Horwath Dr. A. M. Hegazy & Co. Accoumawas & Conaitants A Member of Horwatli International 6 Boulos Hannah St.,- Dokki 12311 Giza - Egypt Tel.: 7600319 - 7600320 - 761631 0 The Governing Body Fax.: 7600468 www.horwath.com Social Housing Fund (SHF) November 5W 2017 Dear Sirs, This report represents the results of our financial audit of the World Bank Loan No. 8498 - EG to finance the implementation and to improve the affordability of formal housing for low income households in the Arab Republic of Egypt and to strengthen the SHF's capacity to design policies and coordinate programs in the social housing sector for the year ended June 30h 2016. Audit Objectives: The objective of this engagement was to conduct a financial audit of the funds receipts and expenditures and related Special Accounts of the World Bank Loan No. 8498 EG for the year ended June 30W 2016. As required by internationally accepted standards on auditing, we have made specific inquires of the management and others about the representations embodied in the financial statement and the effectiveness of the internal control over financial reporting. The results of our audit tests, the responses to our inquiries, and the written representations of the management comprise the evidential matter upon which we intend to rely to forming our opinion. Our activities were confined to auditing the procedures of funds expenditures of the loan project, at all levels and division, for the financial year ended June 30W 2016, according to the Loan agreement and the guidelines of the World Bank. An audit in accordance with International Standards on Auditing does not provide absolute assurance about or guarantee the accuracy of the said statement. Because of the concept of reasonable assurance and because we did not perform a detailed examination of all transactions, there is an inherent risk that material errors, fraud, or illegal acts, may exist and not be detected by us. In planning and performing our audit of the statement of funds receipts and expenditures of the World Bank Loan No. 8498 EG for the year ended June 306 2016, we considered its internal control to determine our auditing procedures for the purpose of expressing our opinion on the said statement and not to provide absolute assurance on the internal control. Our consideration of the internal control would not necessarily disclose all matters in internal control that might be a weakness. A weakness is a condition in which the design or operation of one or more of the internal control components dose not reduce to relatively low level 1 Dr. A. M. Hegazy & Co. HOrwath AL:ouldamws &c ConsulLIltStL~a j~i the risk that errors or fraud in amounts that would be material in relation to the statement being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable assurance about whether the special purpose financial statement of the Sources and Uses of Funds Statement of the World Bank Loan No. 8498 EG is free of material misstatement. Such criteria required us to search for mistakes and irregularities which may seriously affect the usage lists. However as our examination relies on selective checking for accounting records, there is no absolute guarantee that all mistakes and irregularities will be discovered. Additionally, auditing checking should not be relied on to uncover illegal conducts that affect the usage lists, which are disclosed in our examination. Professional standards require that we advise you of any matter relating to our audit and based on the audited sample which represents 73% of the total amounts drawn during the year ended June 30h 2016, we communicated our comments with the project management and agreed with the feedback from the project management in addition such comments do not reveal internal control weakness. Please do not hesitate to contact us if you require any clarifications. Sincerely Dr. Khaled A. M. Hegazy Partner 2 Inclusive Housing Financing Program Social Housing Fund Auditor's Report & Special Purpose Financial Statement June 30th 2016 Contents 1- Auditor's Report 2- Special Purpose Financial Statement as at 30th June 2016. 3- Notes to the Special Purpose Financial Statement as at 30th June 2016. Ho !wath C)LoDr. A. M. Hegazy & Co. Accol(wamus & CopsOdrants A Member of HYorwkath Inernanonal 6 BoLos Hannah St.,- Dokki 12311 Giza - Egypt Tel.: 7600319 - 7600320 - 7616310 Fax.: 7600468 Auditor's Report w'wvhorwath.com To the Social Housing Fund Inclusive Housing Financing Program We have audited the accompanying Special Purpose Financial Statement (SPFS) of Inclusive Housing Financing Program represented in the Sources and Uses of Funds statement for the year ended 300 June 2016. The Program's management is responsible for ensuring that the Special purpose financial statement is perpared. It is our responsibility is to form an independent opinion, based on our audit, on this statement and to report our opioin to you. We conducted our audit in accordance with Egyptian and International Auditing Standards and such other specific procedures requested by the Program's management. An audit includes examination, on a test basis, evidence supporting amounts and disclosures in the funds receipts and expenditures statement. It also includes an assessment of the significant estimates and judgements made by the Program's management in the