Ernst & Young Jordan P.O.Box 1140 BuildIng a better working world TeL: 00 962 6580 0777/00 962 6552 6111 Fax: 00 962 6553 8300 www.ey.com/me 16 August 2016 Messers. Central Bank of Jordan Amman - Jordan Dear Sirs, Enclosed please find three copies of the project financial statements of the the Grant Agreement between the Hashemite Kingdom of Jordan and the World Bank for Reconstruction and Development for the year ended 31 December 2015 together with our report, With our best regards, ERNST & YOUNG / JORDAN By: - Mohammad Al-Karaki t' ofC;-t& vouI10 G10b'-[,IG Ernst & Young Jordan PODBox 1140 Arnan 11.118 Building a better Jordan working world Tel: 00 962 6580 0777/00 962 6552 6111 Fax: 00 962 6553 8300 www.ey. corn/rnle 16 August 2016 Central Bank of Jordan Amman - Jordan Dears, INTERNAL CONTROL DEFICIENCIES OVER FINANCIAL REPORTING FOR THE YEAR ENDED 31 DECEMBER 2015 We have completed our audit of the project financial statements of the Grant Agreement between the Hashemite Kingdom of Jordan and the World Bank for the year ended 31 December 2015. This is to report to you that our audit of the financial statements and the samples selected during the performance of our audit did not show any exceptions in the internal controls that may contradict with the loan agreement terms and conditions. This letter is a distinct and separate document from our audit opinion and do not affect, in any material way, the opinion issued for the year end audit, in due course, on your project financial statements. Our responsibility is to express an opinion on the project financial statements based on our audit. The auditor considers internal control relevant to the unit's preparation and fair presentation of the project 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 unit's internal control. Yours faithfully, Ernst & Young/ Jordan By: Mohammad Al- Karaki GRANT AGREEMENT BETWEEN HASHEMITE KINGDOM OF JORDAN AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FOR ENHANCING GOVERNANCE AND STRENGTHENING THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT PROJECT PROJECT FINANCIAL STATEMENTS 31 DECEMBER 2015 Ernst & Young Jordan P.O.Box 1140 Amman 11118 Building a better Joruan working world Tel : 00 962 6580 0777/00 962 6552 6111 Fax: 00 962 6553 8300 www.eV.corn/me INDEPENDENT AUDITOR'S REPORT GRANT AGREEMENT BETWEEN THE HASHEMITE KINGDOM OF JORDAN AND THE INTERNATIONAL BANK AMMAN - JORDAN We have audited the accompanying project financial statements of the grant agreement between the Hashemite Kingdom of Jordan and The International Bank for Reconstruction and Development, which comprise the statement of cash receipts and cash payments for the year ended 31 December 2015, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements The Central Bank of Jordan is responsible for the preparation and fair presentation of these project financial statements in accordance with the accounting policies set out in Note (3) and for such internal control as management determines is necessary to enable the preparation of project 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 project 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 project financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the project financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the project financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the unit'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 unit'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 project financial statements. 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 project financial statements present fairly, in all material respects, the statement of cash receipts and cash payments for the year ended 31 December 2015 in accordance with the accounting policies set out in Note (3). Amman - Jordan 14 August 2016 GRANT AGREEMENT BETWEEN HASHEMITE KINGDOM OF JORDAN AND INTERNATIONAL BANK STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 31 DECEMBER 2015 For the period from 9 February 2014 to 31 December 2015 2014 Total Cash Receipts USD USD USD Funds received from the International Bank 478,510 400,000 878,510 Total receipts 478,510 400,000 878,510 Cash Payments Jordan Loan Guarantee Corporation 215,161 280,966 496,127 Consumers