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           r11 H11 'i' n. ti 'i"'l T 1111 C "'l 'Lil 1: C                                     Ref.No.    k}L_n)LbJ/zr ·
     The Federal Democratic Republic of Ethiopia                                              cf>')
                                                                                              Date
    Ministry of Finance and Economic Cooperation
     The World Bank


I    Ethiopia Country Office
     Addis Ababa


     Dear Sir,


      Subject: -        Submission of General Education Quality Improvement Proiect-11

                 IDA Cr. No. 53150; GPE Grant No. TF 016684 and MDTF Grant No. TF018053
                    Annual financial audit report for the period ended July 7, 2017 (EFY 2009)

     Attached herewith please find the annual financial Audit Report for the year ended July 7, 2017
      (EFY 2009).

        ~    Annual Audit findings and recommendations (one copy)
        ~    Independent auditors' report on the financial statements (one copy) and
        ~    Independent auditors' report on designated and pool birr account statements

      Thank you for your usual cooperation.

                                                                                     Sincerely yours,




                                                                                      Degu Labw Bguale
                                                                          Channel One Programs CoontiDating DiMctlnte
                                                                                    Provisional Coordinator


         •   Ministry of Education
             Addis Ababa

         •    Channel One Programs Coordinating Directorate
                                                                                                      o5JAN    C-,J

         •   GEQIP Program follow up
             MoFEC


llAh                           f?'.U/.41                       4-hll                                               +r-w,
                                                                                                      nllil nfllJ n.
Tel 251-11-155 24 00, 22 66 98 P.O.Box 1905,1037               Fax 251-11-156 01 24,55 14 96          Addis Ababa- Ethiopia
    251-11-155 00 81, 83 86 89                                                  251-11-155 11 38
                                       MhP''} on All il.lJ4-A '} Yi;''} <l?'l'C .l','1'4'(l.
I
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I
I
    •                        f 'I.U/il P"Coo&. h1A°lll-T JlC?' ~7i'J
                    The Federal Democratic Republic of Ethiopia
                            Audit Services Corporation


I    INDEPENDENT AUDITOR'S REPORT ON THE

I    FINANCIAL STATEMENTS OF
     MINISTRY OF FINANCE AND ECONOMIC COOPERATION
     GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II

I    We have audited the accompanying financial statements of General Education Quality
     Improvement Program Phase II of the Federal Democratic Republic of Ethiopia, Ministry of

I    Finance and Economic Cooperation, which comprise the balance sheet as at 7 July 2017, and
     the statement of sources and uses of funds and the designated account statement for the year
     then ended and a summary of significant accounting policies and other explanatory

I    information.

     Responsibility for the Financial Statements

I    The Ministry of Finance and Economic Cooperation (MoFEC) is responsible for the
     preparation and fair presentation of these financial statements in accordance with the Ethiopian
I    Government's Manual of the Federal Accounting System which is based on a modified cash
     basis of accounting and for such internal control as it determines is necessary to enable the
     preparation of financial statements that are free from material misstatement, whether due to
I    fraud or error.

     Auditor's Responsibility
I    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
I    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.
I   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
I   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
I   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
I   policies used and the reasonableness of accounting estimates made by management, as well as
    evaluating the overall presentation of the financial statements.

I   ~ 251-011-5515222         Fax 251-011-5513083
      251-011-5535012
I     251-011-5535015
      251-011-5535016


I
I
I   INDEPENDENT AUDITOR'S REPORT ON THE
    FINANCIAL STATEMENTS OF
    MINISTRY OF FINANCE AND ECONOMIC COOPERATION
I   GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
       (continued)

I   We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
    basis for our audit opinion.

I   Opinion
    In our opinion the financial statements give a true and fair view of the financial position of
I   General Education Quality Improvement Program Phase II (GEQIP II) of the Federal
    Democratic Republic of Ethiopia, Ministry of Finance and Economic Cooperation as at 7 July
    2017 and of its financial performance and its sources and uses of funds for the year then ended
I   in accordance with the Ethiopian Government's Manual of the Federal Accounting System
    which is based on a modified cash basis of accounting.

