Office of the Auditor-General

REPUBLIC OF KENYA Public Disclosure Authorized OFFICE OF THE AUDITOR-GENERAL

REPORT THE WORLD BANK RECEIVED IN CD'S OFFICE FReceived bY ...... Public Disclosure Authorized OF Action bY......

cc -

THE AUDITOR-GENERAL

ON Public Disclosure Authorized

THE FINANCIAL STATEMENTS OF ON NORTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT (NCTIP) CREDIT NO. 393014571KE

FOR THE YEAR ENDED Public Disclosure Authorized 30 JUNE 2016

KENYA AIRPORTS AUTHORITY 一不看× Kenya Airports Authority

NORTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT (NCTIP)

KENYA AIRPORTS AUTHORITY

PROJECT CREDIT NUMBER 3930-KE,

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 3 0, 2016

KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0TH JUNE 2016

CONTENTS PAGE

1. BOARD OF DIRECTORS AND COMPANY INFORMATION...... 1 -13

2. SENIOR MANAGEMENT TEAM ...... 14-18

3. COMPANY OBLECTIVE AND PROJECT INFORMATION...... 19-23

4. FUN D STA TEM EN T ...... 24

5. STATEMENT OF DIRECTORS RESPONSIBILITY...... 25

6. STATEMENT OF RECEIPTS AND PAYMENTS...... 26

7. STATEMENT OF FINANCIAL POSITION...... 27

8. STATEMENT OF CASH FLOW...... 28

9. NOTES TO THE FINANCIAL STATEMENTS...... 29-35. KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0Tn JUNE 2016

BOARD OF DIRECTORS AND COMPANY INFORMATION KEY ENTITY INFORMATION Background Information Kenya Airports Authority is a body corporate in Kenya formed under the Kenya Airports Authority Act Cap 395, and is domiciled in Kenya.

Principal Activities The principal activities of Kenya Airports Authority are:

* To construct, operate and maintain aerodromes and other related facilities; * To construct or maintain aerodromes on an agency basis on the request of any Government department: * To provide such other amenities or facilities for passengers and other persons making use of the services or the facilities provided by the Authority * Construct any other necessary or desirable works required for the purposes of the Authority; * Control the construction and use of prescribed aerodromes; * Carry on any business that may be necessary or desirable for the purposes of the Authority and act as an agent for the Government in the provision of any agreed functions; * Acquire, construct, manufacture, maintain or repair any works, plants or apparatus necessary or desirable for the purposes of the Authority; * Determine, impose and levy rates, charges, dues or fees for any services performed by the Authority, or for use by any person of the facilities provided by the Authority, or for the grant to any person of a licence, permit or certificate.

I KENYA AIRPORTS AUTHORITY PROJECT NOTHERN CORRIDOR TRANSPORT IMPROVEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 FOR THE YEAR ENDED 3 0 TH JUNE

KEY ENTITY INFORMATION (Continued)

Risk Management Policy Statement for the management of risk. This KAA to apply a consistent framework to It is the policy of strategies, processes and infrastructure incorporates the application of risk management support the Vision for risk management. risk management as The strategic imperative of the risk management framework is to develop determine the appetite for risk (choice and assist the Board and management and to a core capability to risk (economic and operating sensitivities) of strategies and actions) and tolerance communicate these throughout KAA.

that the KAA pursues a structured The purpose of the risk management policy is to ensure approach to management of risk.

Key Risk * Risk of Fire at airport and its environs * Airport security risks * Land grabbing and encroachment * Lack of robust performance management system * Over reliance on aeronautical revenue tenders * Risk associated with improperly structured airfield * Risk of power failure on runway and and newer airports within the region * Increased competition from recently upgraded * In adequate business continuity planning * Risk of unauthorized access to ICT system * Risk of delay in implementation of capital projects * Brand erosion due to media misrepresentation * Risk of litigations

2 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 *' JUNE 2016

KEY ENTITY INFORMATION (Continued) Directors The Directors who served the entity during the year were as follows:

1. Gen.Rtd.(Dr.) Julius W. Karangi Chairman -Appointed on 24 /06/2016

2. IG. (Rtd) David Kimaiyo, MGH, CBS Chairman -Retired on 24 /06/2016

3. Mr. Nicholas Bodo Ag. Managing Director- Appointed on 12/07/2016

4. Mr. Yatich Kangugo Ag. Managing Director - Ceased on 12/07/2016

5. Mr. Gabriel Comba Kivuti Director -Appointed on 4/03/2013 -Ceased 02/10/2015 6. Mr. Hassan Maalim Kulow Director -Appointed on 04/03/2013 -Ceased 02/10/2015 7. Capt. Bootsy Mutiso Director -Appointed on 21/04/2015

