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LOCAL DEVELOPMENT FUND (LDF) Public Disclosure Authorized Public Disclosure Authorized Government of the Republic of Malawi LOCAL DEVELOPMENT FUND (LDF) Public Disclosure Authorized FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 FOURTH MALA WI SOCIAL ACTION FUND (MASAF 4) - STRENGTHENING SAFETY NET SYSTEMS PROJECT CREDIT 5343 MW Public Disclosure Authorized Public Disclosure Authorized Nati onal Audit Office PO Box 30045 Lilongwe 3 LOCAL DEVELOPMENT FUND (LDF) FOURTH MALA WI SOCIAL ACTION FUND (MASAF 4) -STRENGTHENING SAFETY NET SYSTEMS PROJECT-CREDIT 5343 MW Table of Contents CONTENT PAGE EXECUTIVE DIRECTOR' S EXECUTIVE DIRECTOR' S REPORT FOR YEAR ENDED 30TH JUNE 2017 ... ...... ............. ...... ... ..... ... ... ..... ........ .... .............. ........ ...... ..... ..... .. 3 EXECUTIVE DIRECTOR'S REPORT FOR YEAR ENDED 30 TH JUNE 2017 .. .... continued ... .... ... ... ......... .. ....... .. ................ .. .... ..... .. ............ 4 EXECUTIVE DIRECTOR' S REPORT FOR YEAR ENDED 30TH JUNE 2017 .... Continued ... ... .... .... .. .. ........... ... ...... ... ..... ............ .. .... .... ......... 5 EXECUTIVE DIRECTOR' S REPORT FOR YEAR ENDED 30 TH JUNE 2017 .... Continued ... ... .. ... ..... .... .. .. ............. .......................... .... ..... .. ... 6 AUDITOR GENERAL' S REPORT ... ..... ... .. .... .......... ........... ..... .......... ...... ....... .... .... ...... ......... ..... .. ........ 8 STATEMENT OF FINANCIAL POSITION AS AT 30 TH JUNE 2017 .... .... ..... ...... .... ..... .. ........ ... ......... ... ... ........ ...... ....... .... ... .... ... ..... ........ ...... ........ .. 11 RECEIPTS AND PAYMENT ACCOUNT FOR THE DESIGNATED ACCOUNT FOR THE YEAR ENDED 30TH JUNE 2017 .... ............ .... .. ... ..... .. ...... ... .... ...... ... ..... ...... .... .. ..... ..... ....... 13 NOTES TO THE FINANCIAL STA TEMENTS FOR THE YEAR 30 TH JUNE 2017 .... .. .. .... .... .. ... .... ..... .. .......... ......... ..... ... ...... ...... .... ..... .............. .. .. ..... 14 NOTES TO THE FINANCIAL STATEMENTS CONT'D .. ... .......... .. .... ... ................. .. ............ .. .. ....... 16 NOTES TO THE FINANCIAL STATEMENTS CONT'D ....... .............. ........ ...... .... .. ........... ... .. ....... .. 17 NOTES TO THE FINANCIAL STATEMENTS CONT'D ..... ... ... ............................... .. ........... .......... 18 ANNEX II ....... .... ...... .... ... .. .... ...... ..... ....... ..... ... ... .... ... ......... ...... ..... .. .............. ......... ..... .......... ... .. .... .. ..... 22 LOCAL DEVELOPMENT FUND (LDF) FOURTH MALAWI SOCIAL ACTION FUND (MASAF 4) -STRENGTHENING SAFETY NET SYSTEMS PROJECT-CREDIT 5343 MW EXECUTIVE DIRECTOR'S REPORT FOR YEAR ENDED 30TH JUNE 2017 1. Establishment of the Local Development Fund (LDF) - LDF Areas of Operation The Government established the LDF to support and strengthen decentralisation process in Malawi with the overall objective to "empower local communities to take part in decision­ making processes through improved local governance and development management, in order to reduce poverty and improve service delivery. " At the National Level, the Government established a Technical Support Team (TST) of experts responsible for the day to day operations of projects financing the LDF. The TST assists in (a) the development of operational procedures, (b) monitoring of project implementation and performance, and providing assistance to Ministries and Local Authorities involved in the implementation of the LDF. Responsible for policy guidance and approval of planning figures is the LDF Steering Committee with the following memberships: Secretary to the Treasury, Principal Secretary for Public Sector Reform, Secretary for Development Planning and Cooperation, Secretary for Local Government and Rural Development, representative of Council for Non­ Governmental Organisations, Executive Secretary of National Local Government Finance Committee. The Steering Committee is supported by the National Technical Advisory Committee. At the Local Assembly level, the LDF has four funding windows maintained as budget lines under the control of the District Commissioner:- • Community Window for micro-projects requested and managed by communities using structures at the Village Development Committee level and finance services for strengthening economic growth; • Local Authority Window to finance investments too large for direct community management; • Urban Window for developing and improving economic services for private investments and especially for low income groups and stimulate economic growth and private investments; and • Performance Window to finance activities needed to address capacity constraints at Village, Area Development, and Local Authority development structures. 