I I 3 AUDITORS' REPORT TO THE FINANCIAL STATEMENTS OF I AS AT AND FOR PERIOD ENDED 7 JULY I.TAY & Co. 3 TAY TAY

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1 Public Disclosure Authorized 3 TAY TAY 3 AUDTORS' REPORT TO THE FNANCAL STATEMENTS OF Public Disclosure Authorized Public Disclosure Authorized MNSTRY OF AGRCULTURE AND NATURAL RESOURCES-AGRCULTURAL GROWTH PROGRAM AS AT AND FOR PEROD ENDED 7 JULY 2016 Public Disclosure Authorized,.TAY & Co. ~ Chartered Certified Accountants & Authorized Auditors Addis Ababa, Ethiopia Tel Fax taycon_lethionet.et P.O.Box 1335 Addis Ababa, Ethiopia Ethio-china Friendship Street Wongelawit Tadesse Building 1st Floor Website:

2 TAY&Co. TAAYCe NDEPENDENT AUDTOR'S REPORT ON THE FNANCAL STATEMENTS OF MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM We have audited the accompanying financial statements of Ministry of Agriculture and Natural Resources-Agricultural Growth Program DA Credit 5605-ET, and AECD Grant for the period ended 7 July Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Generally Accepted Accounting Principles, and for such internal control as management determines is necessary to enable the preparation of 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 financial statements based on our audit. We conducted our audit in accordance with nternational 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 financial statements are 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 auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. n making those risk assessment, the auditors 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 purposes of expressing an opinion on the effectiveness of the entity'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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Opinion n our opinion, the financial statements give a true and fair view of the financial Ministry of Agriculture and Natural Resource- Agricultural Growth Project DA Credit 5605-ET and AECD Grant as at 7 July 2016 and of its sources and uses of funds for the period then ended in accordance with Generally Accepted Accounting Principles and are in agreement with the records maintained by the program. n addition, with respect to the nterim Financial Reports submitted during the period ended 7 July 2016, in our opinion, The ith the procedures and internal controls involved in their preparation, can be u s the relevant withdrawals; and - ex nditures a e ig le for financing under DA Credit 5605-ET and AECD Grant. TAY& o. Charter r ifiec ccou d Addis Ababa Authoriz -lilnary 02, Aj Ahinn Friend%hin Street Wencelawit Tadesse Buildina 1 st Floor

3 MNSTRY OF AGRCULTURE AND NATURAL RESOURCE AGRCULTURAL GROWTH PROGRAM BALANCESHEET AS AT 07 JULY 2016 Debtors and prepayernents 4 65,664, CURRENT ASSETS Notes Birr Cash on hand and at bank 5 270,567, ,231, TOTAL ASSETS 336,231, REPRESENTED BY: FUND BALANCE 6 336,231, W

4 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PEROD ENDED 7 JULY 2016 SOURCES Notes DA Credit 35,324, Grant received 357,773, OTHER NCOME Gain on forex currency USES Agricultural Public Support Services 7 2,940, Agricultural Research 8 19,378, Small-Scale rrigation Schemes 9 812, Birr 393,097, ,249, ,347, Project Management, Capacity Building and Monitoring And Evaluation 10 38,984, ,115, EXCESS OF SOURCES OVER USES 4/~ ~sed C. 336,231, C.Box1335 Adds Ababa

