carried out by the BOT and the Government with the support of the Financial Sector Support Project (FSSP) particularly under the financial markets and long-term development finance components. It has also benefited from reports by the Urban Institute, which were funded by the Financial Sector Reform and Strengthening Initiative (FIRST). This work provided an initial feasibility assessment for the creation of a mortgage liquidity facility in Tanzania.
PROJECT'S OBJECTIVES The objective of HFP is to create and develop a sustainable, market-based mortgage through the provision of medium and long-term liquidity to mortgage lenders. The Project combines demand, using a mix of mortgage and housing-microfinance instruments, with supply stimulation, using technical assistance, promoting the use of low cost building materials and technologies as a way to make housing more affordable.
The Project's intermediary objectives are to; (i) improve access to long-term housing finance progressively mobilized through the domestic capital market; (ii) develop access to medium-term affordable housing micro-finance; and (iii) support the development of a private developer industry and promoting the use of low cost building materials and technologies as a way to make housing more affordable. BAN!< OF 'f ANZAN!A · HOUSING FINANCE PROJt:CT PROJECT FINANCIAL REPORT FOR iHE YEAR ENDED 30 .JUNE 2018
,... 2. PROJECT STATUTE AND PRINCIPAL ACTIVITIES
HFP operates in the United Republic of Tanzania i.e. Mainland and Zanzibar and is owned by the Govemment of United .republic of Tanzania. The Bank of Tanzania implements the Project under agency agreeme;it with the Government.
ihe Project has the following ccmponents:
(i) Component I • Development of t:,e Mortgage Market · (USO 73.8 miilion - USD 33.0 million frcm the Parent project and USO 40.8 mi!lion under the Additional Financing). This component seaks to develop the mortgage market by creating a mortgage liquidity facility namely, Tanzania Mortgage Refinar.ce Company (TMRC) for providi~;g Ieng-term loans to primary mortga~e !enders. Under this component, funds are loaned to TMRC for provision of liquidity to primary mortgaga landers at its Jwn risk. TMRC is a private limited company established with the help of the HFP and is mainly owned by commercial ban~s. TMRC's iending operations were beir1g financed by 1he IDA credit but the instit•Jtion has start&d i$SUing bo11d_$,for. its fur.ding n6eds c1longside the IDA credit.
(fi)' Component II· Developm~nt ~f Housing Mi~rofir.a:ice - {USO 20.5 million - USO 5.0 million fr8m tl11~ parent project and USO 15.5 million under the additional financing). This compommt seeks to address hous:ng finance needs of !ow-income population ihraugh housing microfin,rnce. A rlousii-19 rAicmfinance Fund (HMFF) was established to provide loans of up to 5 years m· longer to low income households. HMFF started with a se'3d i::apital frorn HFP and is op&n to oUier d0nor funds. Und&r thi3 component, regulatory reforms and capacity building to eligible Microfinance lnstitutio;1s (Mfls) to foster safe lending practices were envisaged.
(iii) Component Ill - Expansion of Affordable Housir.g Supply· (USO 5.7 million - USO 2.0 million from the Parent project and USO 3.7 miiiion under the Add[tional Financing). Activities under this componant aim at supporting the· dGveloprnent of a private developer industry. They inc!ude conducting a baseline housing market study to identify the gaps and con~traints facing the housing market, improving the capacity of the National Housing Corroration (i~HC) to cleiiver serviced iand for housing development, improving capacity· cf banks to provide real estate development finance and pror.:oting the use of !ow cost building materials and technologies as a way i0 -iilake housing rr.c,re affordable. · ·
3., RESOURCES AND STRENGTHS ·
Resources and strengths that facilitate the ~.,roject in achieving its strategic objectives i8clude financial and humm~ resourc8s, partn;;rships and proper profect governance structure.
In terms of human capital, the Project bas p81rnanant stf.lff who are qualified a~d cormniUed to the pi"Oject implementption. Furthei", the Project is rn,a_instrearned in the 130T govem2nce and internal control sys~ems wl1ich is an additionai strength for the project management. The Pr::iject _has a ~,trong governance struc:ure th:::it inc!ude the Streelii'!g Committee (SC) chaired by ~he Permanent Secratary Treasury'. This BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
REPORT OF PROJECT MANAGEMENT (CONTINUED)
3. RESOURCES AND STRENGTHS (CONTINUED)
Committee reviews overall project policies and results. The other committee is Project Coordinating Committee (PCC) chaired by the Director of Strategic Planning and Performance Review (DSPR) of the BOT. This Committee is a main decision-making body of the Project. Moreover, there is a Project Administration Team (PAT) comprising a mix of project staff and BOT employees who are responsible for the day-to-day operations of the Project.
The Project collaborates with the World Bank in monitoring and reporting results, budget management, cash forecasts, and on technical assistance to enable the Project achieve its objectives. Other partners include the Government through its beneficiary ministries, its agents and other private institutions that access loans and/or technical assistance from the Project.
4. PROJECT PERFORMANCE AND ACHIEVEMENTS
The following are the major achievements of the Project since it started in March 2010:
(i) Component I · Development of the Mortgage Market Under this component, establishment of Tanzania Mortgage Refinance Company (TMRC) for provision of liquidity to Primary Mortgage Lenders (PMLs) was envisaged. TMRC was incorporated in January 2010 as a Private Limited Company. Currently TMRC has twelve 1 (12) shareholding commercial banks and three2 (3) non-banking institutions. TMRC commenced its operations in January 2011 and receives loan funds from HFP for providing liquidity finance to enable Primary Mortgage Lenders (PM Ls) refinance and pre-finance their mortgage portfolios. As at 30 June 2018, a total of TZS 87.1 Billion (USD 38.2 Million) had been disbursed to TMRC to facilitate refinancing and pre-financing of mortgages portfolios. TMRC is also expected to raise funds from other sources including issuing bonds to address sustainability of its funding needs.
The mortgage market in Tanzania has grown rapidly in recent years both in terms of number of loans and balances outstanding. HFP has played a critical role in supporting this market's growth. The mortgage market continued to grow steadily since the inception of the HFP. The number of financial institutions offering mortgage finance products reached 33 compared to only 8 banks in 201 Oprior to the establishment of HFP. This increase has brought increased competition in the market. Outstanding mortgage debt stood at TZS 331.49 billion as at 30 June 2018 up from TZS 130.55 billion in 2010. Current average mortgage debt size is TZS 81.62 million equivalents to around USD 35,704. Tanzania Mortgage Refinance Company (TMRC) is now extending financing to non-member banks as well as its member banks. Mortgage loans tenors have increased from 5 - 10 years in 2010 to 15 - 25 years to date. Furthermore, the first Mortgage Finance Company in Tanzania formed by partnership between Bank M, IFC, HDFC (India) and other investors has been licensed. Mortgage loans interest rates have decreased from the range of 22% - 24% in 2010 to 15% - 19%. It is anticipated that more real estate developers will respond with great interest to opportunities in the Tanzania housing market.
1 Azania, BOA, DCB, CRDB, Exim, TIB, I&M, NBC, BancABC, NMB, PBZ and NIC 2 Shelter Afrique, NHC and M Mortgage Finance
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REPORT OF PROJECT MANAGEMENT (CONTINUED)
4. PROJECT PERFORMANCE AND ACHIEVEMENTS (CONTINUED)
(ii) Under Component II • Development of Housing Microfinance This component seeks to address housing finance needs of low-income population which could not be served under traditional mortgage. A stLidy was undertaken in year 2012 to assess the potential to develop housing microfinance product, examine and set up a Housing Microfinance Fund (HMFF) that could provide loans for up to 5 years or longer. A seed capital of USO 18.0 million was set aside; it was formally established in April 2014 through public finance (Housing Micro Finance Fund Establishment) order 2014 issued by the Minister for Finance. Further, a five-year Agency Agreement between the Ministry of Finance and the Bank of Tanzania (BOT) was signed in May 2014 that mandated BOT to implement the Fund.
As at 30 June 2018 funds disbursed under the HMFF amounted to TZS 13.9 billion. (USO 6.1 million) to facilitate those financial institutions to provide microloans for housing purposes to their customers .
(iii) Under Component Ill · Expansion of Affordable Housing Supply
Activities under this component aim at supporting the development of a private and public developer industry. The activities undertaken under this component included conducting a baseline housing market study to identify the gaps and constraints facing the housing market; improving capacity of banks to provide real estate developer finance; improving the capacity of the National Housing Corporation (NHC) and Watumishi Housing company Limited(WHC) to deliver serviced land for housing development; improving the capacity of National Housing Building and Research Agency (NHBRA) to develop and promote affordable housing products and promoting the use of low cost construction technologies as a means to make housing more affordable. Activities which were supported under the project relating to the Ministry of Lands, Housing and Human Settlements Development include Establishing Legal and Regulatory Framework for Enhancing Operational Efficiency and Effectiveness of Real Estate Business in Tanzania and Setting of Housing lnforniation Center ..
Notable milestone under this component include procurement of equipment for planning and designing studio for the NHC to enable the institution undertake its operations in a more efficient manner; financing cf various capacity building programmes for staff from TMRC, MLHHSD, MOF, NHBRA, NHC and BOT in a bid to enhance the capacity of the institutions to discharge their respective mandates on development of housing and housing finance; procurement of motor vehicle for NHBRA to assist the institution to disseminate low cost building technologies in various regions in Tanzania; technical assistance for effective issuance of bonds by TMRC; acquisition of TMRC mortgage refinance core system for performing its operations; development of capacity building programs for the mortgage market in Tanzania; review of NHBRA operations on the development and promotion of affordable housing products; supply of computers and electronic equipment to NHBRA aiming at enhancing the agency's capacity in discharging the mandate of carrying out research, develop and promote use of low-cost building materials and technologies so that the majority of low-income earners can have access to affordable housing; housing market study to establish reliable data on Tanzania's housing market; and enhancing operational efficiency and effectiveness of the real estate business in Tanzania. On-going activities include training and capacity building on HMFF; setting-up a Housing
4 BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
Information Centre at the Ministry of Lands; and establishment of Guidelines and Standards for low income housing.
