.TAY TAY AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET AND TRUST FUND NO.16392 ET AS AT AND FOR THE YEAR ENDED 30 JUNE 2017 TAY & Co. Chartered Certified Accountants & Authorized Auditors Addis Ababa, Ethiopia Tel. 251-11-442-1336 Fax 251-11-442-1338 E-mail. tavco(-ethionet.et P.O.Box 1335 Addis Ababa, Ethiopia Ethio-china Friendship Street Wongelawit Tadesse Building 1 Floor Website: www.taNaudi[ir,.comn TAY & Co. i!kx~rteraq Certifie,4 cnnoi nt4vnts~ A-vi t&orizeA Ai d4to INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 & IDA TRUST FUND NO. 16392 ET Report on the financial Statements We have audited the accompanying financial statements of Development Bank of Ethiopia Women Entrepreneurship Development Project Number IDA Credit No.5112 and IDA Trust Fund No.16392 ET, which comprise the statement of financial position as at 30 June 2017, the statement of sources, the statement of income and expenditures and uses of fund, and a summary of significant accounting policies and other explanatory notes for the year then ended. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Generally Accepted Accounting Principle. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policy; and making accounting estimates that are reasonable in the circumstances. 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. Opinion In our opinion, the financial statements present fairly, in all material respect financial position of Development Bank of Ethiopia Women Entrepreneurship Developme o r IDA Credit No.5112 and IDA Trust Fund No.16392 ET, as at 30 June 2017, its fi er o et d operating result for the year then ended in accordance with Generally Accepted c nting Princ Ethio-China Friendship Street, Wengelawit Tadesse B ot F 3 Tel. (011) 442 1336, 442 0062, (011) 470 7092, (011) 470 7094 - Mob. 0 (021 51 5038/39 Fax (011) 442 1338 - e-mail: tayco@ethionet.et - www.tayauditing.com - P.O. 1a ktA baba, Ethiopia In addition, with respect to the statement of income and expenditure ended 30 June 2017, in our opinion:-. a. The statements, together with the procedures and initial control involved in their preparation, can be relied up on to support the relevant withdrawals, b. Adequate supporting documentation has been maintained to support claims to IDA and TF for reimbursements of expenditures incurred; and c. Expenditures are eligible for financing under IDA Credit No.5112 and Trust Fund t No.16392 ET. Nd Cwj, TAY & Co. Chartered Ce d Addis Ababa, Authorized Au s November 17, 2017 2 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET BALANCE SHEET AS AT 30 JUNE 2017 CURRENCY: ETHIOPIAN BIRR Notes 2017 2016 ASSETS Current assets Receivables 4 992,943,440.93 913,596,904.93 Cash at Bank - 22,005,933.62 Total assets 992,943,440.93 935,602,838.55 LIABILITIES Current liabilities Creditors 5 913,751,949.79 877,888,431.63 Net current asset 79,191,491.14 57,714,406.92 Represented by Fund Balance 3d, 6 79,191,491.14 57,714,406.92 ,opo Ily U 0011Uv DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET INCOME AND EXPENDITURE FOR THE YEAR ENDED 30 JUNE 2017 CURRENCY: ETHIOPIAN BIRR Notes 2017 2016 INCOME 3c Interest Income 34,396,925.93 37,155,692.17 Gain on Exchange Rate 502,517.14 1,134,140.38 34,899,443.07 38,289,832.55 EXPENDITURE 3c Financial Charge 13,422,358.86 12,809,063.51 EXCESS OF INCOME OVER EXPENDITURE 21,477,084.21 25,480,769.04 4 x, 41(,79 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 and Trust Fund NO 16392 ET NOTES TO THE ACCOUNT FOR THE YEAR ENDED 30 JUNE 2017 CURRENCY: ETHIOPIAN BIRR 1. Background of the project Financing agreement was signed on 12 June 2012 between the Federal Democratic Republic of Ethiopia and the International Development Association (IDA) and amended on August 18,2014 according to which a special drawing right (SDR) 