Public Disclosure Authorized English Translation of the Original Arabic Text Public Disclosure Authorized Public Disclosure Authorized SMALL AND MICRO ENTERPRISE PROMOTION SERVICES ENTERPRISE REVITALIZATION AND EMPLOYMENT PILOT PROJECT FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT Public Disclosure Authorized
English Translation of the Original Arabic Text SMALL AND MICRO ENTERPRISE PROMOTION SERVICES ENTERPRISE REVITALIZATION AND EMPLOYMENT PILOT PROJECT FINANCIAL STATEMENT AND INDEPENDENT AUDITOR'S REPORT TABLE OF CONTENTS Pag~e Independent Auditor's Report 1-2 Statement of Sources and Uses of Funds 3 Notes to the Financial Statement 4-7
KPMG Yemen Mejanni & Co. Telephone +967 (1) 401 667/8 / 9 Public Accountants Fax +967 (1) 206 130 150 Zubairl St. Internet ;. v.kpmg.com,,,e P0 Box 3501 English Translation of the Original Arabic Text INDEPENDENT AUDITOR'S REPORT TO THE EXECUTIVE DIRECTOR OF SMALL AND MICRO ENTERPRISE PROMOTION SERVICES (SMEPS) ENTERPRISE REVITALIZATION AND EMPLOYMENT PILOT PROJECT We have audited the accompanying statement of sources and uses of funds of the Small and Micro Enterprise Promotion Services (SMEPS) - Enterprise Revitalization and Employment Pilot Project (IDA Grant No. TF014977) (the "Project") for the year ended December 31, 2014, and a summary of significant accounting policies and other explanatory information (together "the Financial Statement"). The Financial Statement has been prepared by management using the cash basis of accounting described in Note 2 to the Financial Statement. Management's Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of the Financial Statement in accordance with the cash basis of accounting described in Note 2 to the Financial Statement; this includes determining that the cash basis of accounting is an acceptable basis for the preparation of the Financial Statement in the circumstances, and for such internal controls as management determines is necessary to enable the preparation of the Financial Statement that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the Financial Statement 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 about 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 Statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Financial Statement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the Financial Statement 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 Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, made by management, as well as evaluating the overall presentation of the Financial Statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KP[ i Yemen Mejanni & Co, a partnership established underyemeni, and a member firm of the KPrM1G net* ork Gf independent member firms affliated KPi tg International Cooperati ("KPI1G Intern einal"e), a Sc ifs entit, ith
English Translation of the Original Arabic Text Opinion In our opinion, the accompanying Financial Statement presents fairly, in all material respects, the fund balance of the Small and Micro Enterprise Promotion Services - Enterprise Revitalization and Employment Pilot Project (IDA Grant No. TF014977) as at December 31, 2014 and the sources and uses of fund for the year then ended in accordance with the cash basis of accounting described in Note 2 to the Financial Statement. Emphasis of Matter Without modifying our opinion, we draw attention to Note 7 to the financial statement related to the subsequent events taking place in the Republic of Yemen during the year 2015. These events could affect the Project's statement of sources and uses of funds for the year 2014 in a manner not currently determinable. Basis of Accounting Without modifying our opinion, we draw attention to Note 2 to the Financial Statement, which describes the basis of accounting. The Financial Statement is prepared to provide information to the Small and Micro Enterprise Promotion Services - Enterprise Revitalization and Employment Pilot Project (IDA Grant No. TF014977). As a result, the statement may not be suitable for another purpose. M. hdi Mej Associated Ac " Sana'a, June 22 2
