AHC Chartered Accountants & Business Advisors The Financial Audit Report The Egyptian National Railways Reconstructing Project Finance & loan Agreement With International Bank for Reconstruction & Development - IBRD the Egyptian National Railways Reconstructing Project (ENRRP) Loan No.76560 For the period July 1. 2019 to June 30, 2020 Member Firm DR L The Financial Audit Report The Eqyptian National Railways Reconstructing Project Finance & loan Agreement With International Bank for Reconstruction & Development - IBRD the Egyptian National Railways Reconstructing Promect (ENRRP) Loan No.76560 For the period July 1. 2019 to June 30, 2020 I J The Financial Audit Report The Eqyptian National Railways Reconstructing Promect Finance & loan Agreement With International Bank for Reconstruction & Development - IBRD the Eqyptian National Railways Reconstructing Project (ENRRP) Loan No. 76560 For the period July 1, 2019 to June 30, 2020 Table of Contents In tro d u c tio n ....................................................................................... . 3 B ac kg ro u n d ....................................................................................... 4 Audit Objectives and Scope ...........................................................................4 R e sults of A ud it ................................................................................... 6 Fund Accountability Statement... ..................................................................7 Independent Auditors Report .............................................................. Interna l C o ntro ls ..................................................................................-s..10 Independent Auditors Report ......................................................................11 Compliance with Applicable Laws Rules and Requlation ...............................13 Independent Auditor's Report ........................................................................14 Approved Budget & Notes of the .................................................................................15 Statement of Financial Position.......................................................................20 Statement of Sources and Uses of Funds .................................................................22 C a sh F o re ca st...........................................................................................24 2 INTRODUCTION 3 AHC DK Chartered Accountants & Consultants INEKWATMAI TO THE MANAGEMENT OF THE IAN NATIONAL RAILWAYS RECONSTRUCTURING PROJECT (ENRRP) PROJECT MANAGEMENT UNIT (PMU) This report represents the results of our financial audit of the "the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT - The Egyptian National Railways - related to Sources of fund incurred according to the Loan agreement between "International Bank for Reconstruction & Development (hereinafter referred to as the bank) and The Egyptian National Railways (hereinafter referred to as the Organization)". Background The purpose of this agreement is to provide support for activities with in the project description "the Egyptian National Railways Reconstructing Project (ENRRP)". Audit Objectives and Scope The objective of this engagement was to conduct a financial audit of the Ministry resources managed by the Organization related to expenditures incurred under "the Egyptian National Railways Reconstructing Project (ENRRP)" according to the Loan agreement between the bank and the Organization. The audit encompassed an examination of "the Egyptian National Railways Reconstructing Project (ENRRP))" expenses in order to determine whether they were in compliance with the terms and condition of the Contract and applicable with the Ministry Rules and regulation. We also reviewed internal controls associated with "the Egyptian National Railways Reconstructing Project (ENRRP)" management of the Contracts. 4 4 El Mohandseein Towers - Floor 19 - Comiche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 AHC ' DFK Charterd Accountants & Consultants The specific objectives were to: 1. Express an opinion on whether the fund accountability statement for the "the Egyptian National Railways Reconstructing Project ( ENRRP )" financed Contract presents fairly in all material respects revenues received and costs incurred for the period under audit in conformity with the International Standards of Audit or other comprehensive basis of accounting. IL 2. Determine if the expenditures reported as incurred under the Contract are in fact allowable allocable and reasonable in accordance with the terms of the Contract. 3. Evaluate and obtain a sufficient understanding of the internal controls of the "the Egyptian National Railways Reconstructing Project (ENRRP)" assess control risk ;identify reportable conditions and material internal control weaknesses. 4. Perform tests to determine whether the Organization complied in all material respects with the terms and conditions of the Contract and also applicable laws and the Ministry rules and regulation. Preliminary planning and review procedures started in July 2020 and consisted of: * A review of the Contract. * Interview and discussion with the Organization key personnel concerning the status of the Contract accomplishments during the period the statutory reporting requirements the Contract budget and procedures governing actual expenditures incurred by the (FIMP) project. * Review of the (FIMP) project organizational structure and established polices and procedures and controls related to personnel, procurement financial accounting and reporting. 