8. Ms. Susan Kiama Director -Appointed on 11/10/2015

9. Ms. Jacqueline Oyuyo Director -Appointed on 02/10/2015 -Ceased 31/05/2016

10. Mr. Isaac Newton Onyango Director -Appointed on 02/10/2015 -Ceased 31/05/2016

10. Mr. Kevin Kariuki Kihara Director -Appointed on 21/04/2015 -Ceased 31/05/2016

11. Mr. Mbatia Kimani Director -Appointed on 31/05/2016

12. Mr. William Ole Mayiani Director -Appointed on 31/05/2016

13. Mrs. Jeridah Bosibori Mbaka Director -Appointed on 31/05/2016

14. Mr. Irungu Nyakera Director Principal Secretary Ministry of Transport & Infrastructure KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 " JUNE 2016

KEY ENTITY INFORMATION (Continued) 15. Dr. Kamau Thugge, EBS Director Principal Secretary National Treasury

16. Amb.(DR) Monica K. Juma, EBS Director Principal Secretary Ministry of Interior & Coordination of National Government

17. Ms. Eunice Kigen Alternate Director National Treasury

18. Mr. Arthur A. Osiya Alternate Director Ministry of Interior & Coordination of National Government

19. Mr. Samwel Karanja Alternate Director Ministry of Transport and Infrastructure

20. Dr. Karanja Kibicho Director Principal Secretary Ministry of Interior & Coordination of National Government Corporation Secretary/General Counsel

CS Katherine N. Kisila Airport North Road P.O. Box 19001-00501 NAIROBI

Registered Office/Corporate Headquarter Kenya Airports Authority- Headquarters Airport North Road P.O. Box 19001-00501 NAIROBI Tel: 6611000/6612000/822111 Fax: 020-822078 Email: [email protected] Www: Kenyaairports.go.ke

BRANCH NETWORK Jomo Kenyatta International Airport P. 0. Box 19087-00501 NAIROBI Tel: 020-822111 Fax: 822930

4 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30"' JUNE 2016

KEY ENTITY INFORMATION (Continued) Moi International Airport P. O. Box 93904-80115 MOMBASA Tel: 041-3433211 Fax: 434434

Eldoret International Airport P. 0. Box 2323 ELDORET Tel: 053-63377/63844/5 Fax: 61337

Kisumu International Airport P. O. Box 13 KISUMU Tel: 057- 41976 Fax: 057-2021857

Lokichoggio Airport P. 0. Box 88 LOKICHOGIO Tel: 054-32266 Fax:054-32440

Wilson Airport P. 0. Box 19005 NAIROBI Tel: 501941/2/3 Fax: 020-6001496

Malindi Airport P. 0. Box 67 MALINDI Tel: 042-31201 Fax: 20806

Kitale Airstrip P. O. Box 1718 KITALE Tel: 054- 31017

5 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 3 0 TI JUNE 2016

KEY ENTITY INFORMATION (Continued) Wajir Airport P. O. Box 512 WAJIR Tel: 046-421019 Fax: 421362

Ukunda Airstrip P. O. Box 139 KWALE Tel: 040-3202126 Fax: 3203246

Manda Airstrip P. O. Box 167 LAMU Tel: 042-633018 Fax: 63218

Isiolo Airport P.O. Box 817 - 60300 ISIOLO

Nanyuki Airstrip P. 0. Box 1436- 10400 NANYUKI

Kabunde Airstrip HOMABAY

Principal Bankers

Barclays Bank of Kenya limited Enterprise Road Branch P. 0. Box 18060-Nairobi NAIROBI Tel: +254 -020-530700-1 Fax: 020-543388.

Citibank N.A Upper Hill Branch P.O Box 30711-00100 NAIROBI Tel: +254 -020-2754800 Fax: 020-2714810-1.

