performance audit of the support to community- led ... · tolosa gadafa bureau head oromia, bofed...

Document Classification - KPMG Confidential

Performance Audit of The Support to Community-Led Accelerated Water, Sanitation and Hygiene, COWASH, III July 2016–December 2018

Ministry for Foreign Affairs of Finland

Performance Audit of COWASH III, July 2016–December 2018 31 May, 2019

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Glossary

ACSI Amhara Credit and Saving Institution BG Benishangul-Gumuz Region BoE Bureau of Education BoFED Bureau of Finance and Economic Development BoH Bureau of Health BoMSE Bureau of Micro and Small Enterprises BoWA Bureau of Womens’ Affairs BoW Bureau of Water BoWR Bureau of Water Resources CMP Community Managed Project COWASH Community-Led Accelerated WASH CTA Chief Technical Advisor DECSI Dedebit Credit and Savings Institution EFY Ethiopian Fiscal Year ETB Ethiopian Birr EUR Euro FinnWASH The Government of Finland supported bi-lateral project FinnWaSH-BG FTAT Federal Technical Assistance Team GoF Government of Finland GoE Government of Ethiopia HO Ramboll Home Office HOC Home Office Coordinator JPO Junior Professional Officer M&E Monitoring and Evaluation MFA Ministry for Foreign Affairs of Finland MFI Micro Finance Institution MoFEC Ministry of Finance and Economic Cooperation MoWIE Ministry of Water, Irrigation and Energy Niras Niras Finland Oy NWSC NWTT

National WASH Steering Committee National WASH Technical Team

OCSSCO OneWASH

Oromia Credit and Saving Shareholder Company One WASH National Program

ONRS Oromia National Regional State O&M Operation and Maintenance PD Ramboll

Project Document Ramboll Finland Oy

RSU Regional Support Unit RWSC Regional WASH Steering Committee RWSEP Rural Water Supply and Environment Programme RWTT Regional WASH Technical Team SNNPR Southern Nations, Nationalities and Peoples’ Region TNRS Tigray National Regional State UAP Universal Access Plan WASH Water, Sanitation and Hygiene WASHCO Water Supply, Sanitation and Hygiene Committee WoFED Woreda Level Finance Bureau WSSD WWT

Water Supply and Sanitation Directorate Woreda Wash Team

ZoFED Zone Level Finance Bureau Calendar Converter

Ethiopian Fiscal Year Gregorian Period

EFY2009 8 July 2016–7 July 2017 EFY2010 8 July 2017–7 July 2018 EFY2011 8 July 2018–7 July 2019


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Tables

Table 1: Budget Utilisation in All Regions EFY2009 ............................................................................. 13

Table 2: Budget Utilisation in All Regions EFY2010 ............................................................................. 14

Table 3: TA Cumulative Budget Utilisation ............................................................................................ 15

Table 4: Oromia Realisation of Planned Activities for EFY2009 and EFY2010 .................................... 22

Table 5: Oromia Fund Utilisation for FY2016/2017 and FY2017/2018 ................................................. 24

Table 6: Tigray Realisation of Planned Activities for EFY2009 and EFY2010 ..................................... 27

Table 7: Tigray Fund Utilisation for EFY2009 and EFY2010 ................................................................ 29

Table 8: Amhara Realisation of Planned Activities for EFY2009 and EFY2010 ................................... 31

Table 9: Amhara Fund Utilisation for EFY2009 and EFY2010 ............................................................. 33


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Contents

1 Introduction 1

1.1 Scope and Execution 1

1.2 List of Interviewed Persons 2

2 Executive Summary 5

3 Background and Structure 7

3.1 Background of Project 7

3.2 Project Structure 8

4 Project Management 10

4.1 Governance 10

4.2 Channel of Funding 11

4.3 Performance and Utilisation of Funds 13

4.4 Project Reporting and Monitoring 16

4.5 Follow-up of Previous Audit Recommendations 18

5 Regions 20

5.1 Management Structure in Regions 20

5.2 Financial Management and Reporting 20

5.3 Oromia Region 21

5.4 Tigray Region 26

5.5 Amhara Region 31


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Document Classification - KPMG Confidential 1

1 Introduction

1.1 Scope and Execution

Scope

The Assignment is based on the Framework Agreement and the Terms of Reference (ToR) between the Ministry for Foreign Affairs of Finland (MFA) and KPMG Oy Ab. The objective of the Assignment is to support the risk management and capacity building in Community-Led Accelerated Water, Sanitation and Hygiene (COWASH) Project, focusing particularly on various management and administration related issues, such as the implementation of the Community managed Project (CMP) modality. The target is to assess the performance and implementation, the achievement of the objectives and the progress of the results-based management. The objective is also to review the practises for utilisation of funds, internal control and risk management as well as the financial administration.

The audit examines the period of 2 and half years: July 2016–December 2018, Ethiopian Fiscal Years (EFY) 2009–2011. The Assignment specifically focuses on financial and accounting issues, performance issues as well as administration and governance issues.

Execution

The Assignment was conducted by KPMG Oy Ab. Anders Lundin, Authorised Public Accountant and Kati Nikunen, Authorised Public Accountant were responsible for the overall Assignment. The field work was carried out by KPMG Finland with the support of A. A. Bromhead & Co. Chartered Accountants. The Assignment was performed in good co-operation with the parties involved. We would like to express our appreciation for all parties involved.

The Assignment was performed as on the spot at the Project Home Office in Espoo, Finland, Federal Technical Assistance Team (FTAT) Office in Addis Ababa, Ethiopia and in the Project implementation areas in the Amhara, Oromia and Tigray Regions, Ethiopia. The field work took place in March–April 2019.

