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~"l'C I I Ref.Nokt/cW:i 7- 111-9 . +1 I The Federal Democratic Republic of Ethiopia

Ministry of Finance and Economic Cooperation Date 3 0 MAR 2018 I ---=-=-· C..::... I

World Bank Ethiopia country office, Addis Ababa

Subject:- Annual Audit Report on PBS-III Proiect Sub-programs A, B and ESPES program EFY 2009

It is to be recalled that the OF AG has conducted annual audit for PBS-III project Sub-program A, B and

ESPES program for EFY 2009 and had been submitted to The World Bank Country Office.

However, MoFEC noted that the submitted audit reports were missing some essential elements and

decided the audit report to be revised considering these elements.

Accordingly, OFAG has revised the audit reports by incorporating the missing elements. We have,

therefore attached herewith the revised PBS-III project Sub-program A, B and ESPES program EFY 2009

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>­MoFEC

Best Regards,

£ Channel One Programs Coordinating Directorate

Provisional Coordinator

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Ministry of Finance and Economic Cooperation

Addis Ababa

. . . . ·. Re: ·· Submission of the PBS III -Project Sub--:-Programs

· A, Band ESPES Program Audit Report

It is to be recalled that the Ethiopian Government and the Development Partners have reached an Agreement regarding the Annual Audit of the Project Financial Statements of the promoting of Basic Services III (PBS III) Project Sub-programs A and Band Enhancing shared prosperity through Equitable service (ESPES) program to be submitted to the Ministry of Finance and Economic Cooperation by the Office of the Federal Auditor General.

We have, therefore, attached herewith the PBS III Project Audit report for the Year ended sene 30, 2009 (7 July 2017).

Sincerely yours,

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[I The Federal Democratic lJ Republic of Ethiopia Vh.Tr-A.Y '°~&-t\'f! "L 'P'h&-lt.Y'f &1Nllt.h

[1a OFFICE OF THE FEDERAL 1rJ AUDITOR GENERAL

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THE FEDERAL DEMOCRATIC RPUBLIC OF ETHIOPIA

MINISTRY OF FINANACE AND ECONOMIC COOPERATION

PROMOTING OF BASIC SERVICES ill PROJECT

SUB-PROGRAMS A, B AND ENHANCING SHARED PROSPOR­

ITY THROUGH EQUITABLE SERVICE( ESPES}

INDEPENDENT AUDITOR'S REPORT ,AUDIT FINDINGS AND

RECOMMENDATIONSONTHEPROJECTFINANCIAL

STATEMENTS

FORTHE YEARENDED7JULY2017

05 January 2017·

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INDEPENDENT AUDITOR'S REPORT ON THE PROJECT FINANCIAL STATEMENTS OF THE MINISTRY OF FINANCE AND ECONOMIC COOPERATION OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICES III PROJECT SUB-PROGRAMS A AND BAND ENHANCING SHARED PROSPITY THOUGHY EQAUTABLE SERVICE (ESPES) PROJECT

We have audited the accompanying Project Financial Statements of

the Promoting of Basic Services III Project Sub-Programs A and B

and Enhancing Shared Prosperity through Equitable Service

(ESPES) project of the Ministry of Finance and Economic

Cooperation of the Federal Democratic Republic of Ethiopia for

the year ended 7 July 2017, which has been financed by IDA

Financing Agreements IDA51620, IDA5716, Multi Donors Trust Fund

Financing Agreement TF13952, Austria fund and Italy fund.

The preparation of the Project Financial Statements (PFSs) is

the responsibility of the Ministry of Finance and Economic

Cooperation. This audit is a special purpose audit for the

Promoting of Basic Services III Project Sub-Programs A and B and

Enhancing shared prosperity through Equitable service (ESPES)

whose terms of reference are those given in the Terms of

Reference for the audit of Promoting of Basic Services III (PBS

III) Project Sub-Programs A and B and Enhancing Shared

Prosperity thought Equitable Service (ESPES). These Terms of

Reference include, inter alia, our responsibility to express an

opinion on. the Project Financial Statements based on our audit

and report on material inappropriate expenditure and other

pertinent matters.

