BA-MAT 4A/,-4r' AVvief-4X eW7~lRbi Federal Democratic Republic of Ethiopia MINTSTRY OF AGRICULTURE Date 5 Z6 RLLP TTL rld Bank, African Region thiopia Country Office Addis Ababa Subject:- Submission of Audit report Kindly, here we have attached 4th quarter audit report of Resilient Landscapes and Livelihoods Project no P163383 IDA credit no 63120 and TF A9048, for the year ended April 18 to July 07, 2019. The audit report includes: > Financial Statements > Management letter > Statement of Designated Account Sincerely yours, CC: Ailnistli > Ministry of Finance > Office of the Federal Audit General Addis Ababa > Natural Resource and Food Security Sector State Minister Office > Finance Directorate MoA +'PC 0 62347 M 0116-46-32-02 FP 011646-20-03 3735 0116-46-22-73 Website www.moa.gov.et anAh AAn' ?XfM.FT17 A?f*ky -hk.) hflQ Please quote Our Ref. *v'hP ;?T7 - Ethionia-Addis Ababa when replying, MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) IDA LOAN No. 63120-ET AND TF GRANT No. A9048 FINANCIAL STATEMENTS AND AUDIT REPORT FROM APRIL 18, 2019-JULY 07, 2019 TABLE OF CONTENTS Independent A uditors' R eport ......................................................................................1-2 The Statem ent of Financial Position ............................................................................... 3 The Statem ent of Sources and Uses of Funds ................................................................. 4 The Statem ent of D esignated A ccount ............................................................................ 5 N otes to the Financial Statem ents............................................................................... 6-11 F inancing apportionm ent .............................................................................................. 12 M anagem ent L etter ................................................................................................... 13-15 1 Kokeb & Melkamu Audit Partnership Chartered Certified Accountants (UK) INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) IDA LOAN No. 63120-ET AND MDTF GRANT No. A9048 Opinion We have audited the accompanying financial statements of the Resilient Landscapes and Livelihoods Project (RLLP) IDA LOAN No. 63120-ET and MDTF Grant No A9048 comprising the statement of financial position as at July 79h, 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 shown from pages 3 to 12. In our opinion, the financial statements present fairly, in all material respects, the financial position and balance of the Resilient Landscapes and Livelihoods Project (RLLP) IDA LOAN No. 63120-ET and MDTF Grant No A9048 implemented by the FDRE Ministry of Agriculture, the Statement of Sources and Uses of Funds for period covering April 18, 2019 up to July 7, 2019 in accordance with the financial management policy of Ministry of Agriculture adopted for the Project. In addition, the Project was, in all material respects, in compliance with the Financing Agreements and Contracts. 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 proceeds of the Designated account have been used exclusively for eligible expenditures and provisions and covenants of the Financing Agreement and Separate Agreement have been substantially respected. Basis for opinion 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 International Development IDA LOAN No. 63120-ET and MDTF Grant No A9048 Financing Agreements. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Organization in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accounts (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Ethiopia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we hav 'obtal uffi nt and appropriate to provide a basis for our opinion. Lr.; 0½ 2 Management's Responsibility for the Financial Statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting policies of the Project, and for such internal control as management determines is necessary to enable the preparation of a project report that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the project report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The engagement partner on the audit resulting in this independent auditor's report is Ato Kokeb Moges. Kokeb & Melkamu Audit Partners il Addis Ababa Chartered Certified Accountants K) December 18, 2019 Authorized Auditors in Ethiopia "I P. 0. Box 33645 Addis Ababa, Ethiopia Telephone 251-11-616-69-56 E-mail: kokmelk(qethionet.et Mobile Tel. 251-91-120-37-78/51-61-46 Fax 251-11-552-26-88 3 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) IDA LOAN No. 63120, ,MDTF A9048 STATEMENT OF FINANCIAL POSITION AS AT JULY 07,2019 Currency: Ethiopian Birr Notes ASSETS CURRENT ASSETS Cash and cash equivalent 3 25,657,004.69 Accounts receivable 4 25,746,864.74 51,403,869.43 LIABILITIES AND FUND CURRENT LIABILITIES Account payables 5 2,852,061.46 PROJECT FUND Fund balance 6 48,551,807.97 TOTAL LIABILITIES AND FUND BALANCE 51,403,869.43 A '(~,, . 