IR E 71f-ED REPORT AND ACCOUNT 07 JULY 2015

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1 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT Public Disclosure Authorized AGENCY - WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET Public Disclosure Authorized REPORT AND ACCOUNT 07 JULY 2015 Public Disclosure Authorized Public Disclosure Authorized MENBERE LEUL & CO. Tel: /39 Chartered Certified Accountants (UK) Mobile: Fax P. 0. Box 297 Code menbereleulfvahoo.com Addis Ababa, Ethiopia IR E 71f-ED

2 MENBERE LEUL &. CO. CHARTERED CERTIFIED ACCOUNTANT (UK) AUDITORS' REPORT TO THE MANAGEMENT OF FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY - WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET We have audited the accompanying financial statements of Federal Micro and Small Enterprise Development Agency - Women Entrepreneurship Development Project Grant Number IDA Credit No.5112 ET which comprises the balance sheet as at 07 July 2015, and the statement of sources and uses of fund, and a summary of significant accounting policies and other explanatory notes for the year then ended. Managements' Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors'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. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity'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 entity's internal control. An audit also includes evaluating the appropriateness of accounting Tel /39 Fax menbereleulvahoo. com P.O.Box 297 code 1250 Mobile Addis Ababa, Ethiopia

3 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of 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 financial statement gives a true and fair view of the financial position of Federal Micro and Small Enterprise Development Agency - Women Entrepreneurship Development Project Grant Number IDA Credit No.5112 ET, as at 07 July 2015, and its financial performance for the year then ended in accordance with in accordance with International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs). In addition, with respect to the statement of expenditure submitted during the year ended 7 July 2015, in our opinion a. the statements, together with the procedures and internal controls involved in their preparation, can be relied up on to support the relevant withdrawals, b. adequate supporting documentation has been maintained to support claims to IDA for reimbursement of expenditures incurred: and c. Which expenditures are eligible for financing under IDA Credit No.5112 ET. Addis Ababa MENE L 31 December 2015 Chartere rfiyaccountants And A q0 rized uditors 2

4 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET BALANCE SHEET 7 JULY 2015 Notes Currency: Ethiopian Birr CURRENT ASSETS 2014 Recivable 3 1,018, , Cash at Bank 3,584, , ,602, ,571, CURRENT LIABILITIES Creditors and accruals 4 3,894, , NET CURRENT ASSETS 708, ,509, REPRESENTED BY Fund balance 5 708, ,509,

5 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET STATEMENT OF SOURCE AND USES OF FUNDS FOR THE YEAR ENDED 7 JULY 2015 Currency: Ethiopian Birr Notes SOURCES IDA CREDIT 2014 SOE procedures B 19,874, , 9 4 1, Gain on exchange rate 41, , TRUST FUND 5,896, USES 25,812, ,956, Entrepreneurial Skills, Technology and Cluster Development 7 22,612, ,130, Project Management, Advocacy and Outreach, Moinitoring and Evaluation, and Impact Evaluation 8 4,000, ,911, EXCESS OF SOURCES OVER USES (801,363.10) (2,084,744.92) 4

6 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 7 JULY ESTABLISHMENT Currency: Ethiopian Birr A financing agreement was signed on 12 June 2012 between the Federal Democratic Republic of Ethiopia and the International Development Association (IDA) according to which SDR 32,200,000 (Thirty-two million two hundred thousand) is available in the form of credit to implement the activities of the Women Entrepreneurship Development project, under Credit Agreement No ET. The project is implemented through Ministry of Urban Development and construction (MoUD &C) National project Management Team(NPMT) is established with in the Federal Micro and Small Enterprise Development Agency(FeMSEDA) under the MoUD & C. MoUD &C,FeMSEDA, NPMT, Development Bank of Ethiopia(DBE) and other sub-national administration selected for the execution of the project are implementing project activities. The objective of the project is to increase the eaming and employment of Micro and small enterprises(mses) fully or partly owned by female entrepreneurs in the targeted cities. 2. ACCOUNTING POLICIES The principal accounting policies adopted by the project, are as stated bellow: a. Basis of preparation These financial statements have been prepared in compliance with International Financial Reporting Standards for SMES. b. Currency Transactions in foreign currency are converted to Birr at the exchange rate ruling at the date of the transactions. Cash balances maintained in foreign currency is converted to Birr at the exchange rate ruling at the date of the balance sheet date. c. Basis of accounting Modified cash basis of accounting is used in recognition of source and qses Of fun>d d. Fixed assets Fixed assets are treated as project expenditure at the time of purchase yithut applying the rule of depreciation. 5