6 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30"' JUNE 2016

KEY ENTITY INFORMATION (Continued) Family Bank Limited Family Bank Towers-Corporate Branch P.O.Box 74145-00200 NAIROBI Tel: +254 -020-318173 Fax: 020-318174. Kenya Commercial Bank Moi Avenue Branch P.O.Box 48400-00 100 NAIROBI Tel: +254 327000, Fax: 2216405 National Bank of Kenya Limited Jomo Kenyatta International Branch P. 0. Box 19230-00501-GPO Nairobi, Kenya Tel: +254-020-827286, 0710-223623 Fax 020-827254 Standard Chartered Bank of Kenya limited Kenyatta Avenue Branch P.O. Box 30001-00100 NAIROBI. Tel: +254-020-329400 Fax 020-2213233 Equity Bank Limited Equity Centre, P.O Box 75104-00200 Nairobi, Kenya Tel: +254-020-226200 Fax 020-2737276 NIC Bank Limited NIC House, Masaba Road P.O Box 44599-00100 Nairobi, Kenya Tel: +254-020-2888217 Fax 020-2888350

Independent Auditor Auditor General Kenya National Audit Office Anniversary Towers P. 0. Box 30084-00 100 NAIROBI Tel: +254-20-335777 Fax: +254-20-330829

7 AIRPORTS AUTHORITY KENYA PROJECT CORRIDOR TRANSPORT IMPROVEMENT NORTHERN STATEMENTS ANNUAL REPORTS AND FINANCIAL FOR THE YEAR ENDED JUNE 30,2016

THE BOARD OF DIRECTORS Karangi Gen. Rtd. (Dr.) Julius Waweru Appointed on 24/06/2016 Security & Masters of Science (MSc) Degree in Risk Management Letters (Honoris Honorary Doctorate on Humane Causa) Degree of Commander Forces. Formerly Retired General of the Defence Chief of Defence Lieutenant General and Vice Kenya Air Force, Moi HQs, the Commander of the Air Force Logisitcs Air Base, and Kenya Staff College, Command, Commandant Defence and procurement for Incharge of training, doctrine the Golden Heart of KDF. Elder of the Order of the Burning Spear, Kenya, Chief of the Order of Legion of Merit.

CBS IG. (Rtd) David Kimaiyo, MGH, Appointed on 31 /12/2014 Ceased 24/06/2016

of & Criminal Justice, Master Master of Science Criminology Theology, Criminology & Bahof Theology,r Bachelor of Arts Criminal Administration.

Retired Inspector General National Police Service (NPS), Point Senior Deputy Secretary, Ministry of Formerly Director/Coordinator, Kenya National Focal Kenya Police Service. Coordinator, Kenya National Heritage and Culture. Director of Operationsh Establishment and Manpower. National Focal Point and Director of Inspections KENYA AIRPORTS AUTHORITY NORTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016

THE BOARD OF DIRECTORS (Continued)

Mr. Nicholas Bodo Ag. Managing Director-Appointed on 12/07/2016

Bachelor of Arts, Certified Public Secretary of Kenya, (CPS-K) Graduate Diploma in Aviation Management.

Currently pursuing a Master of Business Administration from Laikipia University. He is the Deputy Director, Air Transport in the Ministry of Transport and Infrastructure and also heads the Air Transport Division in the Ministry of Transport and Infrastructure. He was Acting Director General, Kenya Civil Aviation Authority from December, 2008 to July, 2009. He has been an Assistant Secretary III, Senior Assistant Secretary and Chief Air Transport Officer.

Mr. Yatich Kangugo Ag. Managing Director-Appointed on 1/04/2015 -Ceased 12/07/2016

MBA in Energy and Environment, Bachelor of Education, Post Graduate Diploma in Journalism.

Katherine N. Kisila, NDC (K) Corporation Secretary/General Counsel (Appointed on 9th July 2014)

Master of Arts in International Studies; Bachelor of Laws(LLB); Bachelor of Arts(Econ& Soc), Certified Public Secretary(CPS-K); Advocate of the High Court KENYA AIRPORTS AUTHORITY PROJECT NOTHERN CORRIDOR TRANSPORT IMPROVEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30n JUNE 2016

THE BOARD OF DIRECTORS (Continued) Amb.(DR) Monica K. Juma, EBS PS Ministry of Interior

of Secretary, State Department of Interior Amb. PhD Philosophy, Master of Arts (MA) and Bachelor of Arts (BA) and Certificate in Refugees. She is also currently a Senior Research Fellow at the Department of Political Science; Kenya's Ambassador Extra-Ordinary and Plenipotentiary to the Federal Democratic Republic of Ethiopia, the Representative Republic of Djibouti and Permanent to the African Union, Inter- Governmental Authority on Development (IGAD) and United Nations Economic Commission for Africa (UNECA).has served as the Executive Director at the Africa Institute of South Africa (AISA), Pretoria

Dr. Kaman Thugge, EBS Principal Secretary National Treasury

PhD Economics Master of Arts ( Economics), Bachelor of Arts (Economics), He has worked with the International Monetary Fund (IMF).