4 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) STATEMENT OF SOURCE AND USES OF FUNDS FOR THE PERIOD COVERING FROM APRIL 18, 2019 TO JULY 07,2019 Currency: Ethiopian Birr SOURCE OF FUND Notes IDA 7 89,308,034.11 Gain on foreign exchange valuation 200,259.41 Others 6,300.00 89,514,593.52 PROGRAM EXPENDITURE 8 Components Green Infrastructure and Resilient Livelihoods 8.1 16,502,222.74 Investing in Institutions and Information for Resilience 8.2 6,939,342.45 Rural Land Administration, Certification and Land Use 8.3 958,011.18 Project Management 8.4 16,563,209.18 40,962,785.55 EXCESS OF INCOME OVER EXPENDITURE 48,551,807.97 5 MINISI MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) STATEMENT OF DESIGNATED ACCOUNT FOR THE PERIOD COVERING FROM APRIL 18,2019 TO JULY 07,2019 IFAD- Loan Account No. 100071300339 Depository Bank National Bank of Ethiopia Related Credit and Grant No. IDA 63120 Address Addis Ababa, Ethiopia Currency USD USD ETB Opening balance Add: Transfer from IDA 3,105,264.71 89,308,034.11 3,105,264.71 89,308,034.11 Less:- Transferred to Birr account 2,400,000.00 (69,100,640.00) (2,400,000.00) (69,100,640.00) 705,264.71 20,207,394.11 Add:- Gain on exchange - 200,259.41 Ending balance,7 July 2019 705,264.71 20,407,653.52 'A\ NO 6 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) IDA LOAN No. 63120-ET AND MDTF GRANT No. A9048 FOR THE PERIOD FROM APRIL 8,2019 -7TH JULY 2019 Currency: Ethiopian Birr 1. BACKGROUND The objective of the Resilient Landscapes and Livelihoods Project is to improve climate resilience, land productivity and carbon storage, and increase access to diversified livelihood activities in selected rural watersheds. It is a 5-year Investment Project Finance of $129 million, consisting of a $100 million IDA credit and \ Multi donor (MTDF) The indicated Trust Fund financing would be provided by the Government of Norway through a MDTF.grants totalling $19 The counterpart financing from the Government of Ethiopia would be approximately $10 million to cover taxes and duties related to the project. Additional in-kind contribution is provided by beneficiaries. The implementation of the RLLP is being taken place in six of the nine regions of the country. They are: Amhara, Beneshangul-Gumuz, Gambella, Oromia, Southern Nations, Nationalities and People Regiopn (SNNPR), and Tigray. The primary beneficiaries of the RLLP will be 645,000 rural households (approximately 3.2 million individuals) on degraded land, facing land tenure and water insecurity in 152 selected watersheds. Indirect beneficiaries include: (i) communities adjacent to project intervention areas adopting SLM and Climate Smart Agriculture (CSA) practices through demonstration effects, as observed under SLMP-Il; (ii) private sector participants and end-consumers in value chains targeted by the project; (iii) households outside project areas benefiting from the creation of land certification capacity at woreda and regional level; (iv) recipients of capacity building at all levels of government, as well as in national partner organizations; and (v) communities outside project areas benefiting from groundwater recharge, reduced flooding, and lower sediment loads, as a result of SLM interventions. The Project has four components, namely: namely; (i) Green Infrastructure and Resilient Livelihoods (ii) Investing in Institutions and Information for Resilience (iii) Rural Land Administration and Use (iv) Project Management and Reporting. Component 1. Green Infrastructure and Resilient Livelihoods (Total: US$78.5 million of which US$65 million (SDR45.9 million equivalent) from IDA, US$8.5 million from the Multi-Donor Trust Fund - MDTF; and US$5 million from GoE) The objectives of this component will support the restoration of degraded landscapes in selected watersheds and help build resilient livelihoods on this newly productive foundation. This will be achieved through three sub-components, supporting: (i) the implementation of Sustainable Land and Water Management (SLWM) practices in line with MYDPs in 90 SLMP-II watersheds and 17 newly identified watersheds; (ii) the adoption of CSA practices in 200 restored micro-watersheds selected from SLMP-1 and SLMP-ll intervention watersheds; and (iii) the promotion of livelihood-diversifying IGAs in all RLLP watersheds, and support in 16 pilot watersheds for linkages to value chains. While the Government of Norway has provided a letter of commitment for the MDTF resources indicated above, there remains a low risk that this co-financing may not be agreed. In this case, the number of new watersheds selected for SLWM interventions would be reduced from 17 to 14, and the target values to be achieved against PDO-level results indicators 1, Ia and 4 would be reduced by 2 percent, 1 percent and 3 percent respectively. 7 Component 2. Investing in Institutions and Information for Resilience (Total: US$12.5 million of which US$6 million (SDR4.2 million equivalent) from IDA, and US$6.5 million from MDTF) The objective of this component will build capacity for the promotion and management of SLWM practices, and improve information for better decision-making in supporting resilient landscapes and diversified rural livelihoods in the project area. This will be achieved through the implementation of the following subcomponents: (i) capacity building, information modernization and policy development; (ii) impact evaluation, knowledge management and communication. Component 3. Rural Land Administration and Use (Total: US$23 million of which US$20 million (SDR14.1 million equivalent) from IDA, and US$3 million from MDTF) The objective of this component will strengthen