I   Reports on other requirements

    As required by the World Bank guidelines we report that, to the extent we can assess:-
I          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
I          purposes for which the financing was provided;

           counter-part funds have been provided and used in accordance with the financing
I          agreement and only for the purposes for which the financing were provided;

           goods, works and services financed have been provided in accordance with the relevant
I          financing agreement and disbursement letters;

           all necessary supporting documents, records and accounts have been maintained in
I          respect of all Program activities.;

           the funds disbursed covered expenditures that are eligible for financing under IDA
I          Credit No. 5315 ET, Multi Donors Trust Fund Grant No.18053, Global Partnership for
           Education Fund Grant No.16684

I          our examination revealed no weaknesses or irregularities in the systems of internal
           controls over financial expenditure other than those reported in our management letter;

I          and



I
I                                                 2

I
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I
    INDEPENDENT AUDITOR'S REPORT ON THE
I   FINANCIAL STATEMENTS OF
    MINISTRY OF FINANCE AND ECONOMIC COOPERATION
    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
I      (continued)

    Reports on other requirements (continued)
I         with respect to IFR based withdrawal applications submitted during the year ended 7
          July 2017 and listed on page 13, in our opinion;
I         a)   the applications together with the procedures and internal controls involved in their

I         b)
               preparation, can be relied upon to support the relevant withdrawals;

               adequate supporting documentation has been maintained to support claims to the

I              World Bank for reimbursements of expenditures incurred; and

          c)   which expenditures are eligible for financing under IDA Credit No. 5315 ET,

I              Multi Donors Trust Fund Grant No.18053, Global Partnership for Education Fund
               Grant No.16684.


I
I   2 January 2018


I
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I                                                 3

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I   MINISTRY OF FINANCE AND ECONOMIC COOPERATION
    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
I   BALANCE SHEET
    AS AT 7JULY 2017

I
I
I   CURRENT ASSETS
      Debtors
      Cash and bank balances
                                                  3
                                                  4
                                                             11,105,175
                                                            319,728,957
                                                                              14,545,957
                                                                             731,937,109

I   CURRENT LIABILITIES
                                                            330,834,132      746,483,066

      Creditors                                   5            4,889,682        6,980,606

I   NET CURRENT ASSETS                                      325,5H~:d:5Q     132,5Q2,46Q

I   REPRESENTED BY

    ACCUMULATED FUND                              6         325,944,450      739,502,460
I
I
I          The notes on pages 6 to 13 form an integral part of these financial statements.



I
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I                                                4

I
I
I   MINISTRY OF FINANCE AND ECONOMIC COOPERATION
    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
I   STATEMENT OF SOURCES AND USES OF FUNDS
    FOR THE YEAR ENDED 7 JULY 2017

I                                                                       Cumulative for
                                                                        the :geriod from
                                                      Year ended       18 February 2014
I                                                     7 July 2017
                                                          Birr
                                                                         to 7 July 2017
                                                                               Birr
                                                                                            7 July 2016
                                                                                                Birr
    SOURCES
I   IDA credit and grant
    Multi donors trust fund
                                                        191,938,238
                                                      1,175,387,779
                                                                          1,795,458,908
                                                                          2,513,012,369
                                                                                             474,545,513
                                                                                             699,101,631
    Global Partners for Education                       211,384,158       1,837,388,158      825,512,000
I   Fund transfer from teachers
    Development Program (TDP)                                                43,575,894
    Gain on foreign exchange                             15,599,819          36,452,623        14,229,315
I   Direct payment and special commitment
                                                      1,594,309,994       6,225,887,952     2,013,388,459

    IDA Credit and grant                               214,847,374          258,077,395        43,230,021
I   Multi donors trust fund                            356,191,699          519,378,525       163,186,826
                                                      2,165,349,067       7,003,343,872     2,219,805,306
I   USES
    Pre-service education quality improvement           243,268,706         555,997,517       122,004,798
    In-service education quality improvement            232,593,059         694,273,639       302,576,418 ,
I   School grants                                     1,249,269,775       3,989,292,584     1,192,280,671 ;

                                                                                             2!~:~~~:~~~ ;
    School improvement program                           37,579,221          62,475,632
    Teaching and learning materials                     642,699,270         941,904,097
I   Capital development for education
        planning and management                                               14,024,850        7,998,363
    Capital development for school
I       planning and management
    Education materials                                 12,061,602
                                                                             39,531,810
                                                                             63,530,869
                                                                                              22,580,415
                                                                                              39,850,079
    Curriculum reforms and implementation                1,178,781            2,863,174          874,218
I   Program coordination
    Monitoring and evaluation
                                                        23,922,590
                                                         3,364,103
                                                                             56,781,519
                                                                             12,826,353
                                                                                              20,999,014
                                                                                               5,662,885
    Assessment and examination                           7,379,053           24,690,940       10,363,355
I      Inspection
       Communication
                                                        19,552,454
                                                        45,614,638
                                                                             35,293,451
                                                                             52,583,030
                                                                                               9,909,720
                                                                                               4,144,813
       Licensing                                        38,661,769          109,553,071       39,741,621
I      National policy and institution for ICT
       Leadership program                                 2,719,933
                                                                                 14,830
                                                                              2,719,933
                                                                                                   2,747

