HST General Partnership Ethio-China Avenue; Wollo Safer Mina Building 1h Floor P.O. Box 1608 Addis Ababa Ethiopia Chartered Certified Accountants and Authorized Auditors Tel: +251 115 527666/67 f+-o0h1ATr)- V%v`P-111.q o MAC% Fax: +251 115 528384 INDUSTRIAL PARKS DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT (CJCP) INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS FOR THE YEAR EDNED 07 JULY 2019 3.1 INDEPENDENT AUDITORS' REPORT Opinion We have audited the accompanying financial statements of Industrial Parks Development Corporation (IPDC)- Competitiveness and Job Creation Project (CJCP) financed by International Development Association (IDA) set out on pages 8 to 12, which includes the Statement of Financial Position as at 07 July 2019, Statement of Receipts and Expenditure and the Summary of Activity in the Designated Account for the year ended 07 July 2019 and the related notes to the financial statements, including summary of significant accounting policies. In our opinion, the accompanying tinancial statements give a true and fair view of the fund balance as at 07 July 2019 and the receipts and expenditure and summary of activity of designated account of the Industrial Park Development (IPDC) - Competitiveness and Job Creation Project (C]CP) for the year ended 7 July 2019 in accordance with the project's accounting polices and the funding agreement between IPDC and International Development Association. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the ethical requ rements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion, Managements' responsibilities for the project financial statements Management are responsible for the preparation and fair presentation of the financial statements in accordance with the project's accounting policies and the funding agreement between IPDC and International Development Association and for such internal control as management determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The management of IPDC are responsible for overseeing the Project's financial reporting process. Auditors' responsibilities for the audit of the project financial statements Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 based on these financial statements. Audit * Tax * Consulting * Learning Solution Partners: Tekeste Gebru; Solomon Gizaw; Getu Jemaneh; Yonas Harun; Solomon Melaku INDUSTRIAL PARKS DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT (CJCP) INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS FOR THE YEAR EDNED 07 JULY 2019 3 1 INDEPENDENT AUDITORS' REPORT (Continued) Auditors' responsibilities for tie audit of the project financial statements (Continued) As part of an audit conducted in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: * Idlxntify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. This is a report sent to IPDC and International Development Association and is intended solely for their use and information. The engagement partner on the audit resulting in this independent auditors report is Yonas Harun. FIT Yonas Harun Partner Registered Auditor HST General Partnership, Chartered Certified Accountants and Authorized Auditors (Auditors of IPDC - C2CP, Financed by IDA ) Addis Ababa, Ethiopia 03 January 2020 7 INDUSTRIAL PARK DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT .2 STATEMENT Of RECIEPT AND EXPENDJTURE FOR THE YEAR ENDED 07 JULY 2019 2019 2018 ETB ETB RECIEPT Notes Fund receipts during the year 3.5.3 1,550,116,614 3,109,900,806 Other income 3.5.4 -,31,127,560 1,550,116,614 3,148,028,366 EXPENDITURE Total expenditure during the year 3.5.5 (4,224,430,018) (3,292,029,302) Loss from foregn exchange rate fluctuation 3.5.6 (28,290,774) Excess of expenditure over receipts (2,702,604,178) (144,000,936) Fund balance at 8 July 2,151,473,315 2,295,474,251 Fund balance at 7 July (551,130,863) 2,151,473,315 8 INDUSTRIAL PARK DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT 3.3 STATEMENT OF FINANCIAL POSITION AS AT JULY 7 2019 2019 2018 Notes ETB ETB ASSETS CURRENT ASSETS Cash and bank balances 3.5.7 109,527,910 140,014,258 Receivables 3,5.8 201,284,118 2 343,212,437 310,812,028 2,483,226,695 FUND BALANCE AND LIABILITES Fund balance (551,130,863) 2,151,473,315 CURRENT LIABILITIES Payables 3.5.9 861,942,891 331,753,380 Total Liabilities and fund balance 310,812,028 2,483,226,695 The financial statements on pages 8 to 12 were approved by the IPDC management on 03 January 2020 and signed on its behalf by: Tessema Geda Gezahegn Ya ssa Project Coordinator \ Financial Ma age ant Specialist 9 TNDUSTRIAL PARK DEVELOPMENT CORPORATION COMPETITEVINESS AND JOR