the rural land administration system that secures tenure rights, optimizes land use, and empowers land-users to sustainably invest in productive landscapes. The component will provide security of tenure to smallholder farmers in RLLP watersheds through Second Level Landholding Certificationl8 (SLLC) as an incentive to increase the adoption of SLM technologies and practices, and will provide targeted landless youth with communal land certificates in exchange for land restoration. Half of the SLLC and communal certificate title-holders will be women. This component will also extend the on-going local-level participatory land-use planning exercise at kebele level within RLLP watersheds, and will support the rollout of the National Rural Land Administration Information System (NRLAIS) in RLLP woredas. Component 4. Project Management and Reporting (Total: US$15 million of which US$9 million (SDR6.4 million equivalent) from IDA, US$1 million from MDTF, and US$5 million from GoE) The objective of this component will ensure effective implementation and reporting on project activities with due diligence and integrity. The component will finance the operational costs of the PCUs in MoALR and Regional State Bureaus of Agriculture and Natural Resources. These PCUs will carry out all fiduciary aspects of project implementation including financial management, procurement, environmental and social safeguards, as well as Monitoring and Evaluation (M&E) and reporting. 2. ACCOUNTING POLICIES RLLP 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 preparation and presentation of the financial statement, the project uses principal policies such as a) Income and expenditure recognition The income is recognized on the basis of actual cash receipt whereas expenditure recognition is on modified basis. b) Fixed assets Fixed asset acquired for the project are shown as an expenditure in the year it occurs and reported on memorandum records. 8 c) Foreign currency transactions. Transaction in foreign currencies are translated using the exchange rate prevailing on the date of the transaction. Federal RLLP 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 quarterly financial statements using Peachtree accounting program and submit to RPCU; RPCU will prepare quarterly financial statement for its own financial transactions and woreda expenditures and submit to FPCU; FPCU prepares a consolidated financial report and submit to the World Bank and Ministry of Agriculture ZLV , 9 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD COVERING FROM APRIL 18, 2019 TO JULY 07,2019 Currency: Ethiopian Birr 3. CASH AND CASH EQUIVALENT Cash on hand 247,049.42 Cash at bank- National Bank of Ethiopia 25,409,955.27 25,657,004.69 From the total cash at bank maintained at NBE, Birr 20,407,653.52 is the equivalent of USD 705,264.71 balance in the Designated Account. 4. ACCOUNT RECEIVABLES Staff work and travel 221,850.00 Regional Project advance 25,525,014.74 25,746,864.74 i) The breakdown of Birr 25,525,014.74 Regional Project Advances are as follows: Tigray 2,149,265.59 Amhara 7,278,779.62 Oromia 7,559,865.41 SNNPR 5,265,373.53 Benishangul Gumuz 2,999,448.16 Gambella 272,282.43 25,525,014.74 5. ACCOUNT PAYABLES Ministry of Agriculture 2,852,061.46 2,852,061.46 This is temporary loan from the MoA for operation until fund is released from IDA 6.FUND BALANCE Balance brought forward i Add: excess of expenditure over income ,48,551,807,97 Balance carried forward a * ( Ca d 48,551,807.97 Ok - 10 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD COVERING FROM APRIL 18, 2019 TO JULY 07,2019 Currency: Ethiopian Birr 7. IDA SOURCE Withdrawal application USD Exchange Rate ETB No. 01 3,105,264.71 28.7602 89,308,034.11 8. EXPENDITURE Project Components Component 1 -Green Infrastructure and Resilient Livelihoods Budgeted Actual Variance Sub component 1.1 Lands, and Land Restoration and Watershed Management 24,300,000.00 14,435,840.90 9,864,159.10 Sub component 1.2 Climate-Smart Agriculture 1,500,000,00 2,066,381.84 (566,381.84) Sub component 1.3 Livelihood Diversification and Connection to Value Chains 200,000.00 - 200,000.00 Sub Total 26,000,000.00 16,502,222.74 9,497,777.26 Component 2: Investing in Institutions and Information for Resilience Sub component 2 .1 Capacity Building, Information Modernization and Policy Development 14,793,333.33 6,785,434.67 8,007,898-66 Sub component 2.2 Impact Evaluation, Knowledge Management and Communication 9,550,000.00 153,907.78 9,396,092.22 >ua iotai 24,343,333.33 6,939,342.45 17,403,990.88 II 11 MINISTRY OF AGRICULTURE (MoA) RESILIENT LANDSCAPES AND LIVELIHOODS PROJECT (RLLP) NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD COVERING FROM APRIL 18, 2019 TO JULY 07,2019 Currency: Ethiopian Birr Component 3: Rural Land Administration, Certification and Land Use Sub component 3.1 Second Level Landholding Certification 13,000,000.00 958,011.18 12,041,988.82 Sub component 3.2 Participatory Local Land Use Planning and Development Control 600,000.00 - 600,000.00 Sub component 3.3 National Rural Land Administration Information System 670,000.00 - 670,000-00 Sub Total 14,270,000.00 958,011.18 13,311,988.82 Component 4: Project Management 43,300,000.00 16,563,209.18 26,736,790.82 Grand Total 107,913,333.33 40,962,785.55 66,950,547.78 100% 3%62%