5. PROJECT GOVERNANCE
The Steering Committee is the governing organ of the Project. The Permanent Secretary to the Treasury has the mandate to appoint members of the Steering Committee, all of whom must be Tanzanians. The following members served as members of the Steering Committee during the year:
S/N Name Institution Position at the Position of the Steering Institution Committee Mr. Doto James Ministry of Finance and Permanent Secretary to Chairperson Planning the Treasury 2 Dr. Khatibu Kazungu Ministry of Finance Deputy Permanent Member Secretary 3 Dr. Moses Kusiluka Ministi)I of Lands, Acting Permanent Member Housing and Human Secretary Settlements Development 4 Mr. Seif S. Seif Ministry of Finance and Representative of the Member Planning of Zanzibar Principal Secretary 5 Prof. Benno J. Ndulu Bank of Tanzania Governor Member upto January 2018 6 Prof.F Florens D. A. M. Bank of Tanzania Governor Member from February 2018 Luoga to date 6 Dr. Yamungu Bank of Tanzania Deputy Member Kayandabila Governor.Economic and Financial Policies 7 Dr. Bernard Kibesse Bank of Tanzania Deputy Governor , Member Financial Stability and Deepening 8 Mr. Francis Mwakapalila Ministry of Finance and Accountant General Member Planning 9 Mr. Mgonya Benedicto Ministry of Finance and Commissioner for Policy Member Planning Analysis 10 Mr. Shaft Mrutu Bank Of Tanzania Director of Strategic Secretary Planning and Performance Review
Two committees assist the Project Streeling Committee in discharging of its functions namely Project Coordinating Committee (PCC) and Project Implementation Unit (PIU). The Executive Office of the Bank of Tanzania appoints members of the two committees, all whom must be Tanzanians.
Members of PCC who served during the year are as follows: SIN Name Institution Position at the Institution Position in the Committee Mr. Shaft Mrutu Bank of Tanzariia Director of Strntegic Planning Chairperson and Performance Review 2 Mr. Oscar Mgaya Tanzania Mortgage Refinance Chief Executive Officer Member Company Limited {TMRC) 3 Dr. Fred Msemwa Watumishi Housing Company Chief Executive Officer Member Limited 5 BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
4 Mr. Alexander Bank of Tanzania Director Financial Market MP,mber Ng'winamila 5 Mr. Johnson Nyella Bank ofTanzania Director of the Economic Member Policy and Research 6 Mr. Kened Nyoni Bank of Tanzania Director Banking Supervision Member 7 Dr. Matiko Samson National Housing and Building Chief Executive Officer Member Research Agency 8 Mr. Yusto E. Tongola Bank of Tanzania Secretary to the Board Member 9 Mr. Pius Tesha Ministry of Land, Housing and Ag. Director of Housing Member Human Settlement 10 Victor Tarimu Bank of Tanzania Manager Technical Assistance Secretary coordination
Members of the Project Implementation Unit who served during the year as follows: 5/N Name Institution Designation Position 1 Mr. Victor Tarimu Bank of Tanzania Manager Technical Assistance Chairperson Coordination 2 Mr. Damas Mugashe Bank of Financial Management Specialist Member Tanzania/Housing Finance Project 3 Mr. Ayoub Nga'hasha Bank of Procurement Management Member Tanzania/Housing Specialist Finance Project 4 Mr. Baraka Munisi Bank of Mortgage Finance Specialist Member Tanzania/housing Finance Project 5 Mr. Albert Mkenda Bank of Tanzania Head of Project Management Unit Secretary 6 Mr. Deogratias Mnyamani Bank of Tanzania Principal Financial Analyst Member
5. MEETINGS
During the year ended 30th June 2018, the Steering Committee held the first meeting on the 11th August 2017 at the Ministry of Finance Offices in Dar es Salaam.This was to deliberate and make follow up on the meeting of May 2017 which took place in Dodoma. The second meeting was held on the 22nd September 2017 to discuss on the extension of the HFP-Additional Financing since the closure date 1Nas 31st March 2018. Moreover, in the same meeting a task force was formed to prepare the regulations of the Housing Microfinance Fund.
Or. the other hand , the Project Coordinating Committee had three meetings which were held on 24th November 2017, 51h December, 2017 and February, 2018 to deliberate on the progress of tho project, clear consultancy reports and approve terms of references for various consultancies.
Furthermore, the World Bank Implementation Support Mission meetings were held in November 2017 and May 2018 whereby discussions on project extension, progress and implimentation status were conducted, involving relevant stakeholders. The PIU participated in these meetings, and it meets once every month to deliberate on project implementation.
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6. RELATIONSHIP WITH STAKEHOLDERS AND PARTNERS Management of the Project recognize the importance of stakeholders and partners in order to fulfil its objectives. The Project key stakeholders include the Government, its Ministries and agencies, · Tanzania Mortgage Refinance Company Limited, Financial Institutions borrowing under the Housing Microfinance Fund, the World Bank, other financial institutions, public and employees. The Project is committed to deliver value for money to its stakeholders and partners through fulfilling its objectives.
Accordingly, the Project was involved in the following initiatives aiming at creating value for money to stakeholders and partners:
(a) Public awareness iniatives; The project participated in the two trade fairs Sabasaba and Nanenane with an intention of creating awareness to the public on the benefits which can derived from mortgages offered by banks and financial institutions in Tanzania as well as the availability of the housing micro lending opportunities which targets Tanzanians living in lower income bracket.
(b) Dissemination of mortgage literacy materials: The project through a consultant named Tanzania Real Estate Settlement and Tittle Assurance Company Limited (TRESTA) continued disseminating mortgage literacy materials to the public as well as running awareness campaigns on various media. The dissemination were also done through the trade fairs, through workshops and seminars. The dissemination exercise started July 2016 and continue through the year.
(c) Training and capacity building for mortgage market in Tanzania: During the year, three capacity building programs to various financial institutions on the subject of mortgage were undertaken. The The Bank of Tanzania through its Training Institute in collaboration with TMRC, Tanzania Institute of Bankers (TIOB) and internal trainers who were trained by the Project for that purpose conducted these programme jointly. On the other hand, Housing Microfinance Fund beneficiaries were trained by the Consultant M/s HLB Mekonsult on housng microfinance product development and underwriting from dunng the year.
(d) Project staff participated in different meet!ngs for the purpose of creating awareness and informing different stakeholders of the project objectives, progress and implementation. The meetings were held at the National Economic Empowerment Council of Tanzania (NEEC), and Reform Cordination Unit (RCU).
(e) The project progress reports were shared with different stakeholders during World Bank supervision visits.
8. CASH FLOW PROJECTIONS
Due to the nature of the Project activities, cash projections are based on the approved budget and work plans. Most of cash in flows are from the World Bank during the lifetime of the Project. A small part of the cash flow is from the interest income from loans extended to TMRC and other financial institutions borrowing under HMFF, together with income generated from investments in Treasury bills and bonds.
MANAGEMENT
The Bank of Tanzania implements the Project based on the Subsidiary Loan Agreements signed with the Ministry of Finance and Project Agreement between the World Bank and BOT. The agreements give BOT 7 BANK OF TANZANIA · HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
the mandate to implement the Project by mainstreaming it in its operations and internal control mechanisms.
9. FUTURE PROJECT PLANS The Project is scheduled to end on 28 June 2019. The focus of the Project during the remaining time will be on the following:
(a) Ensuring TMRC's funding sustainability by providing support to enable the institution raise long-term funding from the capital market;
(b) Ensuring sustainability of HMFF by striving to recover time lost due to various challenges experienced by the Project. This will involve expediting issuance of loans to eligible financial institutions during the remaining period of the Project, so that HMFF can generate sufficient resources to enable it to operate sustainably after the Project completion. Sustainabi!ity of the HMFF will include exploring and accessing alternative and reliable fund mechanisms to enable the Fund operate independent of the Project; and
(c) Completion of the ongoing assignment of setting-up of a Housing Information Centre at the Ministry of Lands, Housing and Human Settlements Developments.
10. FINANCIAL PERFOMANCE FOR THE YEAR a. Financial Results The performance of the project is measured by the extent to which set objectives are achieved in the course of implementing activities in line with Project Finance Agreement. In the course of implemting the Project's activities, a total income of USO 7.2 million. (2017: USO 5.2 million) was generated. The income was attributable to Government's contribution, amortization of deferred loan from IDA, interests generated from loans to TMRC and HMFF, and investments in Treasury Bonds and Treasury Bills. b. Financial Position
The financial position of the project is set out in the Statement of Financial position of the Project. During the year total assets of the projects increased by USO 8.6 million (2017: USD18.3 million). Major increase was attributable to increase in loan advances, investment in government securities and receivables.
11. RISK MANAGEMENT AND INTERNAL CONTROL
BOT accepts final responsibility for risk mc:1nagement and internal controls systems of the Project. It is the responsibility 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: (a) The effectiveness and efficiency of operations; (b) The safeguarding of the Projects funds; (c) Compliance with applicable laws, regulations and the World Bank funding protocol; (d) The reliability of accounting records; (e) Meeting project objectives under normal as well as adverse conditions; and (Q Responsible behavior towards all stakeholders.
8 BANK OF TANZANIA · HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
12. SIGNIFICANT PREJUDICIAL MATTERS
During the year ended 30 June 2018 there were no significant prejudicial matters to report.
13. AUDITORS
The Controller and Auditor General (CAG) is the statutory auditor of the Bank of Tanzania and related Projects. The Controller and Auditor General conducted audit for the financial year ended 30 June 2018.
