"Supporting Beirut's Immediate Social Recovery Services" Implemented by International Rescue Committee (IRC) Beirut-Lebanon Funded by The World Bank Independent Auditor's Report For the period from January 5, 2022 till December 31, 2022 TALAL ABU-GHAZALEH & CO MEMBER OF TALAL ABu-GHAZALEH GLOBAL "Supporting Beirut's Immediate Social Recovery Services" For the period from January 5, 2022 till December 31, 2022 Table of Contents Independent A uditor's R eport.................................................................................. Sum m ary of A udit R esults.......................................................................................4 Financial Statem ent ......................................................................................4 A udit R eport Statem ent..................................................................................................................... 5 Satement of Fund Received and Cash Receipts and Payments By Category................... 5 Project Statement of Cash Receipts and Payments by Category ...........................................6 Statement of Expenses and Cash Position......................................................................7 Statement of Assets and Equipment .....................................................umt.................8 N otes to the Project Financial Statem ent ...........................................................................................9 P roject B ackground......................................................................................9 A udit O bjectives..............................................................................................................................A Specific A udit objectives.....................................................................................................1 A udit Scope of W ork .......................................................................................................................12 M eth o d o lo g y .................................................................................................................................. 13 Talal Abu-Ghazaleh & Co. TA Audi Global Company for Auditing and Accounting '....A.3jj4~lL~dJ S.....d Societe Civile (R.C. 67) (O 9 (l y ) Certified Public Accountants Independent Auditor's Report Unqualified Opinion We have audited the Financial Report of the project "Supporting Beirut's Immediate Social Recovery Services" consisting of a statement of funds received and expenditures incurred amounted to U.S.D 419,075.56 and notes which describe the significant accounting principles (together the Financial Report) expressed in U.S.D accounting currency. In our opinion the Financial Report present fairly, in all material respects, the revenue received and the expenditures incurred by the organization for the period from January 5, 2022 till December 31, 2022 in accordance with the accounting principles described in Note 1. In addition, we certify the following matters: 1. The expenditures/disbursements were made in accordance with the activities and budgets of the approved and signed agreement, along with any approved and signed amendments. 2. The expenditures were supported by adequate documentation. 3. The financial report is fairly and accurately presented. 4. The result of our review of project documents, project work plan, financial reports and narrative reports by the implanting partner did not disclose any compliance issue for the project execution which came within the timeframe set in performing activities, expected outputs of the project assigned to responsible parties considering compliance with the Grant Agreement, policies, and local laws and regulations. 5. An appropriate management structure, internal controls, and recordkeeping system are maintained and functioning. 6. The cash position reported by the project is accurate. 7. The IP has undertaken and prepared a report for monitoring the substantive activities and evaluating the project management system. 8. There were no fixed assets or equipment acquired with an item cost equal or over the threshold. 9. The DA statement adequately reflect the flow of fund during the period audited. Basis for Unqualified Opinion We conducted our audit in accordance with International Standards on Auditing (ISA) promulgated by the International Federation of Accountants (IFAC). 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 statement presentation. Beirut, Sanayeh, Anis Tabbara Street I ..4 L.