I'77IH* '"I'th*tC Ref. NoThe Federal Democratic Republic of-Ethiopia +- jD"r3- o I

Ministry of Finance Date

e World Bank

Ethiopia Country Office

Addis Ababa 04 JAN 2019

Dear Sirs:

Subject: Submission of General Education Quality Improvement Project-II IDA Cr.No.53150,

GPE Grant No. TF 016684,TF 0A4619, TFOA4701, MDTF Grant No.TF 18053 andTFOA6267Annual financial audit report for the period ended July 7, 2018(EFY 2010).

Attached here with please find the annual financial Audit Report for the year ended

July 7, 2018 (EFY 2010)

> Annual Audit findings and recommendations (one copy)

> Independent auditors' report on the financial statements (one copy)

> Independent auditors' report on designated and pool birr account statements

Thank you for your usual cooperation.

'TheF

Sincerely Yours,

zVgale

Channel Onc Prorams toordictingDirectorute Director

CC.O

* Ministry of Education o .Addis Ababa

* Channel-. One Prnrams, Cordination Directorate

* GEQIP program follow upMoF

Ah 7.*. 4-hA m h4. )L+*ATel 251-11-155 24 00, 22 66 98 P.O.Box 1905,1037 Fax 251-11-156 01 24,55 14 96 Addis Ababa-Ethiopia

251-11-155 00 81,83 86 89 251-11-155 11 38

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The Federal Democratic Republic of EthiopiaAudit Services Corporation

0 4 JAN 2019INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFMINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II

We have audited the accompanying financial statements of General Education QualityImprovement Program Phase II of the Federal Democratic Republic of Ethiopia, Ministry ofFinance, which comprise the balance sheet as at 7 July 2018, and the statement of sources and usesof funds and the designated account statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.

Responsibility for the Financial Statements

The Ministry of Finance (MoF) is responsible for the preparation and fair presentation of thesefinancial statements in accordance with the Ethiopian Government's Manual of the FederalAccounting System which is based on a modified cash basis of accounting and for such internalcontrol as it determines is necessary to enable the preparation of financial statements that are freefrom 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. Weconducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures 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, whetherdue to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financial statements in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financialstatements.

1 251-011-5515222 Fax 251-011-5513083 E-mail: ASC@ethionet.com 2 5720251-011-5535012251-011-5535015251-011-5535016

INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFMINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II (continued)

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

Opinion

In our opinion the financial statements give a true and fair view of the financial position of GeneralEducation Quality Improvement Program Phase II (GEQIP II) of the Federal Democratic Republicof Ethiopia, Ministry of Finance as at 7 July 2018 and of its financial performance and its sourcesand uses of funds for the year then ended in accordance with the Ethiopian Government's Manualof the Federal Accounting System which is based on a modified cash basis of accounting.

Reports on other requirements

As required by the World Bank guidelines we report that, to the extent we can assess:-

- all external financing has been used in accordance with the conditions of the relevantfinancing agreements, with due attention to economy and efficiency, and only for thepurposes for which the financing was provided;

- counter-part funds have been provided and used in accordance with the financingagreement and only for the purposes for which the financing were provided;

- goods, works and services financed have been provided in accordance with the relevantfinancing agreement and disbursement letters;

- all necessary supporting documents, records and accounts have been maintained in respectof all Program activities;

- the funds disbursed covered expenditures that are eligible for financing under IDA CreditNo. 5315 ET, Multi Donors Trust Fund 18053, TF 0A6267, Global Partnership for EducationFund 16684, TFOA4619 and Education for all Fast Track Initiative Catalytic Trust Fund GrantNo TFOA4701

- our examination revealed no weaknesses or irregularities in the systems of internal controlsover financial expenditure other than those reported in our management letter; and

a-sc-

* 2

INDEPENDENT AUDITOR'S REPORT ON THEFINANCIAL STATEMENTS OFMINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II (continued)

