Ministry of Peace Pastoral Community Development Project (PCDP) 4reC/Ref.No. ) 0 0 +I/Date 31 Dr. Teklu Tesfaye Task Team Leader of Pastoral Community Dev't Project (PCDP III) World Bank Ethiopian country Office Addis Ababa Subject: Submission of External Audit Report of PCDP III for the year 2010 EFY. Attached herewith please find the Final External Audit Report which consists of Audited Financial Statement and Management Letter for the year 2010 EFY. Regrds, FedeaerojsCooA.A Cc: Vel > H.E Dr. Seyum Mesfin, State Minister for Federalism and 03 JAN 219 Equitable Development Ministry of Peace > International Financial Institutions Cooperation Directorate MoFEC Addiv AhAhA 550 45 49 Tel 550 45 69 Fax 550 45 96 P 5608 ebi www.pcdp.gov.et Ad Anb 655P.O.Box Website Addis Ababa MINISTRY OF PEACE PASTORAL COMMUNITY DEVELOPMENT PROJECT (PCDP III) FINANCIAL STATEMENTS AND AUDIT REPORT JULY 7, 2018 Kokeb & Melkamu Audit Partnership Chartered Certified Accountants (UK) Authorized Auditors in Ethiopia P. O. Box 33645 Addis Ababa, Ethiopia Telephone 251-11-515-07-52 E-mail: kokmelk@ethionet.et Mob.Tel. 251-91-120-37-78/51-61-46 Fax 251-11-552-26-88 0 3 JAN 2019 MINISTRY OF PEACE PASTORAL COMMUNITY DEVELOPMENT PROJECT (PCDP III) FINACIAL STATEMENTS AND AUDIT REPORT FOR THE YEAR ENDED 7th JULY 2018 TABLE OF CONTENTS I Independent A uditors' R eport ......................................................................................1-2 The Statement of Financial Position ..............................................................si....n 3 I The Statement of Sources and Uses of Funds................................................................. 4 The Statement of Designated Account- IDA .................................................................. 5 The Statement of Designated Account- IFAD................................................................ 6 I N otes to the Financial Statem ents...............................................................................7-12 Reconciliation of Amounts Received by the Program and Funds Disbursed By the W orld B ank .................................................................................................................... 13 I Fixed asset procurem ent by FPCU ................................................................................ 14 Lists of Audited A ccounting Entities ............................................................................ 15 M anagem ent L etter ...................................................................................................16-19 I I I I I I I Kokeb & Melkamu Audit Partnership Chartered Certified Accountants (UK) INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF I MINISTRY OF PEACE PASTORAL COMMUNITY DEVELOPMENT PROJECT (PCDP III) 1 We have audited the accompanying financial statements of the Pastoral Community Development Project (PCDP III), for the year ended July 7th, 2018, set out on pages 3 to 13 which have been prepared under the historical cost convention and the accounting policies set out on page 8. These financial statements are the responsibility of the Management of the Project. Our responsibility is to express an independent opinion on these financial statements based on our audit. In addition we are required to give special opinion on the fund management by the communities (Project Beneficiaries) We conducted our audit in accordance with the International Standards on Auditing applicable to the audit of financial statements. Furthermore, we have audited the Project's compliance with the provisions and covenants of the World Bank and International Fund for Agricultural Development Financing Agreements ,i.e. IDA Credit No. 5335-ET and IFAD Loan No. 2000000426, respectively. I These Standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether the Project has complied with the Financing Agreements. An audit includes examining, on a test basis, I evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position and balance of the Special Accounts of the Pastoral Community Development Project (PCDP III), as at July 7m, 2018 and the Statement of Sources and Uses of Funds for the year then ended in I accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. In addition, the Programme was, in all material respects, in compliance with the Financing Agreements and Contracts as at July 7t, 2018. I With respect to the statements of sources and uses of funds submitted during the period listed on page 4, 