Audit financial 2004
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KOSOVO ENTERPRISE PROGRAM FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2004 (WITH THE REPORT OF THE INDEPENDENT AUDITORS) KOSOVO ENTERPRISE PROGRAM FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2004 CONTENTS PAGES Report of the independent auditors - Income statement 1 Balance sheet 2 Statement of changes in equity 3 Statement of cash flows 4 Notes to the financial statements 5 - 29 Report of the independent auditors to the management of the Kosovo Enterprise Program We have audited the accompanying balance sheet of the Kosovo Enterprise Program (the “Organization”) as of 31 December 2004, and the related statements of income, changes in equity and cash flows for the year then ended. These financial statements are the responsibility of the Organization’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating ...
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KOSOVO ENTERPRISE PROGRAM
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2004
(WITH THE REPORT OF THE INDEPENDENT AUDITORS)
KOSOVO ENTERPRISE PROGRAM FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2004
CONTENTS Report of the independent auditors Income statement Balance sheet Statement of changes in equity Statement of cash flows Notes to the financial statements
PAGES
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4 5 - 29
Report of the independent auditors to the management of the Kosovo Enterprise Program We have audited the accompanying balance sheet of the Kosovo Enterprise Program (the “Organization) as of 31 December 2004, and the related statements of income, changes in equity and cash flows for the year then ended. These financial statements are the responsibility of the Organization’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Organization as of 31 December 2004, and the results of its operations and its cash flows for the year then ended are in accordance with International Financial Reporting Standards. KPMG Albania Sh.p.k. 29 April 2005 Tirana
KOSOVO ENTERPRISE PROGRAM INCOME STATEMENT FOR THE YEAR ENDED31 DECEMBER 2004
Year ended Year ended Note 31 December 2004 31 December 2003 (restated) Euro Euro Interest income 7517,821, 9,551,702 Interest expense (30,516) (30,516) Interest margin1,797,001 1,528,556 Fee income, net 14 247,969 239,007 Other operating income, net (1,129) 14,228 Gross operating surplus,340,2184 1791,781, Allowance for loan impairment 8 (18,379) (13,828) Personnel expenses 15 (766,219) (634,164) Depreciation and amortization 5, 6 (57,866) (66,754) Administration expenses 16 (432,288) (371,968) Operating expenses(1,274,752) (1,086,714) Operating surplus/(deficit) for the year before contributions 695,077 769,089 Grant income 13, 17 538,386 663,190 Net surplus for the year 1,307,475 1,358,267 Authorised for issue by the Board of Directors, on 29 April 2005 and signed by: Muriithi Kagai Safije Shala Executive Director Finance and Administrative Officer
The accompanying notes are an integral part of these financial statements.
KOSOVO ENTERPRISE PROGRAM BALANCE SHEET AS AT 31 DECEMBER 2004
ASSETS Non-current assets Net loans to customers Fixed assets Intangible assets Total non-current assets Current assets Cash and cash equivalents Net loans to customers Other receivables and prepayments Total current assets Total assets Equity & LIABILITIES Equity Retained surplus Total capital Non-current liabilities Long term borrowings Total non-current liabilities Current liabilities Accruals and other short term liabilities Short term borrowings Current portion of long term borrowings Deferred income Total current liabilities Total liabilities Total capital and liabilities
Note 31 December 2004 Euro 8 (d) 2,245,356 5 146,747 6 21,201 2,413,304 7 225,350 8 (d) 5,629,861 9 183,429 6,038,640 8,451,944
10 11 12 10 13
5,577,328 5,577,328 823,143 823,143 60,778 - 87,191 1,903,504 2,051,473 2,874,616 8,451,944
The accompanying notes are an integral part of these financial statements.
31 December 2003 (restated) Euro 137,771 147,070 19,877 304,718 322,605 6,460,407 97,179 6,880,191 7,184,909
4,269,853 4,269,853 610,334 610,334 39,824 2,124,776 - 140,122 2,304,722 2,915,056 7,184,909
KOSOVO ENTERPRISE PROGRAM STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004
Retained Fund Surplus Balance Total Euro Euro Euro Balance at 31 December 2002 1,332,135 3,625,489 4,957,624 Effect of change in accounting policy (note 4) 1,579,451 (3,625,489) (2,046,038) Restated balances at 1 January 2003 2,911,586 - 2,911,586 Net surplus for the year (restated) 1,358,267 - 1,358,267 Restated balance at 31 December 2003 4,269,853 - 4,269,853 Net surplus for the year 1,307,475 - 1,307,475 Balance at 31 December 2004 5,577,328 - 5,577,328
The accompanying notes are an integral part of these financial statements.