The report presents the main observations and risks identified during the Assignment as well as recommendations to improve the management procedures. KPMG has given all the observations a risk & significance classification and a recommendation on the basis of the prioritisation. Risks have been classified into four categories:

Critical Risk Corrective actions are required immediately.

Significant Risk Corrective actions are required as soon as possible.

Moderate Risk Correcting measures are to be carried out within a reasonable time.

Minor Risk Corrective actions are to be taken simultaneously with other relevant measures.

According to the agreement between the MFA and KPMG, the final report is for the MFA’s internal use only.


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1.2 List of Interviewed Persons

Name Position Organisation

Arto Suominen CTA FTAT

Abebaw Getachew M&E Specialist COWASH FTAT

Paulos Biyasazenew Financial Management Specialist FTAT

Elis Karsten Home Office Coordinator Ramboll

Terhi Pakkanen Project Assistant Ramboll

Tigray Region

Nigsti Aydebeb Director of Treasure Finance Tigray, BoFED

Getachew Fekadu Water Supply Directorate Tigray, BoWR

Mebrat Kahsay WASH – Team Leader Tigray, BoFED

Amgre Zerichmen Channel One Coordinator Tigray, BoFED

Mulu Glmdhin Accountant Tigray, BoFED

Meaza Aboy Accountant Tigray, BoFED

Mehret Seyoum Accountant Tigray, BoFED

Mulugeta Berhe Internal Auditor Tigray, BoFED

Solomon G/tsaddik COWASH Coordinator Tigray, RSU

Birhan W/gebreal COWASH MSE & Gender Specialist Tigray, RSU

Girmay Abrha COWASH Sanitation and Hygiene Specialist Tigray, RSU

Araya G/meskel COWASH Financial Specialist Tigray, RSU

Mulu Gebremedhin Accountant Tigray, BoMSE

Mulugeta Grma MSE Focal Person Tigray, BoMSE

Meaza Abay Kahsay Project Accountant Tigray, BoE

Yirgalem Surafel Project Accountant Tigray, BoH

Tamrat Desta Head Endamehoni WoFED

Aligus Eyasu Accountant Endamehoni WoFED

Desta Berhe CMP Supervisor Endamehoni Water Office

Amanuel Ixlendifraw W.S. Engineer Endamehoni Water Office

Tazez Tsadilz Sub-branch Manager Endamehoni DECSI

Girmanesh Nigus Administrator Endamehoni Woreda

Tassew Tlumay CMP Supervisor Degua Temben Water Office

Glitier Decsalegn Head Degua Temben WoFED

Samlawit Hagol Accountant Degua Temben WoFED

Haftu Gebrekidan Head Degua Temben Education Office

Krhli Glmeskel Head Degua temben WRM and Energy Office

Gebremeskel Reda Head Degua Temben Health Office

Tsena Hislassie Accountant Degua Tembern DECSI

Oromia Region

Tolosa Gadafa Bureau Head Oromia, BoFED

Tesfaye Chemada Deputy Bureau Head Oromia, BoFED

Fantahun Bersisa COWASH Accountant Oromia, BoFED

Tibebu Telila COWASH Director Oromia, BoFED


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Melkamu Deiju RSU Team Leader Oromia, RSU

Kefyalew Kebede COWASH Financial Management Specialist Oromia, RSU

Dereje Paulos Monitoring & Evaluation Specialist Oromia, RSU

Tibebu Abebe Planning, Budgeting, Monitoring and Evaluation Director

Oromia, OCCSCO

Girma Bayessa Deputy Bureau Head Oromia, BoE

Kisi Abushu Financial Directorate Oromia, BoE

Bedriya Husen COWASH Accountant Oromia, BoE

Seyoum Abera Administrator Abichugena Woreda

Aklilu Abera Office Head Abichugena WoFED

Askale Abera Accountant Abichugena WoFED

Seifa Tesfaye Office Head Abichugena Water Office

Gebryes Getu CMP Supervisor Abichugena Water Office

Darne Abera Focal Person Abichugena Education Office

Afrasa Gemechu Accountant Abichugena OCSSCO

Kebede Lenjisa Office Head Jeldu Water Office

Tayel Hlgiyonyrs CMP Supervisor Jeldu Water Office

Lefese Geremau Energy Expert Jeldu Water Office

Girma Diriba Office Head Jeldu WoFED

Disara Chewara Accountant Jeldu WoFED

Chala Mepersa Deputy Administrator Jeldu Woreda

Kebebe Guta Office Head Jeldu Health Office

Birhanu Megersa CDC Coordinator Jeldu Health Office

Urjessa Ajema Office Head Jeldu Education Office

Tolera Neda Focal Person Jeldu Education Office

Zawudee Guddisu Head Jeldu Women and Children Office

Tesfaye Bifessu Branch Manager Jeldu OCSSCO

Amhara Region

Abrham Kebede Team Leader Amhara, RSU

Animut Admasu Financial Specialist Amhara, RSU

Muluneh Genetu Planning and Monitoring Specialist Amhara, RSU

Tibebu Kumla Gelaw Business Data Manager ACSI Head Office

Shamawork Ayenew Accountant Gusgusha Shikudad ACSI

Tsegaye Adane CMP Supervisor Gusgusha Shikudad Water Office

Solomon Mersha Water Supply and Core Process Coordinator Gusgusha Shikudad Water Office

Amsalu Tiruneh Water Office Head Gusgusha Shikudad Water Office

Meselech Tesfaw Accountant Gusgusha Shikudad WoFED

Tiruwork Mekonnen Accountant Yilmana Densa WoFED

Kasaye Mulugeta ACSI Head Yilmana Densa ACSI


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Yichalal Shibabaw Water Office Head Yilmana Densa Water Office

Anwar Maru CMP Supervisor Yilmana Densa Water Office

Getnet Misganaw Water Supply and Core Process Coordinator Yilmana Densa Water Office

Ministry for Foreign Affairs of Finland

Marjaana Pekkola Counsellor Embassy of Finland in Addis Ababa

Jutta Marjanen Desk Officer MFA

In addition to this, KPMG interviewed WASHCO members, community members and other Project beneficiaries in Amhara, Tigray and Oromia regions.


