FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA MINISTRY OF FINANCE Ref. No +97 0 b JAN 2023 The World Bank Ja23 Date Ethiopian Country Office Addis Ababa Dear Sirs, Subject:- Submission of Ethiopian Public Financial Management Project IPFM/ Annual financial audit report for the period ended July 7, 2022 (Annual of 2014 EFY) Attached herewith, please find the annual financial audit report for the year ended July 7, 2022 (EFY 2014). > Annual Audit Findings and recommendations(one copy) > Independent auditors' report on financial statements(one copy) and > Independent auditors' report on designated and pool birr account statements Thank you in advance for your usuat Cooperation. Sincerely yours, ,c'Channel On r mCoordiing a Director¶: Director C.C > Expenditure Management Control Program Directorate > Channel One Programs Coordinating Directorate > PFM Follow-up MoF hAh vr'.-IA thh/Fax 0 MoFEthiopia 251-11-140 20 00 P.O.Box 1905,1037 251-11-156 01 24,55 14 96 ofacebook.com/MoFEDet Mn'lP aC seth- 251-11-155 11 38 ( mofed.gov.et n&+rM'4.94-4TE %qlD-AfST &TiV%kh VTF rCag h¶A'7A*+ bCr"71) The Federal Democratic Republic of Ethiopia Audit Services Corporation INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF MINISTRY OF FINANCE We have audited the accompanying financial statements of Ministry of Finance, Public Financial Management Project, financed under IDA Credit No. 5766-ET, which comprise the balance sheet as at 7 July 2022 and the statement of sources and uses of funds for the year then ended and a summary of significant accounting policies and other explanatory information. Management Responsibility for the financial statements The Ministry of Finance is responsible for the preparation and fair presentation of these financial statements in accordance with the Ethiopian Government's Manual of the Federal Accounting System which is based on a modified cash basis of accounting and for such internal control as the Ministry determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility 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. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involkes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Ihe procedures selected depend on the auditor's judgment. including the assessment of' the risks of material il I sstatement 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 entity's internal control. An audit also includes evallating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management. as well as evaluating the overall presentation of the financial statements. ± 251-011-5515222 Fax 251-011-5513083 ai1:asc@asetiop1a-com 251-011-5535012 webasite WWW.ascethioplacom 251-011-5535015 251-011-5535016 INDEPENDENT AUDITOR'S REPORT ON THE ACCOUNTS OF MINISTRY OF FINANCE (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Ministry of Finance, Public Financial Management Project financed under IDA Credit No. 5766-ET as at 7 July 2022 and of its sources and uses of funds for the year then ended in accordance with the modified cash basis of accounting. Report on Other Requirements As required by the World Bank Guidelines and the terms of agreements for financial audit, we report that, to the extent we can assess: a) All external financings have been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; b) Designated accounts have been maintained in accordance with the provision of the relevant financing agreements and funds disbursed out of the accounts were used for the purpose intended I the financing agreement; c) All necessary supporting documents, records and accounts have been maintained in respect of all project activities, including expenditures reported using statements of expenditures (SoE), except for expenditures mentioned in the basis for qualified opinion above: d) National laws and regulations have been compiled with, and that the financial and accounting procedures approved for the project were followed and used; e) (oods. works and services financed have been procured in accordance with the relevant financing agreements and f) Financial performance of the project is satisfactory. 06 January 2023 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT IDA CREDIT No.5766 - ET BALANCE SHEET AS AT JULY 2022 Ethiopian Birr Notes CURRENT ASSET 2022 2021 Accounts receivable 3 280 1,637,818 Cash and Bank balances 4 8,265,266 203,620,987 8,265,545 205,258,805 CURRENT LIABILITY Acconts Payable 5 1,495,000 2,631,033 Taxes payable 6 - 395,651 1,495,000 3,026,684 NET CURRENT ASSETS 6,770,545 202,232,121 REPRESENTED BY FUND BALANCE 7 8,265,545 202,232,121 3 NISTRY OF FINANCE IBLIC FINANCIAL MANAGEMENT A CREDIT No.5766 - ET ATEMENT OF SOURCES AND USES OF FUNDS AT JULY 2022 Cumulative fro m 1-Jul-19 SOURCES Notes to 7 July 2022 2021 Birr Birr Birr IDA - IFR Procedures 16,363,055 802,966,000 55,083,450 Gain/(loss) on foreign exchange rate 19,759,323 107733,562 42,270,407 36,122,378 910,699,562 97,353,857 USES Expenditure management and