Transparency international kenya 2010 accounts

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 CONTENTS

PAGE

Company information

1

Report of the directors

2

Statement of directors' responsibilities

3

Report of the independent auditors

4-5

Financial statements: Statement of comprehensive income

6

Statement of financial position

7

Statement of changes in fund balances

8

Statement of cash flows

9

Basis of preparation and summary of significant accounting policies

10 - 12

Notes to the financial statements

13 - 15

The following page does not form an integral part of these financial statements

Schedule of income and expenditure Detailed income and expenditure account analysed by donor

16 Appendix I

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 COMPANY INFORMATION

BOARD OF DIRECTORS

: : : : : : : : : :

Richard Leakey (Chairman) Samuel Mbithi (Executive Director - Appointed 1 July 2010) Job Ogonda (Resigned 30 April 2010) Omar Amin (Appointed 20 April 2010) Rachel Mbai Bernedette Musundi (Appointed 20 April 2010) Betty Maina (Resigned 1 January 2010) Robert Shaw Florence Omosa (Resigned 23 September 2010) Sheila Mmbijjewe

REGISTERED OFFICE

: : : :

ACK Garden House 1st Ngong Avenue, off Bishop's Road P. O. Box 198, 00200 NAIROBI

: Tel: 254-202727763/5, 254-20-2730324/5 : Fax: 254-20-2729530 : email: transparency@tikenya.org

AUDITORS

: : : :

PKF Kenya Certified Public Accountants P. O. Box 14077, 00800 NAIROBI

COMPANY SECRETARY

: : : :

Scribe Services Lonrho House, Standard Street P. O. Box 3085, 00100 NAIROBI

PRINCIPAL BANKERS

: : : :

Standard Chartered Bank Yaya Centre P.O. Box 76175 NAIROBI

LEGAL ADVISORS

: : : : :

Muriu, Mungai & Co Advocates Britak Centre Mara / Ragati Road, Upper Hill P.O. Box 75362-00200 NAIROBI

1

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 STATEMENT OF COMPREHENSIVE INCOME

Notes Income

2

2010 Shs

2009 Shs

117,176,626

90,864,165

Programme expenses

(87,519,120)

(69,416,328)

Administration expenses

(25,465,039)

(21,077,113)

Surplus for the year

3

4,192,467

370,724

The basis of preparation and summary of significant accounting policies on pages 10 to 12 and the notes on pages 13 to 15 form an integral part of these financial statements.

Report of the independent auditors - pages 4 and 5.

6

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 STATEMENT OF CHANGES IN FUND BALANCES General fund Shs

Revaluation reserve Shs

Total Shs

Year ended 30 September 2009 At start of year Reversal on disposal

(595,117) 1,071,014

1,071,014 (1,071,014)

475,897 -

Surplus for the year

370,724

-

370,724

At end of year

846,621

-

846,621

846,621

-

846,621

Surplus for the year

4,192,467

-

4,192,467

At end of year

5,039,088

-

5,039,088

Year ended 30 September 2010 At start of year

The significant accounting policies on pages 10 to 12 and the notes on pages 13 to 15 form an integral part of the financial statements.

Report of the independent auditors - pages 4 and 5.

8

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 STATEMENT OF CASH FLOWS

Notes

2010 Shs

2009 Shs

Operating activities Surplus for the year Adjustments for: Depreciation Loss on disposal of property Foreign exchange gain Changes in working capital - receivables - payables - deferred income - unutilised programme funds

5

Net cash (used in)/generated from operating activities

4,192,467

370,724

1,437,624 32,596

897,371 271,014 (20,953)

(11,765,305) 565,577 (28,531,015) -

(114,203) 12,077,430 26,646,501 (585,741)

(34,068,056)

39,542,143

(3,098,054) -

(1,713,245) 800,000

(3,098,054)

(913,245)

Investing activities Purchase of equipment Proceeds from disposal of property

5

Net cash used in investing activities Financing activities Net movement in term loans and other borrowings

-

(481,275)

Net cash (used in)/generated from financing activities

-

(481,275)

(Decrease)/increase in cash and cash equivalents

(37,166,110)

38,147,623

51,956,614 (37,166,110) (32,596)

13,788,038 38,147,623 20,953

14,757,908

51,956,614

Movement in cash and cash equivalents At start of year (Decrease)/increase Effect of exchange rate changes At end of year

7

The significant accounting policies on pages 10 to 12 and the notes on pages 13 to 15 form an integral part of the financial statements.

Report of the independent auditors - pages 4 and 5.

9

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.

