The Federal Democratic Republic of EthiopiaAudit Services Corporation

INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFTHE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P151712

We have audited the accompanying financial statements of Urban Productive Safety NetProject- P151712 of the Federal Democratic Republic of Ethiopia, Ministry of Finance andEconomic Cooperation financed by IDA Credit Nos. 57560-ET and PPA Q9780-ET, whichcomprise the balance sheet as at 7 July 2016, and the statement of sources and uses of fundsand a Designated Account statement for the period ended 12 January 2016 to 7 July 2016 anda summary of significant accounting policies and other explanatory information.

Responsibility for the Financial Statements

The Ministry of Finance and Economic Cooperation is responsible for the preparation and fairpresentation of these financial statements in accordance with the Ethiopian Government'sManual of the Federal Accounting System based on a modified cash basis of accountingdescribed in note 2 to the financial statements and for such internal control as it determines isnecessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders intemal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinio

251-011-5515222 Fax 251-011-5513083 E-mail: ASC@ethionetcom 7 5720251-011-5535012251-011-5535015251-011-5535016

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INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFTHE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P1 51712 (continued)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the

Urban Productive. Safety Net Project of the Federal Democratic Republic of Ethiopia, Ministry of

Finance and Economic Cooperation, financed under IDA Credit Nos.57560-ET and PPA Q9780-

ET as at 7 July 2016 and its sources and uses of funds for the period from 12 January 2016 to 7

July 2016 in accordance with the Ethiopian Government's Manual of the Federal Accounting

System based on a modified cash basis of accounting described in note 2 to the financial

statements.

Reports on other requirements

As required by the terms of reference and World Bank guidelines we must report, in addition to

our opinion, that

- during the period all external financing has been used in accordance with the

conditions of the relevant financing agreements, with due attention to economy and

efficiency, and only for the purposes for which the financing was provided;

- goods, works and services financed have been provided in accordance with the

relevant financing agreement and disbursement letters;

- all necessary supporting documents, records and accounts have been maintained in

respect of all Project activities;

- Designated Account has been maintained in accordance with the provisions of the

financing agreement and funds disbursed out of the Account were used only for the

purposes intended in the financing agreements;

- National laws and regulations have been complied with and that the financing and

accounting procedures approved for the Project;

- financial performance of the Project is satisfactory;

- non-expendable equipments procured from Project funds exist and there is a verifiable

ownership by the Project implementing beneficiaries in line with the financing

agreement;and

- our examination reveals no major weaknesses or irregularities in the system of internal

control over financial expenditures other than the mentioned in the management letter.

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INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFTHE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P151712

Furthermore, with respect to the statements of expenditures submitted during the year andlisted on page 10, in our opinion,

i) the statement, together with the procedures and internal controls involved in itspreparation, can be relied upon to support the relevant withdrawals;

ii) adequate supporting documentation has been maintained to support claims toIDA for reimbursements of expenditures incurred; and

iii) which expenditures are eligible for financing under IDA Credit Nos. 57560-ETandPPA Q9780-ET.

30 December 2016

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P151712BALANCE SHEETAS AT 7 JULY2016

Notes Ethiopian BirrASSETS

CURRENT ASSETS

Cash at banks 2b,3 64,411,545

Advances 379,931

64,791,476CURRENT LIABILITIES

Accounts payable 4 8,418596

NET CURRENT ASSETS

REPRESENTED BY

ACCUMULATED FUND

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT - P151712STATEMENT OF SOURCES AND USES OF FUNDSFOR THE PERIOD FROM 12 JANUARY 2016 TO 7 JULY 2016

Period ended7 July 2016

Ethiopian Birr

FINANCING

Credit from IDA 57560-ET,PPA-Q9780-ET 71,251,444

Gain on foreign exchange 1.982313

TOTAL FINANCING 73,233,757

PROJECT EXPENDITURES

Capacity building 16,799,089

Federal Management 61.788

TOTAL EXPENDITURES 16,860,877

EXCESS OF FINANCING OVEREXPENDITURES

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT - P151712DESIGNATED ACCOUNT STATEMENT