5 4 El Mohandseein Towers - Floor 19 - Corniche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 AHC 2 DFK Charterd Accountants & Consultants Fieldwork: The fieldwork segment of our audit was completed on July 29, 2020. The scope of our work was to audit costs incurred by the (ENRRP) project under the Minister according to the Loan agreement. Within each budget line item ,we selected transactions on a judgmental basis in order to perform a substantive test of details. Results of Audit: Fund Accountability Statement Our audit didn't identify any question costs disclosed in our report on the fund accountability statement. Internal Controls Our audit didn't identify any internal control finding disclosed in the internal control report. Compliance with Applicable Laws ,Rules and Regulations Our audits didn't identify any material instances of noncompliance with applicable laws and regulation. This report is intended for the information of the Organization, and the Bank. This restriction is not intended to limit the distribution of this report, which is a matter of public record. ntants, Date: August 10th 2020 Wael Heida Audit & Accounting Pa er FESAA - FEFA - IFA - AMA RAA -9960 6 4 El Mohandseein Towers - Floor 19 - Corniche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 E-mail : info@ahc / W/heite : AAAAAI nh^ k- I] ]3 AHC DFK INTERNATIONAL Chartered Accountants & Consultants Report on the fund Accountability Statement Independent Auditor's Report TO THE MANAGEMENT OF THE EGYPTIAN NATIONAL RAILWAYS RECONSTRUCTURING PROJECT PROJECT MANAGEMENT UNIT (PMU) We have audited tIte accompanying fund accountability statement of the the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT project related to expenditures for the period July 1, 2019 through June 30, 2020 The preparation of the Fund accountability statement is the responsibility of the project management, our responsibility is to express an opinion based in our audit. We conducted our audits in accordance with the International standards of Audit those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fund accountability statements are free of material misstatement. Our audit was performed for the purpose of the forming an opinion on the fund accountability statements. The accompanying schedules are presented for purpose of additional analysis and are part of the fund accountability statement. Such information has been subjected to the auditing procedures applied in the audit of the fund accountability statement and our opinion is fairly stated in all material respects in relation to the fund accountability statements, The fund accountability statements have been prepared on the cash basis, which is a comprehensive basis of accounting other than the International Standards of Audit. The auditor responsibility is to issue a professional opinion before mentioned standards. In our opinion, the statement of sources and uses of fund present fairly in all material respect, the amount received and disbursement incurred pursuant the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT project for the period July 1, 2019 through June 30, 2020 in conformity with the basis of accounting. 8 4 El Mohandseein Towers - Floor 19 - Corniche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 AHC DFK INTERNATIONAL Chartered Accountants & Consultants This report is intended for the information of the Organization, and the Bank. This restriction is not intended to limit the distribution of this report, which is a matter of public record. Date: August 1 01h 2020 Wael Heid HC (Membe-rFirm Audit & Accounting Pa rN-I FESAA-FEFA-IFA-AMA RAA - 9960 9 4 El Mohandseein Towers - Floor 19 - Corniche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 E-mail : info@ahc.bz / Website: www.ahc.bz - &, - 구 · 그 · 그 댜 INTERNAL CONTRL , 1 〕： 그 ; l ［· &．。 - AHC DFK Charterod Accountants & Consultants INTERNATIONAL Report on the internal controls of The fund Accountability statement Independent Auditor's Repo TO THE MANAGEMENT OF THE EGYPTIAN NATIONAL RAILWAYS RECONSTRUCTURING PROJECT (ENRRP) PROJECT MANAGEMENT UNIT JPMU) We have audited the accompanying fund accountability statement of the the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT project related to expenditures for the period July 1, 2019 through June 30,2020 . We conducted our audits in accordance with The International Standards of Audit those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fund accountability statements are free of material misstatement. The management of the Egyptian National Railways Reconstructing Project ( ENRRP loan no. 76560 EGYPT project is responsible for establishing and maintaining internal controls. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control policies and procedures. The objectives of an internal control are to provide management with reasonable but not absolute, assurance that assets are safeguarded against from Unauthorized Use or disposition, and that transactions are executed in accordance with the management's authorization and recorded properly permit the preparation of the fund accountability statements in a accordance with the cash basis of accounting because of the inherent limitation in internal controls errors or irregularities may, nevertheless, Occur and not be detected also, projection of any equation of internal controls-to future periods is subject to the risk that procedures may WAMW become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate -di 4 El Mohandseein Towers - Floor 19 - Comiche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 E-mail: infoOahcbz / Website: www.ahc.hz AH C 2DFK AH C_ _INTERNATIONAL Chartered Accountants & Consultants Our consideration of the internal control structure wouldn't necessarily disclose all matters in the internal control structure that might be material weaknesses under the established international standard. A material weakness is a condition in which the design or operation of one or more of the specific internal control structure elements does not reduce to a relatively low level the risk-that errors or irregularities in amounts that would be material in relation to the fund accountability statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. The result of our audit disclosed no internal control finding that is are required to be reported. This report is intended for the information of the Organization, and the Bank. This restriction is not intended to limit the distribution of this report, which is a matter of public record. on Date: August 10th 2020 Wael Hei a *ll Audit& Accounting Partners FESAA- FEFA-lFA-AMA RAA - 9960 12 4 El Mohandseein Towers - Floor 19 - Comiche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 E-mail: info@ahc.bz / Website: www.ahc.bz COPIAC WITAPLCBELW & REUAIO I3 AHC 2DFK Chartered Accountants & Consultants NTERNATIONA Report on compliance with applicable laws and regulation Of the fund Accountability Statement Independent Auditor's Report TO THE MANAGEMENT OF THE EGYPTIAN NATIONAL RAILWAYS RECONSTRUCTURING PROJECT (ENRRP) PROJECT MANAGEMENT UNIT (PMU) We have audited the accompanying fund accountability statement of the the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT project "related to expenditures for the period July 1, 2019 through June 30, 2020. We conducted our audits in accordance with the International Standards of Audit those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fund accountability statements are free of material misstatement. Compliance with applicable laws, regulations contracts and grants is the responsibility of the the Egyptian National Railways Reconstructing Project ( ENRRP )" loan no. 76560 EGYPT project management. As part of obtaining reasonable assurance about whether the fund accountability statements are free of material misstatements, we performed tests of the the Egyptian National Railways Reconstructing Project ENRRP )" loan no. 76560 EGYPT project compliance with certain provisions of laws, regulations contracts and grants. The results of our tests disclosed no material instance of noncompliance that is required to be reported. This report is intended for the information of the Organization, and the Bank. This restriction is not intended to limit the distribution of this report, which is a matter of public record. Date: August 10th 2020 Wael Heida Audit & Accounting Partner FESAA-FEFA-IFA--AMA RAA - 9960 14 4 El Mohandseein Towers - Floor 19 - Corniche El Nil - Maadi - Cairo. Tel.: (+202) 25250808 - (+202) 25257989 / Fax: (+202) 25257906 E-mail : infnfainh.- by I wat "SAtAtA L2 . 6 ] i i i Approved Budget & Notes of FMR I I I I - I 15 The categories of items to be financed under loan agreement are as follows: World Bank Local Expenditures Category Loan contribution Total to be US$ US$ US$ financed % IS$ 1) Goods under Part A.1and 162,000,000 6,000,000 167,000,000 100% A.2 of the Project 2) Works under Part B of the 86,000,000 20,000,000 106,000,000 100% Project 80,0 000 1000 0 3) Modernization of Management and - 10,000,000 10,000,000 - 0perating Practices 4) Front-end fee () 675,000 - 67,000- 5) Unallocated 12,325,000 - 12,325,000 - 6) Consultants Services - under parts A.3 and C.2 of 9,000.000 9,000.000 100% the project TOTAL AMOUNT 270,000,000 35,000,000 305,000,000 - ACTIVITIES The World Bank (International Bank For Reconstruction And Development ("Bank") agreed to lend Arab Republic Of Egypt "Borrower" a loan of US$ 270,000,000 (two hundred seventy million US Dollar) upon a contract between each other for the purpose of financing a project, The objective of the Project is to improve the reliability, efficiency and safety of the railways' services on targeted sections of the rail network. The Project consists of the following parts: Part A: Signaling Modernization 1. Modernizing the signaling system along the Arab El Raml - Alexandria line consisting of: (a) an automatic block signaling system (on an open line); (b) electronic interlocking systems (in stations); and (c) a level-crossing protection system, through the carrying out of works, and provision of consultants' services for supervisory engineering and goods. 2. Installation of a computerized central traffic control system, through the provision of consultants' services for supervisory engineering and goods. 