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2 Executive Summary

The Community-Led Accelerated Water, Sanitation and Hygiene (COWASH) Phase III is a direct continuation of the previous phases. The Phase III is implemented in the same geographical areas, and the approaches, manuals and strategies from Phase I and II are used also in the Phase III. This Performance Audit focused on the COWASH financial management and accounting, administration and governance as well as performance. The Performance Audit covered Tigray, Oromia and Amhara regions and the federal level processes.

The Project has two fund flows: investment funding from the Government of Ethiopia (GoE) and capacity-building funding from the Government of Finland (GoF). The MFA funding is directed directly to the Federal Technical Assistance Team (FTAT) and to the respective regional Bureau of Finance and Economic Development (BoFED) for capacity building activities. Similarly the GoE funding for the investments and operational costs continues to be channelled through the respective regional BoFEDs. The Micro Finance Institutions (MFIs) are financial intermediaries for holding the implementation funds for Water Supply, Sanitation and Hygiene Committees (WASHCOs).

Based on the KPMG observations, the Project funds have been disbursed to the communities efficiently. The utilisation rate of capacity-building funding of GoF has been slightly higher than the investment funding of GoE, as the average utilisation rate in the regions in EFY2009–EFY 2010 (8 July 2016–7 July 2018) was around 70%. There was only small amount of undisbursed funds at BoFED. Reconciliations between the MFIs and the Woreda Water Offices were in place in the woredas visited by KPMG. However in some cases the observed minor discrepancies had not been clarified.

There are adequate reporting processes established and financial reporting has been developed throughout the Project implementation. However, KPMG observed that the agreements between the GoF and the regions do not define deadlines for the quarterly or annual reporting, and the regions have not been able to provide the quarterly reports according to the agreed reporting timeline. There has been differences between consolidated COWASH annual reports and region-level reports. COWASH has a web-based WASH facility system to track and monitor the achievement of facility construction targets, although it has not been kept systematically up to date at all times.

Until the end of EFY2010 (8 July 2017–7 July 2018), the regional BoFEDs have received around 68% for the GoF and GoE funding allocated for the three years of the Project. Majority of the budget has been transferred to beneficiary sector offices. The budget utilisation performance varies across the regions. TA budget utilisation is in line with the implementation schedule of the Project.

Based on the KPMG observations, the procurement guidelines, salary and per diem levels applied in COWASH are aligned with the Project Operational Manual (POM). Regarding the financial management practices, KPMG observed that the expenditure vouchers are not stamped as paid in any of the regions visited. In some audited woredas, deficiencies were noted in the audit trail, bookkeeping practices and fixed asset monitoring. In Tigray, the Bureau of Womens’ Affairs (BoWA) bookkeeping did not reconcile to the annual reports.

On a general level, KPMG observed that the FTAT had supported the capacity building of the RSU’s and regional bureaus and Regional Support Units (RSU’s) had taken measures to address the recommendations of the previous performance audit and mitigation plans were


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established. The Project has added resources to the financial reporting and, according to KPMG, this has contributed to the improved accounting processes. However, not all the recommendations were fully implemented in all regions. Considering the several contractual arrangements and different fund flow channels, the financial reporting for both the GoF and GoE funding sources are on an adequate level.


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3 Background and Structure

3.1 Background of Project

Water, Sanitation and Hygiene (WASH) is one of the three impact areas of the Finland's Country Strategy for Development Cooperation in Ethiopia in 2016–2019. The WASH cooperation between Finland and Ethiopia started already in the 1990s. So far, the cooperation has secured clean water for over 4.8 million people.

The COWASH Project has been implemented since 2011. The first phase of COWASH was implemented July 2011–September 2014 and the second phase October 2014–June 2016. Currently, the COWASH Project is in its third phase which will be implemented from July 2016 to June 2019, and the extension until June 2020 with additional funds of EUR 700,000 at the federal level and no additional funds at the regional level. The implementation strategy of COWASH is based on the Community Managed Project (CMP) approach, originally developed and implemented within the former Government of Finland -supported Rural Water Supply and Environment Programme in Amhara Region (RWSEP) and expanded within another Government of Finland –supported project, FinnWASH.

The CMP approach is one of the four implementation modalities recognised by WASH Implementation Framework of Ethiopia. The CMP approach gives the communities full responsibility for the water supply development process through planning, financial management, construction and maintenance management as well as participating in the implementation of the government WASH policies. The key feature of the CMP funding mechanism is that it transfers funds and project management responsibilities for physical construction or rehabilitation directly to the communities or relevant institutions such as schools and health facilities, thereby fully empowering communities as they are also responsible for fund management. The transfer of investment funds (grant) is carried through regional micro-finance institutions (MFIs). Also, operation and maintenance (O&M) funds are saved in the MFIs by the WASH Committees (WASHCOs).

