Sub:-Submitting Audit Report for TRANSIP project No.P & IDA 5816-ET from July July

Transcription

1 Public Disclosure Authorized,,.fl J, ; ~.~. t ry :1,f<-,,,,,i. <,/..-..,,,.,,.. r - f.. "" l l A cld/.s.a.ba.ba Cftv.,.Roads Autho.1ty Public Disclosure Authorized /7 The World Bank Addis Ababa Sub:-Submitting Audit Report for TRANSP project No.P & DA 5816-ET from July July Enclosed herewith please find audit report received from our auditor AW Thomas for TRANSP project for the period covering from July 26, 2016-July 7, This audit report comprises statement of financial position, Statement of sources and uses of fund, Statement of designated accounts, independent auditor's report on internal control and Report on compliance with financing agreements. Public Disclosure Authorized Thank you in advance for the usual support given to our project. Public Disclosure Authorized cc Addis Ababa City Road and Transport Bureau Project mplementation Unit Addis Ababa General Director Financial Management Directorate World Bank Finance Unit AACRA ~::;igi;= '*'.,._m; l8i.",,{~)..'i11t'.'1"c 9206 :-i.c:dis,,.a,babp. 1 4,.;11~.=a1( 251- ; :J ff :251~ s1-n-312 s& ss 2S i -,r ' ?.5 '"J ~7.'2 S 1 36

2 A.W. Thomas L. P. \ Chartered Certified Accountants S (Authorized Auditors - f',f-tf..,,j!,j:fm- },,1,f-C'f~ l i 20 December 2017 Ref No 0020/17 Eng. Hagtamu Tegegne General Director Addis Ababa City Road Authority (AACRA) Dear Eng. Habtamu, n accordance with the agreement signed between us and AACRA dated 26 December 2016 under agreement reference on ET-AARTB-405-CS-LCS. We have performed the audit and issue 7 copies of the audit report to AACRA on 20 December Thus, as we have already completed our obligation as per the agreement, we now request payment for our services as per the attached payment request. P.O. Box 1162, Addis Ababa Ethiopia Telephone: 251 (0) , Fax: 251 (0) awthomaslp@gmail.com Partners: A.W. Thomas, Melaku Abeje and Seid Abdela ici::::;;!~,

3 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD FROM 26 JULY 2016 TO 7 JULY 2017 [ ADDS ABABA ETHOPA ~ #'. ~l'"ffi '/j~'\~ fd CERTFED p.c.,c.o A.W. THOMAS L.P. CHARTERED CERTFED ACCOUNTANTS 2. DEC 20\7

4 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY 2017 TABLE OF CONTENTS 1. NTRODUCTON 1.1 Background 1.2 Program objectives 1.3 Project cost and financing 1.4 mplementation 1.5 Accounting and project monitoring system 1.6 Audit objectives 1.7 Audit methodology 1.8 Audit scope 1.9 Summary of audit results 2. NDEPENDENT AUDTOR'S REPORT 2.1 The report 2.2 Statement of financial position 2.3 Statement of sources and uses of funds 2.4 Statement of designated accounts 2.5 Notes to the financial statements 3. NDEPENDENT AUDTOR'S REPORT ON NTERNAL CONTROL 3.1 The report 3.2 Findings 4. NDEPENDENT AUDTOR'S REPORT ON COMPLANCE WTH FNANCNG AGREEMENTS 4.1 The report 4.2 Findings Appendix - General description of accounting and audit methodology Appendix - Reconciliation of amounts received by the project and those disbursed by the bank Appendix - List of materials purchased Appendix V - Abbreviations and acronyms -- Page

5 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY NTRODUCTON BACKGROUND On June 15, 2016, an agreement was signed between the Federal Democratic Republic of Ethiopia represented by Ministry of Finance and Economic Cooperation and nternational Development Association (DA) in order to support the Ethiopian Government's economic development including the implementation of the Growth and Transformation Plan(GTP)-11 which emphasizes the improvement in the provision of infrastructure and services, poverty reduction, and attainment of middle income status by the middle of the next decade. The project will support urban transport performance and governance in Addis Ababa and in Dire Dawa which is critical for the cities to function as the engine of economic development for the country, and modernize key national-level vehicle, licensing and driver training systems upon which transport operations rely. The DA agrees to make available a credit (Credit No ET) in an amount equivalent to 213,000,000 Special Drawing Rights (SDR) to improve mobility along selected corridors in the City of Addis Ababa and the effectiveness of road safety compliance systems throughout the territory. The project is a seven-year program running from June 15, 2016 to December 31, 2023 to be implemented in two chartered cities namely Addis Ababa and Dire Dawa; nine regional states; namely Afar, Amhara, Benishangul-Gumuz, Gambela, Harari, Oromia, Somali, Tigray and SNNPR and seventy four Zones with a total estimated budget of USD 300 million. PROGRAM OBJECTVES The major components of the program, which in tum constitute sub-components, are broadly categorized into three. These are a) Traffic Management and Road Safety in the City of Addis Ababa This component will include four subcomponents. mproving the Traffic and Safety Management Practices in the City of Addis Ababa mproving Road and Pedestrians Safety nterventions of Selected Corridors at dentified Locations and Strengthening the Capacity of Addis Ababa City Roads Authority Addis (AACRA). mproving Traffic Oversight, Public Transport Services and Systems and Strengthening the Capacity of Public Freight and Transport Authority (PFT A) and the Anbessa City Bus Enterprise (ACBE). Supporting Ababa Road and Transport Bureau (AARTB) and the Transport Programs Management Office (TPMO) to improve their business planning and implementation