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) The funds transferred to communities is properly managed and accounted for the intended I purpose. I (c) The funds transferred to pastoralists research groups which are benefiting from the Project under sub component 2.3, were made as per the eligibility criteria outlined on the Rural Livelihoods Program (RLP) Manual. (d) The funds transferred to the Saving and Credit Cooperatives (SAACOs) which are benefiting from the Project under sub component 2.1, were made as per the eligibility criteria outlined on the Rural Livelihoods Program (RLP) Manual. (e) The proceeds of the Designated Fund have been used exclusively for eligible expenditures and provisions and covenants of the Financing Agreement and Separate Agreement have been substantially respected. Kokeb & Melkamu Audit Partnership Addis Ababa I Chartered Certified Accountants (UK) January 2, 2019 Authorized Auditors in Ethiopia I I I I I I I I P. 0. Box 33645 Addis Ababa, Ethiopia Telephone 251-11-515-07-52 E-mail: kokmelk@ethionet.et Mobile Tel. 251-91-120-37-78/51-61-46 Fax 251-11-552-26-88 I I I I- '% a r I N.r"I's- tw %,` I - . -- " -- .-.. .. - -- . 1. ~ - too., STATEMENT OF FINANCIAL POSITION AS AT 7 JULY 2018 Currency: ETB 2017 ASSETS CURRENT ASSETS Notes Cash at bank and on hand 3 2,324,890 295,242,562 Debtors and prepayments 4 35,336,553 95,301,874 Total Assets 37,661,443 390,544,436 I CURRENT LIABILITIES Payables 5 98,484 1,337,763 I REPRESENTED BY Restricted Fund 6 37,562,959 389,206,673 Total Liabilities and Fund 37,661,443 390,544,436 I Since the above amount indicated under "Debtors and Prepayments", represented I by Cash, Receivables and Payables at Implementing Entities as indicated under Note 4, Fund Balance Shown above can be represented from the IFR as follows I Cash at bank and on hand 2,324,890 Debtors and prepayments 35,336,553 Payables 98,484 Restricted Fund 37,562,959 I I I I I STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED JULY 7, 2018 Currency: ETB ~2017 Notes21 SOURCES MAIN 7 IDA Credit 7.1 460,453,593 1,011,989,909 IDA-Direct payment 7.2 - - IFAD Credit 7.3 402,259,759 794,479,338 862,713,352 1,806,469,247 I OTHER Gain on foreign currency exchange 156,035,922 16,243,778 Woreda Matching Fund 7.4 23,900,415 22,913,728 Local community contribution-in Cash 7.5 60,175,718 59,519,604 Local community contribution-in Kind 7.5 122,646,998 114,484,328 Matching Fund Region 24,000,627 - Miscellaneous 953,841 508,823 387,713,521 213,670,262 1,250,426,873 2,020,139,509 I USES 8 Community Driven Service Provision 8.1 1,289,301,771 1,543,147,979 Rural Livelihood Program 8.2 160,273,057 225,907,362 Development Learning & Knowledge Management 8.3 10,368,805 14,397,884 I Monitoring & Evaluation 8.4 142,126,952 135,751,429 1,602,070,586 1,919,204,654 EXCESS OF SOURCES OVER USES (351,643,713) 100,934,855 I I I I I I I STATEMENT OF DESIGNATED ACCOUNT- IDA FOR THE YEAR ENDED 7, JULY 2018 IDA Credit Account number 100051300075 Depository Bank National Bank of Ethiopia Related Credit and Grant IDA Credit 53350 and Project ID No. P130276 Address Addis Ababa, Ethiopia Currency USD I USD Birr Opening balance brought forward,8 July 2017 885,824 20,488,129 Add:-Transferred from World Bank-Credit 19,429,953 460,453,593 Reimbursement from advance payment 20,315,777 480,941,721 Less:- Transferred to Birr account, to Regions & Other expenditures 20,263,410 548,382,025 Bank charges 50,561 1,368,272 (20,313,971) (549,750,297) 1,806 (68,808,575) Add:- Gain on exchange - 68,857,854 Ending balance,7 July 2018 1,806 49,279.20 I I I I I I I STATEMENT OF DESIGNATED ACCOUNT- IFAD I FOR THE YEAR ENDED 7, JULY 2018 IFAD- Loan Account number 100051300076 Depository Bank National Bank of Ethiopia Related Credit and Grant IFAD LOAN No. 2000000426 and Project ID No. P130276 Address Addis Ababa, Ethiopia Currency USD I USD Birr Opening balance brought forward,8 July 2017 11,757,801 271,945,001 Add:-Transferred from World Bank-Credit 17,173,635 402,259,759 I Refunds 55,627 1,512,921 .28,987,062 675,717,681 Less:- Transferred to Birr account, to regions & Other expenditures 28,891,724 760,353,710 I Bank charges 72,042 1,898,809 (28,963,766) (762,252,518) 23,296 (86,534,838) I Add:- Gain on exchange - 87,170,520 I Ending balance,7 July 2018 23,296 635,682 I I I I I I I I MINISTRY OF PEACE PASTORAL COMMUNITY DEVELOPMENT PROJECT (PCDP III) FOR THE YEAR ENDED 7th JULY 2018 . BCurrency: Ethiopian Birr 1. BACKGROUND I The Federal Democratic Republic of Ethiopia (GoE) and