Approve db y the ProJect. Management on ...... ;2.,Lv- l...... 1;2~ ~O/ Governor· Bank of Tanzania Date Mr. Jufian B. Raphael Deputy Governor (AIC) · Bank of Tanzania Date 9 BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018 STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES The management of Bank of Tanzania, who coordinates the implementation of the Housing Finance Project - additional financing IDA Credit no 5590-TZ referred to as ("the Project") is responsible for preparing the financial statements which give a true and fair view of the Project financial position as at 30 June 2018 and of its income and expenditure for the year then ended. The management is required to ensure that the Project keeps proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Project. The management is also responsible for safeguarding the assets of the Project. The management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting policies set out in Note 1 of this report, and for such internal controls as management determine are necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. The management accepts responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with the Project's accounting policies; and the provisions of the financing agreement and its governing clauses. The management is of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Project and of the results of its activities. The management further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial control. Signed on behalf of Project management by: Pr:°ens~.ga Governor· Bank of Tanzania Date . ~c{~- ~Raphael Deputy Governor (AIC) · Bank of Tanzania Date 10 BANK OF TANZANIA· HOUSING FINANCE PROJECT PROJECT FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017 DECLARATION OF THE FINANCE MANAGEMENT SPECIALIST 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 Project management to discharge the responsibility of preparing financial statements of the Project showing true and fair view of financial position and financial performance in accordance with applicable Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the project management as under Project responsibility statement on page 12. I, Damas Damian Mugashe, being the finance management specialist of the Project hereby acknowledge my responsibility of ensuring that financial statements for the year ended 301h June, 2018 have been prepared in compliance with International Financial Reporting standards (IFRSs) and statutory requirements. I thus confirm that the financial statements give a true and fair view position of the Bank of Tanzania as at 30 June 2018 and that they have been prepared based on properly maintained financial records . ...... ~~ .. ·...... Finance Management Specialist NBAA Membership No: ACPA 1418 Date: ...... ~:~ .. \.~.~. J..~.~?...... 11 INDEPENDENT AUDITORS' REPORT Board Chairman Bank of Tanzania P.O. Box 2939 Dar es Salaam, Tanzania RE: REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE HOUSING FINANCE PROJECT (HFP} FOR THE YEAR ENDED 30 JUNE 2018 Report on the financial statements Audit opinion I have audited the financial statements of Housing Finance Project implemented by Bank of Tanzania under IDA Credit no.4712-TA and 5590-TZ which comrrise the statement of financial position as at 30 June 2018, statement of comprehensive income, statement of changes in accumulated fund, statement of cash flow for the year, and notes to the financial statements, including a summary of significant accounting policies and other explanatory notes set out from page 15 to 48. In my opinion, the financial statements give a true and fair view of the financial position of the Housing Finance Project as at 30th June, 2018, its financial performance and cash flows for the year ended in accordance 1Nith International Financial Reporting Standards ("IFRSs") and in compliance with the the provisions of the Project's Finance Agreements. Basis of opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the financial statements section of my report. These standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also, includes assessing the significant estimates and judgments made in the preparation of the financial statements, assessing whether the internal control system and the accounting policies are appropriate to the circumstances of Bank of Tanzania - Housing Finance Project and that they have been consistently applied and adequately disclosed. It also involves evaluating the overall financial statements presentation and assessing the extent of compliance with the statutory requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Independence I am independent of Bank of Tanzania - Housing Finance Project in accordance with the Code of Ethics for Professional Accountants as set out by the International Ethics Standards Board for Accountants (IESBA Code) together with the National Board of Accountants and Auditors (NBAA) Code of Ethics, the financial statements in Tanzania, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. 12 Management Responsibility for the financial statements The Management of Bank of Tanzania - Housing Finance Project is responsible for the preparation and fair presentation of the Project financial statements in accordance with the accounting policies set out in Note 1 of thls report, and for such internal controls as Management determines are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibilities of the Controller and Auditor General My 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 my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, I exercise professional judgement and maintain professional skepticism throughout the audit. I also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control; • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors; • Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern; • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. 13 INDEPENDENT AUDITORS' REPORT (CONTINUED) In addition, Sect. 10 (2) of the Public Audit Act No. 11 of 2008 requires me to satisfy myself that the accounts have been prepared in accordance with the appropriate accounting standards and that; reasonable precautions have been taken to safeguard the collection of revenue, receipt, custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have been duly observed and expenditures of public monies have been properly authorized. Further, Sect 48(3) of the Public Procurement Act No.7 of 2011 as amended in 2016 requires me to state in my annual audit report whether or not the Fund has complied with the provisions of the Law and its Regulations. Compliance with Public Procurement Act In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I reviewed as part of this audit, I state that the Bank of Tanzania Housing Finance Project is generally in compliance with the requirements of the Public Procurement Act No.7 of 2011 and its underlying Regulations. Salhina M. Mkumba Ag. CONTROLLER AND AUDITOR GENERAL National Audit Office of Tanzania, .-:?.?. .. December, 2018 Audit House, 16 Samora Machel Avenue, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8 Fax:255(022)2117527 Email:[email protected] 14 BANK OF TANZANIA· HOUSING FINANCE PROJECT STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30th JUNE, 2018 30.6.2017 Notes 30.6.2018 restated ~ ~ Income Government's contribution 2. 1 320,607 330,675 Amortization of Project fund (Technical Assistance) 2.2 1,843,104 903,560 Total funds available 2,163,711 1,234,235 Other income Interest earned on Loans to TMRC+HMFF 2.3 4,098,128 3,082,561 Interest earned on Government securities 2.4 941,270 873,622 Total other income 5,039,398 3,956,183 ..,.., Total income 7,203,109 5,190,418 Expenditure Development of mortgage market 3.0 371,633 356,463 Development of Housing Microfinance 3.0 410,723 131,313 Expansion of affordable housing supply 3.0 1,044,615 302,901 Project management 3.0 328,495 424,235 Provison for audit fees 3.0 15,250 19,466 Total expenditure 2,170,716 1,234,379 Surplus for the year 4 5,032,393 3,956,039 Effects of foreign currency translations 5 (810,508) (350,285) Net surplus 4,221,885 3,605,754 1 1 This is detailed in note no. 11 15 BANK OF TANZANIA· HOUSING FINANCE PROJECT STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 30.6.2017 ASSETS Notes 30.6.2018 restated US$ US$ Bank Balance 6.1 11,710,352 16,145,833 Loan to TMRC & HMFF 6.2 44,329,608 34,744,598 Interest income receivable 6.3 590,882 500,984 Investment in Government securities 6.4 11,474,081 8,134,896 2 Total Assets 68.104.923 59.526.311 ACCUMULATED FUNDS AND LIABILITIES Accumulated surplus 4 12,314,152 _8,092.268 Liabilities Payable to Government of Tanzania 7.1 55,775,521 51,378,734 Other payables 7.2 15,250 55,309 Total Liabilities 55,790,771 51,434,043 Total accumulated funds and liabilities 68.104.923 59.526.311 The Project's financial statements on pages 15 to 48 was approved by the Bank of Tanzania - Housing Finance Project management on .21.J:/12/ 2018 and was signed on its behalf by: Mf. Julian B. Raphael Governor· Bank of Tanzania Deputy Governor (AIC) · Bank of Tanzania 16 BANK OF TANZANIA · HOUSING FINANCE PROJECT STATEMENT OF CHANGES IN ACCUMULATED FUND FOR THE YEAR ENDED 30 JUNE 2018 Effects of Notes foreign accumulated currency surplus translation Total US$ US$ US$ Balance as of 1 Ju!y 2016 4,486,513 4,486,513 Sulplus fer the year 3,956,039 3,956,039 Effects of exchange rates (350,285) (350,285) Balance as of 30th June 2017 8,442,552 (350,285) 8,092,2683 Balance as of 1 July 2017 8,092,267 8,092,267 Surplus for the year 5,032,393 5,032,393 Effects of exchange rates (810,508) (810,508) Balance as of 30th June 2018 13,124,660 (810,508) 12,314,152 2 Details of restatement are in note no 11 3 Details of restatement are in note no 11 17 BANK OF TANZANIA· HOUSING FINANCE PROJECT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 30.6.2017 Notes 30.06.2018 Restated us$ us$ Operating activities Surplus for the year 4,221,885 3,605,754 Add unrealized loss on currency translation 536,793 267,515 lncrease/(decrease) in receivables (89,898) (84,052) (lncrease)/Decrease in other payables (40,059) 37,343 Net cash flows from Operating activities 4.628.721 3.826.560 Investing activities Increase in loan to TMRC& HMFF 6.1.1 (10,479,824) (12,708,141) Increase in investment in Government securities. 