preparation of the statement, and of whether the accounting policices are appropriate to the project's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanation which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the statements is free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the statements. In our opinion, the special purpose financial statements referred to above present fairly, in all material respects, the Sources and Uses of Fund Statement as at 30h June 2016 in conformity with the accounting principles described in Note 2 to the special purpose financial statements. Expenditures provided are properly supported and represent eligible expenditures under the Loan Agreement 8498 - EG. Dr. Khaled Abdel Aziz Hegazy Cairo: November 1 2017 �. � � � � W Ч � � W *..! у �/''� �,уΡ � � гh � +�+,.i ` Ч �i � � ' ^ 5-� � �„� ,. V°�J �у гЛ гоZ г�у �� '-�! � N � � .°°�. г� � � ° � � � ° С � г�- � � � 4Сз а � � а� ы � Сцб � � � ,� DA � f=+ ® � W a�i �м w � й �" .� � � � �' � Tj U � Gp и�'S �+� а С/� �` е�+ � м�д � Г� "у �L О w � � F-+ � N п,} � ь� . � � � � �` +--+"�' `� >- � � � � r� Q �' � � Ч� � � � ,'� ' г�r� �'"-+ , "� 43 °"Э � �г � « � � и � а � � � � � � `,� G � � � од � _ � � �л � � � b � � � � �� � 'v`' °�' � $ '� ,� � � � о '� � � � � � � � � � е (� у� ' w л � � �! � � • {U г'"�' � �..� _б � ,L � G {7 G у . ,_ � t� С/а � � п�j ,�и С/3 �д ��н �г �,�, � ,�i � � ., � ец r'� Ч �,и' "�. ,� дJ у .� ту�-1 � �' w С о J�г .-��. s�'°+ - fo+ � � ° v �' �н � � � �, � С� � � � .i г�з О - � � � � � - � ,, � � Sа U � �Н �: Social Housing Fund (SHF) The World Bank's Loan No 8498 EG Notes to the Special Purpose Financial Statement From 1 joy 2015 to 30 June 2016 Note I - Nature of Activities The Arab Republic of Egypt and the International Bank for Reconstruction and Development agreed that the latter shall provide additional finance Social Housing Fund on June 101h, 2015, through Loan No 8498 EG, The Bank agrees to lend an amount of five hundred million United States Dollar (US$500 Million) The objective of the Program is to improve the affordability of formal housing for low income households in the Arab Republic of Egypt and to strengthen the SHF's capacity to design policies and coordinate programs in the social housing sector. The Project consist of the following parts: The Program is a part of the Borrower's Social Housing Program and consists of the following components: Part A: Institutional Strengthening of SHF 1. Enhancing the capacity of SHF to improve the Borrower's housing sector through, interalia: (a) coordination and consolidation of housing entities and functions; (b) formulation of social housing policy, programs, regulations and procedures; and (c) preparation and implementation of reforms to improve the efficiency and equitability of the housing system. 2. Enhancing the effectiveness of SHF to provide oversight to the implementation of the Program through, inter alia: (a) the establishment of an improved management information system; (b) the establishment of a sound fiduciary management and governance structure and (c) improving monitoring and evaluation capacity. Part B: Demand-side Housing Subsidy Support 1. Affordable Mortgage Program (AMP) 2. Public Rental Subsidy Program for Tenants 3. Private Rental Subsidy Programs for Investors 4. Private Rental Subsidy Programs for Tenants, The Project Duration: The project closing date is June 30, 2020 Terms of rep4yment and Grace period: According to the loan agreement, Schedule 3 , the Arab Republic shall repay the loan on semi-annual installment due on January and July 15t" each year, starting from July 15th 2020 and ending on January 15th 2050. Each installment amounts to Notes to the special purpose financial statement Social Housing Fund (SHF) The World Bank Loan No. 8498 EG From I July 2015 to 30 June 2016 Page 4 (1.67%) of the loan amount, except for the Installment dated January 15t 2050 which will amount to (1.47%) Note 2 - Accounting Policies The following are the significant applied accounting policies: 2/1 Method of Accounting The Project maintain its accounts on the cash basis of accounting. On this basis receipts are recognized when received by the Project and expenditures are recognized when paid. 2/2 Translation of non U$ dollars currency: The SHF maintains its accounts in Egyptian Pounds. Transactions in U$ dollar currencies are recorded at the average exchange rates ruling at the end of the financial year 30 June 2016, the statement of funds receipts and expenditures has been prepared on the cash basis of accounting. Note 3 - Cash receipt (Financing) Analysis Amounts in US $ Cash Receipt World Bank (WB) 74,482,390 Guarantee and Support Mortgage Activity Fund 219,880 Total Financing 74,702,270 * An amount of USD 59,188 has been refunded to the Program account in the Central Bank of Egypt as a result of refunded amounts from the Demand Side Housing Subsidy Support. * The SHF has withdrawn on December 2015 an amount of USD 125 million as an advance payment under DLI 1 to DLI 8 Note 4 - Expenditure Analysis Analysis of Wages & Salaries as at 30t June 2016 is represented as follows: Amounts in US $ Salaries & Wages Improving Management Information System 32,040 Improving Monitoring & Evaluation Capacity 34,511 Mechanism for considering complaints and grievances 48,981 Total Salaries & Wages 115,532