6 2 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY b) mprovement of ntegrated Urban Planning and Transport System This component will involve: Supporting the Addis Ababa Land Development and Management Bureau (AALDMB) to develop land use and transport plans for the City of Addis Ababa; Carrying out studies on transit-oriented developments and preparing plans and strategies to implement strategic transit-oriented development initiatives, and the provision of advisory and technical assistance to enhance the capacity of AALDMB in these activities and in light- rail master planning; and Strengthening the capacity of AALDMB in carrying out its business functions. c) Road Safety nterventions and nstitutional Strengthening of Selected Federal Transport nstitutions The component includes three subcomponents as follows: mproving Compliance with Road Transport Rules and Regulations Nationally, through mproved Driver Training, Developing an ntegrated Driver Licensing and Vehicle Registration System, and Strengthening Federal Transport Authority's Capacity mproving Federal Traffic Enforcement Capability and Strengthening the Capacity of Federal Traffic Police mproving Oversight Capacity of Ministry of transport (MOT) and Ministry of Construction (MOC) PROJECT COST AND FNANCNG On the agreement dated 15 June 2016, entered into between the Federal Democratic Republic of Ethiopia and nternational Development Association, DA agrees to extend a credit (Credit No ET) in an amount equivalent to 213,000,000 Special Drawing Rights (SOR) to improve mobility along selected corridors in the City of Addis Ababa and the effectiveness of road safety compliance systems throughout the territory. Most of the project preparatory activities are funded under a Project Preparation Advance (PP A) in the amount of US$4.5 million. t is expected that any land acquisition and other costs related to the implementation of the Resettlement Action Plan (RAP) will be covered entirely by the GoE. The rest of the activities of the project will be financed by DA The duration of the project is seven years, reflecting the complexity of the urban setting for implementation, the need for sequencing the project activities, and the long-term nature of the institutional and policy reforms supported through this project. ii,.w nu,m4s \,1,n.1'!H1 P4RTNt:11 1S1111>.. ~ Ho; lidd~ l'8a14 ~ fthop/t. * 1>~.,;,~." (),..,,..,..-t\ '.' ~~~'

7 3 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY MPLEMENTATON Project execution will be carried out by two implementing agencies namely, AARTB and FTA, on behalf of themseves and several beneficiary entities, including AACRA, TMA, ACBE, Addis Ababa Traffic Police, MoT, MoC, Federal Traffic Police and AALMB. With regard to overall coordination of the project, MoT will be responsible while the two implementing agencies (i.e., AARTB and FTA will be responsible for the implementation of components or subcomponents A and B, and Component C respectively. AARTB on its part has delegated the administration of procurement and financial management responsibilities to AACRA, while beneficiary entities will be responsible for initiating the preparation of terms of reference as well as specifications of their respective activities and submit them to the Project mplementation Unit (PU) for finalizing and submission to the World Bank for review. Project mplementation Units (PUs) There will be two PUs, one associated with each implementing agency. AARTB has established a PU under the TPMO and appointed a team for the preparation and implementation of the city activities under the project. The PU is headed by a Team Leader who reports directly to the General Manager, TPMO. FTA has similarly established a PU and appointed a Team Leader who reports directly to the Director Ceneral of the FT A. The PUs, comprising regular staff supported by specialist consultants with the appropriate skills, experience and qualifications, are empowered to manage the day-to-day activities of their respective components of the project. Capacity building and training in managing World Bank financed projects, as well as managing and operating transport related information systems and databases, will be provided to the PUs and the beneficiary agencies. Team members drawn from the permanent staff have already been appointed, while recruitment of the few remaining specialists is ongoing. ~. / tt.111i'to lim'fn fl,,, ' \ Jii/,t ' ib1 Hoa ADD!; /: 13Ae.- ~ ETHOPA '4,<> R. ~~~ ~~ D n. ~.,.,,:,rn ~.cco\)

