1 M.'~~x p.6 R r iz 6T'-nA, V InII 9"'CaDe_ M M)A4J O bC7-e-M I The Federal Democratic Republic of Ethiopia Audit Services Corporation I I INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II We have audited the accompanying financial statements of General Education Quality Improvement Program Phase II of the Federal Democratic Republic of Ethiopia, Ministry of Finance and Economic Cooperation, which comprise the balance sheet as at 7 July 2016, 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 information. Responsibility for the Financial Statements 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 Government's Manual of the Federal Accounting System 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 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. I 1-0 1-5515222 Fix 251-01 - 513o3S E-ia;l: ASC tethion!t.con 7 5720 25 1-011 1-553;()12 I 251-011-55S15016 I We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 Opinion In our opinion the financial statements give a true and fair view of the financial position of General 'I Education Quality Improvement Program II of the Federal Democratic Republic of Ethiopia, Ministry of Finance and Economic Cooperation as at 7 July 2016 and of its financial performance and its sources and I uses of funds for the year then ended in accordance with the Ethiopian Government Manual of the Federal Accounting System based on a modified cash basis of accounting. I Reports on other requirements 1 As required by the World Bank guidelines we report that, to the extent we can assess:- 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; - counter-part funds have been provided and used in accordance with the financing 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 financing in ac or anegitehe reev nt fm nc n agreement and disbursement letters; - all necessary supporting documents, records and accounts have been maintained in respect of all program activities.; - the funds disbursed covered expenditures that are eligible for financing under IDA Credit No. 5315 ET, Multi Donors Trust Fund 18053, Global Partnership for Education Fund 16684 - our examination revealed no weaknesses or irregularities in the systems of internal controls over financial expenditure other than those reported in our management letter and; -with respect to IFR based withdrawal applications submitted during the year ended 7July 2016 and I listed on page 11, in our opinion: a) the applications together with the procedures and internal controls involved in their 1 preparation, can be relied upon to Support the relevant withdrawals; b) adequate supporting documentation has been maintained to support claims to the World Bank for I reimbursements of expenditures incurred: and c) which expenditures are eligible for financing under IDA Credit No. 5315 ET, Multi Donors Trust Fund 18053, Global Partnership for Education Fund 16684. 3 January 2017 I1 2 1 I I MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II BALANCESHEET AT 7 JULY 2016 g 2015 ASSETS Notes Birr Birr 1 CURRENT ASSETS Debtors 3 14,545,957 42,366,411 Cash and bank balances 4 731,937,109 532,644,560 746,483,066 575,010,971 CURRENT LIABILITIES I Creditors 5 6.980.606 7,665,711 NET CURRENT ASSETS 739,502,460. , 1 REPRESENTED BY I ACCUMULATED FUND 6 739.502460 567,345.2 I The notes on pages 6 to 12 form an integral part of these financial statements. I I I I I I I 3 U I MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE 11 STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 7 JULY 2016 Cumulative for the period from For the period Year ended 18February 2014 From 18 February 2014 7 July 2016 to 7 July 2016 To 7 July 2015 Birr Birr Birr IFINANCING IDA credit and grant 474,545,513 1,603,520,670 1,128,975,157 Multi donors trust fund 699,101,631 1,337,624,590 638,522,959 Global Partners for Education 825,512,000 1,626,004,000 800,492,000 Fund transfer from teachers Development Program (TDP) - 43,575,894 43,575,894 Gain on foreign exchange 14.229.315 20.852.804 6.623,489 2,013,388,459 4,631,577,958 2,618,189,499 Direct payment and special commitment IDA Credit and grant 43,230,021 43,230,021 Multi donors trust fund 163,186,826 163,186,826 - TOTAL FINANCING 2,219,805,306 4,837,994,805 2,618,189,499 PROJECT EXPENDITURES Pre-service education quality improvement 122,004,798 312,728,811 190,724,013 In-service education quality improvement 302,576,418 461,680,580 159,104,162 School grants 