the International Development Association (IDA) have signed a Financing Agreement (FA) on January 16/2014 for Pastoral Community Development Project Ill (PCDP 3). Under PCDP-I, Ethiopia will invest US $210,200,000. Four I budget sources are used for financing the project. Of the total amount IDA will contribute US$ 110,000,000 (52.33%) in terms of credit. In addition, the project will receive US $ 85,000,000 (40.44%) soft loan from IFAD, while the GoE and the beneficiary communities will contribute US $ I 1,000,000 (0.47%) and US $14,200,000 (6.76%) respectively. (PCDP-3) is the final phase of a 15-year program that will be implemented from May, 2014 to July 7, 2019. PCDP-3 will follow the overall program approach of empowering communities and woreda governments to better manage local development among pastoralists and agro-pastoralists. It will promote a Community Demand Driven (CDD) process of development linked to a Community Investment Fund (CIF) and a Rural Livelihoods Program (RLP), the funding for which flows through I local governments. By adopting a CDD approach, PCDP-3 aims to promote association among pastoralists, empower them to actively engage in local development (particularly the delivery of basic services and promotion of strengthened and diversified productive systems), and also promote self- I monitoring and learning. This is in line with and upholds the GoE's decentralization policy that has pushed decision making authority for basic service delivery to lower levels of government and has sought effective participation of communities in planning and project implementation. In addition to promoting a CDD planning process linked, the project seeks to institutionalize this approach within the Woreda Government's regular planning and budget development processes. It Ialso complements community based initiatives with support to policy dialogue and strategic thinking around pastoralist development issues. At the end of the 15-year period, the program would have supported significant increase in access to public services by pastoral and agro-pastoral communities and widespread ownership of local development initiatives by such communities. It would enable local governments and pastoral/agro pastoral communities to lead development work in close partnership. The project, during its two phases has developed significant experience and capacity to implement a CDD approach to local development. PCDP -3 takes the program to scale and is expected to reach all accessible pastoral and agro-pastoral woredas of Somali, Afar, Oromiya and the Southern Nations Nationalities and IPeoples Region (SNNPR). Accordingly, PCDP-3 will support about 90 additional new woredas, which would bring the total number of beneficiary woredas about 113. PCDP-3 will scale up achievements of the past two phases geographically whilst also deepening and institutionalizing the CDD approach. It will help targeted communities to think through their development issues more comprehensively, proactively target the priorities of the most vulnerable sections of their societies, particularly in terms of improving livelihoods of the poorest households and those falling out of the traditional livestock-based livelihood systems, ensure inclusiveness in their consultation processes, promote accountability among their representatives, and promote self- monitoring and learning. It will also seek to integrate the CDD modality within the GoE's regular planning and budget development processes, and will include institution-building interventions to enhance the capacity of local government and commfuitLy stAke as totake inerventict ato ivntaes the Vaitom o objective of phase-3 of the project is ,f pand p#ccess to community demand-driven social and I economic services for pastoralists and agro-pastoralists of Ethiopian. PCDP-3 has four components namely; (i) Community Driven Service Provision; (ii) Rural Livelihoods Program; (iii) Development Learning and Knowledge Management (DLKM) and (iv) Project Management and M&E. i. Community Driven Service Provision Component I The project will support the Community Driven Service Provision that aims to expand access of pastoral communities to public services as prioritized by beneficiary communities and to institutionalize the CDD approach. It will strengthen decentralized and participatory planning I procedures at the community/kebele and woreda levels by providing a community investment fund, building community based institutions and pertinent