P,. Box 8759 Kigal e. +250 788307334 nelsapcu n ebas or Equatorial Lakes Subsidiary Action Program Coordination Unit(NELSAP.CU) Public Disclosure Authorized

Our Ref: NELSAP/JS/ 2016 20thDecember 2016

Ms Yadviga SEMIKOLENOVA TTL project Nr P075941 The World Bank Washngton-DC USA

Re: AUDIT REPORT AND FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30th JUNE 2016

FALLS HYDRO ELECTRIC PROJECT Public Disclosure Authorized Name of the Project: REGIONAL RUSUMO PROJECT No P075941

Dear Madam,

Here is an original hard copy of the audit report and financial statements for the period ended June 30th 2016 of Regional Rusumo Falls Hydroelectric Project and the related Management I.etter. The report covers the financial year 2015/2016.

Yours sincerely, Public Disclosure Authorized

Eng. Elic d Nyalie NELSAP Regional Coordinator Public Disclosure Authorized

Buuno DLv Congo,-VEgypt- Kn4y Ran1 San4 naAUUgnd Buirundi, 1).1t, Congo, Egypt, Kenya, R1wanda, Sudan,Twania, Upaida MOORE STEPHENS Fenraj Conseil MARORELSUS

LP EL

FIA December 14, 2016 RusuMM FOIs Pfwter pIk PMe*t- fM audit rO0

CONTENT I. INTRODUCTION... *.4.*...... *......

1.1 PROJECT BACKG ROUND...... f.1.1.Sackground...... 1.2.2. Regionol Rusumo hlydro-power Proect...... 2.13. Project Highights...... s 1.1.4. Project Cosr and Finanding...... 1.1.5. Schedie of Disbursements as or 30/06/2016...... 8

1.2, AI11 COJCEiVES AND SCOPE ...... 9 13 AUDITMETHODOLOGY ...... 12

2. REPORT ON THE FINANCrAL STATEMENTS FOR THE YEAR ENDED 30 IUNE 2014 ...... * ...... - 13 21, JNDEPENDENT AU DITORS' OPINION...... 13 2.2 STATEMENT OF MANAGEMENT RESPONSIBILITIES...... Is 2. STATEMENT OF FW'ANO. POSITON AS AT 30 JUNE 2016...... 16 2.3. STATEMENTOF RECEPTS ANO PAYMENTS...... 17 2.4. SCHEDULE OF REALISATIONS...... 2.5. NOTES TO THE FINANCIAL STATEME TS -30 JUNE 2016 ...... 19

3. REPORT ON THE OPERATIONS OF THE ( REGIONAL RUSUMO FALLS POWERPLANT PROJECTy SPECIAL ACCOUNT AND FUNDS WITHDRAWAL REQUESTS SUBMITTED TO THE ADF FOR THE YEAR ENDED 30 JUNE 2016...... **.. * ...... -..-..-.... *..*...**...... ****.*. **...... 24 3.1.INDEPENDENT AUDITORS'OPINION...... 24

3.2. SPECIAL ACCOUNT AT BANQUE NATIONALE DU RWANDA: "REGIONAL RUSUMO FALLS POWERPLANT PROJECT- DEPOSIT BANK- NATIONAL BANK OF RWANDA - USD A/C N' 10000268228. IDA CREDIT 52950, 52960, H8720, H8730...... 26

3.3. SCHEDULE OF FUNDS WITHDRAWAL REQUESTS ...... 27 3.4. SCHEDULE OF DISBURSEMENTS ...... 29

4 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE ...... 30

5 REPORT TO THE PROJECT MANAGEMENT ON INTERNAL CONTROL...... 31

Fenroj Consell Moore Stephens Decembher 14, 2016 Regional Rusumo Falls Power plant Project- Final audit report

I. INTRODUCTION

1.1. PROJECT BACKGROUND 1.1.1. Background

The (NBI) was set up in 1999 by the countries bordering the Nile, except Eritrea, with a view to tapping the economic development potential of the Nile Basin. The member countries of NBI are: Burundi, Democratic Republic of Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, and .

The initiative is based on a common vision of "achieving viable socio-economic development through equitable harnessing of the common resources of the Nile Basin and fair distribution of profits generated". The Nile Basin Countries thus opted for implementation of this vision through a Strategic Action Plan integrating projects both at the basin and sub-region levels. In addition to this Plan, two subsidiary action programmes were put in place. These are (a) the Subsidiary Action Programme for the Nile Oriental region consisting of Egypt, Ethiopia and Sudan and (b) the Subsidiary Programme for the Nile Equatorial Lake countries of Burundi, RDC, Egypt, Kenya, Rwanda, Sudan, Tanzania and Uganda.