We conducted our audit in accordance with the International

Standards on Auditing (ISA) issued by the International Auditing

and Assurance Standards Board of the International Federation of

1

Accountants with special reference to ISA 800 and the World Bank

relevant Guidelines for the World Bank financed projects.

These Standards require that we plan and perform the audit to

obtain reasonable assurance that the financial statements are

free of material misstatement. An audit includes examining on a

sample test basis of the 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 the audit

evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

In our opinion, the Project Financial Statements present fairly,

in all material respects, the financial position as at 7 July

2017 and the cash receipts and disbursements for the year then

ended of the Promoting of Basic Services III Project Sub­

Programs A and B and Enhancing Shared Prosperity through

Equitable Service of the Ministry of Finance and Economic

cooperation of the Government of the Federal Democratic Republic

of Ethiopia which were prepared on a modified cash basis and in

accordance with the accounting policy of the Government of the

Federal Democratic Republic of Ethiopia.

Emphasis of matters:

• Budget amounting to Birr 973,220.00 allocated and approved

for the Harari Health Bureau was not used for the intended

purpose rather it was transferred to non- basic service

providing sectors

• Budget allocated to basic service providing sectors in Ambo

Woreda amounting to Birr 732,612.4 was not used for the ···~

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intended purpose as it was transferred to none

service sector.

OFFICE OF Regional Auditor General:

basic

• For Transfer amounting to Birr 1,250,933.16 made to Office of

Auditor General, supporting documents were not made available

for the audit.

Regional Council Office:

• For Transfer amounting to Birr 731,325.00 made to Regional

council Office, supporting documents were not made available

for the audit.

In addition, in our opinion, in all material respects:

• During the year, all external financing has been used

in accordance with the conditions of the relevant financing

agreements and only used for the purposes for which the

financing was provided; Except for the matter disclosed in

the Emphasis of matter paragraph and management letter.

• Counterpart funds have been provided and. used in accordance

with the relevant financing agreements and only for the

purposes for which ttey were provided;

• Goods, works and services financed under the Project have

been procured in accorduncc with the relevant financing

agreements including specific provisions of the World Bank

Procurement policies and procedures;

J?0'.:l I ~;lfjThe necessary supporting documents, records and accounts have

been maintained in respect of all project activities,

including expenditures/transfers reported in Interim

Unaudited Financial Reports (IFRs). In addition, the IFRs

issued, during the audit were in agreement with the underlying

books of accounts. Except for the matter disclosed in the

Emphasis of matter paragraph and management letter.

• Designated Accounts have been maintained in accordance with

the provisions of the relevant financing agreements, and

funds disbursed out of the accounts were used only for the

purpose intended in the financing agreement;

• National laws and regulations have been complied with and

that the financial and accounting procedures approved for the

Project were followed and used; Except for the matter

disclosed in the Emphasis of matter paragraph and management

letter.

• Financial performance of the project was satisfactory; and

• Assets procured from project funds existed and there was

verifiable ownership by the implementing agencies or

beneficiaries in line with the financing agreement. Except

for the matter disclosed in the Emphasis of matter paragraph

and management letter.

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICES III PROJECT SUB PROGRAMS A AND BAND ENHANCING SHARED PROSPORITY THROUGH EQUITABLE SERVICE PROGRAM CONSOLIDATED STATEMENT OF FINANCIAI, POSITION AS AT 7 JULY 2017.

ASSETS

CURRENT ASSETS

Cash balances

Advances

Total current Assets

CURRENT LIABILITIES

Account Payable

NET CURRENT ASSETS

REPRESENTED BY

ACCUMULATED FUND

Notes

3

4

5

NB: Cents have been rounded to Birr.

7 July 2017

Birr

98,856,799.00

21,178,794.00

120,035,592.00

4,455,864.00

115,549,728.00

].15,549,728.00

5

MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICES III PROJECT SUB-PROGRAMS A AND B CONSOLIDATED STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 7, JULY 2017.