- t Halabi Bldg. - 2nd Floor 1,2i j4LW i Tel.: +9611754222 1 + 1 vat TY Fax: +961 1 754 222 tagiCom +A,: P.O.Box:11-7381, Beirut, Lebanon Tagco.beirut@tagi.com Zuu u .li 9.I v -vAi Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statement section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the other ethical requirements that are relevant to our audit of the Supporting Beirut's Immediate Social Recovery Services and we have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Basis of Accounting and Restriction on Distribution We draw attention to Note 1 to the financial statements, which describe the basis of accounting. consisting of World Bank guidelines. The financial Report is prepared to provide information to the management of International Rescue Committee (IRC) and World Bank. As a result, the financial report is not suitable for any other purpose. Our opinion is not modified in respect of this matter. Our report is intended solely for the management of International Rescue Committee (IRC) and The World Bank and should not be distributed to other parties Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for preparation and fair presentation of the Financial Report in accordance with the accounting policies described in Note I and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the Financial Report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud involves collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. tag.global * Obtain an understanding of internal control relevant to the audit 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 Organization's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by management. * Evaluate the overall presentation, structure and content of the Financial Report, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Internal Control Audit Result: Inadequate Or Adequate We identified no significant deficiencies or material weaknesses in internal controls over financial reporting that we considered to be material, in addition no deficiencies reported in the management letter. As a result, the internal control audit is adequate. 1) The effectiveness of the system in providing project management with useful and timely information for proper management of the project and; 2) The general effectiveness of the internal controls system in protecting the assets and resources of the project. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Date of the auditor's report: Beirut on August 16, 2023 Audit Firm Talal Abu-Ghazaleh & Co. Beirut, Lebanon Tel: +961 - 1 - 754222 Fax: +961-1-754222 ext 102 tag.global SUMMARY OF AUDIT RESULTS Financial Statement for the Period from January 5, 2022 till December 31, 2022 S. No. Project Name and Amount Audit Opinion Total Reason (s) Observation Project Number Audited and (Unqualified, Amount of for (s) that had Certified Qualified, Qualification Qualification Impact on Disclaimer, of Audit of Audit Qualification Adverse) Opinion Opinion and of Audit Amount Opinion (U.S.D) (U.S.D) "Supporting Beirut's Immediate Social 419,075.56 Unqualified N/A N/A N/A Recovery Services" 4 AUDIT REPORT STATEMENT STATEMENT OF FUND RECEIVED AND CASH RECEIPTS AND PAYMENTS BY CATEGORY Fund received Amount (U.S.D) Received funds from "World Bank to IRC" (Note 2) 700,000.00 Total 700,000.00 Transfers Funds From IRC To Partners (from IRC pooled account) U.S,D) Transfer to Embrace (Note 3) 91,556.43 Transfer to Abaad (Note 4) 99,829.47 Total 191,385.90 Note: out of the amount U.S.D 99,829.47 advanced to Abaad an amount of U.S.D 6,077.98 was reported as actual. Breakdown of the Expenses Type of Cost Total Description Donor Cost Budget Categorv (U.S.D) Project Management Salaries 175,335 Salaries of staff from the month of April till 2 December 2022 Supporting The Gender Violence Based 6,061 Information Management System (Training 1 . . .and Meeting) Program Activities3040adMeig_____ b30,420 lmrace: National Hotlines + step by step 2 10,859 Embrace: National Hotlines + step by step - 2 CIK (purchased by IRC) Consulting Expense 3,000 Consultant PW/OP- for August till November 2 2022 Other Management Direct 2,015 Office rent/utilities/communication expenses 2 Costs I from August till December 2022 5 и � б� � Q а U] 1 1 1 R 1 1 1 ! 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С"i � Q р Ау r"} .� ���,,,� � � Я � �„ Ам ,_., ... � f� Сб va Сб � •*-� �й � д�1 О q`i'а с�б с�б ' О c�J Cr аи3 .'." � Е-+ а U U Н fx С� С� д� STATEMENT OF EXPENSES AND CASH POSITION For the period from January 5, 2022 till December 31, 2022 Receipts Amount (U.S.13) Grant Received from World Bank I " Installment 560,000.00 2 d Installment 140,000.00 Total Receipts 700,000.00 Payments bv Project category - Category 1 105,890.12 - Category 2 313.185.44 Total Payments 419,075.56 Notes: - The amount U.S.1) 227,689.66 were paid from IRC Pooled Account. - The amount U.S.1) 91,556.43 was advanced to Embrace and falls under category 2. - The amount U.S.D 99,829.47 was advanced to Abaad and falls under category 1. - Out of the amount U.S.1) 99,829.47, an amount U.S.1) 6,077.98 were advanced to Abaad (sub-partner) and were reported as actuals. 7 kf L i �' � �7 S� � ,Sa .D .t] .t} � �3 �' jS� LL� W LT.� С.С? 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Н � в Q � v °�r sr �t �t ,� о .