Management Letter

Audit

AuRA – Autoridade
Reguladora de Águas, IP
Water Services and
Institutional Support Project
II
IDA Credit Agreement
Number 57830 – MZ
IDA Grant Agreement
Number D110 - MZ
 Tel +258 21 355200 KPMG Auditores e Consultores SA
Edifício Hollard
Rua 1.233, Nr 72C
Maputo
Mozambique
The Management
HJ/LM/ip/244/2022
Autoridade Reguladora de Águas, IP
Maputo
Mozambique

17 June 2022

Dear Sirs,

Management letter in respect of the audit for the year ended 31 December 2021

We have completed our audit of the financial statements of Autoridade Reguladora de Águas, IP – Water Services and
Institutional Support Project II, IDA Credit Agreement Number 57830 MZ and IDA Grant Agreement Number D110 MZ
(“project”) for the year ended 31 December 2021. In accordance with International Standards on Auditing, the primary purpose of
our audit was to enable us to express an opinion as to whether or not the financial statements have been prepared, in all material
respects, in accordance with the basis of accounting adopted by the project.
Accordingly, we reviewed and evaluated the system of internal accounting control, to the extent we considered necessary, in order to
establish a basis for reliance thereon in determining the nature, timing and extent of auditing procedures that were necessary for
expressing an opinion on the financial statements.
In particular, a system's based approach was followed wherever possible. Internal controls for significant information streams
relating to routine transactions were documented and tested. Limited substantive tests were performed where controls were found to
be effective.
Although your principal safeguard against irregularities is an adequate system of internal accounting control, there are inherent
limitations that should be recognised in considering the potential effectiveness of any such system. Such limitations include the
following:
 The requirement that the cost of an internal control does not exceed the expected benefits to be derived;
 Most internal controls tend to be directed at routine transactions rather than non-routine transactions;
 The potential for human error due to carelessness, distraction, mistakes of judgment and the misunderstanding of
instructions;
 The possibility of circumvention of internal controls through the collusion of a member of management or an employee
with parties inside or outside the entity;
 Responsibility, for example, a member of management overriding an internal control; and
 The possibility that procedures may become inadequate due to changes in conditions, and compliance with procedures may
deteriorate.
Our audit of the financial statements of the project for the year ended 31 December 2021 would not necessarily disclose all
weaknesses in the system because it is based on selective tests of accounting records. However, this report summarises certain
observations and recommendations which resulted from our audit. The implementation by management of these recommendations
should assist management in improving internal accounting controls.
Finally we shall be pleased to discuss and explain these recommendations and to provide any assistance you may require in putting
them into effect.
This report is provided on the basis that it is for your information only and that it will not be copied or disclosed to any third party or
otherwise quoted or referred to, in whole or in part, without KPMG's prior written consent.
Yours faithfully

Hem Chandra Joshi

Partner

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all KPMG firms are members. All rights reserved. Registered office:
Rua 1.233 Nr 72C, Edificio Hollard | Maputo, Mozambique. 2
 Contents
The contacts at KPMG
Page
in connection with this
report are: Prioritizing remediation plans 4
Hem Chandra Joshi
Partner, Mozambique KPMG Performance Improvement Observations – Prior year Audit findings 6
Auditores e Consultores
Tel: + 258 21 355 200
hemjoshi@Kpmg.Com
Performance Improvement Observations – Current year Audit findings 7

1. Non cancellation of paid Invoices 8

Leonardo Muteia Appendix I 9

Manager, Mozambique,
KPMG Auditores e Consultores,
Tel: + 258 21 355 200
lmuteia@Kpmg.Com

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all
KPMG firms are members. All rights reserved.
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Priorizating
remediation plans
 Prioritizing remediation
plans
Prioritizing remediation plans
Finding No. Finding No. Finding No. I
re mm
m ed
For each control deficiency re edi ia
qu at te
identified during the audit, we Likely ( > 50%) ire ion
have considered the nature of the d
deficiency and quantified the
deficiency as to the likelihood and
the size of the impact if the control
failed again. Whilst this is a
relative judgement, this is the
KPMG view.
The analysis of the likelihood and
impact enables us to determine
which control deficiencies should
be prioritised for remediation.