The targeted impact of COWASH III is to contribute to achieving Ethiopia’s Growth and Transformation Plan II (GTP-II, July 2015–July 2020) targets for the WASH sectors in terms of water, sanitation and hygiene access coverage and quality of service delivery in selected rural areas in five Regions by using the CMP approach. The expected outcomes are: 1) Increased community and institutional water coverage 2) Increased community and institutional sanitation and hygiene coverage and usage 3) Increased functionality and sustainability of built WASH facilities through improved service delivery and 4) Increased Women’s empowerment and leadership through WASH related activities. The targets of COWASH I and COWASH II were the same for both phases. The overall objective was to achieve universal access to WASH in the rural areas of Ethiopia. Project target was to support the acceleration of Universal Access Plan (UAP) water and sanitation targets attainment through the establishment of an enabling environment and the implementation of CMP interventions in selected rural areas of Ethiopia.

The COWASH Phase III will be implemented in 76 woredas in 5 regions (Amhara, Tigray, Oromia, SNNP and Benishangul Gumuz). The locations of the Project areas are shown in the map below.


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The COWASH Project is structured in such a way that there are six agreements signed; i.e. one at federal level between the MFA represented by the Embassy of Finland and the Government of Ethiopia represented by the Ministry of Finance as well as five separate agreements between the MFA (represented by the Embassy) and each regional state represented by the respective Bureau of Finance & Economic Development (BoFED).

Accordingly, there are six independent steering committees established at each level conducting meetings biannually. For the Project implementation, there are six plans, then quarterly reports and fund requests which are submitted to the MFA through the Embassy. Moreover, separate annual audits are conducted at each region and reported back to the MFA through the Embassy.

The Government of Finland's support through the MFA to COWASH I and II was all together EUR 20,295,072. The MFA’s support (total disbursed) to the COWASH III is EUR 12,704,927, including the carry over funds from the previous phase (EUR 1,704,927). All in all, the budget for COWASH III, including also Ethiopian contribution, is EUR 36,636,745.

3.2 Project Structure

The COWASH has a technical assistance component that has been procured with open tendering. The project is implemented by the consultancy company Ramboll Finland Oy (Ramboll). The specialists of the technically assisted project work in the Ministry of Water, Irrigation and Energy (MoWIE) in the FTAT. However, most of the MFA’s support is sent from Finland directly to the five regions where the Project is implemented. In the regions, BoFED receives the funds from the MFA and then direct them further to the implementing sector offices.


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As indicated above, each region has a steering committee that makes decisions about the Project. At the federal level, the main responsibility for the implementation of COWASH is with the MoWIE, more precisely with the Water Supply and Sanitation Directorate (WSSD). The highest decision making body of the COWASH III is the National WASH Steering Committee (NWSC). NWSC has been established for the sector program (OneWASH) implementation. The NWSC calls separate annual meeting for COWASH mainly to review and approve annual reports and plans. Depending on the need, an additional meeting can be called. The National WASH Technical Team (NWTT) provides managerial oversight to the OneWASH Program. The main task of the NWTT regarding COWASH is to review the annual plans, budgets and reports of the COWASH and make recommendations to the NWSC. The NWTT meets prior to the NWSC meetings to handle issues of the COWASH implementation.

KPMG acknowledges there is complex program management structure in place and contractual arrangements with several parties and several parties are involved in the overall implementation and reporting. As a consequence, the MFA and the Embassy receive significant amount of reporting and need to participate the Regional Steering Committees which requires resources. However, the Project management has improved financial, accounting and reporting processes in the current Project structure thus it would be beneficial to continue with the current structure. We made a minor observation related to GoE fund flow which is presented in section 4.2.


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4 Project Management

4.1 Governance

As the COWASH Phase III is a direct continuation of the previous phase and implemented in the same geographical areas, the approaches, manuals and strategies from Phase I and II are used also in the Phase III. During the Inception Phase, the Results Framework has been updated and a Risk Management Plan as well as a detailed CMP-specific monitoring and evaluation (M&E) system has been established.

The key guiding manuals for the Project are the CMP Implementation Manual (published in December 2014) and the Program Operational Manual (POM, published in September 2014). The CMP Manual covers the institutional arrangements and responsibilities, funding application process, financial management, procurement, capacity building, reporting and M&E of the CMP projects. As the CMP method of financing does not fully align with the public finance management rules of the GoE, the POM has recognised the adjustments needed for community representatives to access public funds and community procurement. The POM is a guiding document for all development partners that implement One WASH National Program.

Procurements

According to the CMP Manual, the communities represented by WASHCO’s or other institutional groups are responsible for the implementation of the WASH facilities, including contracting the artisans and suppliers and procurement of the material. Woredas, zones and regions provide technical assistance to the communities regarding the procurement.

According to the WASHCO CMP Procurement Guideline (published in 2016), WASHCO’s have three procurement methods for goods, services and works, which are open tendering, proforma invoice/request for quotation and direct/single source procurement. Direct purchase for goods, services and labor is allowed up to ETB 10,000 and in exceptional situations where there is e.g. lack of suppliers and bidders. For procurements greater than ETB 10,000 (approximately EUR 300) proforma invoices or quotations need to be collected from three bidders. WASHCO’s can also opt for open tendering of any amount.

For turnkey contracting (covering the whole physical works), WASHCO’s can procure up to ETB 250,000 by open tendering and proforma invoice. In exceptional situations direct procurement can be made, but this needs to be approved by the WWT.

Salaries and Per Diems

The salaries and per diem levels applied within the OneWASH projects are stipulated in the POM. COWASH has taken the salary level indicated in the POM as a guideline when deciding upon the salaries of the RSU staff, as the COWASH posts are not completely equivalent to the posts indicated in the POM. Regional Steering Committees have the final decision over the RSU salaries.