7 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 7 JULY 2015 Currency: Ethiopian Birr 3. ADVANCE TO REGIONS 2014 Advance to Addis Ababa CoMSEDA 708, ,034,40 Advance to Mekelle CoFED 117, Advance to Adama CoFED 100, , Advance to Dire Dawa CoMSEDA 68, Advance to Bahir Dar CoFED 15, , Advance to Hawassa CoFED 7, , ,018, , CREDITORS AND ACCRUALS Income tax 71, , Sundry creditors - 10, Value added tax 1,291, , Withholding tax 2,531, ,894, , FUND BALANCE Opening balance 1,509, , Add: Current year transfer (801,363.10) (2, ) 708, ,509,

8 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET NOTES TO THE ACCOUNTS FOR THE YEAR ENDED7 JULY 2015 Currency: Ethiopian Birr 6. SOE PROCEDURE 2014 Withdrawal application 16,022, ,460, Direct payment by world bank 3,851, ,481, ,874, ,941, ENTREPRENEURIAL SKILLS,TECHNOLOGY AND CLUSTER DEVELOPMENT Contractual Professional Service 16,019, Training 1,815, , Stationary and office supplies 1,544, , Salary and related benefits 830, , Purchase of equipment and furniture's 634, ,553, Fuel and lubricant 611, , Repair and maintenance 347, ,616, Perdiem 200, , Communication 175, Rent 139, , Publication 67, , Transportation 67, , Insurance 46, Entertainment 46, , Service charge 44, ,676,27 Loading and Unloading 14, Advertising 8, ,29895 Purchase of motor cycles and spare parts - 4,548, ,612, ,130,

9 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 7 JULY 2015 Currency: Ethiopian Birr 8. PROJECT MANAGEMENT,ADVOCACY AND OUTREACH,MOINITORING AND EVALUATION, AND IMPACT EVALUATION 2014 Salaries and related benefits 1,276, , Contracted professional services 772, , Publication 432, , Travel and perdiem 346, ,553,60 Fuel and lubricants 198, , Repair and maintenance 188, Stationary and office supplies 184, , Communication 140, , Training 103, Transportation 100, , Advertising 88, , Service charge 43, , Purchase of plant, machinery and office equipment 34, ,561,71 Insurance 31, , Rent 30, , Purchase of motor vehicle 19, ,88253 Entertainment 9, , Miscellaneous ,000, ,911,399.25

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11 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY - WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET INTERNAL CONTROL MEMORANDUM 07 JULY 2015 MENBERE LEUL & CO. Tel: /39 Chartered Certified Accountants (UK) Mobile: Fax P. 0. Box 297 Code menbereleul@vahoo.com Addis Ababa, Ethiopia