        Support and capacity building                    19,042,123          19,042,123
I   (DEFICIT)/EXCESS OF SOURCES OVER
                                                      2,578,907,077       6,677,399,422     2,047,648,106


I   USES                                              (413.558.010)         325.944,450      172,157,200

          The notes on pages 6 to 13 form an integral part of these financial statements.
I                                                 5

I
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I   MINISTRY OF FINANCE AND ECONOMIC COOPERATION
    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II

I   USD DESIGNATED ACCOUNT STATEMENT
    FOR THE YEAR ENDED 7 JULY 2017


I   For the Year ended                                7 July 2017
    Account number                                    0100101300482

I   Depository bank
    Address
                                                      National Bank of Ethiopia
                                                      Addis Ababa, Ethiopia
    Related credit                                    IDA Credit No. ET- 5315, Multi Donors Trust

I                                                     Fund Grant No. TF-18053, Global Partnership
                                                      for Education Fund Grant No. TF-16684
    Currency                                          USD
I                                                                                      Ethiopian
                                                                 USD                      Birr
I   Beginning balance 8 July 2016                             25,113,291.08           548,243,234.91


I   Add: Fund received during the year                        71,109,238.90
                                                              96,222,529.98
                                                                                    1,578,710,174.89
                                                                                    2,126,953,409.80


I   Less: Transfer to pool Birr account
          Transfer to Ministry of Education
                                                              89,100,000.00
                                                               1,770,773.10
                                                                                    1,977,931,160.00
                                                                                       40,021,905.54

I                                                              5,351,756.88           109,000,344.26

    Gain on foreign exchange                                                           14,779,905.45
I   Ending balance - 7 July 2017                               5,351,756.88           123,780,242.71


I
I
I           The notes on pages 6 to 13 form an integral part of these financial statements.



I
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I                                                 6

I
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I
    MINISTRY OF FINANCE AND ECONOMIC COOPERATION
I   GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
    NOTES TO THE FINANCIAL STATEMENTS

I   1.   PROGRAM INFORMATION


I        The objective of the General Education Quality Improvement Program Phase II
         (GEQIP II) is to support Ethiopia's efforts to increase the quality of general education
         within its territory through improving teaching and learning conditions in schools as

I        well as enhancing management planning and budget capacity of the Ministry of
         Education and of the Regional Education Bureaus respectively. In an agreement dated
         5 December 2013, under credit number 5315 ET, the International Development

I        Association (IDA) agreed to extend a credit in an amount equivalent to Special
         Drawing Rights (SDR) variously "credit and financing" to assist in financing the
         Program which will be supervised through the Ministry of Education with MoFEC

I        being responsible for overall financial management of the Program.

         The Program is also financed by:-

I        a)    The World Bank administered Grant Agreement Multi Donors Trust Fund Grant
               No. 18053-USD 204,348,329 Million and

I        b)    Global Partnership for Education Fund Grant No. 16684-USD 100,000,000


I        The government also intends to contribute the equivalent of approximately USD 78
         million of its own funds to assist in the financing of the GEQIP Program. The proposed
         Adaptable Program Loan (APL) will be implemented in two phases. The first phase is

I        for over a period of four years and the second phase is also for over a period of another
         four years respectively. The second phase of GEQIP has the following parts.


I        Part I
         Part II
                   Curriculum, text books and assessment, examination and inspection
                    -
                     -
                  Teacher development program
         Part III  School improvement program
                    -
I        Part IV
         Part V
                   Management and capacity building
                    -
                     -
                   Improving the quality of learning and teaching through the use of information
                    and communication
I        Part VI -Program and coordination, monitoring, evaluation and communication of the
                        GEQIP
          The above financers Program closing time and application deadline is as follows:-
I                                                                            Application deadline
            Financer                                     Closing Date                date
I        • Multi Donors Trust Fund
              Grant No. TF 18053                         31 July 2018         30 November 2018
         • Global Partnership for Education
I             Fund Grant No. TF 16684
         • International Development Association
                                                       16 February 2018          16June2018

              IDA Credit No. 53150 ET                    07 July 2018        07 November 2018
I                                               7

I
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    MINISTRY OF FINANCE AND ECONOMIC COOPERATION
I   GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
    NOTES TO THE FINANCIAL STATEMENTS (continued)

I   2.   SIGNIFICANT ACCOUNTING POLICIES

         The principal accounting policies adopted by the Program, which are consistent with
I        those applied in the previous years, are stated below.

         a)   Basis of preparation
I             These financial statements are prepared on a modified cash basis and in

I             accordance with the accounting policy of the Government of the Federal
              Democratic Republic of Ethiopia.