The POM acknowledges the utilisation of multiple per diem rates within the OneWASH implementation. To harmonise the per diem levels within donor funded projects, the MoWIE issued in April 2016 the per diem level to be fixed to ETB 300 per day, and the community members’ allowance to ETB 100 per day. According to the voucher checks KPMG performed


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in the FTAT, regions and woredas, these rates have been applied in COWASH. The per diem levels were revised in January 2019 to be ETB 300 per day and for the community members ETB 125 per day.

4.2 Channel of Funding

The fund flow of COWASH has continued the same procedures as practiced during the previous phases. The MFA funding is directed directly to the FTAT and to the respective regional BoFEDs for capacity building activities. Similarly, the GoE funding for the investments and operational costs continues to be channelled through the respective regional BoFEDs. As in the previous phases, the MFIs will continue to be used as financial intermediaries for holding the implementation funds for WASHCOs. The Regional COWASH capacity building funds from the GoF funds will be defined based on the actual needs of the Regions and the actual investment and operational cost that the Region agrees to contribute during the annual planning stage. The main difference for the previous phases is that the funding at the regional level will be channelled directly from BoFED to the respective bureaus (Bureau of Water, Bureau of Health, Bureau of Education and Bureau of Women’s Affairs), not only through Bureaus of Water, Irrigation and Electricity. BoFED is the coordinating bureau of the fund-flow and responsible for managing the COWASH funds. According to the Programme Document, BoFEDs will provide financing/co-financing, attract and channel resources and coordinate financial monitoring and reporting. In some cases these functions are delegated to Regional Water Bureau and RSU.


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Fund Flow of Government of Finland

Funds are disbursed to Regional sector bureaus, Zone and Woreda Finance Offices according to the Annual Plans and budgets. BoFEDs request funds from the MFA. The Embassy of Finland comments the fund requests and submits them to the MFA for payment after the Regional Steering Committees have approved them. When the funds are received in Ethiopia, BoFEDs inform the receipt of funds to the Embassy of Finland with an official letter attached with the bank statement indicating the exchange rate used and euro amount received in the Ethiopian Commercial Bank regional office.

According to KPMG review, the fund flow of the GoF channel is efficient and processes for fund transfers are in place. The MFA has direct agreements with the Regions and fund utilisation monitoring and related controls are maintained in the BoFEDs. As noted in the previous audit, the annual activity plans and budgets are approved late, that is after the financial year has already begun. This is mainly due to GoE budgeting processes. As both the GoE and the GoF funding are approved in the annual plans, the delay affects both sources of funding and causes delays in fund transfers. However, the regions have the possibility to prepare a core plan to facilitate the fund transfers and implementation of annual activities prior to the approval of annual activity plans and budgets. From branch offices, funding is paid to WASHCOs.

Fund Flow of Government of Ethiopia

The COWASH intergovernmental agreement is signed between the Ministry of Finance and Economic Cooperation of Ethiopia (MoFEC) and the MFA for three years. The financial support provided by the GoE for community managed water and sanitation schemes is channelled from BoFED to the MFI and further to the MFI’s zonal branches and district sub-branches.

Funding is channelled through regional MFIs in three ways: In the SNNPR and Tigray Regions, BoFED transfers funds directly to MFI. In the Benishangul-Gumuz (BG) and Oromia Regions, BoFED transfers funds to Water

Bureau who transfers funds to MFI. In the Amhara Region, BoFED transfers funds to Water Bureau, Health Bureau and

Education Bureau that transfer funds to the MFI.

The CMP model ensures that the investment funding from the GoE funding is transferred directly to the community through the MFI. According to the Annual Performance Report, majority of the budget has been transferred to beneficiary sector offices and in the end of EFY2010 only 1.3% remained in COWASH account at BoFED. If BoFED has unutilised balance from the previous year, it is deducted from the future disbursements thus the balance cannot be transferred to the next year. According to KPMG review, the processes of fund flow for the GoE funds have improved in the Phase III. The more detailed observations about the fund flow are presented in the Chapter 5.

Observation, Risk and Recommendation

Observation The structure of GoE fund flow varies between different Regions. In the SNNPR and Tigray Regions, BoFED transfers funds directly to MFI. In other Regions, BoFED transfers the funds to different bureaus who transfer them further to the MFI.

Risk When several steps and organisations/units are included in the fund flow and disbursement of funds, it may slow down the implementation of the Project. Moderate.


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Recommendation COWASH should look into the possibility of streamlining the GoE fund flow in other Regions similar as in the SNNPR and Tigray Regions.

4.3 Performance and Utilisation of Funds

4.3.1 Regions

The budget allocation and utilisation of the funds is indicated in the Annual Performance Reports. Most of the budget is allocated for investment costs funded mainly from the GoE funding, except for the BG Region also from the GoF funding. Human capacity building and physical capacity building are funded by the GoF, and both the GoE and the GoF funds contribute to the operational costs.

In the EFY2009, the overall fund utilisation rate was 76%. The highest budget utilisation was in the Amhara Region (91%), and the lowest in the SNNPR (42%). According to the report, the main reason for the low utilisation in the SNNPR was a delay in the approval of the annual plan.

Table 1: Budget Utilisation in All Regions EFY2009

In the EFY2010, the overall utilisation rate was lower (64%) than in the EFY2009. The SNNPR utilisation rate was the highest of all the regions (77%), and the lowest was in Tigray (40%). The main reason for the low performance in Tigray was the delay in the drilling and construction of shallow wells contracted by the regional water bureau mainly due to long bureaucratic procurement process. Until the end of the EFY2010, the regional BoFEDs had received around 68% for the GoF and the GoE funding allocated for the three years of the Project. According to the Annual Performance Report, 98.7% of the budget is transferred to beneficiary sector offices and only 1.3% remains undisbursed.