- with respect to IFR based withdrawal applications submitted during the year ended 7 July 2018and listed on page 12, in our opinion;

a) the applications together with the procedures and internal controls involved in theirPreparation can be relied upon to support the relevant withdrawals;

b) adequate supporting documentation has been maintained to support claims to the WorldBank for reimbursements of expenditures incurred; and

c) Which expenditures are eligible for financing under IDA Credit No. 5315 ET, MultiDonors Trust Fund 18053, TF 0A6267 ,Global Partnership for Education Fund 16684,Education for all Fast Track Initiative Catalytic Trust Fund Grant No TFOA4619 andTFOA4701

I J a2

S eA/ eP-A CO re

3 January 2019

* 3

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASEBALANCE SHEETAS AT 7 July 2018

2017Notes Birr Birr

CURRENT ASSETSDebtors 3 57,095,157 11,105,175Cash and bank balances 4 139,537,468 319,728,957

196,632,625 330,834,132CURRENT LIABILITIES

Creditors 5 3.191,353 4,889,682

NET CURRENT ASSETS 41.223

REPRESENTED BY

ACCUMULATED FUND 6 193,441.2 325944,4

The notes on pages 6 to 13 form an integral part of these financial statements.

4

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II

STATEMENT OF SOURCES AND USES OF FUNDSFOR THE YEAR ENDED 7 JULY 2018

Cumulative forthe period from

Year ended 18 February 20147 July 2018 to 7 July 2018 7 July 2017

Birr Birr Birr

SOURCESIDA credit and grant 515,382,879 2,310,841,786 191,938,238Multi donors trust fund 659,523,808 3,172,536,177 1,175,387,779

Global Partners for Education 1,280,437,135 3,117,825,293 211,384,158Fast Track Initiative Catalytic Trust Fund 189,400,400 189,400,400 -

Fund transfer from teachersDevelopment Program (TDP) - 43,575,894 -

Gain on foreign exchange 4,843.895 41,296,518 15,599.8192,649,588,117 8,875,476,068 1,594,309,994

Direct payment and special commitmentIDA Credit and grant 73,868,699 331,946,094 214,847,374

Multi donors trust fund 608,825,661 1,128,204,186 356,191,699

Global Partners for Education 31.587,019 31,587,019 -3,363,869,496 10,367,213,367 2,165,349,067

USESPre-service education quality

improvement 412,858,583 968,856,100 243,268,706In-service education quality

improvement 674,409,533 1,368,683,172 232,593,059

School grants 1,402,612,568 5,391,905,152 1,249,269,775School improvement program 41,364,721 103,840,353 37,579,221

Teaching and learning materials 759,521,005 1,701,425,102 642,699,270

Capital development for educationplanning and management 14,424,090 28,448,940 -

Capital development for school

planning and management - 39,531,810 -Education materials - 63,530,869 12,061,602

Curriculum reforms and implementation 14,751,819 17,614,993 1,178,781

Program coordination 29,201,301 85,982,820 23,922,590Monitoring and evaluation 3,076,419 15,902,772 3,364,103

Assessment and examination 9,117,744 33,808,683 7,379,053

Inspection 35,961,592 71,255,043 19,552,454

Communication 15,545,610 68,128,640 45,614,638

Licensing 42,673,337 152,226,408 38,661,769

National policy and institution for ICT - 14,830 -

Leadership program 10,259,601 12,979,534 2,719,933

Support and capacity building 30,594,751 49,636,874 19,042,123

3,496,372,674 10,173,772,095 2.578,907,077(DEFICIT)/EXCESS OF

SOURCES OVER USES (132.503.1 193.441.272 (4A13558,010)

The notes on pages 6 to 13 form an integral part of these financial statements.

5

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE IIUSD DESIGNATED ACCOUNT STATEMENTFOR THE YEAR ENDED 7 JULY 2018

For the Year ended 7 July 2018Account number 0100101300482Depository bank National Bank of EthiopiaAddress Addis Ababa, EthiopiaRelated credit IDA Credit No. ET- 5315, Multi Donors Trust Fund Grant No. TF-

18053, TFOA 6267,Global Partnershipfor Education Fund TrustGrant Nos TF-16684 and TF-0A4619,Education for All- Fast TrackInitiative Catalytic Trust Fund Grant No TF-0A4701

Currency USD

USD Ethiopian Birr

Beginning balance 8 July 2017 5,351,756.88 123,780,249.71

Add:Fund received during the year 105,519,848.87 2,644,744,222.00

110,871,605.75 2,768,524,471.71Less:Transfer to pool Birr account 110,435,833.00 2,761,448,759.94Transfer to Ministry of Education 186,431.26 5,075,116.82

110,622,264.26 2,766,523,876.76

249,341.49 2,000,594.95Gain on foreign exchange 4,803.086.55

Ending balance - 7 July 2018 823 .5

The notes on pages 6 to 13 form an integral part of these financial statements.