En2lish Translation of the Ori2inal Arabic Text STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED DECEMBER 31,2014 Sources of Funds For the period from June 19, Accumulated 2013 to Dec. up to Dec. 31, 2014 31, 2013 2014 Note USD USD USD IDA Contribution 3 1,250,855 353,350 1,604,205 Other income 60,000-60,000 Total Sources of Funds 1,310,855 353,350 1,664,205 Uses of Funds Consultancy services ( 184,355) ( 37,436) ( 221,791) Training ( 77,190) - ( 77,190) Event and activities ( 27,240) ( 15,815) ( 43,055) Cash grant ( 974,813) - ( 974,813) Management costs 4 ( 201,813) ( 121,837) ( 323,650) Total Uses of Funds 5 ( 1,465,411) ( 175,088) ( 1,640,499) (deficit) Surplus for the year / period ( 154,556) 178,262 23,706 Retranslation of foreign currencies 8 6 14 Fund balance at the beginning of the year / period 178,268 - - Fund balance at end of the year / period 23.720 178 8 23,'Z20 Represented in: Cash in banks 6 20,760 175,855 20,760 Accounts receivable - employees' advances 2,960 2,413 2,960 Fund balance at end of the year /period 23.720 178.268 23,720 The attached notes on pages 4 to 7 are an integral part of this financial statement. Independent auditor's report is set out on pages 1 and 2. Wesam Qaid Sal Al- ashi Executive Director Finan e Admin Manager 3
English Translation of the Original Arabic Text NOTES TO THE FINANCIAL STATEMENT 1. BACKGROUND INFORMATION - Small and Micro Enterprise Promotion Services (SMEPS) was registered in accordance with the provisions of Law No. 10 of 1997 concerning the Social Fund for Development and in accordance with the national strategy to develop small and micro enterprise, which was approved by the Council of Ministers on January 17, 2005 and according to the decree of the Fund Executive Manager of the year 2005 for the foundation of the SMEPS. - SMEPS objectives are to participate in the following: 1. Support the initiatives of business development services in order to enhance the diversity and growth of enterprises' business in markets or projects in a sustainable form through the following: a. Generate higher revenue for the establishments sector. b. Introduction of new production lines to enable enterprises achieve better competition capabilities and benefit from available resources. 2. Support the providers of "business development services" and establishment of their capabilities to enhance the enterprises level of product and service. 3. Develop and enhance the market of the providers of "business development services" based on sustainable bases using local or international experts. 4. Support the owners of enterprises in all sectors in order to establish a wide network of business development services in the Republic of Yemen. 5. Broaden the application base of business development services in order to cover the demands and requirements of the enterprises' business nature. - SMEPS implements the following to achieve its objectives: 1 Facilitate the non-financial services for enterprises, such as marketing, consultations, training, information transmission, etc. 2 Contribute in the establishment of participants organizations' capabilities, e.g. institutes and centers of technical training and consultations (with private or public sectors) to provide the enterprises with distinct and purposeful services. 3 Perform studies of the economic sectors (such as fishing, health, tourism, industry, etc.) in order to find out the business capabilities for developing the related enterprises and possibilities of introducing a value-added concept for those sectors based on demands and market potentials. 4 Manage and facilitate the activity of business development by providing nonfinancial services for enterprises through their participants who provide business development services, including the institutes of training, consultants, experts, and private sector. - SMEPS received a grant from IDA of USD 3,720,000 according to the agreement signed on June 19, 2013 to finance Enterprise Revitalization and Employment Pilot Project. The objective of the project is to improve individual employability of college and university graduates and to improve the business capabilities of enterprises participating in the project. 4
English Translation of the Original Arabic Text NOTES TO THE FINANCIAL STATEMENT (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis ofpreparation offinancial statement - The statement of sources and uses of funds (the financial statement) is prepared according to the cash basis of accounting to record the transactions. On this basis, sources of funds are recognized when received and disbursements are recognized when paid. - The statement of sources and uses of funds (the financial statement) represents only the statement of utilization of the grants received from the International Development Association (IDA) Grant No. TF014977 and excludes all other transactions, sources and uses of the SMEPS. - The financial statement was approved by the SMEPS management on June 24, 2015. 