It is in this latter NBI context that NELSAP - Nile Equatorial Lakes Subsidiary Action Programme resolved to organize field solidarity action in order to combat poverty, promote economic growth and reverse the environmental degradation of the region. Thus, twelve multinational projects including hydro-electric energy and electrical interconnections were identified.

Fenraj Conell Moore Stephens Regional Rusunto Falls Power plant Project- Final audit report

The map of the Nile Equatorial Lake region is shown hereafter

CARTE DE LA ZONE

I I

Libye Reuve N9 Egypte I/

- rytr6e

Thd Soudan . A

I- Soudan Ke a e *ROA Etipia

.7- Somalie RDC Ouganda

CO Tanzanie Rwanda Burundi LEGENDE . Angola

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- Lim ile de r [a 6giondes pay s LE N ' tw i

IV'Io.? biclue

Fenraj Conseil Moore Stephens I Decemer2016Regional 14 Rusumno Falls Power plant Project- Final audit report

1.1.2. Regional Rusumo Hydro-power Project

The REGIONAL RUSUMO FALLS POWER-PLANT PROJECT (RRHP) is a Nile Basin Initiative key project prepared through NELSAP. Within this framework, the governments of Burundi, Rwanda and Tanzania have agreed to develop a Joint Development Project with the primary objective of generating hydroelectric power (80MW) that will be shared equitably among the three countries. The Rusumo Power Company Limited (RPCL) is the owner of the Rusumo Power Project. The company was created by the three countries to design, develop, construct, finance, insure, own,

operate and maintain the Rusumo Hydropower Facility. The RPCL has delegated to NELSAP CU i) the implementation of procurements and the provision of supervision services of the construction of the Generation Facility and (ii) the construction of the Generation Facility.

1.1.3. Project Highlights

The RRHP project has completed the preparation phase and is now moving to the implementation phase. The selection process of the contractors CP1 and CP2 is ongoing. After the pre-qualification of contractors and the preparation of the bidding documents, the bidding documents were submitted to pre-qualified contractors in December 2015. CP1 Pre-qualified firm submitted their bids on lt April 2016 and the evaluation process started immediately. The project submitted CP1 Evaluation report to the WB for No objection on 1 9 th April 2016. The Project received comments from the WB on 26th April 2016 and the review process is ongoing.

For the CP2, the bids were received on 3 ' May 2016 and the Evaluation report was submitted on 2 6th May to the WB for No objection. The Project received comments from the WB on 2 nd June and the review process is still ongoing.

The environmental and social risks of the Rusumo Falls Hydropower Project are evaluated as high and impacts as significant. Consequently, the Run of River (RoR) Environmental and Social Impacts Assessment (ESIA) and Resettlement Action Plan (RAP) were finalized in March 2013. From that period, the Safeguard team engaged in the RAP implementation and the major activity was the land acquisition and compensation. With the completion of land compensation, the Social team is now engaged in the Livelihood Restoration Program planning and Implementation. The livelihood restoration is part of the RAP and aims to enabling PAPs to fully restore their livelihoods.

Fenraj Consell Moore Stephens December 14, 2016 Regional Rusumo Falls Power plant Project- Final audit report

Other Social activities included the collection of additional baseline information to facilitate future PAPs livelihood monitoring, grievance redress monitoring and the development of Induced In- Migration Management plan.

On the environmental side, it was judged important to have additional environmental baseline information including the fish baseline survey, the spray zone biodiversity survey, the water quality baseline study and water hyacinth study. The baseline studies will provide information against which further results from monitoring will be compared to appreciate any change resulting from RFHP construction and operational activities. The biodiversity of the Rusumo spray zone and Fish and Fishery baseline survey were finalized and the water quality baseline study is ongoing. In addition, the project is planning to undertake water hyacinth management study to understand water hyacinth importance and mitigate its potential impacts on the power plant. The TORs for the water hyacinth study were developed, approved by the Bank and advertised to recruit a consultant to undertake the study.

1.1.4. Project Cost and Financing

The table below summarizes project costs in US$ million and the percentage contribution of IDA financing per component.. The main co-financiers for this project are the Africa Development Bank (AFDB), which will provide parallel financing for Component B (construction for the transmission lines).