capacities at both the community and local government levels. ii. The Rural Livelihoods Program Component The component will assist pastoralist/agro-pastoralist households to improve their economic livelihood systems by promoting enhanced access to financial services (through the promotion of grassroots financial institutions) and supporting improved advisory services that will enable them to identify viable investment opportunities, technically support them to strengthen and/or diversify their production systems and encourage innovation. iii. Development Learning and Knowledge Management Component- This component comprises a set of interventions to complement community level development by I focusing with policy dialogue, strategic thinking around pastoralist development issues and enhanced transparency and learning within the Project. iv. Project Management and M&E Component Although PCDP-3 implementation will be carried out through community institutions assisted by relevant government offices at the federal, regional and woreda levels, its implementation and oversight will be supported by project coordination units and MSTs. PCDP-3 will therefore cover the cost of federal and regional coordination units, MSTs and woreda level support staff. This component will also include regular review meetings for woreda leadership. M&E activities will include regular monitoring of implementation performance, independent process monitoring (including inter alia regular assessments of community level planning and review of the effectiveness and quality of capacity building efforts), outcome/impact evaluations at midterm and end of project, and annual thematic studies. The project is being handled by the Ministry of Peace, which now amalgamates the responsibility of the former Ministry of Federal and Pastoralist Development and Affairs. 2. ACCOUNTING POLICIES PCDP follows the government's accounting policy of modified cash basis of accounting system with double entry recording taking into account the decentralized accounting structure of the project. In I preparation and presentation of the financial statement, the project uses the international financial reporting standard. Federal Pastoralist Coordinating Unit (FPCU), Regional (RPCU) and Project Woredas will keep the original book of accounts for their own financial transactions and posts to the general ledger, Project woreda keeps all financial documents and prepare monthly financial statements using Peachtree accounting program and submit to RPCU; RPCU will prepare quarterly financial statement for its own financial transactions and woreda expendt -n submit to FPCU; rw Pu prepares a consolidated financiaI repong uT oe vorla tsanK and Ministry of Peace. 1 / I NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 7 JULY 2018 Currency: ETB 3. CASH AT BANK 2017 Designated Accounts-Federal level IDA Credit Account USD 49,279 20,488,129 IFAD Credit Account USD 635,682 271,945,001 Birr Account at Federal 1,639,929 2,809,433 2,324,890 295,242,562 4. DEBTORS AND PREPAYMENTS Advances to implementing partners (Note 4.1) 35,272,569 95,119,422 Staff debtors 63,984 1,620 Purchase advances - 180,732 I Sundry Debtors - 100 35,336,553 95,301,874 4.1 ADVANCE TO IMPLEMENTING PARTNERS(IPS) Somali Region (35,887,682) 21,420,782 Afar Region 19,059,752 19,203,995 Oromia Region 23,493,900 19,523,531 SNNP Region 28,461,243 34,960,504 Ethiopian Institute of Agricultural Research - 10,609 35,127,214 95,119,422 I Representation of the above advances shown on the balance sheet on their respective Cash, Receivables and Payables at respective implementing entities as indicated on the IFR Cash at bank Advance Payables Total & on hand Somali Region 6,613,817 8,241,453 50,742,952 (35,887,682) Afar Region 17,944,872 4,642,664 3,527,784 19,059,752 Oromia Region 29,791,998 2,586,600 8,884,698 23,493,900 SNNP Region 27,189,741 3,691,197 2,419,695 28,461,243 81,540,428 19,161,915 65,575,129 35,127,214 I NOTES TO THE FINANCIAL STATEMENTS I FOR THE YEAR ENDED 7 JULY 2018 Currency: ETB 5. PAYABLES I Withholding tax payable 8,239 27,099 Employees' Income tax payable 67,977 73,863 VAT payable 17,777 149,221 Supplier payable - 1,087,580 Pension & indeminity payables 4.491 - 98,484 1,337,763 6. FUND BALANCE Balance as at 8th July,2017 389,206,672 288,271,818 Excess of Sources Over Uses (351,643,713) 100,934,855 Balance as at 7th July 2018 37,562,959 389,206,673 7. SOURCE OF FUNDS Sources USD Rate ETB 7.1 IDA Credit 30-09-17 17,860,280.91 