6.1.2 (3,548,692) {§,139,527) Net cash flows from investing activities (14.028.516) (17,847.668) Financing activities Increase in payable to the government 6.1.3 4,964,313 15,073,988 Net cash flows from financing activities 4.964.313 15,073.988 Net decrease in cash and cash equivalent (4,435,481) 1,052,881 during the year Opening balance as of 1st July 2017 16,145,833 15,092,952 Cash and Cash equivalent as of 30.6.2018 11.710.352 16.145.833 18 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED} 1. PRINCIPAL ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the Project's financial statements are set out below: (a) Basis of Accounting The Project's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). (b} Accounting Period The Project's financial statements under review cover an accounting period of twelve (12) months from 1 July 2017 to 30 June 2018. (c) Receipts, Income and Payments • Receipts These comprise disbursements by IDA to the Project special bank account together with interest income generated from loans extended to TMRC and other eligible financial institutions under the Housing Microfinance Fund for Housing Microfinance purposes. Other receipts are interest income generated from investment of the Spread Reduction Account (SRA). SRA is maintained specifically to receive interests from loans extended to TMRC as well as interest income from Housing Microfinance Fund. Balances in this account are invested in Government Bonds and/or Treasury Bills. • Income Government contribution: This amount is a contribution in kind as agreed in the Project finance agreement and Project Appraisal Document. The details of calculations are elaborated on NotEl 2.1. This is recognized in the financial statements on accrual basis. Amortization of deferred loan from IDA: This is the expenditure incurred during the financial year after IDA has approved it as eligible expenditure. The expenditure represents economic benefits to the Project. It is recognized in the financial statements as income on accrual basis. This income should match project expenditure for that period as there is no gain or loss. Interest earned on loan to TMRC: This is interest earned on quarterly basis from loans extended to TMRC. They are recognized in the financial statements on accrual basis. Interest earned on loans to HMFF: These are interest income earned from loans extended to eligible financial institutions under the Housing Microfinance Fund for lending to the target group as Housing Microfinance. Interest earned from investments on treasury bonds/ bills: This relates to interest earned from investment of monies in the Spread Reduction Account in treasury bills and bonds. The interest is recognizEld on accrual basis and based on effective interest rates. • Payments All payments are made when good or services have been delivered in accordance to terms of agreement and there are evidences that delivery has been done. 19 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (d) Loan to TMRC These are loans extended to TMRC on the agreed arrangement between the Bank of Tanzania (BOT) and Tanzania Mortgage Refinance Company Limited (TMRC) for on lending to Primary Mortgage Lenders (PML) to refinance or pre-finance their mortgage portfolio. These loans are secured by a debenture certificate comprising of treasury bonds/bills or a list of mortgages which have met eligibility criteria. The principal portion of the loans are repaid at an agreed period as bullet payment and recognized in the financial statements at amortized cost. (e) Loans to HMFF These are loans extended to eligible financial institutions engaged in housing microfinance activities. These loans are secured by a debenture certificate comprising of Treasury Bonds and Bills or a performing loan assets or any other legal security that is not encumbered. These loans are paid back at an agreed period specified in the loan agreement. The principal portion of the loans are repaid as bullet payment and are recognized in the financial statements at amortized cost. (f) Functional and Presentation Currency The Project's financial statements have been prepared and presented in the United States Dollars (US$) which is the reporting currency and this is in accordance to the Finance Agreement between IDA and URT. Transactions denominated in other currencies are translated into US$ at the exchange rate prevailing at the transactions dates. Balances at the year-end are translated using the closing rate. (g) Basis of measurement The financial statements are presented on the historical cost basis except for the financial instruments which are held to maturity and are presented at amortized cost. (h) Uses of estimates and judgments The preparation of financial statements requires management to make judgments, estimates and assumptions that are consistent with the applicable policies in reporting assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Significant estimates are made for the in kind contribution of the government in the form of services the Bank of Tanzania availed to the Project Implementation Unit to run the project such as office space used, stationeries and other facilities. (i) Financial instruments These are bank balances, loans and advances, receivables, investment in treasury bills and bonds. The treasury bonds and bills are held up to maturity and presented at amortized costs while interests accruing from both financial instruments are recognized using effective interest rate. Further, all other financial instruments such as bank balances together with receivables are stated at their nominal value/cost, which approximates fair value due to the short-term nature of the obligation. 20 BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (j) Impairment of financial assets The Project management assesses at each reporting date whether or not there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that c~melate with defaults. Government securities The Bank assesses Government securities investments individually to confirm whether there is an objective evidence of impairment. If there is objective evidence that an impairment loss has been incurred,or there is likeliness for the loss to be incurred , the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows using the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognised, any amounts formerly charged are credited to the 'Impairment losses on financial investments'. Loans and advances Amounts due from banks, loans and advances are carried at amortised cost. The Bank first assesses individually whether or not there is objective evidence of impairment that exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not. it includes the asset in a group of financial assets with similar credit risk characteristics ar,d collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets' carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans iogether with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or 21 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the 'Impairment of loans and advances' The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. . The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less cost for obtaining and selling the collateral, whether or not foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Bank's internal credit grading system that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the ba3is of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the years on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the Bank and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. (k) Changes in accounting policy and disclosures Standards and interpretations not yet adopted by the Project effective from 1st January 2018 or later. A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January, 2017 or later, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the project. • Accounting for Acquisitions of Interests in Joint Operations - amendments to IFRS 11 (issued on 6 May 2014 and effective for the periods beginning on or after 1 January 2017). • Clarification of Acceptable Methods of Depreciation and Amortization - Amendments to IAS 16 and IAS 38 ·(issued on 12 May 2014 and effective for the periods beginning on or after 1 January 2017). • Equity Method in Separate Financial Statements - Amendments to IAS 27 (issued on 12 August 2014 and effective for annual periods beginning 1 January 2017). . • Annual Improvements to IFRSs 2014 (issued on 25 September 2014 and effective for annual periods beginning on or after 1 January 2017. • Disclosure Initiative - Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 January 2017). 22 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) Changes in accounting policies and disclosure( continued} New and amended standards adopted by the Project (Continued) • IFRS 14, Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016). • Investment Entities: Applying the Consolidation Exception Amendment to IFRS 10, IFRS 12 and IAS 28 (issued in December 2014 and effective for annual periods on or after 1 January 2016). New Accounting Standards effective in January 2018 not yet adopted by the project. Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2018 or later, and which the project has not adopted. • IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018). • Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). • IFRS 16 "Leases" (issued in January 2016 and effective for annual periods beginning on or after 1 January 2019) • Recognition of Deferred Tax Assets for Unrealized Losses - Amendments to IAS 12 (issued in January 2016 and effective for annual periods beginning on or after 1 January 2017). • Amendments to IFRS 2, Share-based Payment (issued on 20 June 2016 and effective for annual periods beginning on or after 1 January 2018) • Transfers of Investment Property - Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018). • IFRS 17 Insurance contracts (issued on 18 May 2017) and effective for annual periods beginning on or after 1 January 2021. The above new or amended standards are expected to not have a material impact on the Project financial affairs New and amended standards adopted by the Project (Continued New standards effective January 2018 adopted by tile project • IFRS 9 "Financial Instruments" (issued in July 2014 and effective for annual periods beginning on or after 1 January 2018).This has replaced International Accounting standards no 39. The new standard uses a single approach to determine whether a financial asset is measured at amortised cost or fair value; the approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. Gains and losses on those financial assets classified as measured at fair value are either recognised in profit or loss or in other comprehensive income. "Financial liabilities "The standard does not change the basic accounting model for financial liabilities under IAS 39. Two measurement categories continue to exist: fair value through profit or Joss and amortised cost. IFRS 9 requires gains and losses on financial liabilities designated as at fair value through profit or loss to be split into the amount of change in the fair value that is attributable to changes in the credit risk of the liability, which is presented in other comprehensive income, and the remaining amount of change in the fair value of the liability, which is presented in profit or loss. Amounts presented in other comprehensive income 2re not subsequently reclassified to profit or loss. This 23 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) requirement to recognise own credit risk-related fair value gains and losses in other comprehensive income may be applied by entities in isolation without applying the other requirements of IFRS 9 at the same time. "On impairement" The new requirements are based on an expected loss impairment mode!, which replaces the incurred loss model of IAS 39. Under this new model, expected credit losses are accounted for from the ·date when financial instruments are first recognised. Entities are required to recognise 12-month expected credit