32,200,000 (Thirty-two million two hundred thousand) is available in the form of credit to implement the activities of the Women Entrepreneurship Development project, under credit agreement No 5112-ET and Trust Fund NO. 16392.The project is implemented through Ministry of Urban Development and Construction (MoUD & C) National Project Management Team (NPMT) which is established with in the Federal Micro and Small Enterprise Development Agency (FeMSEDA) under the MoUD & C,MoUD & C,FeMSEDA ,NPMT, Development Bank of Ethiopia (DBE) and other sub national administration selected for the execution of the project and implementing project activities. The objective of the project is to increase the earning and employment of Micro and small enterprises (MSEs)fully or partially owned by female entrepreneurs in the targeted cities. 2. Scope of the audit The audit of the project is carried out in accordance with International Standard on Auditing (ISA) promulgated by the International Federation of Accountants (IFAC) including such test and procedures as deemed necessary under circumstances. We also Visited, on the sample basis,the selected micro finance institutions (MFIs) participated in the project and ensure the following adhered to. We have given a Special attention that 1) The WorldBank financinghas been used in accordance with conditions ofrelevant Financing agreements with due attention to economy and efficiencyand only for the purpose for which the financing was provided. 2) The Counterpart fund have been provided and used in accordance with relevant financing agreements, with due attention to economy and efficiencyand only for the purpose for which they were provided. 3) Goods, works and services financed have been procured in accordance with the relevant financing agreements including specific provisions of World Bank procurement policies and procedures. 4) All necessary supporting documents, records and accou en maintained in respect of the projects activity including expenditures reporte of expenditure (SOE) 5s method of reporting. 5) Designated accounts have been maintained in accordance with the provision of relevant financing agreements and funds disbursed out of the accounts were used only for the purpose intended in the financing Agreements. 6) National laws and regulations have been compiled with, and that the financial and accounting procedures approved for the project were adhered. 7) Financial performance of the project is satisfactory. 8) Assets procured from the projects funds exist and there is verifiable ownership by the implementing agencies or beneficiaries in line with the financing agreement. 9) Ineligible expenditures included in withdrawal applications are identified and reimbursed to the designated accounts. 3. Accounting policies The principal accounting policies adopted by the project are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. a. Basis of presentation These financial statements have been prepared in compliance with Generally Accepted Accounting Principle b. Currency Foreign currency is converted to Birr at the exchange rate ruling at the date of the transaction. Cash balances maintained in the foreign currency is converted to Birr at the mid exchange rate ruling at the balance sheet date. c. Basis of accounting Modified cash basis of accounting is used in the recognition of sources and uses of fund. d. Fund balance It incorporates gain on exchange rate and net interest income before profit and tax of Development bank of Ethiopia obtained from disbursement of loan to micro finance institutions. oxlny 6.1 > nt' 6 0u.r0~ tin 6i '. DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET NOTES TO THE ACCOUNT FOR THE YEAR ENDED 30 JUNE 2017 4. Receivables CURRENCY: ETHIOPIAN BIRR 2017 2016 Loan to micro finance