The Federal Democratic Republic of Ethiopia Audit Services Corporation Draft 27/12/19 INDEPENDENT AUDITOR'S REPORT TO THE SUPERVISING AUTHORITY OF MINISTRY OF WATER, IRRIGATION AND ENERGY We have audited the financial statements of Ministry of Water, Irrigation and Energy, Ethiopia Electrification Program, financed under IDA Credit No. 61580-ET and IDA Credit No. 61570-ET, Part3 (b) and 3 (e) which comprise the balance sheet as at 7 July 2019 and the statement of sources and uses of funds and the Designated Account statement for the period from 29 June 2018 to 7 July 2019, and a summary of significant accounting policies and other explanatory information. Chief Executive Officer's Responsibility for the Financial Statements The Chief Executive Officer of Ministry of Water, Irrigation and Energy is responsible for preparation of financial statements that give a true and fair view under the modified cash basis of accounting as described in note 2 to the financial statements and for such internal control as management 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. ' 251-011-5515222 Fax 21-011-5513083 E-mail: ASC@ethionet.com, I 5720 251-011-5535012 251-011-5535015 251-011-5535016 INDEPENDENT AUDITOR'S REPORT TO THE SUPERVISING AUTHORITY OF MINISTRY OF WATER, IRRIGATION AND ENERGY (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Ministry of Water, Irrigation and Energy, Ethiopia Electrification Program, financed under IDA Credit No.61580-ET and IDA Credit No.61570-ET, Part 3 (b) and 3 (e) as at 7 July 2019 and of its sources and uses of funds for the period from 29 June 2018 to 7 July 2019 in accordance with the modified cash basis of accounting described in note 2 to the financial statements. Report on Other Requirements In our opinion - during the period IDA funds have been used in accordance with the conditions of the relevant financing agreement and only for the purposes for which the financing was provided; - counterpart funds have not been provided and used in accordance with the financing agreement; - goods, works and services financed have been provided in accordance with the relevant financing agreement and disbursement letters: - all necessary supporting documents, records and accounts have been maintained in respect of all activities of the program; - the funds disbursed covered expenditures that are eligible for financing under IDA Credit No. 61580-ET and IDA Credit No. 61570; - Financial performance of the program is satisfactory; - our examination revealed no weaknesses or irregularities in the systems of internal controls over financial expenditure except that indicated in the; - the Designated Account has been maintained in accordance with the provisions of the financing agreement and funds disbursed out of the said Account were used only for the purposes intended in the financing agreement. - with respect to statements of expenditure, we understand that none were submitted during the period ended 7 July 2019. 3 January 2020 2 MINISTRY OF WATER,IRRIGATION & ENERGY ETHIOPIA ELECTRIFICATION PROGRAM IDA CREDIT NO.61580-ET AND IDA CREDIT NO 61570-ET Parts 3 (b) and 3 (e) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 29 JUNE 2018 TO 7 JULY 2019 USD Ethiopian Birr SOURCES Credit from IDA Initial deposit to Designated Account 2,087,001.31 59,656,473 Gain on foreign exchange 376,101 TOTAL SOURCES 2,087,001.31 60,032,574 USES OF FUNDS Contractual services 235,778.26 6,689,430 Capacity Building 22,277.13 632,040 TOTAL USES 258,055.39 7,321,470.00 EXCESS OF SOURCES OVER USES 1,828,945.92 52,711.104 3 MINISTRY OF WATER,IRRIGATION & ENERGY (MoWIE) ETHIOPIA ELECTRIFICATION PROGRAM IDA CREDIT NO.61580-ET AND IDA CREDIT NO 61570-ET Parts 3 (b) and 3 (e) BALANCE SHEET AS AT 7 JULY 2019 Notes USD Ethiopian Birr ASSETS CURRENT ASSETS Advance to staff 1,323.50 37,550 Cash at bank 3 2,063,400.68 59,362,984 2,064,724.18 59,400,534 CURRENT LIABILITY Ethiopian Electric Utility 235,778.26 6,689,430 NET CURRENT ASSET 1,828,945.92 52.711.104 REPRESENTED BY FUND BALANCE 4 1,828,945.92 52,711.104 4 MINISTRY OF WATER,IRRIGATION & ENERGY(MoWIE) ETHIOPIA ELECTRIFICATION PROGRAM IDA CREDIT NO.61580-ET AND IDA CREDIT NO 61570-ET Part 3 (b) and 3 (e) DESIGNATED ACCOUNT STATEMENT For period ended 7 July 2019 Account number 102001300004 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA 6158 - ET Currency USD EQuivalent in USD Birr Initial deposit to designated account 2,087,001.31 59,656,473.00 Less: Transfer to Birr account 387,710.28 11,000,000.00 Bank charge 969.28 27,500.00 388,679.56 11,027,500.00 1,698,321.75 48,628,973.00 Gain on foreign exchange - 376,101.00 Ending balance 7 July 2019 1,698.321.75 49,005 074.00 5 MINISTRY OF WATER, IRRIGATION AND ENERGY ETHIOPIA ELECTRIFICATION PROGRAM IDA CREDIT NO. 61580-ET AND IDA CREDIT NO.61570 ET, Parts 3 (b) and 3 (e) NOTES TO THE FINANCIAL STATEMENTS 7 JULY 2019 I PROGRAM INFORMATION Two financing agreements were signed on 9 March 2018 between the Federal Democratic Republic of Ethiopia and the International Development Association (IDA) to finance the implementation of Ethiopia Electrification Program. The objectives of the Program are to increase access to electricity in Ethiopia and to enhance institutional capacity for planning and implementation of the Government's electrification Program. As per the financing agreements, IDA agrees to provide the amount of USD 125,000,000 ("Scale-up Facility Credit") under Credit No. 6157-ET and to extend a credit in an amount equivalent to SDR 176,900,000 (Regular Credit) under Credit No.6158-ET. A Program agreement was also signed on the same date between IDA and Ethiopian Electric Utility (EEU) to implement the Program. Ministry of Water, Irrigation and Energy, the Program Implementing Entity, will carry out Parts 3(b),) and 3(e) of the Program. Furthermore, a subsidiary agreement was signed on the same date between the Ministry of Finance and EEU to facilitate the implementation of the Program. The Project became effective on 07 June 2018 and is expected to be closed on 7 July 2023. 2 SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation These financial statements have been prepared on a modified cash basis whereby non- monetary assets are expensed when acquired and monetary assets and liabilities are carried at fair value. b) Currency Transactions in foreign currency are translated into Birr at the approximate rate of exchange prevailing at the date of the transaction. Cash balances denominated in foreign currencies are translated into Birr at the exchange rates ruling at the balance sheet date. 6 MINISTRY OF WATER, IRRIGATION AND ENERGY ETHIOPIA ELECTRIFICATION PROGRAM IDA CREDIT NO. 61580-ET AND IDA CREDIT NO.61570 ET, Parts 3 (b) and 3 (e) NOTES TO THE FINANCIAL STATEMENTS 7 JULY 2019 3 BANK BALANCES USD Ethiopian Birr National Bank of Ethiopia- A/c No. 012001300004 1,698,321.74 49,005,074 National Bank of Ethiopia in Birr A/c No. 0102001040002 - 10,357.910 1,698,321.74 59.362.984 4 DATE OF AUTHORIZATION The State Minister for Energy Sector of the Ministry of Water, Irrigation and Energy authorized the issue of these financial statements on 3 January 2020. 7