� 4 .� '�С7. �Lч '�д � '�О �О � � � � � � � 4 �� с},с5 � Q � С? С7 С.7 С7 С7 С: � ,-, и и � �i' � 7 �t д' -�'. р U� �О �,� м_ м� с� м r_ъ М_ ss ,.. Е"' ��д�_ �`Z� д ¢' д д д д и 'б �р � F С v.°? з ��� г'G к х Х х г�`G ...� .�. � '�} , s�, пг сд га c�v � � > • с � > . � пs С4 �в й� пг Сд �ь �д � �4 с� р� (� i д•� � д' .� � С7 С7 С7 С'7 С7 С7 С.7 �7 С7 �С7 С7 С? Е� '4а �..,1 г� N r�t сд c�r � га � � cv гу cJ ev сц� cV Ci1 �� г°� ° а�э a�i а�э а�т п�з a�i р о°о о L1 Г� t� С] � О N i ar а, а� о� о� а� NOTES TO THE PROJECT FINANCIAL STATEMENT PROJECT BACKGROUND The International Rescue Committee responds to the world's worst humanitarian crises and helps people whose lives and livelihoods are shattered by conflict and disaster to survive, recover and gain control of their future. In more than 40 countries and over 20 U.S. cities, our dedicated teams provide clean water, shelter, health care, education and empowerment support to refugees and displaced people. The International Rescue Committee (IRC) has received funds from the World Bank to Support Beirut's Immediate Social Recovery Services. The IRC will implement material measures and actions so that the project is implemented in accordance with the World Bank Environmental and Social Framework (ESF) and the Environmental and Social Standards (ESS). The August 4, 2020, Port of Beirut explosion (POB) compounded Lebanon's existing economic and social challenges and disproportionally affected Beirut's vulnerable populations. Since the explosion, the efforts of civil society have been crucial for recovery and rehabilitation efforts. Several obstacles remain that challenge the effectiveness, inclusivity, and sustainability of the broader recovery and rehabilitation process, which include coordination challenges between ongoing efforts and the temporary nature of interventions. The situation of Beirut's population remains precarious, and the need for support for recovery and reconstruction efforts is urgent. Several assessments conducted after the POB explosion highlight the priority areas for recovery and reconstruction, as well as the main weaknesses in the social safety net system in Lebanon. Consultations carried out by the World Bank with local Civil Society Organizations (CSOs) and NGO's in December 2020 revealed heightened vulnerabilities amongst the following three population groups affected by the blast in Beirut: (i) survivors and those at risk of Gender-Based Violence (GBV), (ii) individuals suffering from deteriorated psycho-social wellbeing, and (iii) the elderly and persons with disabilities. The project will focus on reducing vulnerabilities which are prevalent amongst three groups affected by the blast in Beirut: (i) survivors of Gender-Based Violence (SGBV); (ii) those suffering from deteriorated psycho-social wellbeing.- (iii) and/or those facing limitations related to being a person with disabilities and older persons. Supporting Beirut's Immediate Social Recovery Services interventions will entail providing grant financing directly to a select number of NGO's, to enable them to provide social services to reduce vulnerabilities in these groups. 9 This will be achieved by supporting non-government stakeholders that are engaged and have a track record in delivering social recovery services and working with target groups by improving their capacity to participate in the broader social recovery and reconstruction processes. The World Bank has selected the IRC to act as the Intermediary Implementing Agency (IIA) to implement the Supporting Beirut's Immediate Social Recovery Services project. The IRC will take on project management, grant provision and/or procurement of services from NGO's and will be responsible for the fiduciary and safeguards supervision of the selected NGO partners. Note 1: Basis of Accounting The statement is prepared on the cash basis of accounting. Revenues are recorded when received and expenses are recorded when paid. Note 2: Fund received from World Bank Date received Amount (U.S.D) Budget 1,032,749 Transfers First Instalment September 8, 2022 560,000 Second Instalment December 20, 2022 140,000 Total 700,000 Variance 332,749 Note 3: Transfer to Embrace from IRC Pooled Account Transfers Date received Amount (U.S.D) First Instalment September 27, 2022 61,711.88 Second Instalment November 18, 2022 29,844.55 Total 91,556.43 Note 4: Transfer to Abaad from IRC Pooled Account Transfers Date received Amount (U.S.D) First Instalment October 14, 2022 12,380.00 Second Instalment December 23, 2022 87,449.47 Total 99,829.47 Note: The amount U.S.D 91,556.43 to Embrace and the amount U.S.D 99,829.47 to Abaad were paid from IRC pooled account. 