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KOSOVO ENTERPRISE PROGRAM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
Year ended Year ended 31 December 2004 31 December 2003 (restated) Euro Euro Cash flows from operating activities Net surplus for the year ,103,7745 1,358,267 Adjustments for: Depreciation and amortisation 57,866 66,754 Provision for loan impairment 18,379 13,828 Loans written off (1,139) (1,517) Grant income (538,386) (663,190) Interest income (1,827,517) (1,559,072) Interest expense 30,516 30,516 Operating cash flows before working capital changes (952,806) (754,414) Net increase in loans to customers (1,294,279) (1,414,861) Net increase / (decrease) in other assets (47,768) 6,353 Net increase / (decrease) in other liabilities 20,954 (3,452) Cash flows used in operating activities (2,273,899) (2,166,374) Interest received 1,789,035 1,560,739 Interest paid (30,516) (30,516) Net cash from operating activities (515,380) (636,151) Cash flows from investing activities Acquisition of fixed and intangible assets (58,867) (73,806) Net cash used in investing activities (58,867) (73,806) Cash flows from financing activities Proceeds from borrowings 300,000 -Proceeds from grants 176,992 555,930 Net cash from financing activities 476,992 555,930 Net (decrease)/increase in cash and cash equivalents(97,255) (1,054)27 Cash and cash equivalents at beginning of the year 322,605 476,632 Cash and cash equivalents at end of the year (note 7) 225,350 322,605 GENERAL INFORMATION Organisation’s operations
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KOSOVO ENTERPRISE PROGRAM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
The Micro Finance Institution - Kosovo Enterprise Program (“KEP or the “Organisation) was founded by the humanitairan organization International Catholic Migration Commission Switzerland (ICMC) in August 1999, obtaining authority to operate as a Micro Finance Institution from the Banking and Payments Authority of Kosovo (BPK) on 19 May 2000 when new regulations on financial institutions came into effect in Kosovo. KEP registered as a separate local Non-Governmental Organisation on 4 March 2003 and is registered with the BPK as a non-bank micro financial institution as defined in section 2 of Regulation 1999/21. KEP’s principal activity is to provide financial services to the people of Kosovo. At 31 December 2004, KEP employed 69 employees (31 December 2003: 64). Board of directors KEP is governed by the following people: Charles Davy Chairman ofthe Board since November 2003 Muriithi Kagai Executive Director Jane Lewis Member of the Board Dag Sigurdson Member of the Board Cindy Jakovac Member of the Board Prof. Mustafa Mohamet Member of the Board Anne Sophie Laenkholm -Member of the Board Management The Management of KEP comprises the following persons: Muriithi Kagai Executive Director Safije Shala Finance and Administration Manager Alex Kimanzi Technical Advisor for Microfinance Services Sead Shehu Administration Officer Lulzim Shala Regional Operation Officer Luftar Gashi Regional Operation Officer Menduh Lluka Regional Operation Officer Naim Kukaj Delinquency Management officer Fatmire Dumoshi PA to Director/HR Officer Petrit Tigani Internal Audit Officer Number of authorised offices and registered addresses The activities of KEP are distributed over 3 regions covering 8 branch offices throughout Kosovo: a) Southern Region located in Prizren, Branch offices Prizren, Suhareka 6
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KOSOVO ENTERPRISE PROGRAM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
b) Western Region located in Peja, Branch offices Peje, Gjakova, Istog; sub-branch offices: Klina, Decan and Malesheva c) Eastern Region located in Pristina, Branch offices Pristina, Gjilan, Mitrovica; sub-branch offices: Drenas and Gracanica The head office is located in Pristina, Bedri Pejeni 4, Kosovo. STATEMENT OF COMPLIANCE The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation The financial statements are presented in Euro. The financial statements are prepared on the historical cost basis. The accompanying accounting policies have been consistently applied to all periods presented. b) Financial instruments (i) Classification Originated loans and receivables are loans and receivables created by the Organisation providing money to a debtor. Originated loans and receivables comprise loans and advances to customers and financial institutions as well as expenses incurred on behalf of the International Centre for Community and Enterprise Development (ICCED) to be settled in shares of ICCED once ICCED is incorporated. (ii) Recognition Originated loans and receivablesare recognized on the day when the Organisation becomes a party to the contractual provisions of the instrument.
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KOSOVO ENTERPRISE PROGRAM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (iii) Measurement Financial instruments are measured initially at cost, including transaction costs. Subsequent to initial recognition originated loans and receivables are measured at amortised cost less impairment losses, if any. Amortised cost is calculated on the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument, when applicable. (iv) Specific instruments Cash and cash equivalents Cash and cash equivalents comprise cash balances on hand and cash deposited in current bank accounts or accounts with less than 30 days maturity. Loans to customers Loans and advances to customers originated by KEP are classified as originated loans and receivables. Loans and advances are reported net of an allowance for impairment to reflect the estimated recoverable amounts (refer accounting policy d) (vii) Derecognition A financial asset is derecognized when the Organisation loses control over the contractual rights that comprise that asset. This occurs when the rights are realized, expire or are surrendered. A financial liability is derecognized when it is extinguished. Originated loans and receivables are derecognized on the day they are transferred by the Organisation. Loans to customers Loans to customers are reported at amortized cost net of allowances to reflect the estimated recoverable amounts. Allowances are made against the carrying amount of loans that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans to their recoverable amounts. The amount of the loss is the difference between the asset’s carrying amount and the present value of expected cash flows discounted at the original effective interest rate (recoverable amount). Cash flows related to short term receivables are not discounted. Expected cash flows are estimated based on previous experience of customers’ repayment history and any late payments of interest or penalties. Changes in the allowance for loan impairment are recognised in the income statement. Management adjusts the level of the allowance through the impairment for loan losses, which is recorded as a current period operating expense. Management
c)
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KOSOVO ENTERPRISE PROGRAM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d) Loans to customers (continued) believes that the allowance for loan losses is adequate. While management uses available information to recognise losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the write down, the write down or provision is reversed through the income statement. The allowance for loan impairment also covers losses where there is no objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical pattern of losses in each component, credit ratings allocated to the borrowers and the current economic climate in which the borrower operates. Borrowings Borrowed funds are reported at amortised cost. Expenses arising on borrowed funds are expensed when incurred. Fixed assets Fixed assets are presented at their historical costs net of accumulated depreciation and impairment losses, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. At 31 December 2004, the depreciation rates are as follows: Rates in % Office equipment 25% Motor vehicles 20% Furniture 18% Intangible assets Intangible assets acquired by the Organisation are stated at cost less accumulated amortization and impairment losses, if any. The annual amortization rate is 25%.
e) f)
g)
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