1,192,280,671 2,740,022,809 1,547,742,138 School improvement program 19,372,551 24,896,411 5,523,860 Teaching and learning materials 249,286,438 299,204,827 49,918,389 Capital development for education planning and management 7,998,363 14,024,850 6,026,487 Capital development for school planning and management 22,580,415 39,531,810 16,951,395 Education materials 39,850,079 51,469,267 11,619,188 Curriculum reforms and implementation 874,218 1,684,393 810,175 Program coordination 20,999,014 32,858,929 11,859,915 Monitoring and evaluation 5,662,885 9,462,250 3,799,365 I Assessment and examination 10,363,355 17,311,887 6,948,532 Inspection 9,909,720 15,740,997 5,831,277 Communication 4,144,813 6,968,392 2,823,579 Licensing 39,741,621 70,891,302 31,149,681 National policy and institution for ICT 2.747 14.830 12.083 TOTAL PROGRAM EXPENDITURES 2,047,648.106 4,098,492,345 2,050,844,239 EXCESS OF FINANCING OVER EXPENDITURES 172157200 739.502.46056 The notes on pages 6 to 12 form an integral part of these financial statements. 4 U MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II USD DESIGNATED ACCOUNT STATEMENT FOR THE YEAR ENDED 7 JULY 2016 For the Year ended 7 July 2016 I Account number 0100101300482 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA Credit No. ET- 5315, Multi Donors Trust Fund Grant No. TF-18053, Global Partnership for Education Fund Grant No. TF-16684 Currency USD Ethiopian USD Birr Beginning balance 8 July 2015 10,448,956.00 215,100,126.00 Add: Fund received during the year 95,664,335.00 1,999,159,144.00 106,113,291.00 2,214,259,270.00 Less: Transfer to pool Birr account 81.000,000.00 1.680,245,350.00 25,113,291.00 534,013,920.00 Gain on foreign exchange - 14,229.315.00 Ending balance - 7 July 2016 25,113.291.00 548,243,235.00 I The notes on pages 6 to 12 form an integral part of these financial statements. I I I I I I5 U 1 MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II (GEQIP II) NOTES TO THE FINANCIAL STATEMENTS AT 7 JULY 2016 I l BACKGROUND The objective of the General Education Quality Improvement Program Phase II (GEQIPII) 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 well as enhancing management planning and budget capacity of the Ministry of Education and of the Regional Education Bureaux respectively. In an agreement dated 5 December 2013, under credit number 5315 ET, the International Development 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 project which will be supervised through the Ministry of Education with MoFEC being responsible for overall financial management of the Program. I The program is also financed by:- a) The World Bank administered Grant TF Multi Donors Trust Fund 18053-USD 143 million and b) Global Partnership for Education Fund Grant 16684-USD100,000,000 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 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. Part I - Curriculum, text books and assessment, examination and inspection Part II -Teacher development program Part III - School improvement program Part IV - Management and capacity building Part V - Improving the quality of learning and teaching through the use of information and communication Part VI - Program and coordination, monitoring, evaluation and communication of the I GEQIP I I I I I6 86 I MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II NOTES TO THE FINANCIAL STATEMENTS (continued) I AT 7 JULY 2016 I 2 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by the Program, which are consistent with those applied in the previous years, are stated below. a) Basis of preparation These financial statements are prepared on a modified cash basis and in accordance with the accounting policy of the Government of the Federal Democratic Republic of Ethiopia. Sb) 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. Balances in foreign currencies at the statement of financial position date are translated at the rate of exchange prevailing on that date. I I I I I I I I I 1I U MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE I NOTES TO THE FINANCIAL STATEMENTS (continued) AT 7 JULY 2016 3. DEBTORS 1 2015 Birr Birr Amhara national Regiona State 1,675,564 4,338,173 BenishangulGumuz National Regional State 14,607 6,675 Harrari People National Regional State 51,416 141,809 Oromiya National Regional State 1,141,406 9,044,440 Southern Nations, Nationalities and People's Regional State 880,258 4,177,440 National Regional