Project Cost and Financing Project Components Project Cost IDA Percentage (US$ million) Financing (%) IDA (US$ million) Financing 1. Power Plant Complex Civil Works 155.0 155.0 100 2. Mechanical and Electrical works 126.0 126.0 100 3. Engineering, Administration and Supervision 37 37 100 Costs

4. Social and Environmental impact Mitigation 22 22 100 Costs

Total project Costs 468.6 340 73 Total financing Required 468.6 340 73

Fenroj Conell Moore Stephens[ Regional Rusumo Falls Power plant Project- Final audit report

The table below summarizes IDA financing per country.

Proposed IDA Amount of the Amount of the Percentage(%) of financing per Credit/Grant Credit/Grant Expenditure to be Country Country allocated allocated Financed (inclusive (SDR million) (Equivalent US$ of Taxes) million)

Burundi 75.60 113.3 100 Rwanda 75.60 113.3 100 Tanzania 75.40 113.3 100 Total 226.60 340.0

Fenraj Consell Moore Stephens Regional Rusumo Folls Power plant Project- Final audit report

1.1.5. Schedule of Disbursements as at 30/06/2016

E CREDIT REF. TOTAL IDA 52960 H872 ID 52950 H8730

Total Loan (US$) 113,000,000 113,300,000 56,650,000 56,650,000 339,600,000

Disbursements (US$) 4,423,986 4,177,445 3,012,961 2,112,911 13,727,303 Balance remaining

US$ 108,576,014 109,122,555 53,637,039 54,537,089 325,872,697 Disbursement ration 4% 4% 5% 4% 4%

Fenraj Conseil Moore Stephens December 14, 2016 Regional Rusumo Falls Power plant Project- Final audit report

1.2. AUDIT OBJECTIVES AND SCOPE

Le consortium Fenraj Conseil Moore Stephens Mauritius has been appointed by NELSAP-CU to conduct an external audit of the financial statements of the a Regional Rusumo Falls Hydropower Project " for its second year of operations covering the period 1" July 2015 to 30 June 2016.

> Overall objectives : express a professional opinion

* On the financial position of the Project as at 30 June 2016 and on its statements of expenditure;

* On the operation of its special account; * On NELSAP's compliance with the provisions of the grant agreement and the ADF rules and procedures;

) The audit will be carried out in accordance with International Standards of Auditing (ISA), and will include such tests and controls, as the auditors consider necessary under the circumstances. In conducting the audit, special attention should be paid to whether:

a) All the grant and counterpart funds have been used in accordance with the provisions of the grant agreement No. 10000268228 , Project No 075941, with due attention to economy and efficiency and only for the purposes for which the funds were provided; b) Goods and services have been procured in accordance with the relevant grant agreement;

c) All goods and services subject to the financing genuinely exist and are of good quality; this phase will require project site visits and evaluating the performance of the partners, including the Project Coordination Unit, consultants, suppliers of services and technical assistance, as well as enterprises responsible for carrying out the constructions, if applicable.

d) All necessary supporting documents, records and accounts have been well kept in respect of all program activities. These should reflect evident links between the accounting records, the reports submitted to the World Bank and the physical execution of the Project.

Fenrol Conseil Moore Stephens Regonal Rusumo Folls Power plant Project- Final audit report

e) The Bank accounts in the National Bank of Rwanda have been maintained in accordance with the provisions of the grant agreement;

f) The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) and give a true and fair view of the financial position of the project as at June 30, 2016 and of its receipts and expenditures for the period then ended.

g) The Project has been carried out in accordance with the provisions of the credit agreements, the rules and regulations of the Bank and the local legislation in force.

h) There are adequate and effective accounting and internal control systems to enable efficient and effective monitoring of expenditures, other financial transactions and safe custody of program's assets

> Moreover, the auditors will have to prepare reconciliation between amounts disclosed as a Disbursements received from the World Bank n in the financial statements and amounts registered as bank disbursements and present it in an appendix to the financial statements of the project. The reconciliation will have to specify the disbursement method (special account, statements of expenditure or direct payments).

Statements of expenditure

The auditors are also required to verify, in addition to the financial statements, all the statements of expenditure supporting the requests for disbursements. They have to carry out all tests of control and verification that they deem necessary for that purpose. They should examine those expenses with due diligence in order to determine whether they are eligible according to the grant agreements.

In addition to the main opinion on the financial statements, the annual report of the accounts of the study should include a separate paragraph on the accuracy and eligibility of the expenses giving rise to the disbursements as per the statements of expenditure, as well as on the level of reliability of the statements of expenditure used as a basis for the grant disbursements.

Fenral Conseil Moore Stephens e 1 2Regional Rusuma Falls Power plant Project- Final audit report

Special Account

We are also required to verify, in addition to the financial statements, movements of funds in the special account related to the project, and to form an opinion on whether the Bank procedures have been followed and on the closing balance of the special account at the year end. We will have to ascertain whether transactions effected during the period under review, as well as closing balances, were justified and correct, to verify whether the special account was managed and utilized in accordance with the Credits Agreements, and to ensure that controls applicable to that disbursement method are adequate.

