The Federal Democratic Republic of Ethiopia Audit Services Corporation INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET 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 2020, 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's Responsibility for the Financial Statements The Project's management 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 controls as management 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement 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 evaluating 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 8 251-011-5515222 Fax 251-011-5513083 E-mail: ASC@ethionet.com 2] 5720 251-011-5535012 251-01 1-5535015 251-01 1-5535016 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET (continued) 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 2020 and of its sources and uses of funds for the year then ended in accordance with the Ethiopian Government's Manual of the Federal Accounting System which is based on a modified cash basis of accounting. Report on Other Requirements As required by the World Bank Guidelines and the terms of reference for financial audit, we report that, to the extent we can assess: a) All external financing has been used in accordance with the conditions of the relevant financing agreements with due attention to economy and efficiency, and only for the purposes for which the financing was provided; b) Goods, works and services financed have been procured in accordance with the relevant financing agreements; c) All necessary supporting documents, records and accounts have been maintained in respect of all project activities; d) Designated accounts have been maintained in accordance with the provisions of the relevant financing agreements, and funds disbursed out of the accounts were used for the purposes intended in the financing agreement; e) National laws and regulations have been complied with, and that the financial and accounting procedures approved for the Project were followed and used; and f) Financial performance of the Project is satisfactory. 30 December 2020 2 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET BALANCE SHEET AS AT 7JULY 2020 2020 2019 CURRENT ASSETS Notes Ethiopian Birr Ethiopian Birr Accounts receivable 3 2,769,805 23,716,395 Cash and bank balances 4 199,084542 114,269107 201.8 54,347 137,98_5,,502 CURRENT LIABILITIES Accounts payable 5 1.012,881 689,160 Taxes payable 6 1,43 4,91 1,169.364 1,122.4811 NET CURRENT ASSETS REPRESENTED BY FUND BALANCE 7 The notes on pages 7 to 10 form an integral part of these financial statements 3 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 7JULY 2020 Cumulative from 8 July 2016 2020 to 7July 2020 2019 SOURCES Ethiopian Birr Ethiopian Birr Ethiopian Birr IDA - IFR Procedures 268,236,062 731,519,495 147,651,305 Gain on foreign exchange 35,905,374 45,703,832 77g4 304,141,436 777,223.327 134239 USES Expenditure Management and information system support 193,096,676 442,992,289 109,257,488 Strengthening Accountability Institution 38,430,791 111,858,689 31,476,132 Program Management, Monitoring and Evaluation 8,792,007 21,66 10, 35 240,319,474 576.538,344 150,867655 EXCESS OF SOURCES OVER USES The notes on pages 7 to 10 form an integral part of these financial statements 4 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET DESIGNATED ACCOUNT STATEMENT For year ended 7 July 2020 Account number 0100101300538 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA 5766-ET Currency USD 2020 2019 USD Ethiopian Birr USD Ethiopian Birr Beginning balance - 7 July 2019 1,979,877,39 57,291,514,05 2,771,773,20 75,632,266.60 Advance received - IFR Procedures -9,168 394.88 268,236,061.65 5,286,011.78 14Z.513 48 Less 11,148,272.27 325,527,575.70 8,057,784.98 223,283,571.41 Transfer to Birr account 5,000,000.00 156,097,900.00 4,800,000.00 135,044,520,00 Transfer to MoF - Finance 3676,026.24 116,325,132.22 1,277,907.59 3±9jiQ9.4 8,676,02624 272,423,032.22 6,077,907.59 170,95751904 2,472,246.03 53,104,543.48 1,979,877.39 52,326,052.37 Add: Gain on foreign exchange 33,527,160.23 -4965§j.8 Ending balance - 7 July 2020 gAUa!z.8663UQZ.LIU 2LU4i& 5 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766- ET SCHEDULE OF MOVEMENTS IN BIRR ACCOUNT For year ended 7 July 2020 Account number 0100101040680 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Currency Ethiopian Birr 2020 2019 Ethiopian Birr Ethiopian Birr Beginning balance - 7 July 2019 16,844,960 13,563,260 Transfer from USD designated Account 156,097,900 135,044,520 172,942,860 148,607,780 Less: Transfers to Project implementing agencies - (Regions and other Government offices) Tigray 1,345,187 7,096,170 Afar 2,935,394 2,831,824 Amhara 8,652,095 8,927,188 Oromia 5,816,761 16,500,453 Somali 4,756,496 5,003,894 Benshangul Gumuz 498,912 1,875,153 SNNPR 355,028 7,692,390 Gambella 589,986 3,205,774 Harari 225,444 1,182,342 Dire Dawa 345,275 1,894,516 Addis Ababa 6,362,256 5,973,817 Ministry of Finance - Finance 70,000,000 37,448,389 Office of the Federal Auditor General (OFAG) - 8,866,003 Public Procurement and Property Administration - Agency (PPPAA) 11,290,027 18,607,296 Accounting and Auditing Board of Ethiopia 3,0 4.oo 116,172,861 131,425,209 Bank service charge 39245 7,11 116,563,106 .131,762,820 Ending balance - 7 July 2020 1-484,6 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 nternational Development Association (IDA) entered into an agreement dated 17 March 2016 to finance the Public Financial Management Project The ratter agreed to extend to the former a credit in an 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 expenditures of the Government at the federal and regional levels. The Project consists of the following parts: Part A: Improving Expenditure management and Information System Part B: Strengthening Accountability Institutions Part C: Project Management, Monitoring and Evaluation. The effective date of the Project is 18 May 2016 and its closing date shall be 7 April 2020 prior to one year extension up to 7 April 2021 granted by the World Bank, 2. SIGNIFICANT ACCOUNTIG POLICIES The principal accounting policies adopted by the Project are stated below: a) Basis of preparation These financial statements 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 currencies are translated into Birr at the approximate rates of exchange prevailing at the dates of the transactions. Foreign currency balances are translated into Birr at the exchange rates ruling at the balance sheet date. 7 MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET NOTES TO THE FINANCIAL STATEMENTS (continued) 3. ACCOUNTS RECEIVABLE 2020 2019 Ethiopian Birr Ethiopian Birr Advance to Government and Regional Offices 2,363,092 6,106,685 Purchase advance 401,568 17,450,040 Other advances 5,145 124,722 Staff debtors - 948 4. CASH AND BANK BALANCES USDAccount No.0100101300538 86,631704 57,291,514 Birr Account No. 0100101040680 56,379,754 16,844,960 Ministry of Finance - Finance 25,435,423 16,275,457 Public Procurement and Property Administration Agency 10,042,701 9,661,377 Office of the Federal Auditor General 9,148,243 9,301,422 Accounting and Auditing Board of Ethiopia 104,239 538,747 Cash at bank at Regional Offices 11,2583553 419 933 199,000,617 114,110,410 Cash on hand 39518I7 199,084,542 jj4j269jL07 5. ACCOUNTS PAYABLE Payable to Government Offices 971,230 265,419 Other payable 941 651 419 482 37L MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET NOTES TO THE FINANCIAL STATEMENTS (continued) 6. TAXES PAYABLE 2020 2019 Ethiopian Birr Ethiopian Birr Value added tax 141,432 424,025 Withholding tax 914 4296 7. ACCUMULATED FUND Ethiopian Birr Balance at 7 July 2019 136,863,021 Add: Excess of financing over expenditure for the year 8. DATE OF AUTHORIZATION The Director, Channel One Programs Coordinating Directorate of the Ministry authorized the issue of these financial statements on 30 December 2020. 9 ANNEX MINISTRY OF FINANCE PUBLIC FINANCIAL MANAGEMENT PROJECT IDA CREDIT No. 5766-ET IFR WITHDRAWAL SCHEDULE for applications submitted during the year ended 7 July 2020 Application A Amount disbursed Equvlni No. USD USD Ethiopian Bir PFM-14 D 10