5 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM NOTES TO THE ACCOUNT FOR THE PEROD ENDED 7 JULY BACKGROUND OF THE PROGRAM 1.1 AGP DA Credit Financing agreement was signed on 07 May 2015 between the Federal Democratic Republic of Ethiopia (FDRE) and the nternational Development Association (DA) according to which a special drawing right (SDR) 248,300,000 USD is available in the form of credit was extended to the FDRE to implement the Second Agricultural Growth Program. The first fund transfer for the program was received on 04 February The credit will be repaid on each September 15 and March 15, commencing September 15, 2021, to and including March 15, AGP AECD Grant The grant agreement was signed betweenthe Presidency of the Spanish Agency for nternational Development Cooperation (AECD) and the Federal Democratic Republic of Ethiopia (FDRE), for total grant amount of 1,500,000 Euros, with the aim of financing in Ethiopia, the Agricultural Growth Program. The first fund transfer for the program was received on 09 February The Ministry of Agriculture and Natural resources is responsible to ensure that required program activities are implemented appropriately by coordinating various federal institutions and regions that are selected to implement the Program. These include various zones and weredas of Tigray Region, Oromia Region, Amhara Region, Southern Nations Nationalities and People (SNNP), Gambella Region, Benishangul Gumuz Region, Harari Region, and Dire Dewa City Administration. n addition of the Ministry of Agriculture and Natural Resources, two federal institutions were also involved in the implementation- Ministry of Livestock and Fisheries and Ethiopian nstitute of Agricultural Research EAR. 4

6 2. OBJECTVE OF THE PROGRAM General Objective of the Program The objective of the Program is to increase agricultural productivity andcommercialization of smallholder farmers targeted by the program. Specific Objectives of the Program The specific objectives of the Program are to support and improve: 1) Agricultural Public Support Services 2) Agricultural Research 3) Small-Scale rrigation Schemes 4) Agriculture Marketing and Value ChainsSchemes 5) Program Management, Capacity Building and Monitoring and Evaluation 3. Accounting Policies The principal accounting policies adopted by the Program are set out below. Basis of Accounting Modified cash basis of accounting is used in the recognition of sources and uses of fund. Expenditures of Capital nature Expenditures of capital nature are directly charged to program expense upon purchase. Stocks Stocks are expensed when they are purchased or aided by donors. Foreign currency Translation Cash receipts and payments arising from transactions in a foreign currency are recorded in the financial statements using the actual rate of exchange prevailing on the date of the transaction. Cash balances maintained in the foreign currency is converted to Birr at the exchange rate prevailing at the balance sheet date which islusd: Birr. Currency The reporting currency for the Program FinancialStatements is Ethiopian Birr. W A A 5N

7 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM NOTES TO THE ACCOUNT FOR THE PEROD ENDED 7 JULY DEBTORS AND PREPAYEMENTS Birr Project advance(note 4.1) 65,496, Staff debtors 167, ,664, PROJECT ADVANCE Oromia Region 23,685, Amhara Region 13,855, SNNPR AGP 3,961, Tigray Region 3,563, Gambella Region 3, Benishangul Gumuz Region 525, Harari Region (14,180.85) Dire Dewa C.A 23, Ministry of Livestock 1,271, EAR 18,621, ,496, CASH ON HAND AND AT BANK Cash on Hand 20, Cash at bank Special bank account (Note 5.1) 250,131, Birr bank account 20,415, ,546, ,567, SPECAL BANK ACCOUNT DA 213,642, AECD 36,489, ,131,257.92;- 6. FUND BALANCE Fund Balance incorporates both realized and unrealized gain on exchange rates. Opening balance Excess of sources over uses 336,231, ,231, B i r r -4 t h o d

8 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM NOTES TO THE ACCOUNT FOR THE PEROD ENDED 7 JULY Component 1: Agricultural Public Support Services Benishangul Amhara Oromia SNNP Gumuz Total Perdiem and transportation 152, , , , Repair and Maintenance Plant and Machinery Training and workshop 1,380, , , ,169, Advertisement Stationery and other supplies , , , Telephone, fax and postage Livestock - - Fuel and lubricants 2, , , , Fees and charges - - Freight - 11, , Entertainment - 32, , Rent Miscellaneous Total 1,535, , ,066, , ,940,1, 7~ 7

9 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM NOTES TO THE ACCOUNT FOR THE PEROD ENDED 7 JULY Component 2: Agricultural Research Birr Salary and related benefits 3,156, Perdiem and transportation 4,119, Repair and Maintenance 947, Plant and Machiner 2,142, Training and workshop 5,942, Advertisement 2, Stationery and other supplies 952, Telephone, fax and postage 16, Veternary 8, Fertilizer 477, Fuel and lubricants 814, Consultancy 22, Fees and charges 27, Freight 12, Entertainment 13, Research 722, Total 19,378, Component 3: Small-Scale rrigation Schemes Amhara Region Birr Perdiem and transportation 759, Stationery and other supplies 23, Fuel & Lubricant 28, , 'jh %ze35