3. Carrying out: (i) studies to prepare the next phase of the modernization of the signaling system; (ii) studies for the signaling system and automatic train protection on the remaining secondary lines. Part B Track Renewal Renewal of about 260 km of track along the Cairo-Aswan line through the carrying out of works, and provision of consultants' services for supervisory engineering and goods. Part C Modernization of Management and Operating Practices Supporting the development and delivery of: (a) an intensive management training program for mid- and upper-level of the Project Implementing Entity's management and relevant officials from the Ministry of Transport; (b) a technical training program and curricula at the new railway academy (Wardan Institute); and (c) market research for the development of the freight business, demand and usage analysis 16 of key passenger lines, and analysis of means to increase the revenues from the Project Implementing Entity's property, through the provision of consultants' services. Part A.3 Consultants Services Carrying out of studies to support the restructuring of the project implementing entity and improve the safety of its operations. The loan installments will be settled in 15 February and 15 August of each year starting 15 August 2014 and ending 15 August 2039. Also to facilitate carrying out of the Project, the Borrower shall make the proceeds of the Loan available to the Project Implementing Entity "Egyptian National Railways (ENR)" under a subsidiary loan agreement between the Borrower and the Project Implementing Entity "ENR", under terms and conditions satisfactory to the Bank. Project Management Unit (PMU) approved issuance of FMRs for the period ended 1 April 2020 on ...30 June 2020. ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the Financial Monitoring Reports (FMRs) are as follows: a) Accounting convention The Financial Monitoring Reports (FMRs) were prepared in accordance with the cash basis convention. b) Cash There is no designated bank account is maintained yet by the project as the project depends on direct disbursements from the World Bank. c) Taxation No taxes are imposed on the World Bank (WB) financial contribution. Taxes due on purchased goods or services are charged to the Egyptian party 17 3 LONG TERM RECEIVABLES This balance represents the following: 30/6/2020 30/6/2019 USS USS Amounts received through direct payment from IBRD (*) 8,131,302.63 179,129,508.06 Amount deducted by IBRD as a Front-end fees (**) 675,000 675,000 Initial cash disbursed 8,806,302.63 179,804,508.06 (*) Direct payment represents amount paid directly from IBRD during the period to the following:- ]. SALCEF Company against execution of 275 km railways tracks renewal Cairo Aswan line. 2. THALES Company against modernization of signaling systems on Cairo / Alexandria line. 3. SYSTRA Company against the consultancy services for modernization of signaling systems for ASYUT-SOHAG-NAGH HAMMADI corridor. 4. ITALFERR Company against the consultancy services for Migration to ETCS level .1 - on board and track side - on the Alexandria- Cairo - Asyut main corridor. The Front-end fees payable by the borrower shall equal (0.25%) of the loan amount, the bank shall, on behalf of the borrower withdraw from the loan account and pay itself the amount of said fee. IBRD loans position Loan Cash Cash Amount Received Available US US$ US$ Loan Agreement No.7656-EG 270,000,000.00 211,180,759.35 58,819,240.65 18 1 3 LONG TERM RECEIVABLES - Continued Cash available will be received in due course upon the completion of each stage/part of the project and approval of disbursements by the World Bank's l lead Quarter 4 FAIR VALUES Fair values of financial assets are not materially different from their carrying values at the financial position date. 19 Statement of Financial Position 2 The Financial Monitoring Report - FMR The Eqyptian National Railways Reconstructing Project Finance & loan Agreement With International Bank for Reconstruction & Development - IBRD the Eqyptian National Railways Reconstructing Project (ENRRP) Loan No.76560 For the period July 1, 2019 to June 30, 2020 30/6/2020 30/6/2019 UsS USS ASSETS NON CURRENT ASSETS Long term receivables 3 8,806,302.63 179,804,508.06 Funds received Review report "attached" PMU - Financial Manager PMU - Director 21 � � ' � i Ф � � � � � � � Statement of Sources & uses of г � Funds 1 I 1 ] - 1 ] ] � 2г 1 The Financial Monitorina Report - FMR The Eqntian National Railways Reconstructing PrgLct Finance & loan-Agreement With International Bank for Reconstruction & Development - IBRD the Enyptian National -Railways Reconstructina Prolect (ENRRP) Loan No.76560 For the Period July 1. 2019 to June 30, L020 STATEMENT OF SOURCES AND USES OF FUNDS For the Period July 1, 2019 to June 30, 2020 Cumulative Period from period from 1/4/2020 to 2/8/2009 to Note 30/6/2020 30/6/2020 (3 months) (131months) us$ US$ Funds received from IBRD 3 8,806,302.63 211,180,759.35 PMU - Financial Manager ----VMU - Director 23 戶 亡 勺 勺 勺 1 1 1 1 1 。cash Forecast 1 1 1 1 〕 1_ 1 1 1 The FinaMcial Monitoring Report - FMR The Egyptian ka WAU Re_onstrugting Proiect Flnancq &loan AuLement W:it__ International Bank for ftconstruction & Develgp_ment - IB!3D the Eantlan tLational Rafwa)a ReoonstL ng, Loan No.76560 ucti Project (9NRRP) For tho-period A kO to June 30, 2020 IT For the six months f0flowing to the reporting period From July 1, 2020 to December 31, 2020 Incoming Cash Cash 6 months Category Bank financing Received Available Project US$ us$ us$ disbursements forecasts Modernize signaling systems on US$ the Arab El Rami Alexandria 164,300,000.00 120,935,473.96 43,364,526.04 30,000,000.00 includin,g CTC Renewal of 211n of track 83,700 00 jOOO. 190878.17 190878.17 nallocated 12,325,000.00 0.00 12,3253,000 - ront-End Fee 6L75 000.00 6 5000.00 0.06 nsultants Se =- -,--;J 000 OQUO. Total 270,000,000-00 211,180,759.35 58,819,240.65 33,190,878.17 17 -- A