@TC EFCM /014/2020 January 06, 2020 Ref. No. Date Mr .Salman Alibhai, Task Team leader (a.i.) WEDP Project World Bank Subject: Submitting External Audit Report of WEDP for June 30,2019. Attached herewith, please find independent external auditor's report with management letter for Women Entrepreneurship Development Program /WEDP/ Wit regards Encl * Audit report with management letter CC:- / V/P Small & Medium Enterprise Financing Development Bank of Ethiopia AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764, IDA 51120 (F.ROT/AID 15/010/00) AS AT AND FOR THE YEAR ENDED 30 JUNE 2019 TAY Authorized Accountants & Auditors Addis Ababa, Ethiopia Tel. 251-11-442-1336 Fax 251-11-442-1338 E-mail: info(@tayauditin_.com P.O.Box 1335 Addis Ababa, Ethiopia Ethio-china Friendship Street Wongelawit Tadesse Building 1st Floor Website: www.tavauditing.com TAY A14 tk rz fvc a4. tt ri aritr INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764, IDA 51120 (F.ROT/AID 15/010/00) Opinion We have audited the accompanying financial statements of, Development Bank of Ethiopia Women Entrepreneurship Project Grant No. P122764, IDA 51120 (F.ROT/AID 15/010/00) which comprise statements of financial position as at 30 June 2019, statements of source & uses of fund, summary of designated accounts and summary of significant accounting policies and other explanatory notes for the year then ended. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of Development Bank of Ethiopia Women Entrepreneurship Development Project Grant No. P122764, IDA51120 (FROT/AID 15/010/00) as at 30 June 2019, its financial performance and Operating result and it's movements in cash in the designated account for the year then ended in accordance with Generally Accepted Accounting Principle. In addition, with respect to the statement of expenditure submitted during the year ended 30 June 2019, in our opinion. a. The statements, together with the procedures and initial control involved in their preparation, can be replied up on to support the relevant withdrawals, b. Adequate supporting documentation has been maintained to support claims to IDA for reimbursements of expenditures incurred: and c. Expenditures are eligible for financing under IDA51120 (FROT/AID 15/010/00) Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the international Ethics Standards Board for Accountants' code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirments that are relevant to our audit of the financial statemetns in Ethiopia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A member of Kreston International | A global network of independent accounting firms Ethio-China Friendship Street, Wengelawit Tadesse Building 1st Floor Tel. (011) 442 1336, 442 0062, (011) 470 7092,(011) 470 7094 - Mob.(093) 001 4106, (091) 151 5038/39 Fax (011) 442 1338 - e-mail: Info@tayauditing.com - www.tayauditing.com - P.O. Box 1335 - Addis Ababa, Ethiopia Responsibilities of the Management and those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting policy of the Project, and for such internal control as management determines is necessary to enable the preparation of a project report that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the project report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The engagement partner on the audit resulting in this independent auditor's report is Tesfa Tadesse MSc, FCCA. TAY uthorize4,7 Addis Ababa Accourtants & 27 December 2019 2 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) BALANCE SHEET AS AT 30 JUNE 2019 CURRENCY: ETHIOPIAN BIRR Notes 2018 ASSETS Birr Birr Current assets Receivables 4,annex 2.2 1,255,393,890 215,516,446 Cash at Bank 5 212,103,448 111,448,707 Total assets 1,467,497,338 326,965,153 LIABILITIES Current liabilities Creditors 6 1,462,358,759 328,140,539 Net current asset 5,138,579 - 1,175,386 Represented by Fund Balance 3d, 7 5,138,579 - 1,175,386 3 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) INCOME AND EXPENDITURE FOR THE YEAR ENDED 30 JUNE 2019 CURRENCY: ETHIOPIAN BIRR Notes 2018 Birr Birr INCOME 3c Foreigen exchange gain 7,815,203 - EXPENDITURE 3c Loss on Exchange Rate - 1,501,237 720,386 Bank Service Charge - 455,000 - 1,501,237 1,175,386 EXCESS OF EXPENDITURE OVER INCOME 6,313,965 - 1,175,386 4ji A lit4Y?