10 AUDIT OBJECTIVES The objective of this engagement is to express an opinion in accordance with ISA 800/805, whether or not the submitted financial Report regarding the Project "Supporting Beirut's Immediate Social Recovery Services" is in accordance with the Partner Organization's accounting records and that it is also in accordance with the World Bank's requirements on financial reporting as stated in the Grant Agreement. Specific audit objectives were: 1. Express an opinion on whether the project financial report, present fairly, in all material respects, project revenues earned and locally incurred costs for the period from January 5, 2022 till December 31, 2022. In conformity with applicable accounting principles, and the Grant Agreement. 2. Determine if the project expenses reported as incurred by IRC comply with the terms and conditions of the relevant Regulations under which the grant has been awarded. 3. Evaluate and obtain a sufficient understanding of IRC internal controls, assess control risk and identify reportable conditions, including material internal control weaknesses. 4. Perform tests to determine whether IRC complied, in all material respects, with the financial policies of World Bank. 5. Expenses fit into one of the captions of the contractual budget agreed, budget chapters/total have either not been exceeded, or not been exceeded by more than an allowed percentage. 6. Expenses are adequately supported by original proofs and have been properly accounted for. 7. Expenses have been incurred during the eligibility period. 8. Expenses charged to the agreement have been duly authorised, in accordance with the contractual basis of the project. 9. The method applied for the conversion of local currencies into certain currency is consistent with standard accounting practices. 10. Expenses are not expressly considered ineligible by the contractual basis of the project (e.g. capital investment costs - debts). 11 AUDIT SCOPE OF WORK Our scope of work is designed to ensure the accomplishment of the engagement objectives mentioned above. Below is a summary of our scope of work: 1. Reviewing the Grant Agreement with IRC in relation to the project "Supporting Beirut's Immediate Social Recovery Services" including annual work plans. 2. Verify whether all funds provided to the Project have been used, accounted for and classified in accordance with the relevant grant and Grant Agreements. 3. Project activities financed have been procured in accordance with the relevant grant and Grant Agreement. 4. All necessary copy of supporting documents, records, and accounts have been kept in respect of the project. 5. Eligibility of expenditures claimed under Statement of Expenditures submitted to World Bank. In addition to substantiation of these expenditures. 6. Assess whether goods (supplies, equipment) and services for the project are procured competitively and in a transparent manner in accordance with the World Bank policies and procedures. 7. Assess the organization structure of the projects in terms of its effectiveness and efficiency for the management of projects. 8. Assess the management aspects in terms of project approvals, work plans, project resources, monitoring and evaluation of implementation towards achievement of project objectives. 9. Assess timeliness of recruitment of competent personnel for clearly defined tasks and responsibilities through a competitive and transparent process. 10. Assess the adequacy of the accounting and reporting systems fused for the management of project resources. 11. Assess whether project assets are adequately recorded, safeguarded and monitored. 12. Review the safeguarding of all cash (including bank account) held separately for the purposes of the project. 13. Assess the efficiency and security of the information system 12 Methodology We performed our audit and assessed the internal controls in accordance with The International Standards on Auditing-ISA-, and with terms & conditions of funding agreement. The methodology of the audit consisted of an internal control evaluation, testing of funds received, incurred expenditures, and testing project compliance with specific requirements of the agreement and applicable laws and regulations. Our preliminary planning consisted of: 1) Review of the agreements. 2) Interviews and discussions with project personnel concerning the status of the agreements. 3) Review IRC organizational structure, established policies and procedures, controls related to personnel, and reports sent to World Bank. Our testing included, but was not limited to the following: 1) Direct expenses billed, 2) Identifying, and quantifying questionable costs. 3) Direct salary charges to determine whether appropriate payroll records support salaries. 4) Other direct costs to determine if these costs are allowable and supported by adequate documentation. 5) Posting to the accounting ledgers to determine proper recording. 6) Project revenues received in order to ensure that they are presented fairly, in all material respects, in the financial statement. 7) All procedures manuals. 13