Mr. Irungu Nyakera PS Ministry of Transport & Infrastructure

Bsc, Management Science Engineering Systems Diploma, Management Information Bank Former Managing Director Equity Investment Africa) Frontier Regional Head(East & Southern Markets Fund Managers, Guarantco, NIC Capital Ltd and Citi Group in various capacities

10 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30" JUNE 2016

THE BOARD OF DIRECTORS (Continued)

Capt. Bootsy Mutiso Director

Level 4 Diploma in Business & Professional Administration City of Guilds Institute of London

Currently Managing Director, Flex Air Charters. Member of the Institute of Leadership & Management of England Currently pursuing a BA (Hons) in Business Management - University of London (UK)

Mr. Mbatia Kimani Director

MBA Bachelor of Commerce CPA (K)

Currently the Director of Orion Lubricants (Caltex Tanzania). He has long and wide experience in the accounting and information systems field having worked as a Finance Director at ASSA ABLOY, Head of Finance at Kenya Airways, Group Financial Controller at Best Foods Unilever Group, Chief Accountant at Coca Cola, Management Accountant at Unga Ltd and Chief Internal Auditor KCC Ltd

Mrs. Jeridah Bosibori Mbaka Director

Master of Business Administration Higher Diploma in HR Management Bachelor of Arts Member of the Institute of Human Resource Management

She has a wide working knowledge of Human Resource having worked in several institutions including NSF, Plan International - Kenya and Directorate of Personnel Management

11 KENYA AIRPORTS AUTHORITY PROJECT NOTHERN CORRIDOR TRANSPORT IMPROVEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 " JUNE 2016

THE BOARD OF DIRECTORS (Continued) Mr. William Ole Mayiani Director

Bachelor of Arts - Business Economics He has vast Currently a Director at Skyrealtors Limited. Shell Kenya management experience having worked at lphone Ltd, Total Kenya Ltd, Raiser Resource Group, Global Ltd, Marathon Marketing Ltd and Nairobi City Council

Mrs. Susan Kiama Director & Post Graduate Diploma in Personnel Management Industrial Relations Bachelor of Arts( Business Administration & Economics) of Personnel & Fellow of the Chartered Institute of Human Development UK, Fellow of the Institute of World at Resource Management- Kenya, Member Human Resource Work-USA, Member of Society for of Kenya Institute of Management- USA, member Management a vast working Green Apples Consulting Ltd. She has Currently Managing Consultant with Three worked as Managing Director at Resource Management Services, having of Human knowledge of Human Resource Officer at Safaricom Ltd, Head 21 Century East Africa Ltd, Chief Human Consultant with Deloitte & Touche Consulting-Kenya, Resource at Citibank NA-Kenya, Principal and Tetra Pak-UK Mr. Arthur A. Osiya Alternate Director, Ministry of Interior

12 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

THE BOARD OF DIRECTORS (Continued)

Ms. Eunice Kigen Alternate Director, National Treasury

Executive MBA Bachelor of Commerce (Accounting option) CPA (K). She is currently the Senior Deputy Director of Budgets at National Treasury

13 KENYA AIRPORTS AUTHORITY PROJECT NOTHERN CORRIDOR TRANSPORT IMPROVEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30'" JUNE 2016

SENIOR MANAGEMENT TEAM

Mr. Nicholas Bodo 12/07/2016 Ag. Managing Director-Appointed on

Bachelor of Arts, Certified Public Secretary oi Kenya, (CPS-K) Graduate Diploma in Aviation Management.

Currently pursuing a Master of Business Administration from Laikipia University. He is the Deputy Director, Air and Transport in the Ministry of Transport Division Infrastructure and also heads the Air Transport Civil in the Ministry of Transport and Infrastructure. He was Acting Director General, Kenya He has been an Assistant Secretary Authority from December, 2008 to July, 2009. Aviation Air Transport Officer. III, Senior Assistant Secretary and Chief

Mr. Yatich Kangugo 12/07/2016 Ag. Managing Director-Ceased on

MBA in Energy and Environment Bachelor of Education Post Graduate Diploma in Journalism

Patrick Chonde Ag. General Manager, Finance

MBA in Finance, Bachelor of Commerce, Accounting Option, Certified Public Accountant of Kenya (CPA-K), of Kenya. Member of Institute of Certified Public Accountants International Airport Professional (IAP).

14 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0 " JUNE 2016

SENIOR MANAGEMENT TEAM (Continued)

Samson Kimilu General Manager Risk Management & Internal Audit

MBA in Strategic Management and Finance Bachelor of Science in Business Administration, Certified Public Accountant of Kenya (CPA-K), International Airport Professional (IAP), Member of Institute of Certified Public Accountants of Kenya.