~7 * 4C DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF DESIGNATED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2019 Account number: 101171300040 Depository Bank National Bank of Ethiopia Address: Addis Ababa, Ethiopia Related Grant: F.ROT/AID 15/010/00 Currency EURO 2018 Beginning balance 3,190,049.77 Add: Transfer from Cassa IDC (S.P.A.) fund A/C 4,999,925.00 9,999,925.00 8,189,974.77 9,999,925.00 Less: Transfer from EURO A/C to Fund Birr A/C (8,189,974.77) Loan given to Micro Finances during the year - (6,793,582.85) Bank service charge - (16,292.38) (8,189,974.77) (6,809,875.23) Ending Balance of Trust Fund - 3,190,049.77 5 lp" S).J -f o 9 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF DESIGNATED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2019 Account number: 0100381040072 Depository Bank National Bank of Ethiopia Address: Addis Ababa, Ethiopia Related Grant: F.ROT/AID 15/010/00 Currency Birr 2018 Beginning balance 9,724,718.92 Add: Transfer from EURO A/C 262,267,319.94 181,999,999.92 271,992,038.86 181,999,999.92 Less: Loan given to Micro Finances during the year 108,444,248.00 172,275,281.00 Bank service charge - - 108,444,248.00 172,275,281.00 Ending Balance of Trust Fund 163,547,790.86 9,724,718.92 6it DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF DESIGNATED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2019 Account number: 101171300040 Depository Bank National Bank of Ethiopia Address: Addis Ababa, Ethiopia Related Grant: F.ROT/AID 15/010/00 Currency JPY 2018 Beginning balance Add: Transfer from Cassa JAICA to fund A/C 3,956,739,646.00 3,956,739,646.00 Less: Transfer from to Fund Birr A/C 3,954,757,277.00 Loan given to Micro Finances during the year Bank service charge 1,982,369.00 3,956,739,646.00 Ending Balance of Trust Fund , AD thr A,~ '/. DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF DESIGNATED BIRR ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2019 Account number: 101171040005 Depository Bank National Bank of Ethiopia Address: Addis Ababa, Ethiopia Related Grant: F.ROT/AID 15/010/00 Currency BIRR 2018 Beginning balance Add: Transfer from JPY A/C 979,988,853.24 - 979,988,853.24 Less: Loan given to Micro Finances during the year 931,433,196.00 Bank service charge - - 931,433,196.00 - Ending Balance of Trust Fund 48,555,657.24 - 8 44, > .40 la . 14 'AS lo DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) NOTES TO THE ACCOUNT FOR THE YEAR ENDED 30 JUNE 2019 CURRENCY: ETHIOPIAN BIRR 1. Background of the project Financing agreement was signed between Ministry of Finance (MoF) on behalf of the Federal Democratic Republic of Ethiopia and Cassa depositi e prestiti (S.P.A.)/JAICA respectively on August 4,2016/February 24,2017 and on August 9,2016/ July 21,2017 according to which a soft loan up to a maximum amount of EURO 15,000,000.00 (fifty million)and JPY 5.5 Billion respectively is available in the form of credit to implement the activities of the Women Entrepreneurship Development project, under credit agreement No P122764,IDA 51120(F.ROT/AID 15/010/00).The project is implemented through under subsidary loan agreement between Ministry of Finance (MoF) and the Development Bank of Ethiopia (DBE) to act as implementing agency for establishiment and operation of a credit facility providing access to finance for working capital for qualifying growth-oriented micro and small enterprises owned or partly owned by female entrepreneurs. 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 carried out in accordance with international standared on auditing (ISA)promulgated by the international federation of Accountants (IFAC) included such test and procedures Necessary under circumstances . Along with the accounts of DBE,We on the sample basis Visited the selected micro finance instititutions(MFIs) particpated in the project and ensure the following adhered to. Special attention were paid as ti whether the : (a) world bank financing (and all External financing where the world bank is not the only financer )has been used in accordance with conditions relevant Financing agreements with due attention to economy and efficency , only for the purpose for which the financing was provided. ( b) counter part fund have been provided and used in accordance with relevant financing agreements, with due attention to economy and Efficency only for the purpose for which they were provided. (c) Goods, works and services financed have been procured in accordance with the relevant financing agreements including specific provisions of world bank procurment policies and procedures (d) All nessary suporting documents,recordes and accounts have been maintained in respect of the projects activity including expendituries reported using statments of expenditure (SOE) method of reporting . 