TAY AUDITORS' REPORT ON THE FINANCIAL STATEMENTS OF SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A UNDER THE AFRICAN UNION COMMISSION AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2018 TAY & Co. Chartered Certified Accountants & Authorized Auditors Addis Ababa, Ethiopia Tel. 251-11-442-1336 Fax 251-11-442-1338 E-mail: tayco(@ethionet.et P.O.3ox 1335 Addis Ababa, Ethiopia Ethio-china Friendship Street Wongelawit Tadesse Building 1st Floor Website: www.tayauditine.com TAY INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS OF SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A UNDER THE AFRICAN UNION COMMISSION Opinion We have audited the financial statements of Support for Capacity Development of the African Union Commission and Other African Union Organs Project Grant No. IDA H939- 3A under the African Union Commission, which comprise the Balance Sheet as at 31 December 2018, and the Statement of Income and Expenditure, Statement of Changes in Net Asset, Statement of Cash flows and the Statement of designated account for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the Projecting financial statements present fairly, in all material respects, the financial position of the Support for Capacity Development of the African Union Commission and Other African Union Organs Project under African Union Commission as at 31 December 2018 and its receipts and payments for the year then ended in accordance with the International Public Sector Accounting Standards (IPSAS). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accounts (IESBA Code) together with the ethical requirmets that are relevant to our audit of the financil statmetns in Ethiopia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our nancial statements of the current period. These matters were aFr ship Street, Wengelawit Tadesse Building 1st Floor Tel. (011) 442 1336, 442 0062, (011) 470 7092,(011) 470 7094 - Mob.(093) 011 4106, (091) 151 5038/39 Fax (011) 442 1338 - e-mail: info@tayauditing.com - www.tayauditing.com - P.O. Box 1335 - Addis Ababa, Ethiopia addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Responsibilities of the Management and those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting policies of the Commission/ IPSAS, and for such internal control as management determines is necessary to enable the preparation of a project report that is free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the project report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit 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. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 2 /Z: * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonable be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statement of the current period and are therefore the key audit matters. We describe these, matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor's report is Ato Yeheyis Bekele, BA, FCCA. TAY & Company Addis Ababa Chartered Certified Accountants & 7 June 2019 Authorized Auditors 3 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 2017 Note USD USD CURRENT ASSETS Cash and Bank balance 6 497,331 1,723,506 Debtors 7 310,969 59,739 808,300 1,783,245 CURRENT LIABILITIES Creditors 8 760,902 396,072 NET ASSETS 47,398 1,387,173 REPRESENTED BY: FUND BALANCE 47,398 1,387,173 'JAN Al"(1' ,> \ AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 31 DECEMBER 2018 2017 INCOME Note USD USD Grants received during the year 9 669,068 3,312,958 Other income 11,975 2,275 681,043 3,315,232 EXPENDITURE BY COMPONENT Strengthening Institutional Capacity 10 1,136,477 1,053,566 Facilitating Economic Development Results With St 11 86,790 299,717 Project Management and Leaning 751,385 607,586 Project Audit Fee 2,000 518 1,976,652 1,961,387 Surplus/Deficit for the year (1,295,609 1,353,845 I5 5 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A STATEMENT OF CHANGE IN NET ASSET FOR THE YEAR ENDED 31 DECEMBER 2018 2017 USD USD Balance as at 1st, January 2017 33,327 (1,124,483) Surplus/Deficit for the year 1,353.845 1,157,810 Balance as at 31st December 2017 1,387,173 33,327 Current period change: Surplus for the year (1,295,609) 1,353,845 Prior period adjustment 44166 - Balance as at 31st December 2018 47,398 1,387,173 6 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMIMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2018 Cash flow from Operating activities 2017 USD USD (Deficit)/Surplus for the year (1,295,609) 1,353,845 Net Increase in debtors (251,230) (36,013) Net Decrease in creditors 364,830 (443,236) Net Cash inflow from Operating Activities (1,182,009) 874,597 Prior period adjustment 144,166) - Net Increase in cash and cash equivalent (1,226,175) 874,597 Cash and cash equivalent at the beginning of the year 1,723,506 848,909 Cash and cash equivalent at the end of the year 497,331 1,723,506 7 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A STATEMENT OF DESIGNATED ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 Account number: 1000092522068 (USD account) Depository bank Commercial Bank of Ethiopia Related Credit and