Katherine N. Kisila, NDC (K) Corporation Secretary/General Counsel

Master of Arts , International Studies; Bachelor of Law (LLB); Bachelor of Arts(Econ& Soc), Certified Public Secretary of Kenya (CPS-K), Advocate of the High Court, Commissioner for Oaths Notary Public.

Kasaine Ole Pertet General Manager, Information and Communication Technology

MBA, Finance, Bachelor's Degree in Mathematics, Certified Public Accountant of Kenya (CPA-K), Member of Institute of Certified Public Accountants of Kenya.

15 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0'm JUNE 2016

SENIOR MANAGEMENT TEAM (Continued)

Henry Ogoye Head of Corporate Planning

MBA in Finance and MA(Economics), Bachelor of Arts (Maths and Economics), Diploma Financial Management.

Juliet Otieno Ag. General Manager, H RD

Bachelor of Arts Degree, Technology and Management, Postgraduate Diploma Human Resource Management, Diploma in Counselling, Member of the Institute of Human Resource Management, Associate member, Kenya Institute of Management.

Mr. Nelson Njiri General Manager, Security & Safety Services -Appointed on 27/04/2016

Studies Masters of Security Management and Police -KU Studies - BA - Community Safety and Social Legal UNISA

16 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0TH JUNE 2016

SENIOR MANAGEMENT TEAM (Continued)

Eric Kiraithe General Manager, Security & Safety Services Ceased on 30/05/2016

MBA in Strategic Management, Bachelor of Arts.

Eng. David Kaman Ag. GGneral Manager, Projects & Engineering Services

Bachelor's Degree in Civil Engineering Postgraduate qualification in Airport Engineering Professional Engineer - Engineers Board of Kenya Corporate Member - Institution of Engineers of Kenya

Margaret Muraya Ag.General Manager, Procurement & Logistics

Bachelor's Degree in Economics and Sociology, Post Graduate Diploma in Supplies Management.

17 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 3 0 TH JUNE 2016

SENIOR MANAGEMENT TEAM (Continued)

William Simba Ag. General Manager, Marketing & Business Development

Bachelor of Laws (LLB) Postgraduate Diploma (KSL) Bachelor of Arts Advocate of the High Court

18 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 0 " JUNE 2016

PROJECT INFORMATION AND OVERALL PERFORMANCE Project Name: Northern Corridor Transport Improvement Project (NCTIP). Objective: The key objective of the project is to enhance aviation safety and security to meet international standards. Address: The address of registered office is:

Kenya Airports Authority- Ilicadquarters Telephone: (254) 020 6611000 E-mail: [email protected] Website: www.kaa.go.ke

PROJECT PERFORMANCE The Kenya Airports Authority (KAA) component of the project is part of the IDA financed Northern Corridor Transport Improvement Project No. P082615 Credit No 3930 KE that the Government of Kenya signed in June 2004 for the purpose of financing development projects in the then Roads & Transport ministries. KAA is one of the implementing agencies in the Aviation sector. Development Credit Agreement (DCA) was signed between KAA and the Government of Kenya on 24t'August 2004 and was amended by the Amended Financing Agreement dated 8th May 2009. The loan attracts an interest of 5% p.a payable on 15"' April and 15th October each year. The repayment of the principal amount of the loan commenced on April 2013 to be paid over a period of 23 years.

COMPONENTS The Kenya Airports Authority project components comprise the following: - a) Civil works b) Goods, Equipment & Vehicles c) Consultancy and training a) CIVIL WORKS

1. Expansion of passenger terminal facilities & associated works at Jomo Kenyatta International Airport The main purpose of this project is to improve on safety and security, increase capacity for passenger handling and accommodate the projected needs to the year 2024, with the expansion of passenger facilities. Construction work is to be implemented in three major work packages as follows:

Work package 1: This project, fully funded by Kenya Airports Authority is now complete and functional. The project involved construction of apron and associated taxiways and airside roads. The scope was to; * Increase parking space from 200,000 sq. meters to 300,000 sq. meters to cater for 37 stands from the existing 20 stands. * Increase maneuvering area-by construction of two additional taxiways.

19 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 ' JUNE 2016

PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued)

Work package 2: This is to cover the construction of Terminal IA (Formerly T4) building and the multi-storey car park. It will increase the terminal building space by 26,000 sq. meters. Parking space will also increase by construction of a three (3) storey-car park to accommodate a total of 1,500 cars and grade parking for 400 cars.