Opening Balance

Beginning Balance Adjustment PBS Ill Financing

International Development Association( IDA) 51620

Trust Fund (TF) 13952 From IDA 5716

From Italy Austria Fund Sub Total

Contribution by the Ethiopian

Government (Counterpart fund) Gain on foreign Exchange

Total Financing

PBS Project Expenditure

Sub-Program A Sub-Program B

Total Project Expenditure

Excess of Financing over Expenditure (Accumulated Fund)

6

7

For the year

ended 7 July 2017 Birr

173,450,857.00 370,102.00

216,707,103.00 0.00

2,991,259,609.00 0.00

0.00

3,381,787,672.00

58,741,053,306.30

8,025,631.00

62,130,866,609.30

61,750,458,640.00 264,858,241.00

62,015,316,881.00

115,549,728.30

Note: - Pease note that ETB 12,168,453.74 is included in this budget year due to which incurred as special commitment was not reported as source in the previous year

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA DESIGNATED DOLLAR ACCOUNTS WITH EQUIVALENT BIRR AMOUNT STATEMENT FOR THE ENHANCING SHARED PROSPERITY THROUGHY EQUITABLE SERVICES (ESPES).

For the year ended

Account Number

Depository Bank

Address

Currency

BEGINNING BALANCE

Fund Received From: International Development Association

{IDA)5716 Total

Deducted -Transfer to:­

Government Treasury account­

Bank Service Charge

Total Fund Available

Closing balance Gain on foreign exchange

ENDING BALANCE-7 JULY 2017

Amount in USD

67,858.13

133,022,562.57

133,090,420.70

133,050.000.00

133,050,000.00

40,420.70

40,420.70

7 JULY 2017

010010/1300528

NBE

Addis Ababa, Ethiopia

USD and Birr

Amount in Birr

1,481,397.26

2,991,259,609.40

2,992,741,006.66

2,997,236,880.00

2,997,236,880.00

(4,495,873.34) 5,430,759.67

934,886.33

Note: ETB( 4,495,873.34) was revealed due to Dollar exchange rate made vary during fund

received and fund transferred to Gov. treasury.

NB: The closing exchange rate used for ending balance is 1USD=23.1289

7

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA DESIGNATED DOLLAR ACCOUNTS WITH EQUIVALENT BIRR AMOUNT STATEMENT FOR THE PBS III Sub Program A

For the year ended

Account Number

Depository Bank

Address

Currency

BEGINNING BALANCE

Fund Received From: International Development Association (IDA)

Trust Fund (TF)

ITALY

Austria Fund

Total Fund Available

Deduct-TRANSFER TO Government Treasury Account-Birr Bank Service Charge

Total Transfers

Closing Fund Balance

Gain on foreign exchange

ENDING BALANCE-7 JULY 2017

7 JULY 2017

02615/147000/00

NBE

Addis Ababa, Ethiopia

USD and Birr

Amount in USD Amount in Birr

338,018.00 7,379,195.28

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Q Q

338,018.00 7,379,195.28

0

0

338,018.00

338,018.00

0

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7,379,195.28

438,778.14

7,817,973.42

NB: The closing exchange rate used for ending balance i~ 1U5D=23.1289

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA DESIGNATED DOLLAR ACCOUNTS WITH EQUIVALENT BIRR AMOUNT STATEMENT FOR THE PBS III SUB-PROGRAM B

For the year ended

Account Number

Depository Bank

Address

Currency

BEGINNING BALANCE

Add: Receipt

Fund Received From IDA 51620

Fund Received From -TF 13952

Total Fund Available

DEDUCT-Transfer To: Bl and B2 Birr Account B3 Birr Account

MoFEC Finance

Transfer to CSA

Bank Service Charge

Total Transfers and expenditure

Closing Fund balance

Gain on foreign exchange

ENDING BALANCE-7, JULY 2017

Amount in USD

2,346,774.06

9,140,942.56

Q

11,4871716.62

6,900,000.00 4,200,000.00

52,160.00

11,152,160.00

335,556.62

335,556.62

NB: The closing exchange rate used for er,ding balance is 1USD=23.1289

(335,556.62*23.1289}= 7,761,055.51

7 JULY 2017

02615/148000/00

NBE

Addis Ababa, Ethiopia

USD and Birr

Amount in Birr

51,231,955.15

204,538,649.44

Q

255,770,604.59

154,870,990.00 94,015,350.00

1,151,823.20

250,038.163.20

5,732,441.39

2,028,614.12

7,761,055.51

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA DESIGNATED BIRR ACCOUNTS STATEMENT FOR THE PBS III SUB-PROGRAMS Bl AND B2