General Information Transparency International Kenya is incorporated in Kenya under the Kenyan Companies Act as a private company limited by guarantee, and is domiciled in Kenya. The address of its registered office and principal place of business is Plot No. 29/8342/3, Off Bishops Road, Nairobi. The principal activity of the company is to curb international and national corruption through research, public awareness and advocacy.

2.

Basis of preparation These financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) issued by the International Accounting Standards Board. They are presented in Kenya Shillings (Shs).

The measurement basis used is the historical cost basis.

The financial statements of the previous year were prepared in accordance with full International Financial Reporting Standards.

The preparation of financial statements in conformity with IFRS for SMEs require the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3a.

3.

Summary of significant accounting policies

a)

Significant judgements made by management in applying the company's accounting policies Management has made the following judgements that are considered to have the most significant effect on the amounts recognised in the financial statements: -

The entity applies judgement in determining whether the conditions for recognition of grants as income have been met.

Key sources of estimation uncertainty In the opinion of management there are no assumptions or other major sources of estimation uncertainty at the balance sheet date that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within 12 months of the balance sheet date. b)

Income Grant income is recognised when the monetary value of the grant can be measured with sufficient reliability, there is reasonable assurance of receipt and conditions for receipt, if any, have been met. Donations in kind whose monetary value can not be quantified are not recognised as income.

Grant income is deferred where it has been received to fund specific future expenditure.

c)

Translation of foreign currencies Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Kenya shillings at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income and expenditure account. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement for the liability for at least 12 months after the reporting date.

10

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3. Summary of significant accounting policies (continued) d) Motor vehicle, equipment, furniture and fittings All motor vehicle, equipment, furniture and fittings are initially recorded at cost and thereafter stated at historical cost less depreciation. Motor vehicles are subsequently shown at market value, based on periodic valuations by external independent valuers, less subsequent depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost can be reliably measured. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income and expenditure account during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against the revaluation reserve; all other decreases are charged to the income and expenditure account.

Each year the difference between depreciation based on the revalued carrying amount of the asset (the depreciation charged to the income and expenditure account) and depreciation based on the asset's original cost is transferred from the revaluation reserve to retained earnings.

Depreciation on assets is calculated on the straight line basis to write down the cost of each asset to its residual value over its estimated useful life using the following annual rates: Rate 25% 25% 12.5%

Motor vehicles Equipment Furniture and fittings

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal of equipment are determined by reference to their carrying amount and are taken into account in determining operating surplus/deficit. e) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and bank balances. f)

Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

11

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3. Summary of significant accounting policies (continued) g) Trade receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less impairment.

Impairment of trade receivables is recognized in the profit and loss account under administrative expenses when there is objective evidence that the company will not be able to collect all amounts due per the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default in payments are considered indicators that the trade receivable is impaired. The provision is based on the difference between the carrying amount and the present fair value of the expected cash flows, discounted at the effective interest rate.

Receivables not collectible are written off against the impairment. Subsequent recoveries of amounts previously written off are credited to the statement of comprehensive income under administrative expenses in the year of their recovery. h) Taxation No taxation has been provided in these financial statements, as the company was not in receipt of taxable income. i)

Accounting for leases Leases of assets under which a significant portion of the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income and expenditure account on a straight line basis over the period of the lease.

j)

Retirement benefits The company contributes to the statutory National Social Security Fund. This is a defined contribution scheme registered under the National Social Security Act. The company’s obligations under the scheme are limited to specific contributions legislated from time to time and are currently limited to a maximum of Shs 200 per employee per month.

In addition to the statutory NSSF deduction, the company contributes 5% of the employees basic salary to a defined contribution scheme, administered by ICEA Ltd.

l)

Comparatives Where necessary comparative figures have been adjusted to conform with changes in presentation in the current period.

12

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 NOTES TO THE FINANCIAL STATEMENTS 1. Transition to the IFRS for SMEs The company's financial statements for the year ended 30 September 2010 are its first annual financial statements prepared under accounting policies that comply with the IFRS for SMEs. 2. Income

2010 Shs

Grant income Membership fee Foreign currency exchange (loss) / gain

2009 Shs

117,155,222 54,000 (32,596)

90,843,212 20,953

117,176,626

90,864,165

1,437,624 37,972,041 5,078,600

897,371 33,867,710 5,942,400

3. Operating surplus The surplus for the year is arrived at after charging: Depreciation (Note 5) Staff costs (Note 4) Directors' remuneration Audit fees - current year - under/(over) provision in prior year

500,000 92,417

500,000 (6,167)