6

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II (GEQIP II)NOTES TO THE FINANCIAL STATEMENTS

1. PROGRAM INFORMATION

The objective of the General Education Quality Improvement Program Phase II (GEQIPII) isto support Ethiopia's efforts to increase the quality of general education within its territorythrough improving teaching and learning conditions in schools as well as enhancingmanagement planning and budget capacity of the Ministry of Education and of the RegionalEducation Bureaus respectively. In an agreement dated 5 December 2013, under creditnumber 5315 ET, the International Development Association (IDA) agreed to extend a creditin an amount equivalent to Special Drawing Rights (SDR) variously "credit and financing" toassist in financing the Program which will be supervised through the Ministry of Educationwith MoF being responsible for overall financial management of the Program.

The Program is also financed by:-

a) The World Bank administered Grant Agreement Multi Donors Trust Fund Grant No.18053- USD 212,065,446 and Grant No.TF 0A6267- USD 18,190,979;

b) Global Partnership for Education Fund Grant No. 16684-USD 100,000,000;c) Education for all Fast Track Initiative Catalytic Trust Fund Grant No. TF 0A4701-USD

7,000,000 andd) Global Partnership for Education Fund Grant No. TF 0A4619-USD 62,500,000

The government also intends to contribute the equivalent of approximately USD 78 millionof its own funds to assist in the financing of the GEQIP Program. The proposed AdaptableProgram Loan (APL) will be implemented in two phases. The first phase is for over a periodof four years and the second phase is also for over a period of another four years respectively.The second phase of GEQIP has the following parts.

Part I - Curriculum, text books and assessment, examination and inspection

Part 11 -Teacher development program

Part III - School improvement program

Part IV - Management and capacity building

Part V - Improving the quality of learning and teaching through the use of information andcommunication

Part VI -Program and coordination, monitoring, evaluation and communication of theGEQIP

* 7

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE II (GEQIP II)NOTES TO THE FINANCIAL STATEMENTS (continued)

1. PROGRAM INFORMATION (continued)

The above financers Program closing time and application deadline is as follows:-

Program Closing Application DeadlineFinancer Date

International Development 31 December 2018 30 April 2018Association IDA Credit No.53150 ET

Multi Donors Trust Fund 31 December 2018 30April 2018Grant No. TF 18053 andTF A6267

- Global Partnership forEducation Fund Grant No. 16 February 2018 16 June 2018TF 16684

- Global Partnership forEducation Fund Grant No. 31 December 2018 30 April 2018TF A4619

Education for all Fast 30 April 2018 31 August 2018Track Initiative CatalyticTrust Fund Grant No. TFA4701

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Program, which are consistent withthose applied in the previous years, are stated below.

a) Basis of preparation

These financial statements are prepared on a modified cash basis and in accordancewith the accounting policy of the Government of the Federal Democratic Republic ofEthiopia.

b) Currency

These financial statements are presented in Birr. Transactions in foreign currenciesare translated into Birr at the approximate rates of exchange prevailing at the dates ofthe transaction. Balances in foreign currencies at the balance sheet date are translatedat the rate of exchange prevailing on that date.