For the year ended

Account Number

Depository Bank

Address

Currency

Beginning Balance

ADD: Transfer from Pooled Special Account

Total fund available

TRANSFER TO REGIONAL/ PROGRAM IMPLEMENTING ENTITIES:

Tigray National Regional State

Afar National Regional State

Amhara National Regional State

Oromiya National Regional State

Somali National Regional State

Benshangul-Gumuz National Regional State

Southern Nations, Nationalities and people's Regional State

Gambella Peoples National Regional State

Harari National Regional State

Dire Dawa City Administration

Addis Ababa City Administration

Office of the Federal Auditor General (OFAG)

Ministry of Finance and Economic Cooperation (MoFEC)

Total Transfer

Bank Service Charge

Sub Total

ENDING BALANCE-7, JULY 2017

7, JULY 2017

01601/014311/00

NBE

Addis Ababa, Ethiopia

Birr

9,909,056.45

154,870,990.00

164,780,046.00

7,869,430.94

6,277,319.22

23,785,820.78

22,868,409.43

9,750,311.75

4,976,673.83

26,156,491.84

4,922,149.47

3,516,230.17

4,453,709.75

16,642,756.97

7,910,906.45

19,468,942.38

158,599,152.98

387,177.49

158,986,330.50

5,793,715.98

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA DESIGNATED BIRR ACCOUNTS STATEMENT FOR THE PBS III SUB-PROGRAM B3

For the year ended

Account Number

Depository Bank

Address

Currency

Opening Balance

Add: Transfer from Pooled Special Account

Total fund available for use

Less: Transfer and Expenditure

Transfer to CSA

Transfer to MoFEC

Transfer to MOA

Transfer to MOWIE

Transfer to MOH/EHN RI

Transfer to Regions for B4 Activities

Transfer to Tigray

Transfer to Afar

Transfer to Am hara

Transfer to Oromia

Transfer to Som ale

Transfer to Benshangul

Transfer to SNNPR

Transfer to Gambella

Transfer to Hareri

Transfer to Diredawa

Transfer to Addis Ababa

Total Transfer

Expenditure

Bank Service Charges

Total Transfer & Expenditure

CLOSING BALANCE-7, JULY 2017

34,659,875.00

60,591,451.61

2,918,301.14

0

438,400.00

207,570.00

1,462,570.00

2,675,540.00

1,443,100.00

195,630.00

1,346,920.00

141,660.00

34,140.00

84,090.00

259,570.00

106,458,817.75

235,038.39

71 JULY 2017

0160101431200

NBE

Addis Ababa, Ethiopia

Birr

20,081,924.93

94,015,350.00

114,097,274.93

-·.

106,693,856.14

7,403,418.79

MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICES III PROJECT SUB-PROGRAMS A AND BAND ENHANCING SHARED PROSPORITY THRUOGY EQIUTABLE SERVICE(ESPES) DECLARATION OF NON-PROCUREMENT OF MATERIAL ASSETS FOR THE YEAR ENDED 7, JULY 2017

We hereby declare that there were no material assets acquired or

procured to date with the project funds for the sub-programs that

are valued individually at USD 20,000 or more each and financed by

the project.

12

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRA~IC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICE III PROJECT SUB PROGRAMS A AND BAND ENHANCING SHARED PROSPERITY THROUGH EQUITABLE SERVICES (ESPES) NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 7, JULY 2017

1. BACKGROUND

With the objective of expanding access and improving the

quality of basic services in Education, Health, Agriculture,

Water Supply and Sanitation and Rural Roads delivered by sub­

national governments and strengthening financial transparency

and accountability in service delivery, the Government of

Ethiopia and the World Bank signed the Promoting of Basic

Services (PBS III) Project which commenced in December 11,

2015. PBS III has two sub-programs. These sub programs are

implemented by MoFEC is discussed as under:

SUB-PROGRAM A - It is to contribute to the higher level of

objective of promoting basic service and improving the

quality of Government services at Regional and local

_levels.