losses, or, where credit risk has increased significantly since initial recognition, lifetime expected credit losses. • lFRIC 22 - Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018). It's the opinion of the management that it complies with these two standards (I) Financial Risk Management Financial risk factors The Project's activities expose it to a variety of financial risks: market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Project's overall risk management program seeks to minimize potential adverse effects on the projects's financial performance. Risk management of the project is carried out by management under policies approved by the Board of Directors of the Bank of Tanzania. a) Market risk Market risk is the risk that movements in market prices, including foreign exchange rates, interest rates, credit spreads and equity prices will affect income or the value of portfolios. Market risks comprise credit risk, foreign currency risk, interest rate risk and other price risks. Financial Risk Management( continued) b) Credit risk Credit risk arises from credit exposures to customers and cash and cash equivalents. The project has no significant concentration of credit risk. For cash and cash equivalents, the Bank of Tanzania is a custodian of the project's deposits. For trade receivables, theProject Management Unit(PMU) assesses the credit quality of the customer, taking into account its financial position, pnst experience and other factors. Concentration of credit risk with respect to trade receivables is limited due to the fact that the projects 's customer's credit quality and history have been assessed to be good. • Credit quality Receivables arise from interest income earned on loans to TMRC and to HMFF beneficiaries , it represents contractual right to receive money on fixed date. It is recognized as an asset in the entity's statement of financial position. No collateral is held for trade receivables. All receivables that are neither past due or impaired are within their approved limits, and no receivables have had their terms renegotiated. • Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Losses arising from holding of foreign currency denominated liabilities are controlled by maintaining those accounts in foreign currency as the project is US-Dollar based. Large bank balances of the project are denominated in US -dollar 24 BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PRO ..IECT FINANCIAL STATEMENTS (CONTINUED) Accounts. Transnactions which arc done in local currency which result into a loss of currency due to fractuations are mitigated by investments in treasury bonds/bills to manage the purchasing power of the currency. • Price risk The carrying values of trade receivables and trade payables are assumed to approximate their fair va:ues due to the short-term nature of trade receivables and trade payables. c) Liquidity risk Liquidity risk is the risk that the project will encounter difficulty in raising funds to meet its maturing obligations when they fall due. Liquidity risk exists when the maturities of assets and liabilities do not match. The matching and or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to liquidity management. The project 's approach to managing liquidity is through approved annual work and budget plans which translate into cash flow forecast for six months. This is used to request funds on time from the government through IDA. The process is is to ensure that as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage the project's reputation. All liquidity policies and procedures are subject to review and approval by the Project Steering Committee together with with the World bank. Project Management Unit ensures that will have sufficient funds available to meet its liabilities as and when they fall due. d) Operational risk Operational risk is the risk of a change in value caused by the fact that actual losses are, incurred for inadequate or failed internal processes, people and systems, frauds and other criminal activity or from external events. This risk is managed by the arrangement between the government of Tanzania and BOT of mainstreaming project activtities into the BOT's operations. Thus, ensuring that adequate resouces interms of human capital, facilities and robust internal control systems are available to ensure smooth running of the project ac.;tivities. e) Fund risk management The project objectives when managing funds are focused on; • To safeguard the project's ability to continue as a going concern so that it can continue discharching projects objectives to its a stakeholders; and • To mainta,in a strong finance base to support the project developmental objectives. This is monitored by the Project Management Unit on daily basis 25 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 2. INCOME 2.1 Government's contribution The Government of Tanzania supported the Project in the form of in-kind contributions by facilitating the Project through the Bank of Tanzania. The in-kind contribution arrangement is well articulated in the Project Appraisal Document (PAD) whereby the Government of Tanzania is expected to contribute US$ 2 million towards the Project. The in-kind contribution has been apportioned to the Project's components based on the percentage of components' actual expenditure to the total costs of the financial year ended 30 June 2018. The following was the basis of in-kind contribution: i. Cost of Human Capital: Total emoluments for financial year 2017/2018 for Manager-Technical Assistance Programmes Coordination, Head of Project Management Unit, Assistant Manager-Technical Assistance Coordination and two coordinators. All these are BOT Staff who are directly involved in the implementation of the Project. ii. Telephone Costs: The total cost of telephone of the Bank of Tanzania head office for the financial year 2017/2018. This amount was divided by 47 floors of the entire building and the result divided by 2 since the Technical Assistance Program coordination department, which coordinates the implementation of the Project occupies about half a floor. iii. Water, electricity, stationary and cleaning costs were determined using the same basis as per (ii) above. iv. Rent Contribution: The cost per square meter was estimated at US$ 25. The total occupied square meters by the Technical Assistance Coordination Department are 520m 2, which result to US$ 156,000 per annum. This rate is similar to that of the Deposit Insurance Board (DIB) where a predetermined price per square meter drawn from the market of renting the office of the same size. The following is the summary of the government contribution in kind during the year Exchange 30.6.2018 30.6.2017 Description Currency Amount rate USD USD Costs of human capital TZS 288,209,197 2,255.51 127,780 136,222 Telephone TZS 15,611,821 2,255.51 6,992 8,904 Water and electricity TZS 44,944,404 2,255.51 19,926 21,908 Rent contribution US$ 156,000 156,000 Stationary TZS 21,032,218 2,255.51 9,325 7,186 Cleaning costs TZS 1,474,520 2,255.51 654 455 Total 371,272,161 320,607 330,675 It is worth to note that cumulatively up to 30th June 2018, the Government's contribution in kind has been valued at US$ 2.1 million 26 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS {CONTINUED) 2.2 Amortization of Project fund (technical assistance) Funds are disbursed to the Project upon cash flow requests, which are based on approved annual work plans. Ee.ch request is supported by the expenditure of previous disbursements and by showing how much was left from that part of the loan already disbursed. In the financial year which ended 301h June, 2018, expenditure to the tune of US$1.8 million (2017: US$ 0.9 million) was incurred from IDA credit as technical assistance. Project annual income is recognized to the extent of this expenditure because income cannot be recognized until there is reasonable assurance that all conditions of the World Bank have been met and the entire expenditure has been accepted as eligible. Below is summary of Project expenditure funded by IDA. Expenditure 30.6.2018 30.6.2017 USD USD Development of Mortgage Market 265,704 104,903 Development of Housing Microfinance 293,651 67,430 Expansion of affordable housing supply 1,038,535 296,226 Project Management cost 229,964 415,535 Audit fees 15,250 19,466 Total 1,843,104 903,560 27 > BANKOF TAN~ANIA· HOUSING~INANCE PROJE:tT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) 2. INCOME(CONTINUED) 2.3 Interestincome earned on loansto TMRC& HMFF Interestearned on loan to TMRCand HMFFduring the year ending 30 June 2018 was US$ 3,752,560(2017: US$ 3,082,561). (i) Interestincome from TMRC Interestearned on loans extendedto TMRCis paid quarterly. Previously,interest rates differed per loan dependingon the rate of treasurybills at the time of extendingthe loan to TMRC. However,during the year, which ended 30 June 2018, interest rate was fixed at 10 percent. Below is the table detailing eligibleinterest income from TMRCfor the year ending30 June 2018. Loan Periodto Beneficiary Interest Date of Interestamount Interestamount SIN Amount(TZS) tenor Maturity Date charge Institution Rate disbursemer.t (TZS) FY 2018 (TZS) FY 2017 (years) interest AzaniaBank loan 1 2,500,000,000 8.90% 5.1 15-Nov-11 14-Nov-16 1.00 0 83,513,6~9 AzaniaBank loan 1 2 Roll over 2,500,000,000 10.00% 2.0 14-Nov-16 14-Nov-18 1.00 250,000,000 156,164,384 3 AzaniaBank loan 2 1,700,000,000 14.86% 3.0 1-May-12 30-Apr-15 1.00 0 AzaniaBank Loan 2 4 Rollover 1,700,000,000 10.0% 5.1 1-May-15 30-Apr-20 1.00 170,000,000 170,000,000 5 Azania BankLoan 3 2,500,000,000 10.0% 3.0 27-Jun-13 26-Jun-16 1.00 0 AzaniaBank loan 3 6 Rollover 2,500,000,000 10.00% 3.0 28-Jun-16 27-Jun-19 1.00 250,000,000 250,000,000 7 AzaniaBank Loan 4 2,500,000,000 10.01% 3.0 31-Jul-13 30-Jul-16 1.00 0 20,568,493 AzaniaBankk loan 4- 8 extension 2,500,000,000 10.01% 0.5 30-Jul-16 30-Jan-17 1.00 0 126,153,425 AzaniaBank loan 4- 9 Roll Over 2,500,000,000 10.01% 3.0 30-Jan-17 29-Jan-20 1.00 250,250,000 103,528,082 10 Bankof Africa loan I 2,750,000,000 10.00% 3.0 27-Jun-13 26-Jun-16 1.00 0 Bankof Africa loan I 11 Rollover 2,750,000,000 10.00% 3.0 28-Jun-16 27-Jun-19 1.00 275,000,000 275,000,000 BankOf Africa Loan 12 2 3,000,000,000 10.00% 2.5 8-Sep-14 7-Mar-17 1.00 0 205,479,452 Bankof Africa loan 2 13 roll over 3,000,000,000 10.00% 3.0 7-Mar-17 6-Mar-20 1.00 300,000,000 94,520,548 14 DCBloan I 10.01% 30-Aug-13 28-Feb-15 0 0 ?R hANKOF TAN~ANIA· HOUSING~INANCE PROJE:tT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) Loan Periodto Beneficiary Interest Date of Interestamount Interestamount SIN Amount(TZS) tenor MaturityDate charge Institution Rate disbursement (TZS)FY 2018 (TZS) FY 2017 (years) interest 1,500,000,000 1.5 1.00 15 DCBloan I rollover 1,500,000,000 10.00% 2.0 1-Mar-15 28-Feb-17 1.00 0 99,863,014 DCBloan 1 , 2nd roll 16 over 1,500,000,000. 