This table provides a summary of Finding No. Finding No. Finding No.
each of the likelihood and impact
evaluations made in the detailed
findings.
Possible (10–50%)

The evaluation of the likelihood

and impact is made before
considering any planned
remediation. i.e. if management
did nothing what is the likelihood
Likelihood of reoccurrence

and impact of the deficiency

occurring again?

Definitions of control
deficiencies
A control deficiency exists when
the design or operation of a Finding No. Finding No. Finding No.
control does not prevent or detect
misstatements on a timely basis.
Remote (<10%)

A material weakness is a control

1
deficiency that results in more
than a remote likelihood that a
material misstatement would not
be prevented or detected in the
financial statements.
A significant deficiency is a
control deficiency, or combination
of control deficiencies, that results
in more than a remote likelihood
that a misstatement that is more
than inconsequential would not be Impact
prevented or detected.

Manageable Significant Material

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all
KPMG firms are members. All rights reserved.
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Document Classification: KPMG Confidential

 Performance Improvement
Observations – Prior year Audit
findngs
Follow-up status of KPMG update from Management update
Observation and recommendation
prior year from prior year
implementation

1. No evidence of activities report Resolved Not applicable

We noted some instances on which the payments to

the consultants did not enclose activity reports of
services provided.

2. No evidence of authorization for an expense Resolved Not applicable

We were not provided evidence of authorization of

the payment for the consultancy services provided
by Cesar Trigo in February, in amount of USD 3
540.

3. No evidence of receipt of allowance Resolved Not applicable

We were not provided with evidence to the

payment for 7 surveyors in Chimoio, amounting to
USD 5 81 were received by the beneficiaries.

4. Expenses not documented and not yet Not resolved The expenses were
submitted to the World Bank documented in June
with the expenses of
We noted that expenses amounting to USD 5 603, April and May 2022
incurred in 2020, were not documented and not and approved by the
submitted yet to the World Bank up to June 2022. World Bank

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all
KPMG firms are members. All rights reserved.
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Document Classification: KPMG Confidential

Performance Improvement
Observations –Current
year Audit findings
1. Non cancellation of paid
invoices
Financial Caption Expenses

Grade Control deficiency

Observation The entity does not cancel payment vouchers and their supporting documents after
payment has been made. The instances noted are detailed in the Appendix I.

Risk The invoices could be used to support other payments either through error or
intentionally for fraudulent reasons.

Recommendation We recommend that all payment vouchers and their supporting documents should be
stamped “PAID” immediately after payment. The stamp should contain a specific
reference to the project, for example ("Paid WASIS").

Management We have the stamp and by the mistake we did not cancel the vouchers after the
response and action payments. But the after audit we proceed with the recommendation accordingly. See
plan some examples.
Probabilidade Maior


Menor

Menor Impacto Maior

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all
KPMG firms are members. All rights reserved.
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Document Classification: KPMG Confidential