2 Funding Sources During the year to 30th June 2017, World Bank provided funding under MASAF IV Original Financing through credit number 5343 MW which became effective on 14th August 2014 and through Credit no 5610-MW and Grant D045 under Additional Financing signed on 13th August 2015. LOCAL DEVELOPMENT FUND (LDF) FOURTH MALA WI SOCIAL ACTION FUND (MASAF 4) -STRENGTHENING SAFETY NET SYSTEMS PROJECT-CREDIT 5343 MW EXECUTIVE DIRECTOR'S REPORT FOR YEAR ENDED 30TH JUNE 2017 ...... continued MASAF IV Original Financing Through Credit no 5343-MW under Original Financing, the IDA has provided SDR21.4m­ Special Drawing Rights (US$30.4m) to support implementation of Strengthening Safety Net Systems Project. MASAF IV Additional Financing Through Credit no 5610-MW and Grant D045 under Additional Financing signed on 18th August 2015, the IDA has provided SDR52.8m (US$75million) to support implementation of Strengthening Safety Net Systems Project. The programme will run up to 30th June 2018. The Project Development Objective (PDO) of the proposed project is "to strengthen Malawi's social safety net delivery systems and coordination across programs." The PDO would be achieved through the strengthening of a Social Safety Nets system, which would increase productive assets and reduce the impact of shocks and vulnerability of the poor in Malawi and improve coverage of targeted benefits. The overarching goal of the PDO is to reduce vulnerability. In the PDO, strengthening delivery systems would mean providing coverage and support for the poor and vulnerable households for the purpose of improving incomes, resilience, assets and ability to manage risks. This would be assessed in terms of (i) targeting and coverage of benefits, (ii) adequacy of the benefit in terms of ability of households to invest in household level assets and human capital, and (iii) capacity of involved institutions to manage the program efficiently so that the costs of delivery are within established norms for effective safety nets. The Project activities are supported through three Components and these are: (a) Productive Safety Nets, comprising of three subcomponents: Productive Public Works Programme; Livelihoods and Skills Development; and Social Cash Transfer; (b) Systems and Capacity Building; and (c) Project Management. These statements have been prepared to reflect the activities and position of MASAF IV Original Financing, Strengthening Safety Net Systems Project, Credit no 5343-MW for the period ended 30th June 2017. 3.0 PROGRAMME ACHIEVEMENTS 3.1 Productive Safety nets component (a) Productive Public Works A total of 985,635 households (representing 100% of End of Project target) have been reached with Productive Public Works Programmed cash transfers of which 450,000 EXECUTIVE DIRECTOR'S REPORT FOR YEAR ENDED 30TH JUNE 2017 .... Continued households are repeated across each of the cycles since June 2016 to enable the beneficiary livelihoods achieve enough resilience against shocks. In the year under review, an additional 450,000 households had been reached in 2 cycles through the Emergency Public Works Programme. A total of MK15.6billion (USD21.5million) has been transferred to councils for implementation of PWP during the year under review. (b) Livelihoods and skills development As at the end of June 2017, a total of 5,254 groups were formed against end target of 6,697 groups. These groups have a total membership of 134,700 people surpassing the targeted 120,808 members by 13 ,892. Overall, a total of256 cooperatives and clusters have benefited against an end of Project target of 400. On savings mobilisation, cumulative group savings were estimated at MK2.9 billion against the targeted MK4.2 billion. (c) Social Cash Transfer The SCT sub-component had initially targeted Dedza and Nkhata Bay district councils, with 21,612 households against the target of21,000 enrolled and receiving cash transfers. The SCT programme is being scaled up to 9 additional district councils namely; Rumphi, Nkhotakokota, Lilongwe, Kasungu, Blantyre, Chiradzulu, Dowa, Ntchisi and Karonga. Resources amounting to US$4.4million (MK3.3billion) had been disbursed to councils for implementation of the Social Cash Transfer programme during the year under review. These include: transfers to beneficiary households; funds for case management and for administration for Dedza and Nkhata Bay district councils and roll out of SCT in the 9 additional districts. 3.2 Systems and Capacity Building Component Major accomplishments included: Training of District Training Teams (DDT members in UBR processes; Supervision of UBR data collection process in the 9 councils; Support finalization of Safety net planning process in urban councils; Facilitation on the updating of Social Economic Profiles (SEPs) and District
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