Grant: IDA H939-3A Address: Addis Ababa, Ethiopia 2017 USD USD Initial Balance 1,715,437 843,981 Add: Transferred from the World Bank 669,062 2,977,840 Others (unused imprest advances,refunds) 237,685 131,929 906,747 3,109,768 Funds available for use 2,622,184 3,953,749 Less: Transfer to project Birr account 250,000 124,481 Payments during the year 1,892,831 2,113,831 2,142,831 2,238,312 Ending Balance 479,353 1,715,437 8 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 1 Background The African Union Commission (AUC) and the International Development Association (IDA) made an agreement on 8th August 2014 to implement a program entitled 'Support for Capacity Development of the African Union Commission and other African Union Organs Project' Grant No. IDA H939-3A,Contract No. AUC/CDP/LCS/01-2015.The International Development Association has agreed to provide Twenty Five Million US$ (SDR 16.5 Million ) to the African Union Commission. The Project initially has run from 05 November 2014 to 31 December 2018. Subsquently, the closing period is extended to 30 June 2021. 2 Project description The objective of the project is to strengthen the African Union Commission's capacity to facilitate economic development results and transformation through enhanced institutional efficiency and consists of two pails: A. Strengthening Institutional Capacity; and B. Facilitate Economic development results with stakeholders. 3 Audit Scope The audit of the Program is carried out in accordance with International Standard on Auditing (ISA) promulgated by the International Federation of Accountants (IFAC) including such test and procedures as deemed necessary under the circumstances. 4 Audit Methodology We conducted the audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. During the audit we have given special attention that: a) The World Bank financing has been used in accordance with conditions of relevant financing agreements with due attention to economy and efficiency and only for the purpose for which the financing was provided. b) Goods, works and services financed have been procured in accordance with the relevant financing agreements including specific provisions of World Bank procurement policies and procedures. c) All necessary supporting documents, records, and accounts have been maintained in respect of all project activities, including expenditures reported using Interim Unaudited Financial Report (IFR) methods of reporting. \\T I<7 or9 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 d) Designated accounts have been maintained in accordance with the provision of relevant financing agreements and funds disbursed out of the accounts were used only for the purpose intended in the financing Agreements. e) Relevant laws and regulations have been complied with, and that the financial and accounting procedures approved for the project were followed and used f) Financial performance of the project is satisfactory g) Assets procured from project funds exist and there is verifiable ownership by the implementing agency or beneficiaries in line with the financing agreement. h) Ineligible expenditures included in withdrawal applications are identified and reimbursed to the Designated Accounts and separately noted in the audit report. 5 Accounting Policies The principal accounting policies adopted and consistently applied by the Commission are set out below: Basis of Preparation The financial statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS) and the AUC financial rules and procedures. Income Income represents amounts received in USD from International Development Association. Income is recognized when the funds are received into the project's bank. Other Income Other income is in respect of refund from unused air ticket cost. ExDenditure Expenditure represents amounts disbursed and costs incurred denominated in USD. Taxation The AUC has agreement with the host county, the Federal Democratic Republic of Ethiopia, for exemption of any taxes. Foreign currency transactions Cash receipts and payments arising from transactions in currencies other than the reporting currency are recorded using the actual rate of exchange. Cash balances held in foreign currency are reported using the closing rate. Any gains or losses of foreign currency transactions/balances are dealt within the statement of income and expenditure. 11 (Z 1! 0 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 6. Cash and Bank Balance 2017 USD USD Commercial Bank of Ethiopia-ETB account 17,978 8,069 Commercial Bank of Ethiopia-USD account 479,353 1,715,437 497,331 1,723,506 7. Debtors 2017 USD USD Travel advance 1,157 8,510 Supplier advance 18,182 875 Receivable from regional offices and organs 14,765 33,979 Receivable from General Fund 276,865 16,375 310,969 59,739 8. Creditors 2017 USD USD Payable to suppliers 432,208 301,574 Regional Offices claims from HO 51,389 344 Staff creditors - 1,782 Other payables 156,643 12,334 Accrued leave payable 120,662 80,038 760,902 396,072 9. Receipt during the year Application No. Date per receipt Amount in USD Withdrawal account 22 27/8/2018 669,068 o?