State of Tigray 287,051 221,357 Somali National Regional State - 2,628,757 Addis Ababa University 85,580 831,508 Assosa University - 264,500 BahrdarUniversity 393,460 474,458 Dilla University 168,914 360,556 Hawassa University 10,227 2,513 Mekele University 5,919 815,529 Ministry of Education 9,464,325 19,008,939 Addis Ababa Administration 5,000 - Haromaya University 32,848 - Adigrat University 5,929 Axumn University 47,531 - Medawelabo University 247,829 - Debremarkos University 2,743 - Jigjiga University 25,350 - Welavta Sodo University - 49757 14,545,957 4 I I 4. CASH AND BANK BALANCES 2015 Birr Birr US Dollar account 548,243,235 215,100,126 Main Birr account 356,333 7,550,992 Cash and bank balances in Regional States and Universities 183,337,541 309,993,442 I 1 532,644,560 I 1 1 MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II NOTES TO THE FINANCIAL STATEMENTS (continued) AT 7 JULY 2016 5. CREDITORS 2015 Birr Birr Addis Ababa City Government 24,109 48,097 Amhara National Regional State 545,730 913,944 Benishangul Gumuz National Regional State - 5,690 Dire Dawa City Administration Council 157 5,257 Harrari People National Regional State 1,689 Ministry of Education 309,017 419,063 Oromiya National Regional State 310,452 233,992 Southern Nations, Nationalities and People's Regional State 130,594 1,157,703 Somali National Regional State 4,375,995 - Tigray National Regional State 25,543 51,564 Addis Ababa University 516,932 942,889 Adigrat Universitv 8,567 Ambo University 42,130 Arbaminch University 262,384 Axum University - 358,772 Bahir Dar University 7,375 Debre Birhan University - 12,676 Debre markos University 1,106 - Bahir Dar University 7,375 Debre Birhan University - 12,676 Dilla University 106,430 75,162 Haromava University 36,849 3,083,676 Hawassa University 50,936 102,421 Mekele University 4,788 143,658 Meda-Welabo University 8,964 17,679 Welavta-Sodo University 17,980 12,205 Woldia University 4,200 30,069 Wollo University 233,627 - Jigiigga University 6.246 6390,06 7,665,711 I I I 9 I MINISTRY OF FINANCE AND ECONOMIC COOPERATION I GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II NOTES TO THE FINANCIAL STATEMENTS (continued) 7JULY 2016 * 6. ACCUMULATED FUND Birr Beginning balance at 7 July 2015 567,345,260 Excess of financing over project expenditures of the current year 172,157.200 739,502,460 7. COMPARATIVE FIGURES The comparative figures covered the period from 18 February 2014 to 7 July 2015 while the current year covers the Ethiopian fiscal year (8 July 2015 to 7 July 2016). 8. DATE OF AUTHORIZATION 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 3 January 2017. I I I I I I I I 10 U I I MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II IFR BASED WITHDRAWAL SCHEDULE FOR APPLICATIONS submitted during from 8 July 2015 to 7 July 2016 Application Number USD BIRR Balance 8 July 2015 129,665,904 2,567,990,116 012 1,140,630 23,521,949 013 40,000,000 825,512,000 014 22,570,557 465,447,774 021 10,282,514 217,965,651 025 10,835,317 233,057,914 026 10,835,317 233,653,857 225,330,239 4,567,149,261 Application For special commitment number 001 778,191 16,304,406 002 3,291,921 68,955,023 003 2,851,069 59,445,729 008 1,235,097 26,925,615 009 1,596.776 34,786,074 I 9,753,054 206,416,847 TOTAL 235,083,293 4, I I I I I I I MINISTRY OF FINANCE AND ECONOMIC COOPERATION GENERAL EDUCATION QUALITY IMPROVEMENTI PROGRAM PIlIASE Il RECONCILIATION FROM FOUR LjUA RTERS OF 2007 E.C 2016 G.C INTERIM FINANCIAL REPORTS (IFRS) WITHI TIlE PERIOD END STATEMENT OF SOURCE AND USES OF FUNDS AND STATEMENT OF FINANCIAL POSITION Cumulative 1s 2"n 31" 4th 18 Feb. 2014 to Quarter Quarter Ouarter Quarter 7 July 2016 Year ended Birr Birr Birr Birr Birr SOURCES Balance 8 July 2015 2,618,189,499 Collection during the year Cash transfer 7 July 2016 1,314,481,723 - 217,965,651 466,711,770 1,999,159,144 Direct Payments and special commitments 7 July 2016 20_90J95 123 743 963 - 61711.689 206,416,847 1335442,918 121743 963 217,965,651 528,423,459 4,823,765,490 Gain on foreign exchange __14229,315 4.837,994,805 EX PEINDITURES Balance 8 July 2015 2,050,844,239 Program expenditures 7 July 2016 672,753351 762,737 951 278,757,424 333,399,380 2704_74 8106 Cumulative program expenditures 4,098,492,345 EXCESS /(DEFICIENCY) OF SOURCES OVER EXPENDITURES 739,502,460 Cash at bank 730,591,431 Cash on hand 1,345,678 Advances 14,545,957 Payables (6,980,606) ACCUMULATED FUND 739,502A60 12