The schedules relating to the special account operations, and the audit opinion thereon, should accompany the financial statements of the project.

Fenra]Conseil Moore Stephens December 14, 2016 Regional Rusumo Folls Power plant Project- Final audit report

1.3 AUDIT METHODOLOGY

Our audit was conducted in accordance with International Standards of Auditing (ISA) and included all the tests and controls that we deemed necessary under the circumstances,

The audit methodology that we adopted is summarized as follows:

* Obtain an understanding of the terms of reference * Knowledge of the project's business and environment * Evaluate the internal control procedures and systems of the project * Perform detailed examination of the financial statements * Wrap up sessions and compilation and submission of audit reports

Examination of financial statements included, inter alia:

a) Vouching of financial transactions to supporting documents b) Control of assets/iabilities recording and their evaluation c) Direct confirmation of third party balances at the end of the year including bank confirmations

d) Verifications of realisations through examination of periodic reports on the progress of the study.

This report contains the following:

- Report on the financial statements at 30 June 2016 - Report on the operations of the special account and funds withdrawals at 30 June 2016 - Report on the execution of the project at 30 June 2016 - Report to the Project Coordinator on internal controls.

Fenrai consel Moore Stephens December 14, 2016 Regional Rusumo Falls Power plant Project- Final audit report

2. REPORT ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

8 2.1. INDEPENDENT AUDITORS' OPINION

To the NELSAP Regional Coordinator Project Coordination Unit (PCU) Kigali, Rwanda

We have audited the accompanying financial statements of the a REGIONAL RUSUMO FALLS POWER-PLANT PROJECT) on pages 16 to 23 for the YEAR ended 30 June 2016, which have been prepared on the basis of accounting policies set out on page 18. This project is financed by the World Bank through Project N' P075941, CREDIT Agreements N' IDA H8720, IDA H8730, IDA 52960 and IDA 52950, signed in October 2013 between the World Bank and the respective Government of Tanzania, Burundi and Rwanda.

This report is strictly confidential and is addressed to the Project management and the World Bank. The firm cannot be held responsible for any unauthorized distribution or uses.

RESPECTIVE RESPONSIBILITIES OF THE PROJECT MANAGEMENT AND THE INDEPENDENT AUDITORS

The management of NELSAP-CU is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the project and for ensuring that the financial statements comply with the International Financial Reporting Standards and the World Bank grant and guidelines. They are also responsible for safeguarding the assets of the project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with International Standards of Auditing (ISA) issued by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance that the accounts are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

Fearaf Consel Moore Stephens December 14, 2016 Regional Rusumo Falls Power plant Project- Final audit report

it also includes assessing the accounting principles used and significant estimates made by project management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

OPINION

In our opinion, the financial statements from page 16 to 18 give a true and fair view of the financial position of the project as at 30 June 2016 and of its statement of receipts and payments for the period ended 30 June 2016, in conformity with International Public Sector Accounting Standards (IPSAS), and the World bank agreements and guidelines.

Kigall,4 D ember 2016

BUSG TH DharmraJ (Raj), Bsc (Econ)FCA Lead Partner

Fenraj Consell Moore Stephens D e 1Regional Rusuma Falls Power plant Project- Final audit report

2.2 STATEMENT OF MANAGEMENT RESPONSIBILITIES

Management is responsible for maintaining books of account and records of the RRHP, preparing reports on budget execution, managing revenues and expenditures, preparing, maintaining and coordinating the use of financial plans, managing the financial resources for the project effectively, efficiently and transparently, ensuring sound internal control systems in the Project and safeguarding the public property held by the project,

W I accept responsibility for the annual financial statements, which have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) issued International Federation of Accountants (IFAC) with the "modified cash basis" of accounting and using appropriate accounting policies supported by reasonable and prudent judgments and estimates as well as compliance with World bank credit guidelines and laws and regulations.

These financial statements have been extracted from the accounting records of Regional Rusumo Falls Hydropower plant Project (RRHP) and the information provided is accurate and complete in all material respects.

In our opinion, except for the matters mentioned on the financial statements give a true and fair view of the state of the financial affairs of RRHP. We further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, ensuring adequate systems of internal financial control and safeguarding the assets of RRHP.