10.00% 2.0 28-Mar-17 29-Mar-19 1.00 150,000,000 38,630,137 17 EximBank Loan 1 3,000,000,000 10.00% 3.0 30-Aug-13 29-Aug-16 1.00 0 49,315,068 EximBank Loan 1- 18 Extension 3,000,000,000 10.00% 0.8 29-Aug-16 29-May-17 1.00 0 224,383,562 EximBank loan 1 - 19 Roll over 1,000,000,000 10.00% 1.0 29-May-17 28-May-18 1.00 90,000,000 8,767,123 EximBank loan 1 - 20 Roll over 2 1,000,000,000 7.50% 1.0 28-May-18 27-May-19 0.09 7,500,000 0 21 CRDBBank Loan 1 5,000,000,000 10.00% 3.0 31-Mar-14 30-Mar-17 1.00 0 373,972,603 GROBLoan 1 Roll 22 over 5,000,000,000 10.00% 3.0 30-Mar-17 29-Mar-20 1.00 500,000,000 126,027,397 23 GROBBank Loan 2 5,000,000,000 10.00% 3.0 26-Sep-14 25-Sep-17 1.00 120,000,000 500,000,000 24 GROBBank Loan 2 5,000,000,000 10.00% 5.1 25-Sep-17 24-Sep-220.76 380,000,000 0 25 CRDBBank loan 3 7,000,000,000 10.00% 3.0 4-Jun-15 3-Jun-18 1.00 646,301,370 700,000,000 26 GROBBank loan 3 7,000,.000,000 10.00% 5.1 3-Jun-18 4-Juri-23 0.07 52,500,000 0 27 BankABC 1,400,000,000 10.00% 3.0 15-Jul-14 14-Jul-17 1.00 5,600,000 140,000,000 28 BankABC Roll over 1,400,000,000 10.00% 2.0 14-Jul-17 13-Jul-19 0.96 134,400,000 0 29 I & M Loari 1 3,250,000,000 10.00% 3.0 14-Aug-14 13-Aug-17 1.00 32,500,000 325,000,000 30 I & M Loan 1 3,250,000,000 10.00% 1.0 ~3-Aug-17 12-Aug-18 0.88 292,500,000 0 31 AzaniaBank Loan 5 2,800,000,000 10.00% 3.0 7-0ct-15 6-0ct-18 1.00 280,000,000 280,000,000 32 NBCBank loan 1 2,000,000,000 13.07% 3.0 16-Mar-16 15-Mar-19 1.00 261,400,000 261,400,000 ?Q hANKOF TAN~ANIA· HOUSING~INANCE PROJE:tT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED} Loan Periodto Beneficiary Interest Date of Interest amount Interest amount S/N Amount(TZS) tenor MaturityDate charge Institution Rate disbursement (TZS) FY 2018 (TZS) FY 2017 (years) interest 33 Bankof Africa loan 3 5,000,000,000 10.00% 3.0 5-Jul-16 4-Jul-19 1.00 500,000,000 493,150,685 34 DCBLoan 2 2,000,000,000 10.00% 3.0 15-Jui-16 14-Jul-19 1.00 200,000,000 191,780,822 35 BarclaysBank Loan 1 5,000,000,000 10.00% 2.7 1-Nov-16 15-Jul-19 1.00 500,000,000 330,136,986 36 NMBloan 1 1,700,000,000 10.00% 4.1 1-Nov-16 30-0ct-20 1.00 170,000,000 112,246,576 37 CBALoan 1 3,000,000,000 10.00% 3.0 13-Apr-17 26-Mar-20 1.00 300,000,000 64,109,589 38 KGBLoan 1 5,000,000,000 10.00% 3.0 14-Apr-17 23-Mar-20 1.00 500,000,000 105,479,452 39 FNBLoan 1 2,500,000,000 10.00% 5.1 15-Jun-17 14-Jun-22 1.00 250,000,000 10,273,973 GROBLoan 4 10.00% 3 22-Sep-17 21-Sep-20 40 8,000,000,000 615,890,411 PBZloan 1 10.00% 3 19-0ct-17 18-0ct-20 41 3,000,000,000 208,767,123 BancABC Loan 2 10.00% 3 2-Jan-18 1-Jan-21 42 4,000,000,000 196,164,384 NMBloan 2 10.00% 3 2-Jan-18 1-Jan-21 43 4,000,000,000 196,164,384 Total 136,200,000,000 Expectedinterest Earnedin TZS 8,084,937,671 5,919,465,069 Loanmatured beforeyear end 31,450,000,000 AverageExchange rate 2,255.51 2,189.52 Loanbalance as at yearend 104,750,000,000 ExpectedInterest Amountin USD 3,584,528 2,703,545 in bANKOF TANZ4NIA• HOUSING~INANCE PROJE::CT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) 2.3 InterestIncome Earned on Loansto TMRC& HMFF(continued) (i) Interestincome on loansto HousingMicrofinance Fund (HMFF) PeriodEnd 30-Jun-18 Loan Periodto Beneficiary Interest Date of Interestamount Interestamount S/N Amount(TZS) tenor MaturityDate charge Institution Rate disbursement (TZS) FY 2018 (TZS) FY 2017 (years) interest DCB Commercial Bankloan 1 1,000,000,000 10.00% 5.0 31-Jul-15 31-Jul-20 1.00 100,000,000 100,000,000 DCBCommercial 2 bank-Loan2 2,000,000,000 10.00% 5.0 31-Mar-16 31-Mar-21 1.00 200,000,000 200,000,000 EFCMicrofinance 3 bankloan 1 4,000,000,000 10.00% 5.1 19-Aug-16 18-Sep-21 1.00 400,000,000 345,205,479 Yetu Microfinance 4 Loan1 2,000,000,000 10.00% 5.0 28-Jul-16 27-Jul-21 1.00 200,000,000 184,657,533 5 Mukobaloan1 1,000,000,000 10.00% 5.0 04-Jul-17 03-Jul-22 0.99 98,904,110 Yetu Microfinance 27-Sep-17 26-Sep-22 6 Loan12 1,500,000,000 10.00% 5.0 0.76 113,424,658 Mkombozibank 2,370,000,000 10.00% 10 20-Apr-18 19-Apr-28 7 loan 1 46,101,370 Total 11,500,000,000 Expectedinterest Earnedin TZS 1,158,430,137 829,863,013 Loanmatured beforeyear end AverageExchange rate 2,255.51 2,189.52 Loanbalance as at year end 11,500,000,000 ExpectedInterest Amountin USO 513,600 379,016 (ii) Totalinterest earned on loans to TMRC& HMFF 30.6.2018 30.6.20·17 USD USD Interestincome from TMRC 3,584,528 2,703,545 Interestincome on loans to HousingMicrofinance Fund 513,600 379,016 Total interestearned on loans to TMRC& HMFF 4,098,128 3,082,561 11 hANKOF TAN~ANIA· HOUSING~INANCE PROJE:tT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) 2.4 interestearned on governmentsecurities (i) Treasurybonds Auction Face value - Income Details Issuedate Maturitydate Amortized cost value no amount 30.6.2018 30.6.2017 Restatedincome TZS TZS TZS TZS 5 year Bond 30-Apr-15 30-Apr-20 392 4,082,703,385 4,400,000,000 575,599,110 926,218,128 5 year Bond 27-Apr-16 20-Apr-21 416 2,277,738,854 2,696,000,000 366,040,134 484,120,963 10 year 15-Mar-18 15-Mar-28 472 Bond 19,774,187,918 21,813,600,000 774,215,114 Totalincome from treasurybonds 1,715,854,357 1,410,339,091 Exchangerate 2,255.51 2,188.52 US$Equivalent 760,739 644,132 (ii) Treasurybills Portionof Portionof income incomeup to upto Details Issue date Maturitydate Auction Cost value Amortizedcost 30.6.2018 30.6. 2017 restated 365 Days-T-bills 7-0ct-15 6-0ct-16 938 1,893,178,701 2,176,120,000 75,451,013 182 Cays-T-bills 1-Dec-16 20-Jun-17 983 5,777,501,000 6,200,000,000 422,499,000 182 DaysT-bills 29-Jun-17 28-Dec-17 968 11,976,999,868 12,388,714,000 407,189,801 4,524,331 Tota!Income from Treasury Bills 407,189,801 502,474,344 ExchangeRate 2,255.51 2,219.05 US$Equivalent 180,531 229,491 1? ~ANKOF TAI\IZANIA· HOUSING~INANCE PROJE:~T NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) Total incomeearned US$ 941,270 873,622 3. PROJECTEXPENDITURE Projectexpenditure is recognizedon accrual basis. The tabie below shows the expenditurefunded by IDA. SpreadReduction Account and Governmentof Tanzania(GOT) for the year ended 30 June 2018. All figures in US$ 30.06.2018 30.06.2017 Spread Spread Fundedby Deduction Funded Fundedby Deduction Funded Projectexpenditure IDA Account by GOT Total IDA Account by GOT Total Developmentof MortgageFinance 265,704 105,930 371,633 104,903 251,560 356,463 Developmentof HousingMicrofinance Fund 293,651 117,072 410,723 67,430 63,883 131,313 Expansionof affordablehousing supply 1,038,535 6,080 1,044,615 296,226 6,675 302,901 Projectmanagement costs 229,965 7,005 91,526 328,495 415,535 143 8,557 424,235 Audit fees ____ 15,250 15,250 19,466 19,466 Total expenditure 1,843,105 7,005 -- 2,170,716 903,560 143 330,675 1,234,378 320,607 4. SURPLUS Surplusis generateddue to the interest earned from loans extendedto TMRC and those of HMFFtogether with interest income generatedfrom investment of funds from the SRA in Governmentpapers. During the year, ending 30thJune, 2018 incomegenerated from investmentwas US$ 5,039,398which was netted off by small project managementexpenditure of U$ 7,005 resulting into a surplus of US$ 5,032,393 This surplus was adjusted by the negative effects of foreign currency translations amountingto US$ 810,508 resulting to a net surplus of US$ 4,221,885 while the net cumulative surplus from the prior financialyears was restated US$8,092,267thus resultingto cumulativesurplus of US$ 12,314,152. 5. EFFECTSOF FOREIGNCURRENCY TRANSLATIONS The Financii11statements are presented in United States Dollar (US$). This is the currency agreed to be used by IDA and Governmentof Tanzania(GOT) in presentingthe financial statements.Transactions in local currency during the year are translated at BOT averagemonthly exchange rates for the entire financial year. Monetary assets and liabilities are translated at the closing exchange rate on the balance sheet date. The resulting differences from conversionare taken to the Project statement of incomeand expenditurein the year in which they arise.. lt is worth to note that, realized gains or losses are relatedto cash and cash equivalent based transanctionswhile unrealizedgains or losses are related to account payablesand receivables ~~ BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) Summary of the effect of foreign currency translation 30.6.2017 30.6.2018 Restated USD USD Realized foreign currency exchange rate loss (273,715) (82,770) Unrealized foreign currency exchange rate loss (536,793) _(267,515) Total (810,508) (350,285) 6. FINANCIAL ASSETS Financial assets of the project are loans extended to TMRC for on lending purposes and those loans extended to eligible financial institutions under HMFF, bank balances and interest receivable from TMRC, HMFF loans and investments in Treasury bills and bonds. All financial assets are recognized at amortized cost using effective interest rate. 6.1 Bank balances The bank balances constitute HFP designated accounts of which the funds originate from IDA. It also constitute balances from Spread Reduction Account coming from interests generated from loans extended to TMRC to facilitate either re-financing or pre-financing of mortgage portfolios Primary Mortgage Lenders (PML) together with interest from loans extended to eligible Financial Institutions under the Housing Microfinance Fund. It is worth noting that impairment of cash and bank balances will happen when the project ends, unused cash, and bank balances will be returned to the World Bank. All figures in USO 30.06.2018 30.06.2017 HFP designated special account (228) 726,992 Spread Reduction Account 1,623,377 180,582 HMFF Fund 267,512 393,233 HFP ~Additional Financing Holding Account 697 50,549 HFP-Additional Financing-Special Account 9,818,993 14,794,477 Total 11,710,352 16,145,833 34 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 6.1.1 Decrease /(Increase) in loans to TMRC and HMFF 30.6.2018 30.6.2017 TZS TZS New Loans to TMRC during the year 19,000,000,000 24,200,000,000.00 Return of loan from TMRC (2,000,000,000.00) New Leans to HMFF beneficiaries during the year 4,870,000,000 6,000,000,000.00 Total Change during the year in TZS 23,870,000,000 28,200,000,000.00 Exchange rate 2,277.71 2,219.05 Total USO equivalent 10,479,824.03 12,708,140.87 Total change during the year in US$ 10,479,824.03 12,708,140.87 6.1.2 Decrease/ (increase) in Government Treasury bonds/Bills 30.6.2017 30.6.2018 Restated TZS TZS Cash invested to buy new Treasury Bond/bills During the year 18,999,972,804 17,754,500,868 Cash received form redemption of Treasury Bills during the year -12,388,714,000 -7,670,679,702 Coupon Cash Interest received on investment on Bonds during the year -651,412,800 -705,440,298 !ncome earned on investment on government security 2,123,044,158 1,912,813,435 Oerecognition of receivable 113,672,342 Total change during the year in TZS 8,082,890,162 11,404,866,645 Exchange rate 2,277.71 2,219.05 Total Change during the year in US$ 3,548,692 5,139,527 6.1.3 Decrease /(Increase) payable to the Government 30.6.2018 30.6.2017 Restated US$ US$ Amount received from the Government during the year to support project activities 7,534,149 15,977,549 Un used amount and returned back to the goverr.ment due to end of the Hcus!ng Finance -Parent Project -726,731 0 Balance available for utilization during the year 6,807,418 15,977,549 Less funds spent on Technical Assitance during the year (note 3) (1,843,105) (903,561) Total change duing the year 4,964,313 15,073,988 35 BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 6.2 Loan and advances (i) Loan to TMRC Loan to TMRC is another financial asset of the project and it is related to component 1 of the Housing Finance Project. Under this component, the funds are provided to TMRC for on-lending to primary mortgage lenders after analyzing the risks and obtaining adequate loan securities in the form of either existing mortgages, if the purpose of the loan is for re-financing, or government bonds if the loan is for pre-financing arrangements. The Bank assigns securities obtained by TMRC from financial institutions to the Bank of . Tanzania as securities for those particular loans extended to TMRC. Impairment will happen when there is objective evidence that the financial institution, which obtained a loan from TMRC, is under significant financial problems, or where there is default or delinquency in the payment of principal amount, or where a particular debenture, which used to cover the loan cannot realize the entire amount. 