8 4 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY ACCOUNTNG AND PROJECT MONTORNG SYSTEM Results Monitoring and Evaluation Monitoring of project performance will be carried out by a monitoring and evaluation (M&E) consultant who will report on the progress toward achieving the objectives of the project against the indicators provided in the results framework and monitoring arrangements. The M&E consultant will also monitor the impacts of the risks identified in the Systematic Operations Risk Rating (SORT) Framework. FTA will select the university to participate in project monitoring and evaluation. The selected university will sign a contract with FT A and will work in close collaboration with the implementing agencies and beneficiary entities. The selected university will assign a team of experts and will provide both semi and annual reports. The Coordinator for the project will regularly monitor progress on implementation and effectiveness of the strategy, and work with the inter-agency oversight committee in addressing critical issues identified in the course of the project implementation. The committee will regularly brief all the agencies involved in the project. Financial Management A financial management (FM) assessment was conducted at AACRA and FTA, the project entities responsible for FM, in accordance with the Financial Management Manual issued by the Bank's Financial Management Sector Board. The assessment included the identification of key perceived financial management risks that may affect project implementation and proceeded to develop mitigation measures against such risks. AACRA and FTA will follow Government procedures in regard to the project, adjusting them to meet the Bank's specific requirements. Financial management manuals will be prepared as part of the Project mplementation Manuals (PM) for each entity in line with overall Government procedures and will clarify project specific requirements. Financial management specialists have been recruited and assigned for AACRA. Further recruitments will continue to be made by FTA and AACRA to strengthen their capacity. The project will prepare and submit two quarterly unaudited nterim Financial Reports (FRs), one by AACRA and the other by FTA, for the respective parts of the project they implement. n regard to disbursement, the transaction based disbursement method using statements of expenditure will be used for both implementing entities when disbursing project funds to the Designated Accounts (DA) and for reimbursements. All disbursement methods are available to the project including advances to the designated accounts reimbursements, direct payments and special commitments. Accounting Policies The accounting policies are described in Section

9 5 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY AUDT OBJECTVES A.W. Thomas L.P. Chartered Certified Accountants, P.O. Box 1162 Addis Ababa was contracted to perform an audit of the Statement of Sources and Uses of Funds and Statement of Designated Accounts of the Addis Ababa City Road Authority concerning the Transport System mprovement Project funded by DA credit for the period from 26 July 2016 to 7 July 2017 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 whether the statements are free from material misstatements. The principal objective was to determine whether costs incurred by the auditee are adequately supported in accordance with the agreement and are allowable, allocable, and reasonable. With respect to the costs incurred, the objectives of the engagement were to: Express an opinion as to whether the program's financial statements in respect of the World Bank funding presents fairly, in all material respects, loans received and expenditures incurred for the period from26 July 2016 to 7 July 2017 in accordance with the guidelines on Annual Financial Reporting of the World Bank and in conformity with the basis of accounting described in the project's financial statements. Express an opinion as to whether disbursements were made in accordance with the financing agreements. Evaluate and obtain sufficient understanding of Addis Ababa City Road Authority internal control structure related to the World Bank funded project, assess control risks and identify reportable conditions, including material internal control weaknesses. Perform tests to determine whether Addis Ababa City Road Authority complied, in all material respects, with the Financing Agreement terms and applicable laws and regulations related to the World Bank funded project. dentify and disclose all material instances of noncompliance and all indications of illegal acts. Examine the overall financial statements' presentation. '

10 6 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY AUDT METHODOLOGY We have obtained a full understanding of the accounting system, the overall strength of the internal control system, and the extent of compliance with the financing agreement provisions and pertinent laws and regulations, and the degree to which supporting documents were available to provide an adequate audit trail. We have accordingly developed our detailed audit work plan. The scope of the audit consisted of the following:- Check that World Bank financing has been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; Check that goods, works and services financed have been procured in accordance with the relevant financing agreements including specific provisions of the World Bank Procurement Policies and Procedures, and government procurement rules and procedures; Check that all necessary supporting documents, records, and accounts have been maintained in respect of all project activities, including expenditures reported using Statements of Expenditure (SOE) or nterim Unaudited Financial Statements (FS) methods of reporting; Verify that unaudited interim financial reports issued during the period were in agreement with the underlying books of account; Check that national laws and regulations have been complied with, and that the financial and accounting procedures approved for the project ( e.g. operational manual, financial procedures manual, etc.) were followed and used; Check that the financial performance of the project is satisfactory; Review costs billed to and reimbursed by World Bank and ensure that ineligible expenditures included in withdrawal applications are identified and reimbursed to the Designated Accounts; Review general and program ledgers to determine whether costs incurred were properly recorded. Reconcile direct costs billed to, and reimbursed by World Bank to the program and general ledgers;