* 8

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE IINOTES TO THE FINANCIAL STATEMENTS (continued)

3 DEBTORS2017

Birr BirrAmhara National Regiona State 2,645,874 1,006,519Benishangul Gumuz National Regional State 9,576 15,698Harrari People National Regional State 3,690 7Oromiya National Regional State 7,699,768 744,005Southern Nations, Nationalities and People's

Regional State 15,073,477 3,395,560National Regional State of Tigray - 32,547Addis Ababa University 83,970 79,269Dire Dawa City Administration 185,575 14Bahir Dar University - 1,837Dilla University 1,407,250 172,670Jimma University - 50Hawassa University 243 1,948

Mekele University 149,717 11Ministry of Education 26,447,229 2,955,109Addis Ababa City Administration 11,445 11,080Haromaya University 136,306 111,293

Adigrat University - 34,674Axum University 400,588 -Arbaminch University 5,352 1,760Medawelabo University 34,500 433,755Jigjiga University - 1,590,369

Afar National Regional State - 517,000Assosa University 390,196 -Wollega University 265,961Wolaita Sodo University 2,004,395

Ambo University 140,045

4 CASH AND BANK BALANCES

US Dollar account 6,803,682 123,780,250Main Birr account 4,410,227 11,301,948Cash and bank balances in

regional states and universities 128,323,559 184,646,7599 21AKQ

9

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE IINOTES TO THE FINANCIAL STATEMENTS (continued)

5 CREDITORS 2017I 2017Birr Birr

Addis Ababa City Administration 100,783 64,808Amhara National Regional State 2,730 92,795Benishangul Gumuz National Regional State 20,920 542,695Dire Dawa City Administration 508 140Harrari People National Regional State 8,761 424

Ministry of Education 1,219,442 453,530Oromiya National Regional State 457,729 165,798Southern Nations, Nationalities and

People's Regional State 625,983 1,905,341Somali National Regional State - -Tigray National Regional State 100 30,763Afar National Regional State - 158,750

Addis Ababa University 14,772 2,676

Adigrat University - 497,250Ambo University - 24,915Arbaminch University 10,003 10,728Axum University 59,042 23,649Wollega University 4,404 21,683Debre Birhan University 40,866 9,780Dilla University 194,149 289,494Haromaya University 147,751 5,415

Hawassa University - 129,920Mekele University 38,277 -Meda-Welabo University 9,791 441,233

Welayta-Sodo University 8,211 -Wollo University - 60Jimma University 177,370 17,838Assossa University 13,853 -MoFEC Adminstration 35,908

3.191,353 48962

10

MINISTRY OF FINANCEGENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE IINOTES TO THE FINANCIAL STATEMENTS(continued)

6 ACCUMULATED FUNDBirr

Balance at 8 July 2017 325,944,450

(Deficit)/Excess of Sources over Uses

of funds of the current year (132,503.178)

Balance at 7 July 2018 193,44127

7 DATE OF AUTHORIZATION

Channel One Programs Coordinating Directorate Director of The Federal Democratic Republicof Ethiopia, Ministry of Finance authorized the issue of these financial statements on 3January 2019

IVIEIN IKY UYYE INAINCE

GENERAL EDUCATION QUALITY IMPROVEMENT PROGRAM PHASE IIIFR BASED WITHDRAWAL SCHEDULEFOR APPLICATIONS submitted during from 8 July 2017 to 7 July 2018

Application Number USD BIRR

Balance 8 July 2017 331,836,517.00 6,923,315,356

GEQIP II -055 28,000,000.00 654,379,600GEQIP 11-056 10,535,833.72 246,229,809GEQIP II -054 20,000,000.00 467,708,000GEQIP II -058 7,000,000.00 189,400,400GEQIP II -057 9,059,957.15 245,137,073GEQIP II -062 1,751,182.00 47,674,879GEQIP II -064 28,983,935.48 789,070,253GEQIP I -063 188,940.52 5,144,208

105,519,848.87 2,644,744,222

437,356,365.87 9,568,059,578Application for special

commitment number

GEQIP II SCO04 528,809.22 14,400,110GEQIP II SCO05 1,451,618.88 39,529,324GEQIP II SCO06 581,756.80 15,840,598GEQIP II SC008 1,602,267.86 43,627,991GEQIP II SCO19 1,234,571.80 33,529,612GEQIP II SC020 987,948.98 26,782,184GEQIP II SCO21 17,537,792.06 429,408,899GEQIP II SC022 2,401,432.34 64,727,308GEQIP II SC023 545,306.17 14,848,333GEQIP II SC029 1,159,894.33 31,587,019

28,031,398.44 714,281,379

TOTAL 465.387.764.31 10.282.340.57-

12

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