36 t } ) I BANKOF TANZANIA·HOUSING FINANCE PROJECT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) 6.0. FINANCIALASSETS (CONTINUED) 6.2 Loanand advances (continued) (i) Loanto TMRC(continued) Thefollowing table is an analysis of loans issuedto TMRCas at 30 June 2018 Ex pir y dat Ten Ten Ten e Expi Expi or or or lntere lntere on 2nd ry 3rd ry for for for lntere st rate st rate 1st Loa date Loa date 1st 2nd 3rd st rate for for Interest Loa Loa 1st loa n on n on Tenor rolle rolle rolle for 1st 2nd 3rd rate per Nameof n n Loan n roll 2nd roll 3rd of d d d Rolled Rolled Rolled annum( '.he lssu Expi roll roll over loan over loan origin over over over oer oer over %) of the Loan amount(Tzs) Loan amount(Tzs) beneficia e ry ·over ov roll roll al Loa Loa Loa Loans Loa;is Loans original as f 30th June as of 30th June ry Bank date date date er date over data over loan ns ns ns (%) (%) (%) loan 2018 2017 14- 15- 14- 14- No Azania Nov Nov- Nov- v- Loan 1 -11 16 16 18 5 2 10 8.9 2,500,000,000 2,500,000,000 2- 1- 1- 30- Azania May May May- Apr 2 Loan2 -12 -15 15 -20 3 5 10 14.86 1,700,000,000 1,700,0QO,OOO 7- 6- Azania Oct- Oct- 3 !oan5 15 18 3 0 10 2,800,000,000 2,800,000,000 27- I 28- 27- 28- Ju Azania Jun- Jun- Jun- n- 4 Loan3 13 16 16 19 3 3 10 2,500,000,000 2,500,000,000 30- 31- 30- 30- Ja 3Q- 29- Azania Jul- Jul- Jul- n- Jan- Jan- loan 4 13 15 16 16 17 17 20 3 1 10.01 2,500,QQO,OOO 2,500,00U,OOO Bank 15- 14- ! 14- 13- ABC Jul- Jul- Jul- Jul 6 Loan1 14 17 17 -19 3 2 10 1,400,000,000 1,400,000,000 Bankof 28- 27- 28- 27- Africa Jun- Jun- Jun- Ju i 7 Loan1 13 16 16 n- 3 3 10 2,750,000,000 2,750,000,000 17 • • t t BANKOF TANZANIA·HOUSING FINANCE PROJECT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) ,~-- Ex pir I y I dat Ten Ten Ten I e Expi Expi or or or lntere lntere I on 2nd ry 3rd ry for for for lntere st rate st rate 1st Loa date Loa date 1st 2nd 3rd st rate for for Interest Loa Loa 1st loa n on n on Tenor rolle rolle rolle for 1st 2nd 3rd rate per Nameof n n Loan n roll 2nd roll 3rd of d d d Rolled Roiled Rolled annum( the lssu Expi roll roll over loan over loan origin over over over oer oer over %) of the Loan amount(Tzs) Loan amount{Tzs) beneficia ry e over JV roll roll al Loa Loa Loa Loans Loans Loans original as f 30th June as of 30th ,June ry Bank date date date er date over date over loan ns ns ns (%) (%) (%) loan 2018 2017 19 6- Bankof 8- 7- 7- Ma Africa Sep Mar- Mar- r- 8 loan 2 -14 17 17 20 2 3 10 10 3,000,000,000 3,000,000,000 Bankof 5- 4- Africa Jul- Jul- 9 loan 3 16 19 3 10 5,000,000,000 5,000,000,000 brclays 1- 15- 1 Bank Nov Jul- 0 Loan1 -16 19 3 10 5,000,000,000 5,-000,000, 000 13- 26- CSA Apr- Mar- Loan1 i7 20 3 10 3,000,000,000 3,000,000,000 31- 31- 30- 30- Ma 1 CRDB Mar Mar- Mar- r- 2 loan 1 -14 1- 17 I 20 3 3 10 5,000,000,000. 5,000,000,000 24- 26- 25- 25- Se 1 CRDB Sep Sep- Sep- p- 3 loan2 -14 17 17 22 3 5 10 5,000,000,000 5,000,000,000 5- 5- 4- 4- Ju 1 CRDB Jun- Jun- Jun- n- 4 loan 3 15 18 18 23 3 5 10 7,000,000,000 7,000,000,000 30- 28- 1- 28- 28- 27- 1 DCB Aug Feb- Mar- Fe Feb Feb- 5 Loan 1 -13 15 15 b- -17 19 1 2 2 10 10 1,500,000,000 1,500,000,000 '.iR ~ ) ; BANKOF TANZANIA·HOUSING FINANCE PROJECT NOTESTO THEPROJECT FINANCIAL STATEMENTS (CONTINUED) i Ex i pir I y I dat Ten Ten Ten I I e Expi Expi or or or lntere lntere I on 2nd ry 3rd ry for for for lntere st rate st rate I 1st Loa date Loa date 1st 2nd 3rd st rate for for Interest Loa Loa 1st loa n on n on Tenor rolle rolle rolle for 1st 2nd 3rd rate per I Nameof n n Loan n roll 2nd roll 3rd of d d d Rolled Rolled Rolled annum( the lssu Expi roll roll over I loan over loan origin over over over oer oer over %) of the Loan amount(Tzs) Loan amount(Tzs) I beneficia e ry over ov roll rol! al Loa Loa Loa Loans Loans Loans original as f 30th June as of 30th June I ry Bank date date date er date over date over loan ns ns ns (%) (%) (%) loan 2018 2017 17 15- 14- i 1 DCB Jul- Jul- 2,000,000,00 Loan2 ' 6 16 19 3 10 2,000,000,000 0 29- Exim 30- 29- 29- Ma 29- 28- 28- 27- Bank Aug Aug- Aug- y- May May May May 7 Loan1 -13 17 16 16 -17 -18 -18 -19 3 1 1 10 10 7.5 10 1,000,000,000 1,000,000,000 15- 14- 1 FNB Jun- Jun- Loan1 s 17 22 5 10 2,500,000,000 2,500,000,000 12- l&M 14- 13- 13- Au 1 Bank Aug Aug- Aug- g- 9 loan 1 -14 17 17 18 i 3 1 10 3,250,000,000 3,250,000,000 24- 23- I 2 KCB May Mar- Loan1 -17 I o 20 3 10 5,000,000,000 5,000,000,000 16- 15- I 2 NBC Mar Mar- loan 1 -16 19 11 3 13.07 2,000,000,000 2,000,000,000 1- 30- I 2 NMB Nov Oct- I 2 loan 1 -'16 19 3 10 1,700,000,000 1,700,000,000 22- 21- I 2 CRDB Sep Sep- ! 3 Loan4 -17 20 3 10 8,000,000,000 / 2 PBZloan 19- 18- .4 1 Oct- Oct- 3 10 3,000,000,000 1Q . ; ) BANKOF TANZANIA• HOUSINGFINANCE PROJECT NOTESTO THE PROJECTFINANCIAL STATEMENTS (CONTINUED) Ex --1 r pir y I I dat Ten Ten Ten e Expi Expi or or or lntere lntere I on 2nd ry 3rd ry for for for lntere st rate st rate I 1st Loa date Loa date 1st 2nd 3rd st rate for for Interest Loa Loa 1st loa n on n on Tenor rolle rolle rolle for 1st 2nd 3rd rate per I I Nameof n n Loai1 n rol! 2nd roll 3rd of d d d Rolled Roiled Rolled annum( the lssu Expi roll roli over loan over loan origin over over over. oer oer over %) of the Loan amount(Tzs) Loanam'Junt(Tzs) beneficia e ry over ov roll roll al Loa Loa Loa Loans Loans Loans original as f 30th June as of 30th J~ne ry Bank date date date er date over date over loan ns ns ns (%) (%) (%) loan 2018 2017 17 20 Banc 2- 1- 2 ABC Jan- Jan- 5 Loan2 18 21 3 10 4,000,000,000 2- 1- 2 NMB Jan- Jan- 6 lean 2 18 21 3 10 4,000,000,000 Total Loan 3 87,100,000,000 68,100,000,000 Exchange rate 2,277.71 2,219.05 Equivalent in USO 38,240,159 30,688,808 Summaryof TMRCand HMFFLoans 30.6.2018 30.6.2017 US$ US$ Loanto TMRC 38,240,159 30,688,808 Loansunder HMFF 6,089,449 4,055,790 Total 44,329,608 34,744,598 .1.n BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 6.0. FINANCIAL ASSETS (CONTINUED) 6.2 Loan and advances (continued) (ii) Loans under Housing Microfinance Fund These loans are extended directly by BOT to eligible financial institutions with housing micro finance products. These loans relates to Component II of the project. The component seeks to address housing finance needs of low-income population through housing microfinance. A Housing Microfinance Fund (HMFF) has been established to provide loans for up to 5 years or longer to low income households. HMFF started with a seed capital from HFP and will be open to other sources of finance including the Government and donor partners. Under this component, regulatory reforms and capacity building to eligible Microfinance Institutions (MFls) to foster safe lending environment will take place. During the financial year, ended 30 June 2018 three loans amounting to TZS 4.9 billion had been extended from the HMFF resulting to the cumulative total of TZS 13.87 billion loans already extended to MFls. These loans are recorded in the statement of Financial Position at amotised costs. The loans have been secured by specific debentures backed by five years Treasury bond. Impairment will happen when there is objective evidence that the financial institution which obtained a loan from BOT is under significant financial problems and there could be default or delinquency in the payment of principal amount, or in the circumstances that a particular debenture which used to cover the loan cannot realize the entire amount and there is high probability that the said financial institution will be bankrupt. Below is the summary of the HMMF loans extended during the financial year ending 30 June 2018. Loan Loan Loan lnierest Loan amount(Tzs) amount(Tzs) for Issue Loan Expiry Tenor rate psr for year ending year ending June SIN Beneficiary date date (years) annum(%) June 201s· 2017' DCB Commecrcial Bank-Loan1 31-JlJL-15 31-Jul-20 5 10 1,000,000,000 1,000,000,000.00 ! DCB 31-Mar-16 31-Mar-21 10 2,000,000,000 Commecrcial 2,000,000,000.00 2 Bank-Loan 2 5 Yetu 28-Jul-16 6-Feb-21 Microfinance 3 Bank PIC 5 10 2,000,000,000 2,000,000,000.00 EFC Tanzania 19-Aug-16 18-Aug-21 4 Microfinance 5 10 4,000,QOO,OOO 4,000,000,000.00 5 Mukoba loan1 4-Jul-17 :3-Jul-22 5 10 1,000,000,000 Yetu Microfinance 27-Sep-17 26-Sep-22 6 Loan 12 5 10 1,500,000,000 Mkombozi bank ~_7_!o_an_1___ 2_0_-A~pr-18 ~r-28_____ -'-'10'------1:....:.0 ____-=.!,2,:::..:37~0,~00::::0J..::,0.::.:00::..______ 41 BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) Loan Loan Loan Interest Loan amount(Tzsj amount(Tzs) for Issue Loan Expiry Tenor rate per for year ending year ending June S/N Beneficiary date date (years) annum(%) June 2018 2017 Total 13,870,000,000 9,000,000,000 Exchange rate 2,277.71 2,219.05 USO E uivalent 6,089,449 4,055,790 6.3 Interest income receivable (i) Interest income from loans to TMRC Interest income receivable related to interest earned from TMRC but not received during the financial year. Interest income is received on the due date. Interest that falls due at the end of the financial year but not received is treated as receivable. This financial asset is impaired if there is an objective evidence that the bank which obtained a loan from TMRC is under significant financial problems and there could be default or delinquency in the interest payment and the high probability that the said bank will be bankrupt. The table showing Interest receivable from TMRC as at 30 June 2018 30.06.2018 30.06.2017 Details TZS TZS Opening balance 810,843,600 386,731,546 Add: Interest earned during the year 8,084,937,671 5,919,465,068 Total interest receivable during the year 8,895, 78_-'-1-'-"'-,2'-=72'--__;c_J_6'-=-=30_:c.,6,L.:....19::....::.6.L:.., 6...:.....:.14 Less: Interest received during the year (7,770,545,411) (5,495,353,014) Interest Receivable 1,125,235,861 810,843,600 Exchange rate at the end of year ---2,278 2,219 USD Equivalent 494,021 365,401 (ii) Interest income receivable from HMFF Loans Interest income attributable to these loans is receivable each quarter after the loan disbursament date to eligible Micro Finance Institution borrowing the funds from the Housing Microfinance Fund. Each interest income earned but not received at the end of the financial year is recognized as income and recorded as interest income receivable in the statement of financial position. Impairment will happen when there is objective evidence that the financial Institution which obtained a loan from BOT is under significant financial problems and there could be default or delinquency in the payment of the interest amount or in the circumstances that a particular debenture which used to cover the ioan and interest payments cannot realize the entire amount and there is high probability that the said financial institution is becoming bankrupt. 