Appendix I – Non cancellation
of paid Invoices
Account Nr Diário Description Nr Doc Balance
Original Amount
Invoice Nr
MZN
6330401 30042 Nota 309 VODACOM 114 1,990.44 139,420.24 7730168
6330401 50007 Nota 357 VODACOM 232 1,374.99 78,351.74 7970148
6330401 120021 Nota 1447 VODACOM 565 2,593.60 163,865.09 10407893
63310 90014 Nota 953 Noticias 431 764.12 48,204.00 8749
63311 70011 Nota 688 SIM 319 20,579.17 1,294,173.43 22.05.33660
63311 70027 Nota 705 SIM 335 2,642.17 166,168.99 02 23 47643
63311 70047 Nota 780 SIM 355 12,621.11 795,099.97 22.06.33945
63313 50005 Nota 455 Strong Security 230 472.82 26,910.00 734
63313 70037 Nota 754 Strong Security 345 856.14 53,820.00 756 e 770
63313 80038 Nota 886 Kurula 403 1,123.36 70,822.92 79
63316 20012 Nota 105 Auto Spray 54 5,817.70 433,485.00 100634
63316 80011 Nota 825 Auto Spray 376 7,040.24 433,485.00 100722
63317 30023 Nota 268 C Nhantumbo 95 23.69 1,600.00 215
63319 70013 Nota 682 It Com 321 4,365.55 274,411.80 5758, 5759 e 5735
63320 110029 Nota 1360 A & A Truck 542 6,283.71 397,080.00 1/923
63321 110025 Nota 1358 Af Abegão 538 4,258.74 357,900.00 472
63324 10022 Nota 55 EnterPrise 22 236.45 17,518.41 2021FT/8
63324 40051 Nota 416 Supermercado July 219 2,066.52 113,690.94 71971
63399 10013 Nota 14 Media Coop 13 236.40 17,500.00 27/2021
63102 80012 Nota 801 Sotux 377 54,774.95 3,450,771.89 7263
63103 60005 Pagto Directo-Técnica Industri 280 175,723.47 10,930,000.00 FA1/210296
167, 168, 169,
63103 60006 Pagto Directo - Ronil 281 327,156.35 20,444,000.00 170, 171, 172 e
173
63103 70026 Nota 704 Técnica Industrial 334 123,749.01 7,785,000.00 FA1/210379
632110 120023 Nota 1433 Finanças 567 4,707.85 297,535.00 1.1012E+15
632114 80007 Nota 831 inquiridores 372 2,533.93 192,000.00 1271
632120 30026 Nota 274 Nhatumbo 98 5,358.31 387,088.00 7/FTN/2021
632120 40044 Nota 394 F Nhantumbo 212 6,133.91 337,376.00 8/FTN/2021
632120 80033 Nota 891 F Nhantumbo 398 5,304.71 334,412.00 11/FTN/2021
632121 30026 Nota 274 Mendes/Nhatumbo 98 4,637.10 334,980.00 6/ESMM/2021
632121 70042 Nota 761 Salario de consultore 350 4,589.39 288,990.00 10/ESMM/2021
632122 100041 Jeremias Langa 503 4,080.54 257,840.00 8/JAL/2021
632124 90028 Nota1013 Fatima Pereira 445 5,098.90 322,300.00 6/FA/2021
632124 100042 Nota 1238 Fatima Pereira 504 5,100.48 322,300.00 7/FA/2021
632124 120028 Nota 1349 F. Lopes 572 5,100.48 322,300.00 9/FA/2021
632125 100049 Nota 1286 Unity Designer 518 8,609.18 544,050.00 1162
63218 40029 Nota 367 LBC 197 15,007.38 967,476.04 3.2021
63218 50008 Nota 458 LBC 233 12,681.70 723,060.00 7.2021
63218 60029 Nota 586 LBC 304 5,676.46 350,414.51 2.2021
63218 100031 Nota 1080 LBC 493 25,488.44 1,610,819.15 9.2021
63219 90005 Nota 934 KPMG 422 54,098.50 3,416,270.00 F514011249
63220 110037 Nota 1355 Augusto Ferro 613 8,307.76 525,000.00 1
632232 30085 Nota 107 Diego 168 8,116.09 8,100.00 291 e 285
632232 110033 Nota 1265 Diego Fernandez 586 10,818.78 10,800.00 295 e 296
63232 40033 Nota 379 Catiça 201 380.82 21,364.21 1738

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG International, a Swiss cooperative of which all
KPMG firms are members. All rights reserved.
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Document Classification: KPMG Confidential

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circumstances of any particular individual or entity. Although we endeavour to provide accurate and
timely information, there can be no guarantee that such information is accurate as of the date it is
received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.

KPMG Auditores e Consultores, SA, a Mozambican limited liability company is a member of KPMG
International, a Swiss cooperative of which all KPMG firms are members. All rights reserved.
Registered office: Rua 1.233 Nr 72C, Edificio Hollard | Maputo, Mozambique.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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