I        b)   Currency

              These financial statements are presented in Birr. Transactions in foreign

I             currencies are translated into Birr at the approximate rates of exchange prevailing
              at the dates of the transaction. Balances in foreign currencies at the balance sheet
              date are translated at the rate of exchange prevailing on that date.

I
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     MINISTRY OF FINANCE AND ECONOMIC COOPERATION
 I   GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
     NOTES TO THE FINANCIAL STATEMENTS (continued)

 I   3.   DEBTORS


 I                                                           Birr
                                                                           2016
                                                                           Birr


 I        Amhara National Regional State
          Benishangul Gumuz National Regional State
                                                           1,006,519
                                                              15,698
                                                                          1,675,564
                                                                             14,607
          Harrari People National Regional State                   7         51,416
 I        Oromiya National Regional State
          Southern Nations, Nationalities and People's
                                                             744,005      1,141,406

             Regional State                                3,395,560       880,258
 I        Tigray National Regional State
          Addis Ababa University
                                                              32,547
                                                              79,269
                                                                           287,051
                                                                            85,580
          Dire Dawa City Administration                           14
 I        Bahir Dar University
          Dilla University
                                                               1,837
                                                             172,670
                                                                           393,460
                                                                           168,914
          Jimma University                                        50
 I        Hawassa University
          Mekele University
                                                               1,948
                                                                  11
                                                                            10,227
                                                                             5,919
          Ministry of Education                            2,955,109     9,464,325
 I        Addis Ababa City Administration
          Haromaya University
                                                              11,080
                                                             111,293
                                                                             5,000
                                                                            32,848
          Adigrat University                                  34,674         5,929
 I        Axum University
          Arbaminch University                                 1,760
                                                                            47,531
                                                                           247,829
          Medawelabo University                              433,755         2,743
 I        Debremarkos University
          Jigjiga University                               1,590,369
                                                                            25,350

          Afar National Regional State                       517,000
 I                                                        11,105,175    14,545,257


 I   4.   CASH AND BANK BALANCES

                                                                         2016
 I                                                         Birr          Birr

          US Dollar account                              123,780,250   548,243,235
 I        Main Birr account
          Cash and bank balances in
                                                          11,301,948       356,333

                                                         184,646,759   183,337,541
 I          regional states and universities
                                                         312,728,257   731,237, 1Q2


 I                                              9

 I
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     MINISTRY OF FINANCE AND ECONOMIC COOPERATION
I    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
     NOTES TO THE FINANCIAL STATEMENTS (continued)

I    5.   CREDITORS


I                                                     Birr
                                                                      2016
                                                                      Birr


,I        Addis Ababa City Administration                 64,808         24,109
          Amhara National Regional State                  92,795        545,730

I         Benishangul Gumuz National Regional State
          Dire Dawa City Administration
          Harrari People National Regional State
                                                         542,695
                                                             140
                                                             423
                                                                             157


I         Ministry of Education
          Oromiya National Regional State
          Southern Nations, Nationalities and
                                                         453,529
                                                         165,798
                                                                        309,017
                                                                        310,452


I            People's Regional State
          Somali National Regional State
          Tigray National Regional State
                                                       1,905,341

                                                          30,763
                                                                        130,594
                                                                      4,375,995
                                                                         25,543

I         Afar National Regional State
          Addis Ababa University
                                                         158,750
                                                           2,676
                                                         497,250
                                                                        516,932
                                                                          8,567
          Adigrat University

I         Ambo University
          Arbaminch University
                                                          24,915
                                                          10,728        262,384
          Axum University                                 23,649

I         Wollega University
          Debre Birhan University
                                                          21,682
                                                           9,780
          Debremarkos University                                          1,106

I         Dilla University
          Haromaya University
                                                         289,494
                                                           5,415
                                                                        106,430
                                                                         36,849
          Hawassa University                             129,920         50,936
I         Mekele University
          Medawelabo University                          441,233
                                                                          4,788
                                                                          8,964
          Welayta-Sodo University                                        17,980
I         Woldia University
          Wollo University                                       60
                                                                          4,200
                                                                        233,627
          Jimma University                                   17,838
I         Jigiigga University
                                                       4,889.682
                                                                          6,246
                                                                      6.98Q.6Q6