10 STRY OF AGRCULTURE AND NATURAL RESOURCES 1CULTURAL GROWTH PROGRAM 'ES TO THE ACCOUNT, THE PEROD ENDED 7 JULY 2016 imponent 5: Project Management, Capacity Building and Monitoring and Evaluation Benishangul Ministry of Head Tigray Amhara Oromia SNNP Gumuz Gambella Harari Dire Dewa Livestock Ouarter Total ary and related benefits 207, , , , , , ,242, diem and transportation 483, ,022, ,867, ,277, , , , , , , ,708, pair and Maintenance 42, , , nt and Machinery ,176, , , , , lining and workshop 1,007, ,454, ,678, ,395, , , , , ,922, ,953, vertisement , , tionery and other supplies - 26, , , , , ,143, ephone, fax and postage , ,510.00,estock , , :1 and lubricants 42, , , , , , , , :s and charges , , , :ight , , Lertainment , , , at , , scellancous , , ,784, ,942, ,688, ,445, ,527, , , , ,994, , ,984,

11 ANNEX 1 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM RECONCLATON OF DSBURSEMENT WTH RECEPTS FOR THE PEROD ENDED 7 JULY 2016 Received by the Disbursed by Received by the Prgram World Bank AECD Program in Birr in USD in USD in USD in USD DA CREDT 16,786, ,786, ,773, AECD 1,668, ,668, ,324, Total 18,454, ,786, ,668, ,097,803.61

12 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM NDVDUAL APPLCATON FOR THE PEROD ENDED 7 JULY 2016 We have verifed the following withdrawal applications for the six months peiod ended 7 July 2016 and the applications are in agreeement with the grant received. ANNEX 2 Application No. Amount in USD MOANR-AGP ,091, MOANR-AGP ,694, Total 16,786, q#ote

13 ANNEX3 MNSTRY OF AGRCULTURE AND NATURAL RESOURCES AGRCULTURAL GROWTH PROGRAM LST OF VSTED MPLEMENTNG AGENCES, REGONS AND WEREDAS FOR THE PEROD ENDED 7 JULY 2016 n addition to the federal institutions, we also visited, on a sample basis, selected weredas in most of the regions which participated in the program during the period under audit. Below is the list of visited federal agencies, regions and weredas: Region/Agency Bureaus Wereda Contact person Oromia Region Regional AGP CU Solomon Demelew Amahara Region Regional AGP CU Enarj Enawgam Adamu Maru Yilmana Densa Tigray Region Regional AGP CU Tatay Koraro Askalu Gumer Geto SNNP Region Regional AGP CU Habtamu Arbegona Melega Hararri Region Bureau of Agriculture Samrawit Ministry of Agriculture and Natural Resources Ethiopian nstitute of Agricultural Research Woinshet Teshome Ministry Livestock and Fisheries Simret ecer 4

14 1 j TAY TAY AUDTORS' REPORT ON THE DESGNATED ACCOUNTS OF MNSTRY OF AGRCULTURE AND NATURAL RESOURCE (MoANR)- AGRCULTURAL GROWTH PROGRAMME- AS AT AND FOR THE YEAR ENDED 7 JULY 2016 TAY & Co. Chartered Certified Accountants & Authorized Auditors Addis Ababa, Ethiopia Tel Fax tayco(a)ethionet.et P.O.Box 1335 Addis Ababa, Ethiopia Ethio-china Friendship Street Wongelawit Tadesse Building st Floor Website:

