Special Audit of seven State- Owned Enterprises in The Gambia Private and confidential FINAL – 19 August 2019 Ernst & Young LLP FINAL AUGUST 2019 Ernst & Young LLP Tel: +44 20 7951 2000 1 More London Place Fax: +44 20 7951 1345 London ey.com SE1 2AF Private and confidential Mr Mambury Njie 19 August 2019 The Honourable Minister of Finance and Economic Affairs The Projects Coordination Unit The Quadrangle Banjul The Gambia Dear Honourable Minister, Special Audit of seven State-Owned Enterprises in The Gambia We are pleased to attach our final report in respect of our Special Audit of seven State-Owned Enterprises (‘SOEs’) in The Gambia. This report has been prepared in accordance with the Terms of Reference provided to us under the IFMIS-AF2 RFP. The purpose of this report is to provide you with an update on the findings and recommendations arising from Phase 2 of our fieldwork, which has been performed in January and February 2019. This final report should be read in conjunction with our Interim Findings Report issued on December 21, 2018, and which detailed our findings in relation to our Phase 1 work focused on governance, processes and controls. This final version of the report incorporates our responses to the comments made by the SOE management teams in relation to our draft report issued in April 2019. Scope of our work In accordance with your instructions, we have performed the work set out in the engagement letter dated November 8, 2019. We have executed the Special Audit scope of work at the following seven Gambian SOEs: National Water and Electricity Company (‘NAWEC’), Gambia Telecommunications Company Limited (‘GAMTEL’), Gambia Telecommunications Cellular Company Limited (‘GAMCEL’), Social Security and Housing Finance Corporation (‘SSHFC’), Gambia Ports Authority (‘GPA’), Gambia National Petroleum Corporation (‘GNPC’) and the Gambian Civil Aviation Authority (‘GCAA’). The principal objectives of the Special Audit were set out in the Terms of Reference as follows: 1. Obtain an in-depth understanding of the SOEs’ financial performance and identify key financial issues, assess how they have impacted the SOEs’ operations and establish the financial position of the seven SOEs concerned as of December 31, 2017; 2. Conduct an internal controls review and evaluate the systems and controls in place at the SOEs and recommend ways that these can be strengthened to improve the operations of the SOEs and to prevent leakages and fraud; and 3. Assess the Corporate Governance structure / environment of the SOEs and the institutional oversight arrangements, determine to what extent they are conducive to sound and transparent operational and financial management practices, and make appropriate recommendations for improvements. EY ÷ i The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. A list of members' names is available for inspection at 1 More London Place, London SE1 2AF, the firm's principal place of business and registered office. FINAL AUGUST 2019 Our Interim Findings report issued on 21 December 21, 2018, focussed on objectives (2) and (3). The principal focus of this report is objective 1 of the drivers of financial performance and the financial position of the seven SOE as at 31 December 2017. Limitations on execution of scope of our work Our Special Audit has consisted primarily of analytical procedures applied to information and data made available to us, and explanations provided to us. We have not verified the authenticity or validity of the documentation made available to us. Our procedures have not intended, or sought, to express a statutory audit opinion on the information and, therefore, do not constitute a statutory audit and should not be relied on as such. Our Phase 2 report is based on our fieldwork enquiries made during the period November 17, 2018 to February 28, 2019. The receipt of further information may cause us to qualify or amend the findings reported herein. If, for any reason, we subsequently consider that the report requires further qualification or amendment, we will notify you. As we have detailed further in the Executive Summary and the sections covering each SOE, our work was, to a greater or lesser degree across the seven SOEs, significantly affected by restrictions in the availability of reconciling and supporting financial information, underlying transaction documentation and access to individuals who could satisfactorily respond to our enquiries. Wherever possible, we have sought to develop alternative procedures and obtain additional corroboration for our findings. The impact of these limitations is that in many cases we were unable to draw conclusions as to whether a key financial figure is fairly stated, or to report fully on the facts behind an event, transaction or accounting practice. Where this is the case, we have reported as such, and recommended further steps to establish to true position or fact pattern. Our substantive findings have been validated with the management at the SOEs. Whenever possible we have sought to quantify and / or identify specific areas for financial adjustments for management review. However, our observations translating to potential financial adjustments will need to be further discussed with the management of each SOE. Approach, work performed and information relied on This report details the work, findings and subsequent recommendations identified based on our review of each of SOE’s financial position as at December 31, 2017. Our work has been executed by six separate fieldwork teams working in parallel during the period January 7 to February 28, 2019. Our work was based on records, documentation and information provided to us by various departments within the SOEs, as well as information gathered through interviews and specific enquiries with employees. In summary, we performed the following procedures as part of our fieldwork: ► Analysed the Profit and Loss statement and Balance Sheet of each SOE for the period under consideration; ► Analysed relevant management reports, including management letters, Internal Audit reports and Board minutes; EY ÷ ii FINAL AUGUST 2019 ► Analysed supporting ledgers and client maintained schedules for significant items in each SOE’s Profit and Loss statement and Balance Sheet; ► Obtained relevant supporting documentation for transactions and areas of interest; and ► Held discussions with other SOE’s and Government departments to further develop our understanding of the unique situation facing each SOE. Limitations of use and distribution of the report The Special Audit is being carried out solely for the benefit of the Government of The Gambia, and this Report is addressed only to you. Except for the SOE management teams, the National Assembly, and the World Bank and its partners (including the International Monetary Fund), you should not show this Report to any third party without our prior written consent. This report (or any portion or summary of it) may not be quoted, referred to or shown to any other parties except as provided for in the Contract signed between EY LLP and the Ministry of Finance and Economic Affairs (‘MoFEA’). We accept no responsibility or liability to any person other than to our client, or to such party that we have agreed in writing to accept a duty of care in respect of this report, and accordingly if such other persons choose to rely upon any of the contents of this report they do so at their own risk. Structure of the report Section 1 of this report sets out the background to the forensic audit. In Section 2 we set out an Executive Summary of our findings in relation to the financial status of the SOEs as at 31 December 2017 the underlying root causes and our corresponding key recommended actions. Sections 3 to 9 set out our detailed findings and recommendations from our work at each of the SOEs. Our commitment to you in our proposal was to perform a robust Special Audit to provide an independent view of the current financial situation of the SOEs as an input to policy decisions. In delivering on this commitment, we have received considerable logistical and technical assistance from individuals within your Ministry and at the SOEs. The outcome is an independent Special Audit which has been enabled by Gambian colleagues whose leadership and efforts will underpin important structural reforms at the SOEs. We appreciated the opportunity to present on the outcome of the forensic audit to you and some of your team on March 6, 2019, and look forward to working with you and your team on the SoE reform agenda in the future. Yours sincerely Maryam Hussain Partner For and on behalf of Ernst & Young LLP EY ÷ iii Abbreviations Abbreviations Abbreviation Definition ACE African Coast to Europe Submarine Cable ADB Africa Development Bank AFCAC African Civil Aviation Authority AFD Agence Francaise de Development AGIB Arab Gambian Islamic Bank AMRC Asset Management & Recovery Corporation APRC Alliance for Patriotic Reorintation and Construction BAC Brikama Area Council BADEA Arab Bank for Economic Development in Africa BAG Banjul Accord Group BANDES Banco de Desarrollo Económico y Social de Venezuela BCC Banjul City Council BPI BP Investment Group FZE CBG Central Bank of The Gambia CDMA Code Division Multiple Access CFD Caisse Centrale De Cooperation Economique CFO Chief Financial Officer CIF Cost Insurance Freight DATRAC Department of Air Transport & Commerce DT DT Associates