ESPES - It is a portion of Sub-program A which focuses on

improving equitable access to basic service and Strength

accountability and institutionalizes critical Systems at

the decentralized level.

SUB-PROGRAM B Support to strengthening the capacity,

transparency, accountability and financial management

Government at Regional and Lo~al authority levels.

of

13

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Project,

which are consistent with those applied in the preceding

period, are stated below:

a) BASIS OF PREPARATION:

i) These Financial Statements have been prepared on a

modified cash basis in accordance with the accounting

policy of the Government of the Federal Democratic

Republic of Ethiopia.

ii) The Project Financial Statements combine transactions of

Sub-Programs A and B of the Promoting of Basic Services

III (PBS III) and (ESPES) Enhancing Shared Prosperity

through Equitable Service for reporting consolidated

transactions of all of these sub-programs.

b) CURRENCY

These financial statements presented in birr. are

Transactions in foreign currency are translated into birr

at the approximate rate of exchange prevailing at the date

of the transaction.

14

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICE (PBS III) PROJECT SUB-PROGRAMS A AND ENHANCING SHARED PROSPERITY THROUGH EQUITABLE SERVICE (ESPES) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 7, July 2017 3. CASH ON HAND AND AT BANK Balance in Pooled Dollar account No 02615/147000/00 Balance in pooled Dollar account No 0100101300528 Balance in Dollar account No. 02615/148000/00 Balance in Birr account No. 0160101431100 Balance in Birr account No. 0160101431200 BALANCE AT BANK MoFEC Balance at Regions B

Cash on hand Cash in transit Cash at bank

TOTAL CASH BALANCE 4.ADVANCES

These are advances for sub-programs B Tigray Afar Amhara Oromia Somali Benshangule-Gumuz SNNPR Gambella Harari Dire Dawa Addis Ababa MoFED OFAG EPHI CSA MOA MOWE TOTAL 5. ACCOUNT PAYABLES

These are payables for sub-programs B Tigray Afar Amhara Oromia Somali Benshangule-Gumuz SNNPR Gambella Harari Dire Dawa Addis Ababa MoFED OFAG EPHI CSA MOA MOWE TOTAL

220,669.27 0.00

68,825,079.30

Birr

14,327.50 343,725.05

2,021,917.31 -121,148.80

552,349.91 6,232,216.86

271,868.63

623,475.97 7,132,807.54 1,139,290.13

71,907.00 1,914,985.20

4,883.00 733,890.86

21.178,793.76

51,664.44 31,607.92

668,053.07 44,296.28

28,974.35 230,308.29 28,200.00 1,591.40 2,678.04

1,421,311.14 1,795,266.19

148,906.57

33,006.33

4. 485,864.02

BAND

Birr 7,817,973,42

934,886.33 7,761,055.51 5,793,715.98 7,403,418.79

29,711,050.02

69,145,748.57 98,856,798.59

Total

14,327.50 343,725.00

2,021,917.00 121,149.00

552,350.00 6,232,217.00

271,869.00

623,476.00 7,132,808.00 1,139,290.00

71,907.00 1.,914,985.00

4,883.00 733,891.00

21,178,794.00

51,664.44 31,607.92

668,053.29 44,296.28

28,974.35 230,308.29 28,200.00 1,591.40 2,678,04

1,421,311.13 1,795,266.19

148,906.57

33,006.33

4.485,864.00

15

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MINISTRY OF FINANCE AND ECONOMIC COOPERATION GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICE (PBS III) PROJECT AND ENHANCING SHARED PROSPORITY EQUITABLE SERVICE SUB-PROGRAM A AND B NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 7, JULY 2017

6. EXPENDITURE OF SUB-PROGRAM A

Education Health (Including HIV/AIDS) Agriculture and Natural Resource Water Supply and Sanitation Rural Road TOTAL