------NELSAP Region a RPCL Managing Director

Date: Date:______

Fenraj Conseil Moore Stephens Regional Rusumo Falls Power plant Project- Final audit report

NELSAP

PROJECT < REGIONAL RUSUMO FALLS POWEPLANT PROJECTo 2.2. Statement of financial position AS AT 30 June 2016

Note 30/06/2016 30/06/2015 US$ US$ Assets Realizations Consultants Fees 2 5,930,117 2,574,891 Training and Workshop 3118,657 41,775 Goods 4 3,287,199 813,481 Operating Costs 5 868,138 346,588 10,204,110 3,776,735

Debtors and prepayment Cash at bank and in hand 6 3,535,114 632,075

3,535,114 632,075 TotalI assets 13,739,223 4,408810

Liabilities

World bank disbursements 7 13,727,303 4,399,042 Prequalification fees 11,920 6,615 Accruals Total 3,153 Liabilities 13,739,223 4,408,810

Approved by:

NELSARegionKE

Dt:DtCLMTION PRnGai NELSAP Region or I------af4;CRo1 At NUNII RPCL Managing Director

Date: 'Q o -A -~ Date:______

Fenrazj Conseil Moore Stephens[ Regional Rusumo Falls Power plant Project- Final audit report

NELSAP

PROJECT < REGIONAL RUSUMO FALLS POWER PLANT PROJECT>>

2.3. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30 JUNE 2016

Nate 30/06/2016 30/06/2015 us$ uss Receipts Fund transferred to special accounts 7 9,328,261 4,399,042 Other income - 9,328,261 4,399,042

Payments Consultants Fees 2 3,355,226 2,574,891 Training and Workshop 3 76,881 41,775 Goods 4 2,473,718 813,481 Operating Costs 5 521,550 346,588 6,427,374 3,776,735 Net Surplus 2,900,887 622,307 Analyzed as follows Carried out Cash at bank and in hand 6 3,535,114 632,075 Accruals (3,153) Other income (prequalification fees) (11,920) (6,615) Brought forward fund balance (622,307) 2,900,887 622,307 Variance

The financial statements above have been approved by:

NELSAP R gion I RPCL Managing Director

Date: Date: ZI- t24T2.a

Fenraj Consell Moore Stephens egional:Rusumo Falls Power plant Project- Final audit report

1 NELSAP

PROJECT <

30/06/2016 30/06/2015

I- Payments Consultants Fees 2 3,355,226 2,574,891 Training and Workshop 3 76,881 41,775 Goods 4 2,473,718 813,481 Operating Costs 5 521,550 346,588 6,427,374 3,776,735

Fenra Consel Moore Stephens December 14, 2016 Regional Rusuma Falls Power plant Project- Final audit report

2.5. NOTES TO THE FINANCIAL STATEMENTS - 30 JUNE 2016

Note 1. Accounting Policies

a. Basis of accounting

The financial statements of the project have been prepared in US Dollars under the historical cost convention and in accordance with applicable International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC).

The Financial Statements have been prepared on a modified cash basis of accounting, except where stated otherwise. The modified cash basis of accounting means financial transactions which are recognized in the books of account as follows:

1. Generally, transactions are recognized only at the time the associated cash flows take place 2. The expenditure on acquisition of fixed assets is not capitalized. Thus fixed assets are written-off on acquisition and the wear and tear (depreciation) of those assets is not recorded in the books of account; and 3. Prepaid expenditure/advances are written-off during the period of disbursement.

The recognized "modification" is as follows:

1. rnvoices for goods and services which are outstanding on the date of the closure of the fiscal year are recognized as liabilities for that specific fiscal year; 2. Loans and advances are recognized as assets/liabilities at the time of disbursement and related interest is recognized only when disbursed. Interest payable on public debt is accrued; and 3. Book balances denominated in foreign currencies are converted into the US Dollar at rates of exchange ruling on that date issued by the National bank of Rwanda. The associated exchange losses are recorded as recurrent expenditure while the exchange gains are recorded as recurrent revenue.

These financial statements constitute its second financials covering the year from 1V July 2015 to 30 June 2016,

Fenraj Consell Moore Stephens Regional Rusumo Falls Power plant Project- Final audit report

I b.Realisations

These represent expenditure incurred by the Project on the various categories of the grant agreement, namely: - Consultants' fees - Goods -Training and workshops

- Operating costs

They are accounted for as long term assets in the Statement of financial position.

c. World Bank Credit disbursements

U3 The World Bank credit disbursements constitute reimbursements to the special account in respect of expenses incurred by the project during a specific period or direct payments to the service providers. They are recognised in the accounts upon their transfers to the special account or direct settlement by World Bank.

Fenrqj Conseil Moore Stephens