11 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY Review the procedures used to control the funds, including their channeling to contracted financial institutions or other implementing entities. Review the bank accounts and the controls on those bank accounts. Perform positive confirmation of balances, as necessary; Review procurement procedures to determine whether sound commercial practices including competition were used, reasonable prices were obtained, and adequate controls were in place over the qualities and quantities received; Review direct salary charges to determine whether salary rates were reasonable for that position, and supported by appropriate payroll records. Determine whether allowances and fringe benefits received by employees were in accordance with the agreements and applicable laws and regulations; Review travel and transportation charges to determine whether they were adequately supported and approved; Determine whether assets procured from project funds exist or were used for their intended purposes in accordance with the terms of the agreements, and whether control procedures exist and have been placed in operation to adequately safeguard the properties and there is verifiable ownership by the implementing agency or beneficiaries in line with the financing agreement; Review the Financing Agreements between World Bank and MoFEC, the budgets, project implementation manual, all projects financial and progress reports and relevant Government Regulations and other related documents. Review and evaluate AACRA's internal control structure and accounting practices to the extent necessary to give an opinion on the Statement of Financial Position, Statement of Sources and Uses of Funds and Statement of Designated Accounts; Check receipts are supported with official receipt vouchers and those receipts are obtained following the procedures for applications for withdrawals; Review the Programs Financial Statements(PFSs) and check that expenditures reported in the PFSs are: Fully supported by proper documentation Properly authorized and eligible, and Appropriately accounted for

12 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY Check expenditures for procurement of goods and works are made in-line with the provisions in the "Guidelines: Procurement under BRD loans and DA credits"; Check expenditures reported are appropriately classified into their budget categories; Check expenditures for consultants are made in-line with the provisions in the "Guideline: Selection and Employment of Consultants"; Determine that 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; Review Designated Accounts (DA) and check that they are fairly presented and that the balance on the bank statement is reconciled with the leger (including tracking of in-transit items) and that the bank balance is directly confirmed by the bank; Check that interest earned on DA is properly treated and that exchange gain or losses are properly computed and treated as required by the financing agreement; Check that disbursements from the DA's are proper and in accordance with the respective financing agreements; Examine the financial statements, identifying and quantifying costs which are not supported with adequate documentation or are not in accordance with the agreement terms; nspect journal vouchers, agreements, supplier's document, etc; Check the correctness of income and expenditure vouchers and supporting documents, the correct use of project funds in compliance with the budget and special conditions thereof and the correct exchange of project funds into local currency. Check that expenses incurred for the project are in accordance with local prices and are incurred following the principles of economic and efficient use of funds; Review bank statements and accounts of the recipients and other relevant books of account and assess whether they show a complete view of the income received and expenditures incurred in accordance with generally accepted accounting principles;,._.vj. THOM4s, "'"i'ftil PAHTftlf. Dr.,..., '1>Ji,//,o S ilcst ADDS i\[;'!a8a ~ ETHOPiA ~~).._,t">,.r. -- ";<"~,~, to f'fp.r11=1eo r:,..ecov..

13 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY Verify that all commitments are genuine, supported with relevant agreements and are for the pursuance of agreed project objectives; Check whether other income generated by the project, if any, is accounted for properly and is used properly for the furtherance of the project objectives; Reconcile the amounts as " received by the project from the World Bank" with those shown as being disbursed by the Bank and attach as annex to the report a schedule listing individual FR withdrawal applications by specific reference number and amount; AUDT SCOPE (a) Audit Report on the Project Financial Statements (PFS) (b) (c) The audit report covers the statement of financial position, the statement of sources and uses of funds through the Financing Agreements and movements on designated accounts for the period from 26 July 2016 to 7July Audit Report on the auditee's internal control The audit report covers the internal control structure adopted by Addis Ababa City Road Authority relevant to the recording of financial transactions under the Financing Agreements. Audit Report on recipients compliance with applicable laws, regulations and the Financing Agreements The audit report covers the recipient's compliance with applicable laws, regulations and the Financing Agreements in relation to the financial transactions.

14 10 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY SUMMARY Q? AUDT RESULTS Audit report on the project financial statement We have audited the statement of financial position, statement of sources and uses of funds, and statement of designated accounts of Addis Ababa City Road Authority Transport System mprovement Project in respect of the World Bank funded activities for the period from 26 July 2016 to 7 July 2017 in accordance with nternational Auditing Standards. Our audit did not identify ineligible costs during the period Review of internal control structure We have reviewed and evaluated the system of internal control structure of Addis Ababa City Road Authority in respect of the above program. The results of our tests of the internal control structure indicate that there were some weaknesses in internal control. See in Section 3.2. Review of Compliance We have reviewed the compliance of Addis Ababa City Road Authority with the financing agreement, and with related laws, rules and regulations. The result of our review identifies instance of non-compliance. See in Section ~.2.