15 TAY & Co. NDEPENDENT AUDTOR'S REPORT ON THE DESGNATED ACCOUNT OF MNSTRY OF AGRCULTURE AND NATURAL RESOURCE- AGRCULTURAL GROWTH PROGRAMME We have audited the accompanying designated account ofministry of Agriculture and Natural Resource (MoANR)-Agricultural Growth Programme DA Credit ET,DA Grant H6000ET,MDTF Grant TF No 99729,AECD Grant 1811/1 1,GAFSP Grant TFO1 1306, and talian Development Cooperation for the year ended 7 July, Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of designated accounts in accordance with Generally Accepted Accounting Principles, and for such internal control as management determines is necessary to enable the preparation of 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 designated accounts based on our audit. We conducted our audit in accordance with nternational 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 financial statements are 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 auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. n making those risk assessment, the auditors 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 purposes of expressing an opinion on the effectiveness of the entity'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 financial statements. 1 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. 1 Opinion n our opinion, the financial statements thereof present fairly, in all material respects, the financial position of the designated accounts of Ministry of Agriculture and Natural Resource-Agricultural Growth Programme DA Credit ET,DA grant H6000ET,MdTF Grant 99729,AECD Grant 1811/11,GAFSP 06 and talian Development Cooperation as at 7July, 2016 and the movements in ountssfo year then ended in accordance with Generally Accepted Accounting Principles a gre the records maintained by the project. e TAY&Co Chartered 8i d Acch an and Addis Ababa Authorized t January 02, 2017 n-hinn b FriAndshin Street Wenaelawit Tadesse Buildina 1 st Floor

16 MNSTRY OF AGRCULTURE AND NATURAL RESOURCE- AGRCULTURE GROWTH PROGRAMME STATEMENT OF DESGNATED ACCOUNT FOR THE YEAR ENDED 7 July 2016 Account Number 02615/013817/00 Depository bank National Bank of Ethiopia Related Credit and Grant DA Credit (47830-ET) and DA Grant (H600-ET) Address: Addis Ababa, Ethiopia Currency USD nitial Balance 12,169, ,987, Add:- Transferred from World Bank Credit 8,900, ,647, Refund from different payements 26, ,926, , Less:- Transfer to pool birr account 7,980, Transfer To ATA 1,500, Expenditure During the year 3,006, ,095, ,649, ,486, ,480, Ending Balance 8,609, ,169,

17 MNSTRY OF AGRCULTURE AND NATURAL RESOURCE- AGRCULTURE GROWTH PROGRAM STATEMENT OF DESGNATED ACCOUNT FOR THE YEAR ENDED 7 July 2016 Account Number 02615/013818/00 Depository bank National Bank of Ethiopia Related Grant MDTF No Address: Addis Ababa, Ethiopia Currency USD nitial Balance 998, ,141, Add:- Transferred from World Bank Credit 22,500, ,257, ,498, ,398, Less:- Transfer to pool birr account 21,943, Transfer To ATA 1,500, Expenditure During the year 54, ,498, ,400, Ending Balance - 998, b '0 3

18 MNSTRY OF AGRCULTURE AND NATURAL RESOURCE- AGRCULTURE GROWTH PROGRAM STATEMENT OF DESGNATED ACCOUNT FOR THE YEAR ENDED 7 July 2016 Account Number 02615/ /00 Depository bank National Bank of Ethiopia Related Grant GAFSP TF Address: Addis Ababa, Ethiopia Currency USD 2015 nitial Balance 3,501, ,901, Add:- Transferred from World Bank - 15,000, ,501, ,901, Less:- Transfer to pool birr account 1, Transfer To ATA 3,500, Expenditure During the year ,501, ,400, Ending Balance - 3,501, ,- 0)/ 0' e l 4-

19 MNSTRY OF AGRCULTURE AND NATURAL RESOURCE- AGRCULTURE GROWTH PROGRAM STATEMENT OF DESGNATED ACCOUNT FOR THE YEAR ENDED 7 JULY 2016 Account Number Depository bank National Bank of Ethiopia Related Grant talian Development co-operative Address: Addis Ababa, Ethiopia Currency USD nitial Balance 89, Add:- Fund received - 7,089, , ,089, Less:- Transfer to pool birr account 89, ,000, Bank service charge , ,000, Ending Balance - 89,