( (/p, ' AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 10. Strengthening Institutional Capacity 2017 USD USD Roll out and implementation of skills development based on the revised L&D strategy Enhancement of internal communication and development of AU family network Training of trainers and curriculum development for the Balance 94,944.25 Scorecard in collaboration with SPPMERM Peer exchange program with Organization of American States (OAS) 48,782.36 judicial bodies Develop AU communications competency 52,796.70 Enhancing finances reforms through consultancies services & workshopsprocurement manual, Au Warehouse guidelines, AU fixed 25,498.17 asset or (property, plant and equipment) policy Improve Internal and External Communication to better manage - 53,745.11 stakeholder expectations within AHRM Develop and implement SOPs to guide AHRM processes for efficient and effective service delivery - 26,426.00 Consultancy services for the learning and development Strategy for AUC and develop a culture of continuous improvement by all staff - 103,370.98 through skills training and Finalize the development and roll out of Review financial rules and regulations (FRR) 29,250.00 - AUC Network enhancement 132,980.43 84,872.24 On the job learning and closing of performance gaps through coaching and mentoring as well as formal training in the organization - 210,926.95 Support the smooth running of IMIS - 9,325.75 Marketing the AU, social media outreach and flagship program on Google, Facebook, Twitter and Purchase of web template and - 4,125.00 graphics (DIC) Joint meeting of IPSASB regional round table and high level meeting on PFM 224,301.49 IPSAS - Continuous adherence to the IPSAS standards and 106,215.07 implementation of audit recommendations SAP Budget Module 87,747.50 - Establishment of Courtroom Technology - 11,131.92 Integration of Quick-books to SAP 31,849.74 - 1-2. AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 10. Strengthening Institutional Capacity- Continued 2017 USD USD SAP BPC Module implementation - 77,355.00 Implement Grant Management Module, Training on Grant Management Module Policy Formulation, Approval and Implementation - 5,125.43 Organize PBFA team Building & Performance Evaluation Workshop - 46,038.18 Oversight visits to the AU Regional Offices/Organs - 34,361.70 IPSAS Implementation Technical Task Force Meeting; Task force reviews to address gaps identified during annual external audit; - 86,931.65 IPSAS compliance following Gap analysis review Implementation of Accounting Processes and Policies following roll- - 46,799.85 out of SAP to regional offices and Organs Quick books interface - 47,600.00 Understanding the AU - 5,133.22 Interfaith Dialogue . _ _ Peer to peer learning (to Mexico, Colombia, South Africa, Ghana, Benin, OAS, Chile, Caricom) #REF! 20,971.34 2017 Judicial Dialogue - Pre Dialogue Meeting - 108,029.49 1,136,477.35 1,053,565.98 i<~~ ' \7: 3 t, AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 11. Facilitating Economic Development Results With Stakeholders 2017 USD USD Organization of the Africa Industrialization Week with a focus on the private sector involvement in industrialization. Organization of Coordination Meetings (EPAs and WTO Negotiations) 82,068.40 Coordinate Member States common positions on AGOA - Support to National Statistical Agencies - 79,1I90.01 Participation in Monitoring and Evaluation workshops and seminars - 15,661.54 Consultancy Project Management TID - 75,627.29 Legal Associated programme - 129,238.31 86,789.59 2--99,77.15 14 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 ANNEX 1- RECONCILIATION OF DISBURSEMENT WITH RECEIPTS Disbursed by Received by World Bank in AUC in USD USD IDA Grant 669,068.00 669,068.00 15 AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 ANNEX 2- LIST OF WITHDRAWAL APPLICATIONS Withdrawal applications for advance to designated account: Application No. Date per receipt Amount in USD Withdrawal account 22 27/8/2018 669,068.00 669,068.00 Withdrawal applications for documentation of prior advance to designated account Application No. Date per receipt Amount in USD Withdrawal account 20 21/6/2018 197,758.31 Withdrawal account 21 21/6/2018 828,948.45 Withdrawal account 23 25/8/2018 568,041.13 1,594,747.89 ;e - -1 /cl AFRICAN UNION COMMISSION SUPPORT FOR CAPACITY DEVELOPMENT OF THE AFRICAN UNION COMMISSION AND OTHER AFRICAN UNION ORGANS PROJECT GRANT NO. IDA H939-3A NOTES TO THE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 ANNEX 3- FIXED ASSET SCHEDULE To date fixed asset amounting of USD 3,497,638.6 were purchased from the project fund. We reviewed the fixed asset register and we understood that there was no fixed asset purchased during 2016, 2017 and 2018 operating periods. Fixed asset register has been kept in SAP and all the assets are tagged. Fund Center GL Description Amount in USD IAHRO1813 190020 Communications Equipments 190,020.00 IAHRO 1813 190060 Office Equipments 213,504.00 IAHRO1813 190520 Computer and Accessories 2,246,140.00 1CON00404 190520 Conference IT Equipments 847,974.60 3,497,638.60 17