Oh.Tf"k f da1a&.~'e -'l.'l°h&.iLl'I! ~T-flt\.h. f1l.U/-R 9°Coo&. 1i"IA'7/la:,.C tic;r~7i"J The Federal Democratic Republic of Ethiopia Audit Services Corporation [ INDEPENDENT AUDITOR'S REPORT TO THE WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITATION PROJECT We have audited the financial statements of Water Development Commission, Second Urban Water Supply and Sanitation Project, financed under IDA Credit Nos. 60070- ET and 60080- ET, which comprise the balance sheet as at 7 July 2018, and the statement of sources and uses of funds and a Designated Account statement for the period from 1 May 2018 to 7 July 2018, and a summary of significant accounting policies and other explanatory information. r- I . I Project Coordinator's Responsibility for the Financial Statements ! I The Project Coordinator is responsible for the preparation of financial statements that give a true and fair view in accordance with the modified cash basis of accounting 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 I ' standards. require that we comply with ethical requirements and plan and perform the audit to I, 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. e 251-011-5515222 Fax 251-011-5513083 18l 5720 ! I 251-011-5535012 251-011-5535015 251-011-5535016 ~I I I INDEPENDENT AUDITOR'S REPORT TO THE WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITATION PROJECT (continued) I_ Opinion In our. opinion, the financial statements give a true and fair view of the financial position of Water Development Commission, Second Urban Water Supply and Sanitation Project; I , financed under IDA Credit Nos. 60070-ET and 60080-ET, as at 7 July 2018 and of its sources ' I and uses of funds for the Period from 1 May 2018 to 7 July 2018 in accordance with the L modified cash basis of accounting described in note 2 to the financial statements. L Report on Other Requirements As required by the World Bank guidelines we report that, to the extent we can assess during the year all external funds have been used in accordance with the conditions of the relevant financing agreements and only for the purposes for which the financing was provided; counterpart funds were provided and used in accordance with the conditions of the loan agreement, with due attention to economy and efficiency and only for the purposes for which they were provided; goods, works and services financed have been procured in accordance with the relevant financing agreements including specific provisions of the World Bank Procurement Policies and Procedures; all necessary supporting documents, records and accounts have been maintained in respect of all Project activities, the Designated Account has been maintained in accordance with the provisions of the relevant financing agreements and funds disbursed out of the Designated Account were used only for the purposes intended in the financing agreements; National laws and regulations have been complied with and that the financing and accounting procedures approved for the Project; financial performance of the Project is satisfactory; the funds disbursed covered expenditures that are eligible for financing under IDA Credit Nos. 60070- ET and 60080- ET; assets procured from Project funds exist and there is a verifiable ownership by the implementing beneficiaries in line with the financing agreement; with respect to statements of expenditure, we were informed that no withdrawal applications were submitted during the year. ~~'&JM~ 25 February 2019 2 _,I WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITATION PROJECT ' I IDA CREDIT Nos. 60070-ET AND 60080-ET STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM lMAY 2018 TO 7 JULY 2018 2018 Ethiopian Birr FINANCING Credits and grant from IDA Carry forward from Urban Water Supply and Sanitation project, IDA-4292 58,558,957 Initial deposit to Designated Account 735,029,100 793,588,057 Contribution from towns and municipalities 30,847,922 Gain on foreign exchange 2,083,714 TOTAL FINANCING 826,519,693 PROJECT EXPENDITURE Works and goods 8,831,751 Consultants' services 1,448,754 Training 417,516 Operating costs 2,319,420 TOTAL PROJECT EXPENDITURE 13,017,441 EXCESS OF FINANCIN OVER EXPENDITURE 813.502.252 3 WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLAY AND SANITAION PROJECT IDA CREDIT Nos. 60070-ET AND 60080-ET AS AT 7 JULY 2018 2018 Notes Ethiopian Birr ASSETS Cash and bank balances 3 699,480,612 Debtors 4 156,880,923 856,361,535 CURRENT LIABILITIES Creditors 5 42,859,283 NET CURRENT ASSETS 813.502.252 REPRESENTED BY ACCUMULATED FUND 813.502.252 -~ ' 4 --, WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITATION PROJECT IDA CREDIT Nos. 60070-ET AND 60080-ET DESIGNATED ACCOUNT STATEMENT For period ended 7 July 2018 Account number 0102001300003 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA -60070, and 60080-ET Currency USD Equivalent USD in Ethiopian Birr Initial deposit to designated account 27,000,000.00 735,029,100.00 Less: Transfers to Birr account 1,503,750.00 40,969,368.00 ' Transfer to Towns and city Administration 2,320,807.66 63,764,420.74 23,175,442.34 630,295,311.26 Add: Gain on foreign exchange 2,083,713.69 Ending balance 7 July 2018 2J!175!442,J4 632!37~Ml24.25 5 WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITAION PROJECT IDA CREDIT Nos. 60070-ET AND 60080-ET NOTES TO THE FINANCIAL STATEMENTS 1. PROJECT INFORMATION The Project Development Objective (PDO) is to increase access to enhanced water . supply and sanitation services in an operationally efficient manner in Addis Ababa and selected secondary cities. The project comprises three components: Component 1: Addis Ababa sanitation and water supply services improvements; Component 2: Sanitation and water supply services improvement in second Cities; and Component 3: Project management and institutional strengthening (Federal and Regional level). The Project is financed through IDA Credit Nos. 6007-ET and 6008-ET, Regular Credit and Scale-up Facility Credit respectively, signed between the Government of the Federal Democratic Republic of Ethiopia and the International Development Association (IDA) on 7 April 2017. The Project became operational on 1 May 2018 and would be closed on 7 July 2023. 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation These financial statements have been prepared in accordance with the Ethiopian Government's Manual of the Federal Accounting System which is based on a modified ~ ' cash basis of accounting. ' b) Currency These financial statements are presented in Birr. Transactions in foreign currencies are translated into Birr at the approximate rates of exchange prevailing at the dates of the transactions. Cash balances denominated in foreign currencies are translated into Birr at the exchange rates ruling at the balance sheet date. 6 WATER DEVELOPMENT COMMISSION SECOND URBAN WATER SUPPLY AND SANITAION PROJECT IDA CREDIT Nos. 60070-ET AND 60080-ET NOTES TO THE FINANCIAL STATEMENTS 3. CASH AND BANK BALANCES 2018 Ethiopian Birr National Bank of Ethiopia USD Designated Account No. 0261501357700 632,379,025 Birr account No. 0160101368000 40,244,856 _J Commercial Bank of Ethiopia various branches 26,831,731 Cash on hand 25,000.00 699.480.612 4. DEBTORS ~ 2018 -- -i Ethiopian Birr Advances to Suppliers 14,470,844 -- ', Contractors 32,929,305 Staff 21,462 Purchase advance 54,176,529 Sundry 55,282,783 156.880.923 5. CREDITORS 2018 Ethiopian Birr Retention 26,086,364 Value added tax 11,486,595 Withholding taxes 764,705 Income tax 115,979 Pension contribution 28,529 Sundry 4,377,111 42,859,283 DATE OF AUTHORIZATION Deputy Commissioner, Water Development Commission authorized the issue of these financial statements on 25 February 2019. 7