9 (e) 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 porpose intended in the financing Agreements. ( f) national laws and regulations have been compiled with, and that the finanicial and accounting procedures approved for the project. (g) Financial performance of the project is satisfactory. (h) Assets procured from the projects funds exist and there is verifiable ownership by the implementing agencies or beneficaries in line with the financing agreement. ( I) In eligible expenditure included in withdrwal applications are identified and reimbursed to the designated accounts. These should be separatley noted in the audit 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 the GAAP. b. Currency Foreign currency is converted to Birr at the exchange rate rulling 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 date of the balance sheet date . c. Basis of accounting Modified cash basis of accounting is used in the recognition of source and uses of fund. d. Fund balance It incorporates gain on exchange rate of Development Bank of Ethiopia obtained from conversion of foreign currency to local currency(Birr) for reporting purpose. A 10 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) NOTES TO THE ACCOUNT FOR THE YEAR ENDED 30 JUNE 2019 CURRENCY: ETHIOPIAN BIRR 4. Receivables 2018 Birr Birr Loan to micro finance institution 1,255,393,890 215,516,446 1,255,393,890 215,516,446 5 Cash at Bank 2018 NBE-0100381040072 163,547,791 9,724,719 NBE-0101 171300040 48,555,657 101,723,988 212,103,448 111,448,707 6 Creditors Italian Coop WEDP (IDC) 488,605,132 328,140,539 Japan International Cooperation Agency (JICA) 973,753,627 - 1,462,358,759 328,140,539 7 Fund balance 2018 Opening balance 1,175,386 - Current year operational result 6,313,965 - 1,175,386 5,138,579 - 1,175,386 >4 DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF SOURCE AND USE FOR THE PROJECT FOR THE YEAR ENDED 30 JUNE 2019 CURRENCY: ETHIOPIAN BIRR Annex 1 Note 2018 Source Birr Birr Source of fund IDA & JICA Annex 2.1 1,134,218,220 328,140,539 Financial Charge - - 455,000 Gain/Loss on exchange rate 6,313,965 - 720,386 1,140,532,185 326,965,153 Uses Uses of fund by MFIs Annex 2.3 959,323,736 152,255,197 Balance carried forward 174,709,956 - Excess of source over uses 355,918,405 174,709,956 Represented by Cash at bank 212,103,448 111,448,707 Outstanding balance on MFI's Annex 2.4 143,814,957 63,261,249 355,918,405 174,709,956 12 1 a). TA A.A 0 y DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764,IDA 51120 (F.ROT/AID 15/010/00) STATEMENT OF SOURCE AND USE FOR THE PROJECT FOR THE YEAR ENDED 30 JUNE 2019 Annex 2 2.1. Source of fund Cassa depositi e prestiti (S.P.A.) CURRENCY: ETHIOPIAN BIRR Description Date AMOUNT CURRENCY Rate Birr Balance as of 01 July 2017 - ITALIAN COOP WEDP (IDC 31/05/2019 4,999,925 EURO 32.0934 160,464,593 JAPAN INTERNATIONAL COOPERATION AGENCY 24/07/2018 3,956,739,646 JPY 0.2461 973,753,627 (JICA) 1,134,218,220 2.2. Loan given to MFI's by DBE Reference Birr Balance as of 01 July 2018 - 215,516,446 Oromia credit & Saving S.C VP/SMEF/302/2018 158,069,027 WASASA Micro Finance Inst. VP/SMEF/I 10/2018 53,946,016 Specialized Financial & Prom. Inst. VP/SMEF/233/2018 54,253,355 Amhara Cr. & Saving Inst VP/SMEF/282/2018 188,624,913 VISION Fund VP/SMEF/265/201 8 70,002,590 HARBU Micro Finance Inst. VP/SMEF/210/2018 35,213,778 AGAR Micro Finance Inst. VP/SMEF/286/2018 117,796,957 DEDEBIT Cr. & Saving Inst. S.C VP/SMEF/283/2018 183,578,129 METEMAMEN Micro Finance Inst. VP/SMEF/293/2018 29,072,098 Addis credit & saving institution VP/SMEF/374/2018 120,005,719 OMO Micro Finance Inst. VP/SMEF/067/2019 22,299,502 MEKLIT Micro Finance Inst. VP/SMEF/300/2018 7,015,360 1,255,393,890 13 0011 0D 7 j -e1 ot rl' DEVELOPMENT BANK OF ETHIOPIA WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER P122764, IDA 51120 (F.ROT/AID 15/010/00) LIST OF VISTED IMPLEMENTING MICRO FINANCE INSTITUTTIONS Basis for Selection We have selected these for Micro finance institutions based on the amount of disbursement during the year under this audit .According to these Micro finance intuition made a higher disbursement during the year while compare to 1. Number of loan file reviewed and number of beneficiaries contacted From Oromia credit & Saving S.C. Name of Micros Fianc6 Branch Woreda No of loan No file Beneficiaries checked contacted Oromia credit & Saving S.C Finfine Finfine 1 1 Oromia credit & Saving S.C Gulele finfine 3 1 Oromia credit & Saving S.C Kore Woleta 2 1 2. Number of loan file reviewed and number of beneficiaries contacted From AGAR Micro Finance Inst. Region Name of Micros Fianc6 Branch Woreda No of loan No file Beneficiaries reviewed contacted Addis Ababa AGAR Micro Finance Inst. Lideta 06 5 2 Addis Ababa AGAR Micro Finance Inst. K/keraniyo 03 3 1 Addis Ababa AGAR Micro Finance Inst. Kore (yeka) 07 7 1 cf, 3 . A 0 Qtoiq Os7 % 3. Number of loan file reviewed and number of beneficiaries contacted From MEKLIT. Region Name of Micros Fianc6 Branch Woreda No of No loan file Beneficiaries checked contacted Addis Ababa MEKLIT K/keraniyo(Ar/T) 6 1 Addis Ababa MEKLIT ledeta T_ 2 1 4. Number of loan file reviewed and number of beneficiaries contacted From Addis credit & saving institution Region Name of Micros Fianc6 Branch Woreda No of loan No file Beneficiaries reviewed contacted Addis Ababa Addis credit & saving Arada 02 7 1 Addis Ababa Addis credit & saving Arada 10 5 1 A T~ * 07