CREATION PROJECT 234 SUMMARY OF THE ACTIVITY IN THE DESIGNATED ACCOUNT FOR THE YEAR ENDED 07 JULY 2019 USD Bank Accounts (a/c # 100401300006 and a/c # 0101911300002): National Bank of Ethiopia 2019 2019 USD ETB Opening Bank Balance 4,727,017 128,984,203 ADD: Receipts Fund received from IDA 3.5.2.2 25,360,194 705,996,302 Funds available for use 30,087,211 834,980,505 Less: Transfers and Expenditures/payments Expenditures/payments 3.5.2.3 26,415,315 740,928,454 Sub total Closing Balance 3,671,896 94,052,052 10 INDUSTRIAL PARK DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 07 JULY 2019 35.1 INTRODUCTION 3.5.1.1 Project objectives IPDC, in collaboration with Ethiopian Investment Commission and Ethiopian Revenue and Custom Authority and more institutions provides one-stop-shop service for investors investing in designated industrial parks. 3.5.2 BASIS OF PREPARATION The financial statements have been prepared on modified cash basis of accounting whereby receipts are recognized when cash is received and expenditures are recognized when ncurred, except construction costs recognized when approved payment certificates are received 3.5.2.1 Budget The budget is developed on the same accounting basis (modified cash basis), same classification basis, and for the same period as for the financial statements. The budget was approved as required by the standard conditions of the credit agreement and work-plan 3.5.2.2 Funds Receipt Fund receipt is recognized to the extent of credit extended by the Bank to the project's designated account. Funds received and direct payments during the year are as follows: Received Confirmed (USD) (USD) Cash transfer 25,360,194 25,360,194 Direct payment 29,163,486 29,163,486 54,523,68O 54,523,680 3.5.2.3 Expenditure Expenditure represents amounts disbursed and costs tncurred denominated in ETB. 3.5,2.4 Foreign currency transactions Cash receipts and payments arising from transactions in a foreign currency are recoded in the financial statements using the actual rate of exchange applicable on date of transactions. Foreign currency denominated monetary assets and liabilities are translated to ETB using exchange rates applicable at year- end. 3.5 2.5 Non-current assets In accordance with lender's requirements, purchase of fixed assets is expensed on acquisition. IPDC maintains an asset register that tracks all project fixed assets. 3.5.2 6 Currency The financial statements are presented in Ethiopian Birr ( ETB ). 3.5.2.7 Foreign Exchange Gain or losses Foreign exchange gain or losses represent all gains obtained and losses incurred when payment is received from IDA and payments are made to the service providers from the USD account due to exchange rate fluctuation INDUSTRIAL PARK DEVELOPMENT CORPORATION COMPETITEVINESS AND JOB CREATION PROJECT NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 07 JULY 2019 2019 2018 3.5.3 RECEIPT ETB ETB Direct payment 651,464,032 1,844,557,043 Deposits 705,996,302 830,705,080 Government Contribution 192,656,280 434,538,683 1,550,116,614 3,109,900,806 3.5.4 OTHER INCOME Sundry income- staff penalty 3,190 Gain on foreign exchange fluctuation 38,124,370 38,127,560 3.5.5 OPERATING EXPENSES Works/Construction 4,139,843,558 3,215,318,496 Consultancy service 50,409,490 53,631,869 Salary and employees benefits 11,435,899 10,042,031 Bank service charge 3,552,214 2,548,530 Sundry 3,477,762 2,040,562 Linkage expense 9,902,195 1,664,899 Professional fee 1,042,820 1,619,913 Office rent - 1,200,000 Training and workshop 1,862,350 1,149,296 Office supplies 1,357,459 639,204 Repair and maintenance 530,394 396,576 Fuel lubricants 322,886 363,185 Goods - 352,564 Advertising and promotion 116,591 308,905 Entertainment 217,963 214,231 Postage and telephone 133,828 167,172 Vehicles insurance 123,732 115,652 Travelling and per deim 90,655 123,791 Vehicle inspection fee 6,922 128,826 Cash indemnity allowance 3,300 3,600 4,224,430,018 3,292,029,302 3.5.6 LOSS ON FOREIGN EXCHANGE RATE FLUCTUATION Foreign exchange loss was incurred as a result of deferences between the fixed contract exchange rate and the rate used at the date of the various contract setiements. 2019 2018 3.5.7 CASH AND BANK BALANCES ETB ETB Cash at bank 109,527,115 139,993,463 Cash on hand 795 20,795 109,527,910 140,014,258 3.5.8 RECEIVABLES Advance to contractors 194,465,743 2,339,959,098 Sundry 6,564,490 3,082,162 Staff 253,885 171,177 201,284,118 2,343,212,437 3.5.9 PAYABLES Retention 439,950,713 325,761,402 Accruals 297,572,450 - Taxes 100,975,407 214,745 Sundry 21,444,321 1,777,233 Deposit by contractors 2,000,000 4,000,000 861,942,891 331,753,380 12