42 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TC THE PROJECT FINANCIAL STATEMENTS (CONTINUED) Below is the table summary of interest receivable from the HMFF loans for the financial year ended 30 June 2018. 30.06.2018 30.06.2017 TZS TZS Opening balance 98,904,090 16,712,328 Add: Interest earned during the year 1,158,430,137 829,863,013 Total Interest receivable during the year 1,257,334,227 846,575,341 Less: Interest received during the year (1,036,712,329) (747,671,251) Interest Receivable 220,621,698 98,904,090 Exchange rate at the end of year 2,277.71 2,219.05 USO Equivalent 96,861 44,571 (ii) Interest receivable from investments in Government Securities This interest income is attributed to the investment in Treasury Bills and Bonds. Interest on Treasury Bonds is paid every six months and those on Treasury Bills are paid at the end of the investment period. Apportionment is done to capture the interest income earned but not received at the end of the financial year. Income ;s recognized in the statement of Income and Expenditure during the financial year and receivable is recorded in the Statement of Financial Position at an effective interest rate translated at th9 end of the year exchange rate. Impairment is done when it is clear that the Government will fail to honor its obligation. Below is the table summarizing the Interest income receivable on Treasury bills and Treasury bonds. It is worth noting that, in the finance year 2016/2017 these receivables were recorded in the interest receivable from investment account. Howevere, from year 2017/2018 on wards all transanctions releating to interest receivable will be done in the respective investment accounts. 30.6.2017 Summary 30.6.2018 Restated TZS TZS Opening income receivable 201,960,000 504,940,425 Add: Interest earned 0 1,053,872,673 Total interest available during the year 201)960,QQQ_ 1,674,972,215 Less: Interest received during the year (201,960,000) (1,356,853,098) Balance receivable 0 201,960,000 Exchange rate ----- 2,277.71 ____1_d19.05 Equivalent in USD 0 ==---=----=---~-= ~--_91,012 43 BANK OF TANZANIA · HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 6.0. FINANCIAL ASSETS (CONTINUED) 6.3 Interest income receivable (continued) (iii) Interest Receivable from Investments in Government Securities (continued) Table below is the summary of the total interests receivable from loans to TMRC, HMFF and from investments in Government securities. 2016/2017 30.6.2018 Restated US$ US$ Interest income receivable from TMRC Loans 494,021 365,401 Interest income receivable from HMFF loans 96,861 44,571 Interest income receivable from government securities 0 91,012 Total 590,882 500,984 6.4 Investment in Government Securities Total amount of TZS 26,134,630,156 was recorded as investment in Government securities during the financial year which ended 30 June 2018. This is equivalent to to US$ 11,474,081 comparing to TZS 18.04 7,215,662 of 30 June 2017 equivalent of US$ 8,132,857. The increment in the investment is due to more investment in Treasury Bond of 10 years and revaluation of the two 5-year Treasury Bonds as indicated in the table below. The investment in treasury bonds are recognized in the statement of financial position at amortized cost. Below is a summary of cumulative investment as of 30th June 2018 (i) Investment in treasury bonds Amortized cost Amortized cost value as at Maturity Auction value as at 30.6.2017 Details Issue date date no 30.6.2018 Restated TZS TZS 5 year Bond 30-Apr-15 30-Apr-20 392 4,082,703,385 3,911,024,275 5 year Bond 27-Apr -16 20-Apri-21 416 2,277,738,854 2,159,191,520 10 year Bond 15-Mar-13 15-Mar-28 472 19,774,187,918 Total investment Treasury Bonds 26,134,630,156 6,070,215,794 Exchange rate 2,277.71 2,219.05 US$ Equivalent 11,474,081 2,735,502 44 BANK OF TANZANIA • HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) (ii) Investment in treasury bills Amortized cost Amortized as Maturity Auction as as at at 30.6.2017 Details Issue date date No 30.6.2018 restated cost cost TZS TZS 365 Days -T-bills 8-0ct-15 6 Oct-16 938 11,981,524,199 365 Days -T-bills 29-Jun-17 28-Dec-17 983 --- Total Investment in Treasury Bills 11,981,524,199 Exchange rate 2,219.05 US$ Equivale!1t 5,399,394 Total investment in Government securities 11,474,081 8,134,896 7. FINANCIAL LIABILITIES Project's financial liabilities are constituted by the cumulative amount of the loan from the government funded by IDA for the purpose of on lending to TMRC and other e!igible Firiancial Institutions under HMFF. Other payables were mainly provision for audit fees and accrued project expenses that are recognized at amortized cost in the statement of financial position. 7.1 Payable to the Government These are cumulative funds from the Government received by BOT for financing various eligible expenditure under the Project. These funds include, technical assistances for institutional capacity building, mortgage loans for TMRC and housing micro loans for financial institutions (Fis) borrowing under HMFF. Funds used for technical assistances are considered as a grant and are always amortized every year.However,funds spent as loans to TMRC and HMFF for eligible Fis will be repaid by BOT to the Government. Repayment arrangements are defined under schedule 3 of the financing agreements under Project number 4712-TA and 5590-TZ between IDA and URT as detailed beiow: [[E!tails-=~-~--~~~==---~---~ Proj_ecT_no4712-tA~~=---=~-~===-,Pr~ect-no 5590-TZ--~~=~ yment period I On each May ·15 and November 15 On· each August 15 and~ L .. Februa 15 Comm_e_n_c-ing-d--a-te_fo_r !15May 2020 to and including 15 15 August 2021 to andin15 k1 I the first payment phase. I November 2029 at the rate of 1 February 2053 qt the rate of I , I percent of the total credit. , 1.56~5 percent of the total / ~ ___j_Cr_~ed_,t_. ______~Commencing date for 15 May 2030 to and including 15 I I ,e second payment / November 2049 at the rate of 2 I . J I hase. ----"__percent of the total credit. __L----~-- BOT will follow the instructions given by the government for repayment of the cumulative payable amount from both projects as indicated below; 45 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) 30.06.2017 30.06.2018 Restated US$ US$ Opening balance 51,378,734 36,712,454 Add funds from the Government during the year 7,534,149 15,977,549 Total funds during the year 59,912,883 52,690,003 Less funds spent on technical assistance during the year (1,843,105) (903,561) Less funds transferred to IDA (726,731) Less effect of exchange rate translation (567,526) (407,708) Total funds payable to the Government at the end of the year 55,775,521 51,378,734 7.2 Other payables Other payables relate to the audit fees for the financial year ended 30 June 2018, which has been approved by the World Bank and BOT and accrued expenses relating to fees and reimbursable to the Project management costs. 30.06.2018 30.06.2017 US$ US$ Audit fees 15,250 19,466 Accrued expenses 35,843 Total other payables 15,250 55,309 8. RELATED PARTY TRANSACTIONS There were no related party transactions during the year. 9. CONTINGENT LIABILITIES There were no contingent liabilities at the end of the reporting period. 10. CAPITAL COMMITMENTS There were no capital commitments at the end of the reporting period. 11. CHANGES WHICH RESULTED TO THE RESTATEMENTS OF THE AUDITED FIGURES OF 2016/2017 There have been necessesary changes which have resulted to reinstatement of some of tl1e audited figures of year 2016/2017. The reasons for changes have been highlighted below; • Bond re- revaluation because of the changes of the dates for the effective interest bookings and coupon rates repayments. Dates adopted in year 2016/2017 were a bit different from those of bond cirtficates confrmed by the financial Markets. This therefore resulted into an increase in bond 1 and bond 2 by TZS 66,358,551 and TZS 42,789,460 respectively and increase in Treasury Bills by TZS 4,524,331 . 46 BANK O!= TANZANIA · HOUSING FINANCE PROJ!:CT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) • The second reason has been to make prior year adjustment in the interest income receivable account by recognizing the amount into their respective investment accounts.This has resulted into adjusting the receivable account by TZs 116,159,117 as detailed below;. adjustment Recomputed (TZS) Recorded (TZS) Changes (TZS) bond 1 3,911,024,274.99 3,844,665,724.00 66,358,550.99 bond 2 2,159,191,520.00 2,116,402,060.00 42,789,460.00 t/bills 11,981,524,199.00 11,976,999,868.00 4,524,331.00 Total 18,051,739,993.99 113,672,341.99 Overstated income 2,486, 775.01 Total adjustment in the interest income receivable 116,159,117.00 • Changed of reported amount of the effect of foreign currency in year 2016/2017 due to the opening balance of payable to the Governmnet account restatement using closing exchange rate instead of initially used opening rate so as to comply with the standard requirement.This adjtsment brought an effect of reduction in the reported figure by US$ 407,723 Summary of the adjustments which resulted to the restatements in the Financial Statements and its notes as follows; 2016/2017 Audited 2016/2017 Details Financials Adjustment restated US$ US$ US$ Statement of Financial position Interest income receivable 553,330 -52,346 500,984 Investment in Government securities 8,083,670 51,226 8,134,896 Payable to Government 51,786,442 -407,708 51,378,734 Statement of comprehensive income Interest earned on government Securities 874,758 -1, 136 873,622 Effects of foreign currency translations -758,008 407,723 -350,285 Statement of change in accumulated fund Accumulated surplus 7,685,680 406,588 8,092,268 12. GOING CONCERN OF THE PROJECT The project is scheduled to close on the 28th June 20'19, this is in accordance to the Finance Agieement for extension of the project signed in March 2018 between the Government of Tanzania and the World Bank (IDA). However, this will not affect the project activities as the agreements exisiting between the Bank of Tanzania and loans beneficiaries e.g TMRC and other financiai institutions under HMFF extend beyond 28 June,2019. Under these cirmcutances it is expected the BOT to renew agency role with the government through the Minsitry of Finance to continue 47 BANK OF TANZANIA· HOUSING FINANCE PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS (CONTINUED) administer:ng all loans, interest expected from those loans, existing and new investment from Treasury bills and bonds and management ot statutory compliances including audits of the project funds so as to enable the project objectives realized. 13. EVENTS AFTER THE REPORTING PERIOD There were no events after the reporting period that had material impacts on the financial statements of the project. On the other hand, the financial statements are issued to the World Bank by 31 December 2018 and to the Minsitry of Finance after approval by the Board of Directors of the Bank of Tanzania. 48