4. Staff costs Salaries - program officers Salaries - administration Staff training Staff leave expense

26,793,536 11,190,534 444,460 (456,489)

22,855,163 10,540,049 595,339 (122,841)

37,972,041

33,867,710

5. Motor vehicle, equipment, furniture and fittings Motor vehicle Shs

Equipment Shs

Furniture and fittings Shs

Total Shs

Cost At start of year Additions

650,000 -

6,739,562 2,932,314

1,999,008 165,740

9,388,570 3,098,054

At end of year

650,000

9,671,876

2,164,748

12,486,624

Depreciation At start of year Charge for the year

5,343 162,500

5,778,060 1,209,557

1,354,010 65,567

7,137,413 1,437,624

At end of year

167,843

6,987,617

1,419,577

8,575,037

Net book value 2010

482,157

2,684,259

745,171

3,911,587

Net book value 2009

644,657

961,502

644,998

2,251,157

13

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2010 Shs

6. Receivables Deposits Prepayments Staff debtors Due from donors

2009 Shs

711,131 138,252 716,130 13,391,323

691,451 1,519,012 341,747 639,321

14,956,836

3,191,531

14,757,908

51,956,614

14,757,908

51,956,614

7. Cash and cash equivalents Cash at bank and in hand For the purpose of the cash flow statement, the year-end cash and cash equivalents comprise the following: Cash and bank balances

The company is not exposed to credit risk on cash and bank balances as these are held with sound financial institutions.

2010 Shs

8. Payables Payables Accruals Other payables Staff leave days accrual Former Executive Director's final dues

2009 Shs

15,702,798 568,000 21,000 1,786,693 1,183,667

15,269,732 2,243,182 1,183,667

19,262,158

18,696,581

2,962,044 782,500 3,328,215 1,025,012 48,242 737,342 350,147 91,583 -

2,741,443 3,246,245 1,621,913 82,994 29,156,388 1,007,117

9,325,085

37,856,100

9. Deferred income CIDA TISDA Pact Kenya Embassy of Finland Swiss Embassy KPLC KPA ICJ/Pact Kenya NCEP/KPMG DFID

Grant income is deferred when it has been received to fund specific future expenditure.

14

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10. Related party transactions The company is affiliated to Transparency International. The following transactions were carried out with the related party:

i)

2010 Shs

Donations/Grants Transparency International

ii)

2009 Shs

13,533,062

3,791,504

15,000,400

12,088,195

65,594

60,000

Key management compensation Salaries and other short-term benefits Post employment benefits - NSSF

11. Contingent liabilities No provision has been made in the financial statements in respect of the following cases which are long outstanding: (i) A defamation suit filed by a former Executive Director with claims for general and aggravated damages. A defence has been entered. In the opinion of the directors, no reliable estimate of the outcome can be made at present.

15

Transparency International Kenya Annual report and financial statements For the year ended 30 September 2010 SCHEDULE OF INCOME AND EXPENDITURE 2010 Shs

2009 Shs

INCOME Grant income Membership fee Foreign currency exchange (loss)/gain

117,155,222 54,000 (32,596)

90,843,212 20,953

117,176,626

90,864,165

26,793,536 21,007,354 13,313,922 9,035,115 6,990,553 4,480,625 1,863,139 1,771,504 1,082,207 790,301 214,995 175,869 -

22,855,163 24,153,106 7,453,505 4,799,310 4,398,581 1,847,759 1,535,059 652,820 813,914 165,191 168,610 189,827 383,483

87,519,120

69,416,328

11,190,534 3,920,831 2,137,970 1,714,691 1,437,625 790,203 746,460 575,490

10,540,049 3,642,656 1,489,819 1,185,870 897,371 117,231 493,182

EXPENSES Program expenses Program officers' salaries Consultancy fees Advertising Workshops Domestic travel Publications Stationery and office supplies International travel TI Kenya website IT support services Public relations Resource centre Strategic plan review

Administration expenses Salaries Rent Medical Telephone and postage Depreciation Insurance New accounting package Legal and professional fees Audit fees - current year - Under/(over) provision in prior year Capacity building and development Fines and penalties Project audit fees Bank charges Office cleaning Repairs and maintenance Motor vehicle expense Recruitment costs Security Loss on disposal of motor vehicle Staff leave expense

Surplus for the year 16

500,000 92,417 444,460 441,074 437,245 432,208 345,811 206,738 197,411 156,902 153,458 (456,489)

500,000 (6,167) 595,339 193,015 205,256 334,890 265,187 243,154 232,088 271,014 (122,841)

25,465,039

21,077,113

4,192,467

370,724