For period ended 7 July 2016Account number 0100101300506Depository bank National Bank of EthiopiaAddress Addis Ababa, EthiopiaRelated Credit IDA Credit 57560-ET,PPA Q9780-ETCurrency USD

Initial Deposit 3,367,000

Deduct;Transfer to pool Birr account (419,387)

Ending balance - 7 July 2016 2.947.813

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT - P151712DESIGNATED ACCOUNT STATEMENT

Foryearended 7 July 2016Account number 0100101040674Depository bank National Bank of EthiopiaAddress Addis Ababa, EthiopiaRelated loan IDA PPA Q9780-ETCurrency ETB

Transfer from IDA-Q9780-ET 8,885,007

Deduct;Transfer to FEMSEDA (8,844,737)Bank service charge (22.212)

(8,866,949)Ending balance -7 July 2016 1

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P151712NOTES TO THE FINANCIAL STATEMENTS7 JULY 2016

1. BACKGROUND

The Project was established to support the Recipient to improve income of the targetedpoor households and establish urban safety net mechanisms. These financialstatements reflect the receipts and disbursements of credit given by InternationalDevelopment Association (IDA) Credit Nos.57560-et and PPA Q9780-ET., to finance

safety net activities, including public works program sub-projects and support to labor-

poor households, and institutional support. This Project will phase out in July 2021.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Project, are stated below.

a) Basis of preparation

These financial statements have been prepared in accordance with theGovernment's accounting system outlined in the Manual of the FederalAccounting System based on a modified cash basis of accounting.

b) Currency

These financial statements are presented in Birr. Transactions in foreigncurrency are translated into Birr at the approximate rate of exchange prevailing atthe date of the transaction. Assets and liabilities denominated in foreigncurrencies are translated into Birr at the exchange rate ruling at the date of the

balance sheet.

c) Recognition of financial assets and financial liabilities

The Project recognizes a financial asset or a financial liability on its balancesheet when, and only when, it becomes a party to the contractual provisions of

the instrument. A financial asset is derecognized when, and only when, thecontrol over the contractual rights is lost. A financial liability is derecognized

when, and only when, it is extinguished.

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC COOPERATIONURBAN PRODUCTIVE SAFETY NET PROJECT- P151712NOTES TO THE FINANCIAL STATEMENTS (continued)7 JULY 2016

3. CASH AT BANKS

MINISTRY OF FINANCE AND ECONOMIC COOPERATION (MoFEC)

Amount in Exchange EquivalentForeign Rate Balance in

Currency Buying BirrDesignated Accounts

IDA CREDIT Nos. 57560-ET PPA Q9780- ET USD 2,947,613.00 21.8308 64,348,750

Balance in Pool Birr accountNumber 0100101040669 18,058

Balance at Federal Job Creation and FoodSecurity Agency 44,737

64,411,545

4. ACCOUNTS PAYABLE

Ethiopian Birr

Payable to ULGDP 7,855,621Payroll tax 4,050Withholding tax 60,885VAT 459,720

5. DATE OF AUTHORIZATION

The Channel I Project Coordinating Unit Head of the Federal Democratic Republic ofEthiopia, Ministry of Finance and Economic Cooperation authorized the issue of thesefinancial statements 30 December 2016.

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THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIAMINISTRY OF FINANCE AND ECONOMIC DEVELOPMENTURBAN PRODUCTIVE SAFETY NET PROJECT- P1 51712IFR WITHDRAWAL SCHEDULE

for applications submitted during the period from 12 January 2016 to 7 July 2016

Application Co-financiers Amount AmountApliaton Cofianles requested disbursed EquivalentsNo. Reference No. usd usd BirrUSD USD

01 IDA-PPA Q9780-ET 3,367,000 71,2514

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