23.3854 417,669,813.19 I 14-Jun-18 1,569,672.54 27.2565 42,783,779.59 19,429,953.45 460,453,592.78 I I 7.3 IFAD Credit 10-Oct-17 1,044,043.53 23.4231 24,454,736.01 16-Sep-16 16,129,591.00 23.4231 377,805,022.95 17,173,634.53 402,259,758.96 36,603,587.98 862,713,351.74 7.4 MATCHING FUND I This represents the value that the Woreda governments contributed in terms of cash deposited to bank during the year. It has been reflected in the financial statements based on quarterly reports submitted by the regional coordination units. I I NOTES TO THE FINANCIAL STATEMENTS IFOR THE YEAR ENDED 7. JULY 2018 8. USES OF FUNDS BY PROJECT COMPONENTS AND CATEGORY AnnualBudget Annual Cumulative Annual Budget % Age of Actual Utilization Variance Utilization Project Components & Category 1 I 8.1 COMPONENT 1-COMMUNITY DRIVEN SERVICE PROVISION Disbursement Category 1(a) CIF 1,405,717,157 1,200,451,455 205,265,702 85% I Consultant's services -_- - Training and workshops 18,685,250 14,721,966 3,963,284 79% Operating costs 83,564,896 74,128,350 9,436,546 89% I Goods 4,340,239 4,340,239 0% Component Sub total 1,512,307,542 1,289,301,771 223,005,771 85% I 8.2 COMPONENT 2- RURAL LIVELIHOOD PROGRAM Disbursement category 1(b) Category 1-Goods 70,328,579 43,620,518 26,708,061 62% Category 2-Consultant's services - - - 0% Category 3-Training and workshops 29,331,150 29,598,101 (266,951) 101% Category 4 -Grants to SACCOs 83,308,268 70,794,619 12,513,649 94% Category 5 - Innovation grants 10,924,762 1,246,906 9,677,856 11% Operating costs 21,674,280 15,012,914 6,661,366 69% Component Sub total 215,567,038 160,273,057 55,293,981 74% I 8.3. COMPONENT 3- DEVELOPMENT LEARNING AND KNOWLEDGE MANAGEMENT Disbursement category 1 ( c) Category 1-Goods 1,190,000 600,665 589,335 50% Category 2-Consultant's services 10,531,190 2,081,252 8,449,938 20% Category 3-Training and workshops 12,585,933 7,686,888 4,899,045 61% Component Sub total 24,307,123 10,368,805 13,938,318 43% 8.4 COMPONENT 4- PROJECT MANAGEMENT AND MONITORING & EVALUATION Disbursement Category 1(d) Category 1-Goods 6,390,750 148,256 6,242,494' 2% Category 2-Consultant's services 8,900,348 7,725,565 1,174,783 87% Category 3-Training and workshops 11,314,120 6,453,755 4,860,365 57% Operating costs-Project management 133,201,917 127,799,376 5,402,542 96% Component Sub total 159,807,135 142,126,952 17,680,183 89% GRAND TOTAL 1,911,988,838 1,602,070,586 309,918,253 84% I I I V % I i W ll I 1 I .0W,IF-L wo a "I m I I 1 I u mil/ RECONCILATION OF AMOUNTS RECEIVED BY THE PROGRAM AND FUNDS DISBURSED BY THE WORLD BANK FOR THE YEAR ENDED 7 JULY 2018 IDA Credit disbursed Received by the Pro ram by the Bank IDA Credit/ No. Withdrawal USD USD Rate ETB Difference 1 30-Sep-17 17,860,280.91 17,860,280.91 23.385 417,669,813.19 2 14-Jun-18 1,569,672.54 1,569,672.54 27.257 42,783,779.59 3 -I 19,429,953.45 19,429,953.45 460,453,592.78 IFAD Credit disbursed Received by the Program by the Bank IFAD Credit/ No. Withdrawal USD USD Rate ETB Difference 1 10-Oct-17 1,044,043.53 1,044,043.53 23.4231 24,454,736.01 2 10-Oct-17 16,129,591.00 16,129,591.00 23.4231 377,805,022.95 3-- 4 _- - 17,173,634.53 17,173,634.53 402,259,758.96 I I I I I I I I - m # j I %JIg. 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LIST OF CURRENT FIXED ASSET ACQUISITION FOR THE YEAR ENDED 7 JULY 2018 Currency: ETB Procurement by FPCU Currency ET13 unit Toal With No Date Discription Qty price Out Vat Vat Total price MABUS BUSINESS - FOR THE PURCHASE OF 1 UNIT OF DISH FINDER UNIT OF ESTABLISHER 1 7/14/17 1500WT 1 6,000.00 6,000.00 HIWOIT ADANE DESSE COMP ACCESS - FOR THE PURCHASE 2 9/5/17 OF 3CM 8PORT SWITCH & LNB 8 HOLES 1 10,500,00 1,575.00 12,075.00 IT VILLAGE PLC - FOR THE PURCHASE OF SONY LCD 3 2/6/18 PROJECTOR 1 19,130.43 19,130.44 2,869.57 22,000.00 ALTA COMPUTEC PLC - PURCHASE OF 1 LAPTOP 4 5/11/18 1 23,000.00 23,000.00 3,450.00 26,450.00 I I I I I I I I I I I FOR THE YEAR ENDED 7 JUL7 2018 I There are 49 accounting entities covered during the audit work These are, - Federal Pastoral Coordination Unit I - Federal Cooperative Agency - RPCUs, MSTs and Woredas as follow RPCU MST Woreda Fik Ma,eso GoIjano IFi Laga Hida Sagag Garbo Babili Danbal Guna Gado Somali Warder Marsin Galaadi Daroor Bookh Daroor Raso Mustahl Raso Barey Hargelle Beercano Ada'ar Hadela'ela Dewe AfarErabti Aba'ala Afdera Beraha'a Afdera Dallol Robe Dellomena H/Buluk Goro dola Negelle Liban OromiaGia I Girja Melkasoda Adola Sebaboru I_Yabello DIDawa Gnagatom Menit Goldiya IPJinka Maji Mizan I I I