The more detailed observations of the performance of Amhara, Oromia and Tigray Regions are presented in the Chapter 5.

Plan Utilised % Plan Utilised % Plan Utilised %

Amhara 47 689 397 43 294 659 91 % 106 519 600 97 097 672 91 % 154 208 997 140 392 331 91 %

SNNP 15 052 796 4 300 806 29 % 22 424 683 11 486 644 51 % 37 477 479 15 787 450 42 %

Tigray 15 583 285 12 354 768 79 % 26 478 580 13 319 839 50 % 42 061 865 25 674 607 61 %

Oromia 15 275 061 10 744 234 70 % 32 615 355 18 482 808 57 % 47 890 416 29 227 042 61 %

BSG 16 798 786 14 101 397 84 % 7 807 474 6 167 941 79 % 24 606 260 20 269 338 82 %

TOTAL 110 399 325 84 795 864 77 % 195 845 692 146 554 904 75 % 306 245 017 231 350 768 76 %

Total in EUR (1 EUR =

22 Birr) 5 018 151 3 854 357 13 920 228 10 515 944

GoF GoE TotalEFY2009 Budget

Utilisation in Regions


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Table 2: Budget Utilisation in All Regions EFY2010

4.3.2 Federal Level Technical Assistance

The MFA and Ramboll executed a Consultancy Contract signed on 25 July, 2016 for the implementation of the COWASH Phase III during the period of August 2016 to July 2019. The Contract has been amended once, on 2 January, 2019. In the amendment, the duration of the contract was extended until 30 June, 2020 and maximum of EUR 700,000 was added to the Project’s Budget.

Ramboll has entered into a Consortium Contract for Consultancy Services with Niras Finland Oy (Niras) 1 August, 2016 related to the COWASH Project. According to the Consortium Contract, Niras supports Ramboll in the Project implementation and has the right to propose specialists of its special areas of expertise as may be needed in the Project. According to the Consortium Contract Niras also participates in the home office quality assurance of the Project. In practise, this has meant that during the period August 2016–December 2018 the Junior Professional Officer (JPO) in the FTAT has been a consultant contracted from Niras.

The Home Office Coordinator (HOC) and the Project Controller are contributing for the Project at the Ramboll Home Office (HO). The Project Controller has changed once during the Phase III and the current Project Controller started in September 2018. The HOC has been acting as a liaison to the MFA. The HOC has visited the FTAT for coordination and monitoring purposes once during Phase III, in December 2017.

The Project has an Ethiopian Birr (ETB) bank account where the TA funding is received. The FTAT receives payments from the HO monthly according to an estimate of costs prepared by the CTA. The Chief Accountant of Ramboll approves the money transfers. The TA expenses incurred in Ethiopia are reported and sent in an Excel file from the FTAT to HO monthly. The Project Controller prepares an import data-file from the Excel file to the Ramboll Accounting Software, Maconomy. The Project Controller prepares a budget-follow up monthly for the CTA.

The cost items in the Project accounting in Maconomy do not directly reconcile with the MFA invoicing and the Project budget follow-up. In Maconomy reimbursable costs and costs related to fees are not separable from each other. Ramboll allocates expenses that are reimbursable as well as expenses that are covered with consultancy fees into the project accounting. The expenses that are covered with consultancy fees are recorded up to the amount corresponding to the total fee amount invoiced from the MFA. In the Project accounting, it is not clear whether the cost is a reimbursable cost or a cost that is included in the fee.

The Project Controller invoices the MFA monthly separately for fee and reimbursable costs according to the expenses incurred in Ethiopia and in Finland. The HO follows the MFA invoicing in a separate Excel file prepared by the Project Controller. KPMG reviewed by

Plan Utilised % Plan Utilised % Plan Utilised %

Amhara 49 596 603 40 124 783 81 % 122 506 866 74 167 053 61 % 172 103 469 114 291 836 66 %

SNNP 23 960 184 20 152 352 84 % 31 467 125 22 461 459 71 % 55 427 309 42 613 811 77 %

Tigray 21 606 070 16 715 209 77 % 41 543 433 8 528 522 21 % 63 149 503 25 243 731 40 %

Oromia 25 473 143 21 415 510 84 % 36 289 064 23 289 034 64 % 61 762 207 44 704 544 72 %

BSG 18 319 350 14 350 485 78 % 9 500 000 3 630 201 38 % 27 819 350 17 980 686 65 %

TOTAL 138 955 350 112 758 339 81 % 241 306 488 132 076 269 55 % 380 261 838 244 834 608 64 %


30 Birr) 4 631 845 3 758 611 12 675 395 8 161 154

EFY2010 Budget

Utilisation in Regions

GoF GoE Total


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sampling method how Ramboll has complied with the terms and conditions relating to the payment of fees and reimbursable costs. The reviewed consultancy fees for technical assistance and home office coordination were invoiced according to the contracted fixed fees. The reviewed timesheets were properly prepared and approved and the working hours are monitored by the FTAT. Based on the voucher check, the fees and reimbursable costs invoiced from the MFA are in line with the Standard Terms.

The Project Controller at the HO prepares the foreign exchange rate follow-up in Excel. The average rate is used at the Project accounting. The average rate is calculated based on the actual rate of the monthly payment made to the FTAT from the HO and the previous month average rate. KPMG reviewed the average rate calculation and the use of the average rate in the Project accounting on a sample basis and the average rate used was found appropriate.