15 11 A.W. Thomas L. P. Chartered Certified Accountants (Authorized Auditors - f',f-,f.-,.~,t:fm- Mi.TC'~ FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY ndependent Auditor's Report on the Program financial statements 2.1 The Report Addis Ababa City Road Authority Addis Ababa We have audited the project financial statements comprising the statement of financial position, the statement of sources and uses of funds, and the statement of designated accounts and the accompanying supplementary financial information of Addis Ababa City Road Authority Transport System mprovement Project financed by World Bank Loan under Transport systems mprovement project No. P and DA 5816-ET for the year ended from 26 July 2016 to 7 July These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with nternational Auditing Standards. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. t also includes an assessment of the significant estimates and judgments made by the management in the preparation of the financial statements, and of whether the accounting policies are appropriate to the project's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to priwide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. n forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. n our opinion, The financial statements referred to above present fairly in all material respects and it represents the financial position of Addis Ababa City Road Authority-Transport System mprovement Project financed by World Bank Loan under Transport systems mprovement project no. P and DA 5816-ET for the period from 26 July 2016 to 7 July 2017 and the results of its operations for the year then ended in accordance with generally accepted accounting principles, consistently applied. { O!ltiO ' P.O. Box 1162, Addis Ababa Ethiopia ~ A0Df$ AfiA8A. * Telephone: 251 (0) , Fax: 251 (0)11 ~~855 ETHOPA h awthomaslp@gmail.com :..',;;,>-,_\' ~,_~~~ Partners: A.W. Thomas, Melaku Abeje and Seid Abde~ CfRrtFF.O r,.,r.to~... _ "'

16 12 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY 2017 The financial statements referred to above are in agreement with the records maintained by the program. The interim financial reports, together with the procedures and internal controls involved in their preparation, can be relied upon to support the relevant withdrawal applications and the expenditures are eligible. 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 This report is intended for the information of Addis Ababa City Road Authority and the World Bank. However, upon release by the World Bank, this report is a matter of public record and its distribution is not limited. Addis Ababa 30 October 2017

17 13 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY STATEMENT OF FNANCAL POSTON CURRENT ASSETS Cash and bank Debtors and prepayments Total Current Assets CURRENT LABLTES Creditors and accruals NET CURRENT ASSETS REPRESENTED BY Fund balance as at 7 July ,145,097 99,258, ,403,947 (104,402) 325, , Currency: ETB 22,834,358 22,834,358 22, ,

18 14 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY STATEMENTOFSOURCESANDUSESOFFUNDS SOURCES Note 2016 Currency: ETB DA credit 299,718,607 35,407,878 Other income Gain on foreign currency exchange 8,543, ,733 8,543, ,532 USES Miscellaneous 28, ,261,855 36,273,410 Budget Actual Budget Actual Project preparation and Supporting - AARTB and TPMO () 6,588,359 3,374,668 11,027,960 8,421,147 Advisory assistance to traffic management authority and public and freight transport authority 312,500 Technical Assistance for Physical Project mplementation 1,134, ,022 FTA Components for project preparation 3,733,792 3,211,957 mproving the Traffic and Safety Management 22,264,000 mproving Road and Pedestrians Safety 5,314,065 mproving Public Transport & PFT A and ACBE Strengthening 2,619,696 Training and Capacity Building- AARTB and TPMO () 3,000,000 2,422,000 2,500,000 1,233,926 Total uses 39,786,119 5,796,668 18,708,980 13,439,052 EXCESS OF SOURCES OVER USES 302,465,187 22,834,358 Add: Opening fund balance 22,834,358 Fund balance as at 7 July ,299,545 22,834,358

19 15 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY STATEMENT OF DESGN A TED ACCOUNTS DA credit Account number Depository Bank Related Credit and Grant Address Currency Opening balance, 26 July 2016 Add: Transferred from World Bank-Credit Less: Transferred to Birr account DSA payment for trip to Kenya DSA payment made to Brazil Add:- Gain on exchange Ending balance, 7 July Direct Payment To UNOPS JPY Add:-Direct payment JPY/USD 479,435,982 r~,w THOM43,t.l\11"p f.ia,lri~fi,,.. \.. -''l#{jp National Bank of Ethiopia DA Credit(58 l 6-ET) and Project no.(p ) Addis Ababa, Ethiopia USD/JPY USD 881,440 9,049,637 9,931, ,625 5,628 48, ,962 9,626,115 USO 4,233,057 ETB 19,268, ,830, ,098,540 5,725, ,592 1,143,485 8,543, ,641,450 ETB 97,888,163