I
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 I
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I   MINISTRY OF FINANCE AND ECONOMIC COOPERATION
    GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
    NOTES TO THE FINANCIAL STATEMENTS (continued)
I   6.   ACCUMULATED FUND

I
I        Balance at 8 July 2016

         Deficit of Sources over Uses
                                                                   739,502,460



I           of funds of the current year
         Balance at 7 July 2017
                                                                 (413,558,010)
                                                                   325,944.450


I   7.   DATE OF AUTHORIZATION


I        Channel One Programs Coordinating Directorate Director of The Federal Democratic
         Republic of Ethiopia, Ministry of Finance and Economic Cooperation authorized the
         issue of these financial statements on 2 January 2018.

I
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    MINISTRY OF FINANCE AND ECONOMIC COOPERATION
I   GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
    IFR BASED WITHDRAWAL SCHEDULE
    FOR APPLICATIONS submitted from 8 July 2016 to 7 July 2017
I
I                Application
                  Number           USD              BIRR


I        Balance 8 July 2016

                     030
                                  235,083,293

                                    5,614,844
                                                  4,773,566,108

                                                     123,727,569

I                    034
                     032
                     041
                                    5,614,844
                                   44,918,747
                                    1,285,743
                                                     123,727,569
                                                     990,215,840
                                                      29,175,953

I                    039
                     040
                     046
                                      428,581
                                      428,581
                                    7,690,739
                                                       9,730,032
                                                       9,730,032
                                                     175,441,908

I                    045
                     047
                                    2,563,580
                                    2,563,580
                                   71,109,239
                                                      58,480,636
                                                      58,480,636
                                                   1,578,710,175

I                                 306,192,532      6,352,276,283


I                Application
                  for special

I                commitment
                    number


I                    004
                     005
                                    2,114,557
                                    5,822,229
                                                  46,575,432.25
                                                 129,037,491.15
                     006            2,433,014     54,051,647.42
I                    007
                     008
                                    4,550,540
                                    5,200,698
                                                 101,584,869.23
                                                 114,220,294.44
                     009              362,313      8,156,205.50
I                    010
                     011
                                    1,118,944
                                      724,110
                                                  24,702,818.89
                                                  16,347,298.25
                     013              374,478      8,474,584.78
I                    017
                     021
                                      303,110
                                    2,639,992
                                                   6,883,232.12
                                                  61,005,199.14
                                   25,643,985    571,039,073.14
I        TOTAL                    331,836,517   6,923,315,356.03

I
I                                  12

I
I
---------------------
  MINISTRY OF FINANCE AND ECONOMIC COOPERATION
  GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II
  RECONCILIATION OF THE FOUR QUARTERS OF INTERIM FINANCIAL REPORTS (IFR)
  WITHTHEYAERENDSTATEMENTOFSOURCESANDUSESOFFUNDSANDTHEBALANCESHEET

                                                                                                                       Cumulative
                                                             First          Second         Third        Fourth        18 Feb. 2014 to
                                                            Quarter         Quarter       Quarter       Quarter         7 July 2017
                                            Year ended       Birr            Birr           Birr         Birr              Birr
  SOURCES
         Balance 8 July 2016                                                                                            4,837,994,805
        Collection during the year
          Cash transfer                     7 July 2017   1,237,670,978                    48,636,017   292,403,180     1,578,710,175
  Direct Payments and special commitments   7 July 2017     202,049,950    254.035,201     48,016,308    66,937,614       571.039,073
                                                          1,439,720,928    254.035,201     96,652,325   359,340.794     6,987,744,053
          Gain on foreign exchange                                                                                         15,599,819
                                                                                                                        7,003,343,872
  USES
         Balance 8 July 2016                                                                                            4,098,492,345
         Program expenditures               7 July 2017    326,645,509    1.198.270,832   549.467,362   504,523,374     2,578,907,077
         Cumulative Program expenditures                                                                                6,677,399,422

  EXCESS OF SOURCES OVER USES                                                                                            325,944.450


  Cash at bank                                                                                                           319,063,626
  Cash on hand                                                                                                               665,331
  Advances                                                                                                                 11,105,175
                                                                                                                         330.834,132
  Payables                                                                                                                (4,889.682)
  ACCUMULATED FUND                                                                                                       325,944.450



                                                                  13