The latest technical assistance budget for the Phase III is EUR 3,029,900. TA-budget utilisation rate is 65%, which corresponds to the implementation schedule of the Project. Revisions made to the budget are approved in the Steering Committee. The technical assistance expenditure has been used according to the budget.

Technical Assistance Budget Follow‐Up Phase III

Budget Line Budget Actual Dec 2018 Utilisation %

Fees 1 595 160 1 012 567 63%

International Long‐Term TA 811 685 478 937 59%

International Short‐Term Consultants 64 396 28 367 44%

National Short‐Term Consultants 151 728 77 193 51%

National Long‐Term TA 567 353 428 071 75%

Reimbursable Costs 969 076 636 244 66%

Home Office Coordination 47 000 29 000 62%

Junior Professional Officer 142 472 142 472 100%

Other Reimbursable Costs 779 604 464 772 76%

Sector Support 346 888 270 888 78%

Impact Assessment Costs 118 776 48 776 41%

Total 3 029 900 1 968 474 65%

Table 3: TA Cumulative Budget Utilisation

Niras invoices the salaries and travel expenses of the JPO from Ramboll once a month. The invoices pass through the Basware software which Ramboll uses for processing purchase invoices. The expenses are checked by the Project Controller, approved by the HOC and then recorded to the Project bookkeeping.

The documentation for the expenses incurred in Finland is archived at the HO. The original documentation for the TA expenses incurred in Ethiopia is sent to the HO annually for archiving. An external auditor has been engaged to perform a reasonable assurance engagement on the Project support starting from year 2017 onwards. This has been agreed with the MFA. The audit for 2017 was carried out in May 2018 and the Auditor’s Report was dated 19 March, 2019. The Auditor’s Report for 2018 was dated 11 April, 2019.


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In terms of office administration, COWASH has established adequate guidelines for the FTAT and support staff. The Administration Manual includes guidance for example on working hours, work on anti-corruption, use of vehicles, travel regulations, filing and personnel administration. In terms of security, COWASH has an emergency preparedness plan (dated February 2018). The plan includes description of different emergency scenarios as well as how to prepare and react to these situations. The plan covers the FTAT employees. In addition, the CTA prepares weekly report of the security situation of Ethiopia to the HO.

Observations, Risks and Recommendations

Observation In the Project accounting, it is not clear whether the cost is a reimbursable cost or a cost to be covered with the consultancy fee.

Risk The audit trail from project accounting to MFA invoicing is unclear. Moderate.

Recommendation The audit trail from the MFA invoices to the Project accounting should be clarified so that the fees and reimbursable expenses can be separated in the bookkeeping.

Observation Auditor’s Report for 2017 was dated on 19 March, 2019.

Risk If audits are not conducted on time, there is a risk to fail program monitoring and that invoicing is incorrect. Moderate.

Recommendation Ramboll should ensure that the Auditor’s Reports are received on time.

4.4 Project Reporting and Monitoring

Monitoring of the Project is result-based, focusing on progress made on achieving the outcomes and impact as well as explaining the performance in terms of outputs and inputs and targets set in the results framework.

The FTAT has developed and provided the regions with standard annual planning and budgeting templates in Excel to be used in all levels of implementation (regional, zonal and woreda level). The planning templates include the Project goals presented as outcomes and outputs connected with certain activities as inputs that are aimed to assist in achieving these outputs and outcomes. The templates include also a price unit for each activity. The implementing units only need to fill out the amount of planned units (for example the number of trainees targeted, number of workshops planned or number of water points planned to construct) and related budgeted total expenses are automatically generated based on the defined unit cost. The planned activities/inputs are allocated to quarters and the source of funding (GoF or GoE) as well as the cost category (investment, physical capacity building, human capacity building or operational cost) is required to be defined. The annual plans are then consolidated by the FTAT for the whole Project in an Access based reporting tool established by the FTAT.

The FTAT has provided the regions also with reporting templates for reporting of the accomplishments and reached objectives. Examples of the matters to be reported include: how many trainees participated in each implemented training, how many participants attended to the planned events, how many workshops were held, how many applications were received and how many water points were constructed. If and when regions are using these templates, the statistics for reporting purposes can be directly generated from the templates through inbuilt macros. The FTAT has requested the regions to report their accomplishments with these


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reporting templates at least on an annual basis. The FTAT then imports all regions’ plans and accomplishments into the Access based planning and monitoring database to produce consolidated statistics of the whole Project for annual reporting purposes.

Regions are required to provide quarterly progressive and financial reporting of the Project to the Embassy of Finland. The agreements between the GoF and the regions do not define any deadlines for the quarterly or annual reporting. The timelines for submitting the reports to the Embassy of Finland are defined in the Project Document (PD). According to PD, Interim Unaudited Financial Reports will be prepared every quarter and are to be submitted to the Embassy of Finland 45 days after the end of each quarter. At a minimum, the financial reports should include the sources and uses of funds, expenses by main expenditure classifications, beginning and ending cash balances and other supporting schedules. In practice, the regions have not been able to provide the reports within the defined reporting timelines to the Embassy and the delays in reporting have been months.