20 16 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY NOTES TO THE FNANCAL STATEMENTS Accounting policies The principal accounting policies adopted and applied by the project are as follows: a. Basis of accounting The project financial statements are prepared in accordance with Generally Accepted Accounting Principles on a modified cash basis of accounting system. b. Revenue and expenditure Revenue is recognised when funds are received into bank accounts, and aid-in-kind when goods or services are received or rendered. Expenditure is recognised: When payroll is processed, based on payroll and attendance sheet At the end of the year when a grace period payable is recognised. When goods are received or services are rendered. nter-governmental transfers are recognised in the absence of actual cash movement. Transactions resulting from salary withholdings are recognised in the absence of actual cash movement. c. Expenditures of capital nature Expenditures of a capital nature are directly charged to expenditures upon purchase. d. Transaction currency The financial statements are presented in Birr. The reporting currency for the Project is Birr. However, reports on the Designated Accounts shall be provided to WB in the respective currencies at which the Designated Accounts are maintained. Transactions denominated in foreign currencies are translated into Birr and shown in the accounts at the rates ruling on the transaction dates. The balances in the Designated Accounts are translated into local currency (ETB) and shown in the financial statements at the rate prevailing at the end of the reporting period. e. Direct payments Foreign currency direct payments made by WB to goods suppliers and service providers on behalf of the Project are translated into Birr and accounted for as revenue and expenditure in AACRA's accounts using the rate prevailing on the date of transaction. ~: ' "' 11' rjli P MHi~ t'i? 'jl.l ~ \. "l/f) ~Hoi ildd!s ldmrla fthofa

21 17 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY CASH AT BANK NBE Account no CBE Account no Sar Bet Branch DEBTORS AND PREPAYMENTS Advance to non- staffs Advance to supplier CREDTORS AND ACCRUALS Sundry creditors Salary payable FUND BALANCE Opening fund balance as at 26 July 2016 Add. Excess of sources over uses Fund balance as at 7 July ,641,450 3,503, ,145,097 1,177,345 98,081,505 99,258,850 95,078 9, ,402 22,834, ,465, ,299,545 Currency: ETB ,268,096 3,566,266 22,834,358 22,834,358 22,834,358

22 18 FNANCAL AND COMPLANCE AUDT OF THE TRANSPORT SYSTEM MPROVEMENT PROJECT MANAGED BY ADDS ABABA CTY ROAD AUTHORTY FNANCED BY WORLD BANK LOAN UNDER PROJECT NO.P & DA 5816-ET FOR THE PEROD 26 JULY 2016 TO 7 JULY 2017 Currency: ETB USES 2016 Budget Actual Budget Actual. Project preparation and supporting AARTB and TPMO Senior procurement specialist 479, , ,880 Procurement experts salary 399, , , ,510 Senior finance specialist salary 439, , , ,277 Finance expert salary 359, ,640 90,000 80,919 Procurement officer 240,000 Finance officer 199,230 Driver 54,600 Project mplementing Unit(PU) 720,000 Project coordination officer Office furniture & software water distiller table 60,000 coffee machine 800, ,695 Desktop and Laptop computer (server) 2,233,315 1,281,095 Purchase of vehicles and other related costs 5,700,000 5,391,000 Environmental safeguard specialists 532, , , ,600 Social development specialist salary 532, , , ,600 Administrative expenses 430, ,451 Advertisement 96,861 86,096 Audit fee annual 238,165 60,000 Tele,fax and internet 72,000 59,000 Experience sharing/training/consultancy service 800, ,677 Preparation of financial manual 209, ,898 Water distiller 30,000 Purchase of plant and equipment 600, ,000 Application software 282,000 Procurement of books 191, ,217 Quarterly performance review 37,488 Bank charges 72,000 96,239 Sub total 6,588,359 3,374,668 11,027,960 8,421,147. Training and Capacity Building -AARTB and TPMO 3, ,422,000 2,500,000 1,233,926 i2)1162' ADD!$ ABABA ETHOPA

23 ADDS ABABA CTY ROAD AUTHORTY-TRANSPORT SYSTEM MPROVEMENT PROJECT FOR THE PEROD FROM 26 JULY 2016 TO 7 JULY 2017 Appendix. Reconciliation of amounts received by the project from the World Bank and those disbursed by the Bank Received by Received by Type of Grant/Credit the program the program JPY USD DA Credit 479,345,982 9,049,637. Summary of withdrawal applications Withdrawal 5816 ET application number DA credit PPA-SOE-5 PPA-SOE-6 PPA-SOE-7 PPA-SOE-8 PPA-SOE-9 PPA-SOE-10 PPA-SOE-12 Total 455,617 32,704 8,500,000 21,763 13,417 26,138 USD JPY 479,435,982 9,049, ,435,982!9:t'l.62 ADD!.~ 1,~;),!3P Disbursed by Disbursed by World Bank- as World Bank - confirmed by as confirmed the bank by the bank ETB JPY USD 299,718, ,345,982 9,049,637 ETB 9,963, , ,742, , , ,757 97,888, ,607 Difference