The contract was signed on 24th May 2010 and Works commenced on 31st August 2010 for a construction period of 21 months. The building works were substantially complete and handed over on the 12t" August 2014. The Equipment works progress is at various stages of completion but overall weighted average is 97%. Pending works are mainly on snags on specialized supply contracts.

Package 3b: The scope includes renovation, modification and expansion works on the ring building which include Terminal IB, IC and ID. The initial scope included new construction of infill and separation corridor with total new floor area of about 23,200sq.m and renovation of floor area of about 26,600sq.m. M/s Egis (Technical Assistance Consultant) was commissioned to undertake the re-design to provide a pre-concept for the minimal capacity requirement provided. The consultant presented an optimal pre-concept option to Kenya Airports Authority which was again reviewed after a joint Bank mission in March 2012. Implementation of this project has been put on hold due to the following: * Cash flow constraints cannot allow immediate implementation. * The ongoing Greenfield project to be completed first inorder to minimize disruption of operations. The issues were discussed with European Investment Bank during their joint mission of 21St May 2014. However, following consultations with the Ministry and the World Bank, bid was sent out seeking design consultancy for remodeling. A consultant has been identified and contract signing is awaiting budgetary provision by the parent Ministry.

2. Perimeter Fencing. The World Bank is funding procurement of materials for fencing of the following airports: i) Kisumu Airport: Security fencing is being carried out as part of the Kisumu Airport expansion project. The materials for additional security fence strengthening (razor wire) are to be purchased with World Bank funding. The contract has been awarded and the supply is expected to be delivered to the site by October 2015. ii) Moi International Airport: The World Bank is funding procurement of materials under this item. Award was made for the 4 lots and works are ongoing. The four lots were categorized as follows: * Lot 1: Fencing material * Lot 2: Supply of Sand * Lot 3: Supply of cement * Lot 4: Labour All contracts have been signed and implementation is in progress.

20 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2016

PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued)

consults iii) Wilson Airport: The World Bank had advised that Kenya Airports Authority stakeholders on the project. Upon stakeholders' consultation, Kenya Airports Authority responded to the bank on the issues raised by stakeholders. Kenya Airports Authority is undertaking the fencing of Wilson Airport to deter encroachment using own funds.

3. Upgrading of facilities at Kisumu Airport; Runway, Taxiway, Apron, new Terminal building and associated works The scope for this component included construction of a new one storey terminal building (5,400sqm) and new grade vehicle parking (3,500sqm), reconstruction and extension of existing runway, construction of a new aircraft parking apron and linking taxiways, installation of new airfield lighting including approach lights, drainage and other associated infrastructure. Works were commissioned and facilities opened for use on 9 t September 2011 for phase 1. Phase 2 was divided into two stages: * Stage 1: Construction of cargo apron and parallel taxiway. This stage was completed in 2 7 th February 2014. * Stage 2: the scope involves runway strengthening and widening for which the authority has negotiated with the contractor on the contractual terms.

4. Renovation and upgrading of security at Wilson Airport. KAA has removed some of the detailed design scope from the consultancy contract taking into consideration allowable threshold for variation. Consultations were still ongoing with stakeholders regarding the location of the proposed terminal building.

b) GOODS, EQUIPMENT AND VEHICLES

1. Security screening equipment for Jomo Kenyatta International Airport, Moi International Airport, Wilson and Kisumu Airports. This component includes supply and installation of security equipment listed as follows:- * Hand held metal detectors, (Type MH-6) * Walk through metal detectors, (Type Multizone) * X-ray inspection units (Type-Hi-scan 7555i and Hi-scan 100100T) * Mobile X-ray machine inspection unit (Type SCANVAN 8585) * X-ray maintenance tool kit and X-ray meter and mandatory spares. These have already been procured. Their use is to enhance security and safety of the airports and its users.

21 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30'" JUNE 2016

PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued)

2. Flight Information and Public Display System (FIDS) at Jomo Kenyatta and Moi International Airports. The scope for JKIA was carried out as supply and install contract for information and check- in systems under the Information Technology Systems (ITS). Funds under this item were to be used only for MIA. The tender documents were prepared and forwarded to WB for clearance to invite bids. KAA received and acted on bank comments and submission was done for clearance to invite bids. KAA received comments from the bank on the 8th April 2013 and resubmitted on 5th May 2013. KAA received no objection from bank to advertise on the 19th June 2013. Bids were issued on the 15th August 2013 to close on 6th September 2013. An extension of 42 days was allowed in accordance with the bank procedures. However, during the mission of 17th December 2014, it was agreed that KAA to request re-allocation to other components.