information system SLIpport 111,242,803 604,265,248 50,030,156 Stregthning Accountability institutions 109,700,951 261,920,109 40,360,469 Program management and monitoring 9,145,200 36,248,660 5,416,094 Evaluation 230,088,955 902,434,017 95,806,719 EXCESS OF SOURCES OVER USES (193,966,576) 8,265,545 1,547,138 4 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT IDA CREDIT No.5766 - ET DESIGNATED ACCOUNT STATEMENT AS AT JULY 2022 For the year ended 7 July 2022 Account number 1001011300538 Depository Bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related Credit IDA 5766-ET Currency USD 2020 USD Ethiopian Birr USD Ethiopian Birr Balance as at 7 July 2021 3,592,246 157,459,639 2,472,246 86,631,704 Advance received - lFR Procedures 206,321 10,552,639 1,500,000 55,083,450 3,798,567 168,012,278 3,972,246 141,715,154 Less:- Transfer to Birr account 3,752,200 180,755,004 - - Transfer to MOF - Finance - - 380,000 14,204,780 3,752,200 180,755,004 380,000 14,204,780 46,367 (12,742,726) 3,592,246 127,510,374 Add:- Gain on foreign exchange rate - 15,155,180 - 29,949,265 Balance as at 7 July 2022 46,367 2,412,454 3,592,246 157,459,639 5 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT IDA CREDIT No.5766 - ET SIEDULE OF MOVMENT IN BIRR ACCOUNT For the year ended 7 July 2022 Account number 100101040680 Depository Bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related Credit IDA 5766-ET Currency Ethiopian Birr Ethiopian Birr 2021 Beginning Balance - 7 July 2021 15,999,543 56,379,754 Transfer from USD Designated Account 87,893,840 19,487,889 Return from Regions 5,950,233 - 109,843,616 75,867,643 Less:- Transfers to Projects implementing Agencies (Regions and other Government offices) Ministry of Finance 75,000,000 40,000,000 Public Procurement and Property Administration Agency (PPPAA) 23,000,000 19,635,000 Accounting and Auditing Board of Ethiopia 5,901,603 233,100 103,901.603 59,868,100 Bank error 30,130 - Bank service charge 219.735 - 104,151,468 59,868.100 Ending Balance - 7 July 2022 5,692,149 15,999,543 6 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET NOTES TO THE FINANCIAL STATEMENTS 1. PROJECT INFORMATION The Federal Democratic Republic of Ethiopia and the International Development Association (IDA) entered into agreement dated 17 March 2016 to finance the Public Financial Management Project. The latter agreed to extend to the former Credit in amount equivalent to SDR 23,900,000 to assist in financing the mentioned project. The objective of the project is to improve the efficiency, transparency, and accountability of Public expenditure of the Government at the federal and regional levels. The Project consists of the following parts:- A. Improving Expenditure management and Information System B. Strengthening Accountability Institutions C. Project Management, Monitoring and Evaluation The effective date of the project is 18 May 2016 and its closing date shall be 7 March 2022 as amended by the Country office later ref: No. WB/CD/035/02/01/ 2021 on I February 2021. 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by the Project are stated below, a) Basis of accounting and preparation The financial statements of have been prepared in accordance with the Ethiopian Government's Manual of the Federal Accounting System which is based on a modified cash basis of accounting. b) Currency These financial statements are presented in Birr. Transactions in foreign currency are translated into Birr at the approximate rates of exchange prevailing at the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated into Birr at the rate of exchange prevailing at the balance sheet date. 7 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT IDA CREDIT No.5766 - ET NOTES TO THE FINANCIAL STATEMENT 3 ACCONTS RECEIVABLE Ethiopia Birr 2021 Advance to Govrnment and Regional offices 279.52 1,372,105 Purcase advance - 261,318 Advance to UNOPS and other - 4.395 279.52 1,637,818 4 CASH AND BANK BALANCES USD Account No. 01100101300538 2,412,453.82 157,459,639 Birr Account No.0100101040680 5,722,279.79 15,999,544 Ministry of Finance - 11,451,716 Public Procurement and Property Administration Agency - 17,783,496 Accounting and Audting board of Ethiopia - 185,730 Cash at bank at regional offices 130,531.97 664,137 8,265,265.58 203,544,262 Cash on hand - 76,725 8,265,265.58 203,620,987 5 ACCOUNTS PAYABLE Payable to Government Offices - 633.385 Other Payable 1,495,000.00 1,997,647 1,495,000.00 2,631,032 6 TAXES PAYABLE Value added tax - 325.507 Withhold tax - 70.14- - ~ 395,5 7 FUND BALANCE Balance at 07.[ul 2021 202,232,121 200.684.983 Excess of source over uses (193,966.576) 1.547. 18 Balance at 7 July 2022 8,265,545 202,232,121 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT IDA CREDIT No.5766 - ET NOTES TO THE FINANCIAL STATEMENT (continued) 8 DATE OF AUTHORIZATION The Director, Chanal One Program Coordinating Directorate of Ministry Autorized the issue of these financial statements on 06 January 2023 9