24 FOR THE PEROD FROM 26 JULY 2016 TO 7 JULY 2017 FURNTURE, EQUPMENT & OTHERS 12 Tablet TPM0/10 l/4531/911/p!u/22,tpmo/l O l/453.1/9/l/fpp/24,tpmo/ 0 AACRA HO-O 1279,01280,01281,01282,AACRA-20 - mported high quality Excetuive AACRA HO-O 1277,01288,01289,01287,01323, chair,mesh back and seat 18 chair,mesh back and seat '- 'L _(... ~ 0 CERTFEO ~C Date of acqusition May 4,2016 May 4,2016 May 4,2016 April 19,2016 April 19,2017 April 19,2016 April 12,2016 April 12,2016 April 12,2016 April 12,2016 March 25,2016 March 25,2016 March 8,2016 March 8,2016 January 28,2016 January 28,2016 January 28,2016 January 28,2016 June 9,2016 June 16,2016 June 16,2016 May 12,2016 May 12, ljd 01 Appendix Price measurement Quantity Remark Location 36,800 PCS 4 PY PU 36,800 PCS 4 PY AACRA PCS 2 PY AACRA-STORE 39,588 PCS 4 PY AACRA 9,897 PCS PY PU 8,729 PCS 2 PY AACRA 55,800 PCS 4 PY AACRA 55,800 PCS 4 PY PU 27,900 PCS 2 PY AACRA-STORE PCS 3 PY AACRA 53,411 PCS 2 PY AACRA 80,116 PCS 3 PY PU 17,000 PCS l PY PU 168,900 PCS PY PU 47,976 PCS 8 PY AACRA PCS 2 PV PU 47,970 PCS 6 PV AACRA 71,955 PCS 9 PY PU 7,188,000 PCS 4 PY l FTA,3 PU 65,304 PCS 10 PY FTA 10,394 PCS PY FTA 321,500 PCS 10 PY FTA PCS 5 PY FTA 7,800 PCS 1 PV FTA May 12,2016 ADDS ABABA CTY ROAD AUTHORTY-TRANSPORT SYSTEM MPROVEMENT PROJECT LST OF MAERALS PURCHASED S.N. Descri11tion Pro11erty Number 1 UPS l500va 20 l ho-fppasp-l 05, 106,103, l 04 2 UPS 1500va l/4531/9//pu/21,tpm0/101/4531/9/1/gm0/25 PROPERTY NUMBER NOT GVEN BECAUSE T SN'T SSUED 3 UPS l 500va FROM STORE. 4 Metal shelves AACRA HO-FPPASP-(03 73 },(03 72 ),(03 74 ).(03 75) 5 Metal shelves TPMO/l O 1/4529/ 0/ /PU/1 6 Coffee table AACRA HO-FPPASP-0677, Executive office table AACRA FPP ASP-(06 74 ),(06 75),(06 73 ),(0682) 8 Executive office table TPM0/101/4529/8/2/2/PU/(64 )(63 )(65)t,62) PROPERTY NUMBER NOT GVEN BECAUSE T SN'T SSUED 9 Executive office table BY STORE. 10 Wooden shelf with 4 half glass work AACRA-20 l ho-fppasp-(0369),(0370),(03 71) 15 Guest chair with arm rest-u legged HO-FPPASP-01283,01284,01285, Guest chair with ann rest-u legged TPM0/10 l/4529/8/1/1/4/pu/52,53 11 Tablet AACRA-20 l fppasp-(0391),(0388) 13 LCD Projector TPM0/101/4531/3/5/8/P 0/2 14 Computor Server TPM0/101/4531/4/4/CT/O mported high quality Excetuive TPOM/10 /4529/8/l/2/PU-83,88,86,85,84,87,95,89,NOT GVEN Mazda Turbo Diesel Engine powered Chassis No. double cab pick up truck-model BT MM7UR4DB9GW49 l 349,MM7UR4DB GW49 l 12 l,mm7ur4db , WO GW490943,MM7UR4DB3GW49092 t ~Uf"\U,:: Excutive Chair PROP. DE. NO. S GVEN B~A t:;~.';.._ r:1\j;>taj ~;:_ Conference table PROP. DE. NO. S GVE~Y Fl\:.\\ '''.. -17/p '\. 22 All in one computer PROP. DE. NO. S GV ~ BY FTA,,...,. 11 "' Laptop computer PROP. DE. NO. S GV1 '.NillY FTA l,"'d<: t;raba 24 * All in one printer PROP. DE. NO. S GV N BY FTA ETHOPA.