3. Fire Fighting Equipment Six Fire vehicles were delivered in 2008 to help enhance fire and rescue cover in four airports in line with the ICAO minimum requirements. The fire tenders supplied are: * Four new airport crash foam tenders and * Two new rapid intervention vehicles.

4. Security Perimeter Lighting, detection system, communication equipment, vehicles and support of four emergency operation centers at Jomo Kenyatta International Airport, Moi International Airport, Wilson & Kisumu Airports The purpose for the above components was to enhance security surveillance at the Airports. The scope included provision of CCTV, perimeter intrusion detection system, access control system, communication, radios and support for Emergency Operation Centers. Kenya Airports Authority with concurrence of the World Bank has restructured this component in order to fund Package 2 of Jomo Kenyatta international Airport.

c) CONSULTANCY AND TRAINING 1. Update Feasibility and Design for upgrading facilities at Kisumu & Wilson Airports and improvement of Jomo Kenyatta International Airport's runway. Overall, the consultancy services involved feasibility study for upgrading of facilities at Kisumu Airport, recommendation for improvement of runway at Jomo Kenyatta International Airport and upgrading of facilities at Wilson Airport. The status is as explained below: a) Kisumu Airport. The purpose of this consultancy was to conduct feasibility study, preliminary designs and for depending on viability of proposed project, detailed design and supervision of construction cargo traffic. upgrading of facilities to accommodate regional passenger traffic and International The supervision for works services is completed.

22 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 3011 JUNE 2016

PROJECT INFORMATION AND OVERALL PERFORMANCE (Continued) b) Wilson Airport The purpose of this consultancy was to review on security and other airport operational constraints, determining and recommending options for upgrading of facilities to improve on security control and efficiency of operations. The Consultancy Services also covered designs and supervision of construction/installation of recommended upgrading works. However, in view of limited funding for the construction works, Kenya Airports Authority is considering removing the detailed design scope from the consultancy contract in line with prioritization of projects. c) Jomo Kenyatta International Airport (Runway) The purpose of this consultancy was carry out a study on the condition of runway pavement for purposes of improvement and upgrading to Precision Approach Category II Instrument Landing System. It also involved study on runway/taxiway capacity improvement requirements and recommending options including feasibility study and design for rehabilitation/upgrading of airport pavements and access roads to the Airport. Depending on the findings of the study, the consultant is to carry out detailed design and assist in the preparation of the related tender documents. Detailed design and tender documentation has already been completed. Works commenced on 23rd June 2015 and completion of phase I runway and Cargo apron repair is expected in December 2015.

2. Works supervision for JKIA Terminal 1B to ID (formerly unit 1-3) The Supervision consultancy is in progress for package 2 construction works as detailed above.

3. Training The training component was to enhance capacity building in project management, security operations, engineering services, procurement and financial management. Training was successfully carried out on Project Implementation Teams, locally and overseas.

23 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30'"JUNE 2016

FUNDING SUMMARY

The Project is for duration of 11 years from 2004 to 2015 with donor commitment of an approved budget of US$ 34.82 equivalent to Kshs 3.0 billion as highlighted in the table below: Below is the funding summary: Source of funds Donor Amount received as at Undrawn balance as

Commitment 3 0 th June 2015 at 3 0 th June 2015

In "millions" Donor Kshs Donor Kshs Donor Kshs currency currency currenc US$ US$ y US$ (A) (A') (B) (B') (A)-(B) (A')-(B')

(i) Loan The World Bank 34.82 3,051 34.00 2,857 0.82 194 (ii) Counterpart funds KAA 7.1 622 0.26 25.8 6.84 596 Total 41.92 3,673 34.26 2,883.0 7.66 790

24 KENYA AIRPORTS AUTHORITY NOTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 3 0 TH JUNE 2016

STATEMENT OF DIRECTORS' RESPONSIBILITIES The Board of Directors of the Kenya Airports Authority are responsible for the preparation and presentation of the Project's financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year ended on June 30, 2016. This responsibility includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Board of Directors of the Kenya Airports Authority accept responsibility for the Project's financial statements, which have been prepared in accordance with the Cash Basis method of Accounting under the International Public Sector Accounting Standard (IPSAS). However Kenya Airports Authority financial statements are prepared using appropriate accounting policies in accordance with International Financial Reporting Standards. The Board of Directors of the Kenya Airports Authority are of the opinion that the Project's financial statements give a true and fair view of the state of Project's transactions during the financial year ended June 30, 2016, and of the Project's financial position as at.that date. The Board of Directors for Kenya Airports Authority further confirm the completeness of the accounting records maintained for the Project, which have been relied upon in the preparation of the Project financial statements as well as the adequacy of the systems of internal financial control. The Board of Directors of Kenya Airports Authority confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that Project funds received during the financial year under audit were used for the eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by the Board of Directors on 20 6 and signed by them.