protection 7,146 - 7,146 Development of the regulatory and institutional framework for Micro Finance institutions and Non-Bank financial institution 41,817 - 41,817 Bank Commissions 80 41 121 Total payments 264,204 281,007 545,211 Net cash at the end of the year I period 214,306 118,993 333,299 The attached notes from 1 to 3 form part of these project financial statements GRANT AGREEMENT BETWEEN HASHEMITE KINGDOM OF JORDAN AND INTERNATIONAL BANK NOTES TO PROJECT FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2015 (1) GENERAL On 9 February 2014, The International Bank for Reconstruction and Development, acting as implementation agent for the Middle East and North Africa Transition Fund, granted the Hashemite Kingdom of Jordan an amount of three million United States Dollars "USD 3,000,000" to enhance governance and strengthen the regulatory and institutional framework for Micro, Small and Medium enterprise development projects in the Hashemite Kingdom of Jordan. The period of the grant is 3 years starting 9 February 2014. The objectives of the project are as follows: 1) Strengthening credit guarantee schemes. 2) Enhancing the consumer protection schemes. 3) Developing the regulatory and institutional framework for Micro finance institutions and NBFls. As the representative of the Hashemite Kingdom of Jordan is the Minister of Planning and International Cooperation, the Ministry of Planning and International Cooperation signed a subsidiary agreement with the Central Bank of Jordan to be the project implementing entity of the grant as required by the agreement signed with The International Bank for Reconstruction and Development. The grant will be distributed among the project's objectives as follows: USD Strengthening credit guarantee schemes. 1,000,000 Enhancing the consumer protection schemes. 1,200,000 Developing the regulatory and institutional framework for Micro finance institutions and NBFIs. 800,000 3,000,000 -1- USD Grant amount 3,000,000 Amount Withdrawn by the Central Bank for Jordan 878,510 Net cash available to be withdrawn 2,121,490 The utilization of the grant amount among the project's objectives is as follows: Utilized Utilized Amount of amount amount grant during 2015 during 2014 USD USD USD Strengthening credit guarantee schemes.* 1,000,000 215,161 280,966 Enhancing the consumer protection schemes." 1,200,000 7,146 - Developing the regulatory and institutional framework for Micro finance institutions and NBFIs.*** 800,000 41,817 - 3,000,000 264,124 280,966 -2- The details of the utilized amount during the year ended 31 December 2015 are as follows: Eligible /. Total Total Amount of from Amount Amount Amount of Invoice Covered Schedule 1 Eligible Paid from Exchange Contract by Application of for Special Rate (Col. Item USD (Net of Loan/Credit Financing Account (if 7 divided No. Category No Description (Yearly) Retention) USD Agreement (4 x 5) Applicable) by Col. 6) Remarks 1 Operation cost 28 28 100% 28 28 100% Remittances fees 2 C,IND01 business development 62,549 17,073 100% 17,073 17,073 100% consultant Risk management and 3 C.IND.02 consultant 61,752 17,072 100% 17,072 17,072 100% 4 C.IND.03 Marketing consultant 9,842 2,229 100% 2,229 2,229 100% 5 Operation cost 11 11 100% 11 11 100% Remittances fees Business Business development 100% 2,882100% consultant salary & benefit i C.IND.01 development 61,800 32,802 100% 32,802 f /100% on l & 1 consultant for 4-8/2015 + 13"' & 14 salaryl 2015 + 1Su'l2014 Adleen Khoryl risk Risk management and management consultant 7 C.IND.02 consultant 1 68,569 19,245 10091 19,245 100% salary benefits for 3-4/2015 +131' salary/2015 + end of service benefits Rana Tahboub/ risk a C.IND.02 Risk management and 78,116 2m,471 100% 28,471 100% management consultant consultant 2 salary & benefit for 4- 8/2015 + 131h & 14" salary 9 C.IND.03 Marketing consultant 107 107 100% 107 100% Heba alkilani medical medical expenses expense Purchase of PC & luhapt coPte & Purchase of (1) laptop 10 G.SH.03 software, (MS 997 997 100% 997 100% Awael Business & Windows, MS office) Computer Company 11 G.SH.06 Purchase of software 605 605 100% 605 100% purchase of software Platform Purchase of PC & 12 G.SH,03 laptop computer & 1,115 1,115 10016 1,115 100% Purchase of (1) pc/ Mid software, (MS Teks Inc Company Windows, MS office) 13 G.SH.04 Purchase of printers 719 719 100% 719 100% Purchase of (2) printers/ Mid Teks Inc Company Purchase of servers & 14 G.SH.01 Purchase of servers & 13,234 13,234 100% 13,234 100% software Organizers of new softwares information technology company 15 MIND.02 Maintenance for 1,268 1,268 100% 1,268 100% Vaintenance for server/ server Platform 16 G.SH.05 Purchase of scanners 890 890 100% 890 100% Purchase of (1) scanners/ Mid Teks Inc. Company 17 G.SH.04 Purchase of printers 1,031 1,031 100% 1,031 1001. Purchase of (2) Printers/ Platform 1 Tran. 0 Study tours & training 16,387 100% 16,387 100% Study tour & leaming visits (Sevral)& training Business 19 C.IN0.01 development 61,800 11,561 100% 11,581 100% - consultant Risk management and 20 C.IND.02 consultant 2 78,118 16,440 100% 18,440 100% - 21 WIND.01 Development and 20387 1,031 100% 1,031 100% - redesigning of website Purchase of servers & 22 G.SH.01 software 26,505 13,252 100% 13,252 100% - 24 Single source - 19,593 100% 19,593 - - Total 215,161 215,161 -3- ** The details of the utilized amount during the year ended 31 December 2015 are as follows: Eligible % Total Total Amount of from Amount Amount Amount of Invoice Covered Schedule 1 Eligible Paid from Exchange Contract by Application of for Special Rate (Col. Item Category USD (Net of Loan/Credit Financing Account (if 7 divided No. No Description (Yearly) Retention) USD Agreement (4 x 5) Applicable) by Col. 6) Remarks Study tour to Malaysia for enhancing 2 ST. 2.4 the 714 7,146 7,146 714 106 tour to Malaysia for enhancing consuter 7the consumer protection project consumer protection project Total 7,146 7J46 The details of the utilized amount during the year ended 31 December 2015 are as follows: Eligible% Total Total Amount of from Amount Amount Amount of Invoice Covered Schedule 1 Eligible Paid from Exchange Contract by Application of for Special Rate (Col. Item Category USD (Net of Loan/Credit Financing Account (if 7 divided No. No Description (Yearly) Retention) USD Agreement (4 x 5) Applicable) by Col. 6) Remarks Study tour to leading ST.1.1 country in 1 ST.1. 1 Mcrofinance 14,501 14,501 1001. 14,501 14,501 100% Training study tour regulations MF Training course in 2 ST.1.1 g ,254 1,264 100% 1,264 1,264 100% Training course in Egypt IT equipment 3 G.SH2.2 (hardware) fax and 8,326 6,326 100. 8,326 6,326 100% Purchase of (1) PC, (6) laptops scanner and (7) printers Maen Tashtoush/ Microfinance 4 EBC. 1.2 Micsorinance 28,000 4,580 1005 4,580 4,560 100% Supervisor salary and benefits for Supervisor 1 (1618-31/12)/2015 + 14 salary 15 salary Huda Al Refael Microfinance 5 EBC. 1.3 2icrofinance 29,000 5,139 100% 5,139 6,139 1001; Supervisor salary and benefits for Supervisor2 (16B-31112)/2015 + 14 salary 15 salary Wafaa Al Najjar/ Microfinance 6 EBC. 1.4 Microfinance 28,000 4,852 100% 4,853 4,853 100% Supervisor salary and benefits for Supervisor 3 (16/8-31/12)12015 + 14 salary 15 salary 7 ST. 1. 1 SmeS Training course in Jordan 3,154 3,154 100% Total 41,817 41,827 -4- (2) GENERAL POLICIES The financial information for the grant agreement has been prepared in accordance with standard and accounting policies described in Note (3). Receipt, payments and closing account The procedures necessary for managing, maintaining and setting the polices for receipts, disbursements, bookkeeping and the closing account and other related matters, are organized by the Central Bank of Jordan. Receipts The receipts of the grant agreement consist of the fund received from the International Bank for Reconstruction and Development. Payments Cash payments are paid on the eligible expenditures in Jordan as per the grant agreement. Functional currency The project financial statements have been presented in United States Dollars "USD" which is the functional currency of the Grant agreement. (3) SIGNIFICANT ACCOUNTING POLICIES Below are the major accounting policies: Recognition of receipts and payments Receipts The revenues recognized when receiving cash and recorded under the receipts item. Payments The payments are recognized when they are paid, and then recorded in the books. Expense Expenses is recognized at the time physical cash is paid out. -5-