25 - S.N Description Pro11erty Number Laptop computer AACRA-20 l l-ho-fppasp-0391,0390 PROPERTY NUMBER SN'T GVEN BECAUSE T S NOT YET Laptop computer SSUED FROM STORE. FTA=Federal Transp_ort Authority AACRA=Addis Ababa City Road Authority PU= Project mplementation At1th()rity Total ADDS MlABA ETHOPA Date of acqusition May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 12,2016 May 4,2016 May 4,2016 March 24,2016 March 24,2016 July 6,2017 July 6, rn.rno,6.u unll or Price measurement Quantity Remark Location 15,450 PCS PY FTA 32,499 PCS PY FTA 312,300 PCS 9 PY AACRA 208,200 PCS 6 PY PU 52,640 PCS 2 PY AACRA 52,640 PCS 2 PY AACRA-STORE 26,320 PCS PY PU 131,600 PCS 5 PY PU-STORE 8,100 PCS 2 PY AACRA 20,250 PCS 5 PY PU 133,300 PCS 10 PY FTA 26,600 PCS 2 PY FTA 11,150 PCS 5 PY PU 11,150 PCS 5 PY AACRA 370,000 PCS 2 PY AACRA 185,000 PCS PY PU LCD Proiectcr PROP. DE. NO. S GVEN BY FTA Color orinter PROP. DE. NO. S GVEN BY FTA AACRA l-ho-fppasp- All in one computer (0395),(0393 ),(0397),(0392 ),(0408),(0394 ),(0396 ),(0398 ),(0399) All in one computer TPOM/10 l/4531/4/l/pu-106,103, 104,105,107,110 Laptop computer TPM0/101/4531/4/2/PU/39 PROPERTY NUMBER SN'T GVEN BECAUSE T S NOT YET Laptop computer SSUED FROM STORE. External Hard disk External Hard disk Executive office table PROP. DE. NO. S GVEN BY FTA Office shelves PROP. DE. NO. S GVEN BY FTA 4G nternet dongle 4G nternet dongle Photo Copy Machine AACRA-20 l-453 l-05-ho-fppasp-062,063 Printer TPMO/lOl/4531/7/2/PU/5 Bl 1162

26 Abbreviations and Acronyms AACRA AAOAG AARTB AALDMB ACBE BoFED BP BRT CP CPS CSRP CQS EMCP DA DL DP EA EMP ERC ESMF FD FM FTA FY GAP Gbi)S GDP GoE GPN GRM GRS GTP (, ) BEX CB CT DA FAC FR MF Kbps SA SR T TS Appendix V Addis Ababa City Roads Authority Addis Ababa Office of Auditor General Addis Ababa Road and Transport Bureau Addis Ababa Land Development and Management Bureau Anbessa City Bus Enterprise Addis Ababa City Administration Finance and Economic Development Bureau Bank Procedure Bus Rapid Transit Capital nvestment Plan Country Partnership Strategy Civil Service Reform Program Consultant's Qualification Selection Expenditure Management and Control sub-program Designated Account Driver's License Development Partners Environmental mpact Assessments Environmental Management Plan Ethiopia Railway Corporation Environmental and Social Management Framework Foreign Direct nvestment Financial Management Federal Transport Authority Financial Year Gender Action Plan Gigabits per second Gross Domestic Product Government of Ethiopia General Procurement Notice Grievance Redress Mechanism Grievance Redress Service Growth and Transformational Plan (First, Second) ntegrated Budget and Expenditure nternational Competitive Bidding nformation Communications and Technology nternational Development Association nternational Federation of Accountants nterim Un-audited Financial Reports nternational Monetary Fund Kilobit per second nternational Standards of Auditing mplementation Status and Results Report nformation Technology ntelligent Transport Systems

27 LOP M&E MoFEC NCSC 1- LRT Mbps MoC MoT NCB OFAG OP PBS PDO PFM PFTA PM PT PU PPA PRMA PSCAP PSETSE QCBS RAC RAP RoW RPF SBD SC SA SOP SORT STEP TMA TOD TPMO UNDB VKT WB Local Development Plans Light Rail Transit Monitoring and Evaluation Megabits per second Ministry of Construction Ministry of Finance and Economic Cooperation Ministry of Transport National Competitive Bidding National Complete Streets Coalition Office of the Federal Auditor General Bank Operational Policy Promoting Basic Services Project Development Objective Public Financial Management Public and Freight Transport Authority Project mplementation Manual Project mplementing Teams Project mplemer.ting Units Project Preparation Advance Portfolio and Risk Management Public Sector Capacity Building Support Program Public Service Employees Transport Service Enterprise Quality and Cost Based Selection Real Application Cluster Resettlement Action Plan Right of Way Resettlement Policy Framework Standard Bidding Document Steering Committee Social mpact Assessment Series of Projects Systematic Operations Risk Rating Systemic Tracking of Exchanges in Procurement Traffic Management Agency Transit-Oriented Developments Transport Programs Management Office United Nations Development Business Vehicle Kilometers of Travel World Bank