GEN (RTD) DR. JULIUS KARANGI, EGH, CBS, DCO, LOM NICHOLAS BODO CHAIRMAN Ag. MANAGING DIRECTOR

25 REPUBLIC OF KENYA

Telephone: +254-20-342330 P.O. Box 30084-00100 Fax: +254-20-311482 NAIROBI E-mail: [email protected] Website: www.kenao.go.ke

OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON NORTHERN CORRIDOR TRANSPORT IMPROVEMENT PROJECT (NCTIP) - CREDIT NO. 393014571KE FOR THE YEAR ENDED 30 JUNE 2016 - KENYA AIRPORTS AUTHORITY

REPORT ON THE FINANCIAL STATEMENTS I have audited the accompanying financial statements of Northern Corridor Transport Improvement Project (NCTIP) Credit No. 3930/4571 KE, Kenya Airports Authority for the year ended 30 June 2016, set out on pages 26 to 34 which comprise the statement of financial assets and liabilities as at 30 June 2016, the statement of receipts and payments, the statement of cash flows, the statement of budget and actual amounts for the year then ended, and a summary of significant accounting policies and other explanatory information in accordance with provisions of Article 229 of the Constitution of Kenya and Section 35 of the Public Audit Act, 2015 and the Financing Agreement dated 8 May 2009 between the International Development Association (IDA) and the Republic of Kenya. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit.

Management's Responsibility for the Financial Statements

Management of Kenya Airports Authority is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The management is also responsible for the submission of the financial statements to the ,Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015.

Auditor- General's Responsibility

My responsibility is to express an opinion on the financial statements based on the audit and report in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. The audit was conducted in accordance with the International Standards for Supreme Audit Institutions. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance'about whether the financial statements are free from material misstatement.

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

Report of The Auditor-General on the Financial Statements on Northern Corridor Transport Improvement Proiect?(NCTIP)-CreditNo.3930/4571KEfor the year ended 30 June 2016- Kenya Airport Authority 1

Pmrna,tinur Armuntailit in~I, the Publlir .'otor auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

I believe the audit evidence obtained is sufficient and appropriate to provide a basis for my qualified audit opinion.

Basis for Qualified Opinion

Construction of Terminal IA (Formerly Terminal 4) Building, Parking Garage, Grade Parking and Other Associated Works

As reported in the previous year, the contract for Construction of Terminal IA (formerly 4) building, Parking garage, Grade parking and other associated works was awarded to a contractor at a contract sum of 4,147,677,412.88 revised to Kshs.7,174,302,556.26 with an estimated completion dates of 30 June 2011, 30 November 2011 and 31 May 2012 for Grade Parking, Parking garage and Terminal IA (Formerly 4) building respectively. However, although the Grade Parking, Parking garage and Terminal IA building were taken over by employer (KAA) on 25 September 2012, 9 August 2013 and 12 August 2014 respectively, outstanding works for Architectural, Mechanical, electrical as well as general works as detailed in the list dated 12 August 2014 by the Consultant remained outstanding and were to be completed during defects liability period which ended on 13 August 2015. A review of the project in 2015/2016 has indicated that although the defects liability period ended on 13 August 2015, there were still outstanding general works which the contractor had not addressed.

Qualified Opinion

In my opinion, except for the effect of the matters described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the project as at 30 June 2016, and of its financial performance and its cash flows for the year then ended, in accordance with International Public Sector Accounting Standards (Cash Basis) and conform to the Loan Agreement.

In addition, the Special Account Statement presents fairly, the special account transactions and the ending balance has abeen reconciled with the Books of account.

Report of The Auditor-General on the Financial Statements on Northern Corridor Transport Improvement Project(NCTIP)-Credit No.3930/4571KEfor the year ended 30 June 2016- Kenya Airport Authority REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

As required by the International Development Association, I report based on my audit that:- i. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit; and,

ii. In my opinion, proper books of account have been kept by the Project, so far as appears from my examination of those books; and,

iii. The project's statement of financial position is in agreement with the books of account.

FCPA Edward R.O. Ouko, CBS AUDITOR-GENERAL

Nairobi

29 December 2016

Report of The Auditor-Generalon the FinancialStatements on Northern Corridor TransportImprovement Project (NCTIP) - Credit No. 3930/4571KE for the year ended 30 June 2016- Kenya Airports Authority 3