7. EXPENDITURE OF SUB-PROGRAM B Personal Services

Goods and Services

Fixed Assets

TOTAL

35,978,315,720.00

13,709,326,540.00 9,201,701,530.00 2,147,286,750.00

713,828,100.00 61,750,458,640.00

76,804,475.61 175,939,207.01

12,114,558.15 264,858,241.00

16

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GOVERNMENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICE III PROJECT SUBPROGRAMS A AND BAND ESPES ENHANCING SHARED PROSPERITY THROUGH EQUITABLE SREVICE A RECONCILATION OF AMOUNTS "RECEIVED BY THE PROJECT FROM THE DEVELOPMENT PARTNERS (INCLUDING THE WORLD BANK)" WITH THOSE SHOWN AS BEING "DISBURSED BY THE DEVELOPMENT PARTNERS (INCLUDING THE WORLD BANK)"

FOR THE YEAR ENDED 7, JULY 2017

International Development Association (IDA)51620 International Development Association (IDA)51620

USO 9,140,942.56

USO

USO 9,140,942.56 B Advance

USO B Advance 3 International

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Development Association (IDA) 5716

4 International Development Association (IDA) 5716

5 Trust Fund (TF) 13952

Italy Fund

Austrian Fund

Note:

USO 133,023,562.57

USO

USO 0.00

USO 0.00

USO 0.00

USD 133,023,562.57 ESPES Advance

USO ESPES Advance

USO 0.00 A Reimburseme nt

USO 0.00 A Advance

USO 0.00 A Advance

• International Development Association (IDA): Credit Number 51620-ET

• International Development Association (IDA): Credit Number 5716-ET

• Multi Donors Trust Fund (TF): Grant Number 13952

• Italy Fund:

• Austria Development Fund Agency.

MINISTRY OF FINANCE AND ECONOMIC COOPERATION THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA PROMOTING OF BASIC SERVICES PHASE III PROJECT SUB-PROGRAMS A AND B AUDIT FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES ON THE ACCOUNTS FOR THE YEAR ENDED 7 JULY 2017

I. INTRODUCTION

We conducted the audit under the power conferred upon the

Office of the Federal Auditor General by Proclamation Number

982/2016. Our audit followed the audit requirements included

in the Terms of Reference (ToR) for the audit of the

Promoting of Basic Services III (PBS III) Project Sub­

programs A and B for the year ended Sene 30,2009 (7 July

2017) .

This report deals with the findings and recommendations which

came to our attention during our normal audit procedures

which were designed primarily with a view to the expression

of our opinion on the Project Financial Statements ( PFS) of

the Promoting of B2..sic Services III (PBS III) Project Sub

programs A and B and a portion of sub-program A (ESPES)

Enhancing Shared Prosperity through Equitable Service

program. The audit was conducted on a test basis and, thus,

our audit cannot be expected to disclose all possible

weaknesses in internal controls and all other findings which

a more extensive special examination might reveal.

I I . BACKGROUND

The relevant Financing Agreements between the Government of

the Federal Democratic Republic of Ethiopia and the

Financiers for Sub-Programs A and B of the PBS III Projects

and ESPES-program are:

• International Development Association

Agreements IDA51620-ET

(IDA) Financing

18

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• International Development Association

Agreements IDA 5716

(IDA) Financing

• Multi Donors Trust Fund (TF) Financing Agreement TF13952

• ITALY Fund

• Austria Development Fund Agency.

III. SCOPE OF THE AUDIT

a) The audit was conducted in accordance with the International

Standards on Auditing (ISA) issued by the International

Auditing and Assurance Standards Board of the International

Federation of Accountants, with special reference to ISA

800 (Auditor's Report on Special Purpose Audit Engagements)

and relevant World Bank Guidelines. The audit, accordingly,

included such tests of accounting records, transaction,

internal controls, and other procedures as were considered

essential for the performance of this audit.

b) In conducting this audit, we have carried out continuous/

interim and validation audits at various Woredas/Town

Administrations, Zones, Bureaus, Regions and Federal

Implementing Agencies of the Promoting of Basic Services III

Project Sub-Programs A and Band Enhancing Shared Prosperity

through Equitable Service (ESPES) that such review ensured

that the financiul and property managements were reasonably

accurate, reliable and timely.

c) Discussions were held with staffs of the Ministry of Finance

and Economic Cooperation (MoFEC) and the Project

Implementing Agencies at various Government levels.

d) The audit opinion is limited to the funds received from the

Financiers and the Government and of the expenditures

incurred for the Sub-Programs A and .B of the Promoting of

19