The Federal Democratic Republic of Ethiopia Audit Services Corporation INDEPENDENT AUDITOROS REPORT ON THE FINANCIAL STATEMENTS OF ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT We have audited the accompanying financial statements of Ethiopian Roads Authority, Road Sector Support Project, financed under IDA Credit No. 5371 ET, which comprise the balance sheet as at 7 July 2021 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. Responsibility for the Financial Statements Ethiopian Roads Authority is responsible for the preparation and fair presentation of these financial statements in accordance with the basis described in note 2(a) to the financial statements and for such internal control as the Authority 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. 251-011-5515222 Fax 251-011-5513083 E-maiL:asc@ascethiopia.com 25720 251-011-5535012 website WWN.ascethiopia.com. 251-011-5535015 251-u011-5535016 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT (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 present fairly, in all material respects, the financial position of Ethiopian Roads Authority, Road Sector Support Project, financed under IDA Credit No. 5371 ET as at 7 July 2021 and 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 We have performed the procedures as required by the World Bank guidelines 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 agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; b) Counterpart funds from the Government of Ethiopia have been provided and used in accordance .with the financing agreement and only for the purpose for which the financing was provided; c) Goods and services financed have been provided in accordance with the relevant financing agreement and disbursement letters; and d) Designated Account has been maintained in accordance with the provisions of the relevant financing agreement. Furthermore, with respect to the statements of expenditures submitted during the year and listed on page 9, in our opinion, a) The statements, together with the procedures and internal controls involved in their preparation can be relied upon to support the related withdrawals; b) Adequate supporting documentation has been maintained to support claims to the world bank for reimbursements of expenditures incurred; and c) Said expenditures are eligible for financing under IDA credit no. 5371 ET. 13 December 2021 2 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET BALANCE SHEET AS AT 7 JULY 2021 2020 Notes Birr Birr CURRENT ASSETS Accounts receivable 808,414,908 781,666,920 Cash at bank 3 955,325,442 142,519,530 1,763,740,350 924,186,449 CURRENT LIABILITY Accounts payable 201,244,643 91,587,168 NET CURRENT ASSETS 1,562,495,707 832,599,281 REPRESENTED BY ACCUMULATED FUND 5 1,562,495,707 .JU_2,M,281 3 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 7 JULY 2021 Cumulative for the Six years ended 7 July 2021 7 July 2020 Note Birr Birr Birr SOURCES IDA - initial deposit - 235,090,800 - IDA - direct payment 589,613,962 1,308,064,278 234,465,729 IDA-SOE procedures 461,634,104 1,646,862,608 344,222,709 Ethiopian Government contribution 233,538,688 779,335,997 184,067,421 Gain on foreign exchange 4 262,443,621 330,464,269 16,478,709 1,547,230,375 4,299,817,952 779,234,568 USES Civil works 656,347,264 2,315,993,985 588,564,571 Consultants' services 40,198,701 175,409,393 42,540,036 Capacity building costs - 5,009,814 - Right of way settlements 118,112,632 230,906,836 23,908,426 Bank Charges 2,675,352 10,002,217 1,241,666 817,333,949 2,737,322,245 656,254,698 EXCESS OF SOURCES OVER USES 729,896,426 152A,495,707 122,979,870 4 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO.6371 ET DESIGNATED ACCOUNT STATEMENT Foryearended 7 July 2021 Account number 0100231300038 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA 5371 ET Currency USD Ethiopian USD Birr Balance at 8 July 2020 4,067,140.85 142,519,529.52 Add:-World bank replenishments 11,074,229,59 461,634,104,21 15,141,370.44 604,153,633.73 Less:- Payments to consultants and contractors 8,312,742.00 329,817,852.73 6,828,628.44 274,335,781.00 Add:- Gain on foreign exchange rate - 24,984,855.14 Balance at 7 July 2021 6,828,628.44 299,320,636.14 5 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS 1 PROJECT INFORMATION The objective of the Project is to reduce travel time and cost along selected inter- regional corridors and support the sustainability of the federal network. The Project consists of the following parts. Part 1: Upgrading of Critical Link Road a) Upgrading of about 258 kilometers of the Nekemte - Bure road to paved road standards; b) Provision of consulting services for monitoring and supervision of works under (a) above. Part 2: Support to Enhancing Road Asset Management Practice Maintenance of selected roads and strengthening road asset management capacity, including: a) Overlay, resealing, re-graveling and routine maintenance of about 200 kilometers of paved and gravel roads and provision of consulting services for works, monitoring and supervision; b) Strengthening the Authority's road asset management capacity and support for the adoption of low cost road pavement standards. Part 3: Support to Road Safety and Institutional Development a) Support for the development of a safe and green road strategy and preparation of a national road safety audit manual; b) Establishing the Authority's institutional capacity for Output and Performance Based Road Contract design and management; c) Strengthening the Authority's technical capacity on contract management, financial management, construction site environmental and safety monitoring and management, transparency practices, including a social monitoring and beneficiary study of the road sector with emphasis on gender aspects; d) Support for the preparation of follow-on operations, including preparation of feasibility studies, detailed designs and bidding documents for future roads upgrading and rehabilitation projects, as well as road asset management contracts. 6 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS (continued) 2 SIGNIFICANT ACCOUNTING 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 currency are translated into Birr at the approximate rate of exchange prevailing at the date of the transaction. Cash balances denominated in foreign currencies are translated into Birr at the exchange rate ruling at the balance sheet date. c) Recognition of financial assets and financial liabilities The Project recognizes a financial asset or a financial liability on its balance sheet when, and only when, it becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when, and only when, the control over the contractual rights is lost. A financial liability is derecognized when, and only when, it is extinguished. 7 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS (continued) 7 JULY 2021 3 CASHATBANK USD Account 299,320,636 BIRR Account 656,004,806 955,325,442 4 GAIN ON FOREIGN EXCHANGE RATE FLUCTUATION Designated account 24,984,855 Reimbursement of Advance Guarantee 237,458,766 262,443,621 5 ACCUMULATED FUND Balance at 8 July 2020 832,599,281 Add:- Excess of sources over uses for the year 729,896,426 Balance at 7 July 2021 -1.2495.70.7 6 DATE OF AUTHORIZATION The Authority's Financial Management Directorate Director and Corporate Services Deputy Director General authorized the issue of these financial statements on 13 December 2021. ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET SOE WITHDRAWAL SCHEDULE For STATEMENT OF EXPENDITURES Submitted during the YEAR ENDED 7 July 2021 Withdrawal Application No. USD Birr ERA NO. 27 1,369,059.23 51,990,845.67 ERA NO. 28 3,362,622.82 132,686,406.38 ERA NO. 31 6,342,547.54 276,956,852.16 11,074,229.59 461,634,104.21