institution 915,222,769.98 857,182,677.34 Receivable from DBE Interest 11,437,553.09 45,848,702.35 Interest receivable from micro finance institution 66,283,117.86 10,565,525.24 992,943,440.93 913,596,904.93 5. Creditors Loan from IDA 908,038,871.89 872,507,230.01 Interest payable to MoFED 5,713,077.90 5,381,201.62 913,751,949.79 877,888,431.63 6. Fund balance Opening balance 57,714,406.93 32,233,637.88 Current year transfer 21,477,084.2] 25,480,769.05 79,191,491.14 57,714,406.93 ConAPanj , 7 O1?)I'21t' DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET STATEMENT OF SOURCE AND USE FOR THE PROJECT FOR THE YEAR ENDED 30 JUNE 2017 CURRENCY: ETHIOPIAN BIRR Annex 1 Note 2017 2016 Source Source of fund IDA Annex 2.1 908,038,871.90 872,507,230.02 Gain on exchange rate 7,183,898.08 6,681,380.94 915,222,769.98 879,188,610.96 Uses Uses of fund by MFI's Annex 2.3 915,222,769.98 845,732,694.34 Excess of source over uses 0.00 33,455,916.62 Represented by Cash at bank - 22,005,933.62 O u t s t a n d i n g b a l a n c e o n M F I ' s A n n e x 2 . 4 -1 1 , 4 4 9 , 9 8 3 . 0 0 - 33,455,916.62 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET STATEMENT OF SOURCE AND USE FOR THE PROJECT FOR THE YEAR ENDED 30 JUNE 2017 Annex 2 2.1. Source of fund (IDA) CURRENCY: ETHIOPIAN BIRR Withdrawal Description Date application/ USD Rate Birr reference Balance as of 01 July 2016 872,507,230.02 10th disbursement 27/10/2016 TFDBE-005 904,298.13 22.1459 20,026,495.96 11th disbursement 8/12/2016 TFDBE-006 694,980.14 22.3102 15,505,145.92 908,038,871.90 2.2. Loan given to MFI's by DBE Date Reference Birr Balance as of 01 July 2016 857,182,677.34 Addis credit &saving institution 19/10/2016 VPICM/265/16 20,000,000.02 Addis credit &saving institution 23/11/2016 VP/CM/278/16 20,000,000.04 Addis credit &saving institution 14/03/2017 VP/CN/030/17 18,040,092.64 915,222,769.98 9 ANc cou0 9 A. 09. DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET STATEMENT OF SOURCE AND USE FOR THE PROJECT FOR THE YEAR ENDED 30 JUNE 2017 Annex 3 2.3. MFI's Disbursement to Final Beneficiaries up to June 30 2016 Date A Balance as of 01 July 2016 845,732,694.34 Loan provided to MSEs by WASASA 30/6/2016 Loan provided to MSEs by SF&P 30/6/2016 Loan provided to MSEs by ADCSI 30/6/2016 58,040,092.64 Loan provided to MSEs by OCSSCO 30/6/2016 Loan provided to MSEs by Harbu 30/6/2016 Loan provided to MSEs by OMO 30/6/2016 Loan provided to MSEs by DEC 30/6/2016 11,449,983.00 Loan provided to MSEs by AGAR 30/6/2016 Loan provided to MSEs by METEMAMEN 30/6/2016 Loan provided to MSEs by MEKLIT 30/6/2016 Loa prvidd t3MSs6b/MELIT16 ________ Loan provided to MSEs by VISION 30/6/2016 6.9,490,075.64 2.4. Outstanding advance on MFI's 915,222,769.98 Remaining MFI's Remaining balance from Additional loan disbursement to balance as of MFI as of July given to MFI final beneficiary June 302017 WASASA Micro Finance Inst. Specialized Financial & Prom. Inst. Amhara Cr. & Saving Inst Oromia credit & Saving S.C HARBU Micro Finance Inst. OMO Micro Finance Inst. DEDEBIT Cr. & Saving Inst. S.C 11,449,983.00 11,449,983.00 AGAR Micro Finance Inst. METEMAMEN Micro Finance Inst MEKLIT Micro Finance Inst. VISION Fund Addis credit & saving institution 58,040,092.64 58,040,092.64 ~naQ ~RdllipalUMr NcColl DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT IDA CREDIT NO. 5112 AND TRUST FUND NO. 16392 ET STATEMENT OF DESIGNATED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2017 Account number: 02615/1550/0000010038100002 Depository bank National Bank of Ethiopia Address: Addis Ababa, Ethiopia Related Grant: IDA Credit 5112-ET Currency USD 2017 2016 Beginning balance 5,010,278.93 Add: Transfer from IDA Amount settled with SOFs - - 5,010,278.93 Less: Loan given to Micro Finances during the year 5,010,278.93 Ending Balance of IDA 11