12 MENBERE LEUL & CO. CHARTERED CERTIFIED ACCOUNTANT (UK) 31 December 2015 Federal Micro and Small Enterprise Development Agency Women Entrepreneurship Development Project Number Ida Credit No.5112 ET Addis Ababa Dear Sirs, Accounts, 07 July 2015 During our audit for the year ended 07 July 2015, we have examined certain aspects of your Project's system of internal control and attach here to a memorandum containing recommendations on possible ways in which the system could be improved to overcome weaknesses in internal control which came to our notice during our examination, together with other comments and observations. It must be appreciated that the matters referred to this memorandum came to our notice during the conduct of our normal audit procedures which are designed primarily with a view to the expression of our opinion on the accounts of the Project. Therefore, our comments cannot be expected to include all possible improvements in internal control and to disclose all defalcations and other irregularities which a more extensive special examination might develop and reveal. We are frequently in a position to offer constructive suggestions for improvements in accounting and control procedures but our work in these areas is not designed for the purpose of expressing an opinion on the effectiveness of the various control systems and, accordingly, will not extend into all areas in which improvements may be warranted. Additionally, in as much as our examinations do not include a 100% detailed audit of transactions, they would not necessarily disclose defalcations or irregularities should any exit. We have discussed the contents of the memorandum with management. We are grateful to allmeibisofthe project for the courtesy and assistance rendered to our representatives during the conduct o our audit. Yours faithft iy, Mecee Leul and Co. Chartered Certified Accountants (UK) LTeT /J9 dr t03-88 f'a7.bxdaa.m d6.f=297 CA ldd& 0 4ha fabil& fthpl

13 1. Under-utilization of planned activities The following activities which are included in the action plan under the following budget headings have been underutilized during the year. COMPONENT BUDGET ACTUAL VARIANCE Program Management 7,393, ,000, ,392, Capacity Building 45,991, ,612, ,378, Effect Delay in execution of planned activities not only affects timely delivery of the planned outcome but also affects the project budget because of rising costs. Recommendation We recommend management to follow timely implementation of planned activity. Management response This is due to the dalliance: - of TEVT Training consultancy to perform as per the schedule, Procurement of OSS's & TVET Colleges office equipment and furniture, Addis Ababa City MSE's office maintenance and Transtec's TOT dalliance delays the utilization of its budget and the whole training activities. Therefore we have accepted the auditor's recommendation. 2

14 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY - WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET DESIGNATED ACCOUNTS 07 JULY 2015 MENBERE LEUL & CO. Tel: /39 Chartered Certified Accountants (UK) Mobile: Fax P. O. Box 297 Code menbereleuvahoo.com Addis Ababa, Ethiopia

15 MENBERE LEUL & CO. CHARTERED CERTIFIED ACCOUNTANT (UK) AUDITORS' REPORT TO THE MANAGEMENT OF FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY - WOMEN ENTERPENERSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET We have audited the accompanying special accounts of Federal Micro and Small Enterprise Development Agency - Women Entrepreneurship Development Project Grant Number IDA Credit No.5112 ET for the year ended 7 July Managements' Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' 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. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity'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 entity's internal control. An audit also includes evaluating the appropriateness of accounting el /J9 dax "88 f-mad manaeeal@ydo.com d'.o8ox 297 pda 1250 fdde Lbaba, dload

16 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of 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 special accounts give a true and fair view of the financial position of Federal Micro and Small Enterprise Development Agency - Women Entrepreneurship Development Project Grant Number IDA Credit No.5112 ET as at 7 July 2015 and the movement for the year then ended in accordance with International Financial Reporting Standards for Small and Medium Sized Entities (IFRS for SMEs). Addis Ababa MENBERE LEUL> C0, 31 December 2015 Charteiqgqified Accountants A hautharited Aiditors 2

17 FEDERAL MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY WOMEN ENTREPRENEURSHIP DEVELOPMENT PROJECT GRANT NUMBER IDA CREDIT NO.5112 ET STATEMENT OF DESIGNATED ACCOUNT FOR THE YEAR ENDED 7 JULY 2015 For the year ended 7 JULY 2015 Account number /013941/00 Depository bank Address: Related grant Currency National Bank of Ethiopia Addis Ababa, Ethiopia IDA Credit 5112-ET USD Balances as at 08 July 2014 Add;-World bank replenishment 795, Amount transferred from world bank during the period - Other deposit - Less: Expenditure during the period - Transferred to Birr account 795, Balance as at 7 July , , ,