M11-u1 YuCaug- MA17114 W7*611 The Federal Democratic Republic of Ethiopia Audit Services Corporation INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT We have audited the accompanying financial statements of Ethiopian Roads Authority, Road Sector Support Project, financed under IDA Credit No. 5371 ET, which comprise the balance sheet as at 7 July 2019 and the statement of sources and uses of funds for the year then ended, and a summary of significant accounting policies and other explanatory information. Responsibility for the Financial Statements Ethiopian Roads Authority is responsible for the preparation and fair presentation of these financial statements in accordance with the basis described in note 2(a) to the financial statements and for such internal control as the Authority 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 251-011-5513083 E-mail: ASC@ethionet.com H 5720 251-011-5535012 251-011-5535015 251-011-5535016 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT (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 present fairly, in all material respects, the financial position of Ethiopian Roads Authority, Road Sector Support Project, financed under IDA Credit No. 5371 ET as at 7 July 2019 and its sources and uses of funds for the year then ended in accordance with the Ethiopian Government's Manual of the Federal Accounting System which is based on a modified cash basis of accounting. Report on other requirements We have performed the procedures as required by the World Bank guidelines we report that, to the extent we can assess:- a) All external financing has been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; b) Counterpart funds from the Government of Ethiopia have been provided and used in accordance with the financing agreement and only for the purpose for which the financing was provided; c) Goods and services financed have been provided in accordance with the relevant financing agreement and disbursement letters; and d) Designated Account has been maintained in accordance with the provisions of the relevant financing agreement. Furthermore, with respect to the statements of expenditures submitted during the year and listed on page 9, in our opinion, a) The statements, together with the procedures and internal controls involved in their preparation can be relied upon to support the related withdrawals; b) Adequate supporting documentation has been maintained to support claims to the world bank for reimbursements of expenditures incurred; and c) Said expenditures are eligible for financing under IDA credit no. 5371 ET. 23 January 2020 2 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET BALANCE SHEET AS AT 7 JULY 2019 2018 Notes Birr Birr CURRENT ASSETS Accounts receivable 879,741,680 1,022,589,671 Cash at bank 149,160 6,554,331 879,890,840 1,029,144,002 CURRENT LIABILITY Accounts payable 170,271,429 85,786,101 NET CURRENT ASSETS 709,619,411 943,357,901 REPRESENTED BY ACCUMULATED FUND 3 709,619,411 943,357,901 The notes on pages 6 to 9 form an integral part of these financial statements. 3 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET - STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 7 JULY 2019 Cumulative for the Four years Yearended ended Yearended 7 July 2019 7 July 2019 7 July 2018 Birr Birr Birr SOURCES IDA - initial deposit - 235,090,800 IDA - direct payment - 483,984,587 - IDA-SOE procedures 134,810,677 841,005,794 135,877,880 Ethiopian Government contribution 252,661,488 361,729,888 99,736,438 Gain on foreign exchange 2,593,556 51,541,939 15,635,006 390,065,721 1,973,353,008 251,249,324 USES Civil works 553,750,878 1,071,082,150 375,108,053 Consultants' services 29,939,028 92,670,656 45,180,061 Capacity building costs 1,459,953 5,009,814 1,495,311 Right of way settlements 36,948,690 88,885,778 50,364,078 Bank Charges 1,705,662 6,085,199 2,163,677 623,804,211 1,263,733,597 474,311,180 (DEFICIT)/ EXCESS OF SOURCES OVER USES (233,738!4 709,619,411: (,061,856) The notes on pages 6 to 9 form an integral part of these financial statements. 4 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO.5371 ET DESIGNATED ACCOUNT STATEMENT For year ended 7 July 2019 Account number 0100231300038 Depository bank National Bank of Ethiopia Address Addis Ababa, Ethiopia Related credit IDA 5371 ET Currency USD Balance at 8 July 2018 240,159.30 Add:-World bank replenishments 4,914,232.92 5,154,392.22 Less:- Payments to consultants and contractors 5,149,238.49 Balance at 7 July 2019 5,153.73 The notes on pages 6 to 9 form an integral part of these financial statements. 5 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS 7 JULY 2019 1 PROJECT INFORMATION The objective of the Project is to reduce travel time and cost along selected inter- regional corridors and support the sustainability of the federal network. The Project consists of the following parts. Part 1: Upgrading of Critical Link Road a) Upgrading of about 258 kilometers of the Nekemte - Bure road to paved road standards; b) Provision of consulting services for monitoring and supervision of works under (a) above. Part 2: Support to Enhancing Road Asset Management Practice Maintenance of selected roads and strengthening road asset management capacity, including: a) Overlay, resealing, re-graveling and routine maintenance of about 200 kilometers of paved and gravel roads and provision of consulting services for works, monitoring and supervision; b) Strengthening the Authority's road asset management capacity and support for the adoption of low cost road pavement standards. Part 3: Support to Road Safety and Institutional Development a) Support for the development of a safe and green road strategy and preparation of a national road safety audit manual; b) Establishing the Authority's institutional capacity for Output and Performance Based Road Contract design and management; c) Strengthening the Authority's technical capacity on contract management, financial management, construction site environmental and safety monitoring and management, transparency practices, including a social monitoring and beneficiary study of the road sector with emphasis on gender aspects; d) Support for the preparation of follow-on operations, including preparation of feasibility studies, detailed designs and bidding documents for future roads upgrading and rehabilitation projects, as well as road asset management contracts. 6 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS (continued) 7 JULY 2019 2 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by the Project are stated below. 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 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 rate ruling at the balance sheet date. c) Recognition of financial assets and financial liabilities The Project recognizes a financial asset or a financial liability on its balance sheet when, and only when, it becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when, and only when, the control over the contractual rights is lost. A financial liability is derecognized when, and only when, it is extinguished. 7 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET NOTES TO THE FINANCIAL STATEMENTS (continued) 7 July 2019 3 ACCUMULATED FUND Balance at 8 July 2018 943,357,901 Less:- Deficit of sources over uses for the year (233,738,490) 709,619,411 4. DATE OF AUTHORIZATION The Authority's Financial Management Directorate Director and Corporate Services Deputy Director General authorized the issue of these financial statements on 23 January 2020. 8 ETHIOPIAN ROADS AUTHORITY ROAD SECTOR SUPPORT PROJECT IDA CREDIT NO 5371 ET SOE WITHDRAWAL SCHEDULE For STATEMENT OF EXPENDITURES Submitted during the YEAR ENDED 7 July 2019 Withdrawal Application No. USD Birr ERA NO. 13 4,914,232.92 134,810,6 9