2.2 Functional and presentation currency The financial statement is prepared and presented in US Dollars in accordance with the donor's agreement. 2.3 Foreign currency transaction SMEPS maintains its books of account in US Dollars, which is the Project's functional currency. Transactions in currencies other than US Dollars are translated into US Dollars using the exchange rate prevailing on the transaction date. At year end, balances of monetary accounts (cash and accounts receivables) denominated in currencies other than US Dollars are translated at the rates prevailing at that date. The differences arising are reported in the statement of sources and uses of funds. The unrealized profit and loss arising from changes in foreign currency exchange rate are not presented as cash receipts or payments, but the effect of changes in exchange rate on cash held in foreign currency is reported in the statement of sources and uses of funds to settle the cash at the beginning and end of the period and present the amount separately from cash receipts and payments including differences, if any. 2.4 Property and equipment Property and equipment are expensed on the purchasing date and when sold it is recognized as sources. 2.5 Bank's interest Interests on banks are recognized on the date of receipt. 5
English Translation of the Ori2inal Arabic Text NOTES TO THE FINANCIAL STATEMENT (CONTINUED) 3 IDA CONTRIBUTION According to the agreement signed between the International Development Association (IDA) and the SMEPS on June 19, 2013, IDA agreed to grant the SMEPS an amount of USD 3,720,000 to finance Enterprise Revitalization and Employment Pilot Project. During the year ended December 31, 2014, SMEPS received the following amounts: Application No. Date of receipt USD Claim no. 2 3/1/2014 4,795 Claim no. 3 26/2/2014 111,066 Claim no. 4 29/4/2014 158,277 Claim no. 5 4/8/2014 232,914 Claim no. 6 8/9/2014 278,413 Claim no. 7-1 29/10/2014 231,259 Claim no. 7-2 2/12/2014 234,131 Total for the year ended December 31, 2014 Total for the period from June 19, 2013 to 1,250,855 December 31, 2013 353,350 Accumulated up to December 31, 2014 1.604.205 4. MANAGEMENT COSTS Period from June 19, 2013 Accumulated to up to Dec. 31, 2014 Dec. 31, 2013 2014 USD USD USD Wages, salaries and related costs 53,869 34,254 88,123 Property and equipment 43,891 12,369 56,260 Rent 19,200 9,600 28,800 Communication 17,616 4,635 22,251 Travel expenses 12,992 5,324 18,316 Other management expenses 12,715 5,343 18,058 Fuel 12,204 6,125 18,329 Marketing and promotions 8,219 30,516 38,735 Stationery 5,623 2,300 7,923 Repairs and maintenance 3,996 1,998 5,994 Security 3,996 1,998 5,994 Water and electricity 2,796 1,398 4,194 Insurance 2,400 1,200 3,600 Transportation 1,249 499 1,748 Telephone, mail and internet 607 267 874 Advertisement 321 3,741 4,062 Translation 80 270 350 Bank charges 39-39 201,813 121.837 323.650 6
English Translation of the Ori2inal Arabic Text NOTES TO THE FINANCIAL STATEMENT (CONTINUED) 5 USES OF FUNDS The table below shows the total uses of funds according to the main components of the project which were approved according to the agreement. Property, Equipment and Youth Management Training SME Grant Costs Total USD USD USD USD Consultancy services 78,866 82,572 22,917 184,355 Training 60,361-16,829 77,190 Event and activities - 27,240-27,240 Cash grant 84,076 890,737-974,813 Management costs (Note 4) - - 201,813 201,813 Total for the year ended Dec. 31, 2014 223,303 1,000,549 241,559 1,465,411 Total for the period from June 19, 2013 to Dec 31, 2013 23.218 15.652 136,218 175,088 Accumulated up to Dec. 31, 2014 246.521 1.016.201 37147 0499 6 CASH IN BANK December 31, 2014 2013 USD USD Current account - USD 16,621 175,482 Current account - YER 4,139 373 7 Subsequent events 20,760 175,855 Lately, the Republic of Yemen suffered from political, security and economic crises, which starting from March 2015 resulted in a decline of the country's business and economic activities. As a precautionary measure, the IDA suspended all missions to Yemen from January 23, 2015. Based on the IDA letter to the Minister of Planning and International Cooperation in Yemen dated March 11, 2015, the right of the Republic of Yemen to make further withdrawals out of the proceeds of any IDA credit, or IDA grant, or any grant administered under any Trust Fund is suspended from 12:01 am, Washington DC time of March 11, 2015. The final resolution and the effects of the above events are difficult to predict due to the events' continuation at the date of issuing the financial statement for the year 2014. 7