Although the FTAT has the responsibility to prepare consolidated report of the Project, there are no guidelines or regulations that the regions would be obligated to submit their quarterly and annual reports to the FTAT. In practice, the regions submit their quarterly reports to the FTAT member assigned to assist them for review and commenting. The FTAT members review the quarterly reports, compare the reported inputs, outputs and expenses with the annual plan, request explanations for deviations, and provide comments on the reports to the regions. Once regions have adjusted the reports based on the input provided by the FTAT, the regions send once more the revised reports to the FTAT for review before submitting them to the Embassy. Interviews indicate that since the quarterly reports from the regions have not been received on schedule, consolidated performance reports for the entire COWASH Project are prepared by the FTAT annually. KPMG reviewed the COWASH Annual Performance Reports for the EFY2009 and EFY2010 and observed the following differences compared to the region-level reports:

- EFY2009 SNNP Region: utilised GoF funds according to the consolidated report ETB 4,300,806 and according to the report received form the Region ETB 9,743,604, difference ETB 5,442,798 (EUR 247,400).

- EFY2009 Oromia Region: utilised GoE Operational cost according to the consolidated report ETB 2,260,000 and according to the report received from the Region ETB 2,451,139, difference ETB 191,139 (EUR 8,688).

- EFY2010 Amhara Region: utilised GoF funds for RSU according to the consolidated report ETB 523,669 and according to the report received from the Region ETB 5,236,369, difference ETB 4,712,700 (EUR 157,090). Utilised GoE Investment funds according to the consolidated report ETB 67,609,532 and according to the report received from the Region ETB 69,070,550, difference ETB 1,461,018 (EUR 48,701).

- EFY2010 Oromia Region: utilised GoE Investment funds according to the consolidated report ETB 20,023,056 and according to the report received from the Region ETB 19,668,463, difference ETB 354,593 (EUR 11,820).

According to the FTAT, the reasons for the differences were mainly due to updates made by the regions after the annual reports had been submitted. In addition, there was one typo in the consolidated annual report. The FTAT monitors the cumulative expenditure and fund balances based on reports received from the regions since modifications to the figures are often made retrospectively. In addition, the differences have been adjusted in the next annual reports but not corrected to the respective report retrospectively.

The FTAT does not have a documented annual monitoring plan. The annual plans of regions are managed in the Planning and Monitoring Database. The FTAT performs monitoring visits


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to different regions and woredas based on identified need and issues raised within the quarterly reporting and during other communications with region representatives. The monitoring performed at regional level is described in more detailed in the following chapters with specific observations of the specific region.

The FTAT monitors physical progress of the water schemes through a web-based WASH facility. All water schemes and institutional latrines constructed should be added to the facility by the Water Bureaus/Offices. Interviews however indicate that there has been delays in submitting the data to the system so it has not been up to date. The user rights to the system are provided by the CTA and the FTAT monitors the accuracy of the input data.


Observation The agreements between the GoF and the regions do not define any deadlines for the quarterly or annual reporting. The timeline for submitting the reports to the Embassy is defined in the PD. The regions have not been able to provide the quarterly reports according to the defined reporting timeline.

KPMG observed differences in the financial figures between consolidated COWASH annual reports and region-level reports. This is mainly due to updates made to region-level reports after submitted to the FTAT for consolidation.

Risk If reporting timelines are not adhered to and if the consolidated report of the Project is not accurate, there is a risk that decisions are made based on inaccurate information. Moderate.

Recommendation Deadlines for region-level quarterly and annual reports should be adhered to. The consolidated reports of the Project should be based on final regional level reports. If regional level reports are adjusted after submitted for consolidation purposes, the FTAT should be informed and consolidated report adjusted as well.

Observation There have been delays in submitting the data to the web-based WASH facility system and system has not been up to date.

Risk If the information in the system is not up to date, it is difficult for the FTAT to monitor the progress of the Project. Moderate.

Recommendation Regions should submit the data to the WASH facility system on time and regularly.

4.5 Follow-up of Previous Audit Recommendations

Under instructions from the MFA, KPMG carried out a performance audit of COWASH II for the period of July 2014 to July 2016. The audit identified one critical risk (not including region-level risks), two significant, five moderate and one minor level risk.

The critical risk related to reconciliation of investment fund movements between woreda level offices and the MFI as well as follow-up of fund balances per each WASHCO. To address the recommendation, the FTAT has organised training to region level staff. This risk and related recommendation is discussed more in the Chapter 5 concerning different regions visited. On a general level, KPMG observed that measures were taken to address the recommendation but it has not been fully implemented in all regions.

The two significant risks related to financial management capacity in the woreda level Water Offices and annual audit of the TA component. To address the lack of financial management


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capacity in the woreda Water offices, the FTAT created reconciliation templates to be used in the water offices and supervision checklists to be used to monitor the Water Offices. Annual audits of the TA component of the Project has been agreed to be conducted starting from year 2017 onwards. The Project also hired a Financial Specialist to the FTAT to address the financial management related recommendations presented in the Audit Report. The Financial Specialist has for example conducted financial management assessments in Tigray and prepared Internal Audit Guidelines to internal auditors of the Project. Also in Amhara and Oromia, the Financial Specialists are closely working with the woreda-level officials and providing them training and capacity building.

The Project prepared separate mitigation plans on recommendations concerning general issues, TA and all regions. KPMG reviewed these mitigations plans and observed that the Project has implemented appropriate measures to address the recommendations. In addition, the Project has developed its processes during the Phase III. This includes establishment of a performance monitoring database to monitor the annual work plans and project performance planning to monitor the original plans of the sites. Implementation of the region-level recommendations is discussed in sections 5.3 and 5.5. The Tigray Region was not a part of the previous audit.


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5 Regions

The objective of the Project is to accelerate the implementation of the UAP through the adaption and application of the CMP projects in the Project regions. The expected outcomes of the Project include increased community and institutional water coverage, increased community and institutional sanitation and hygiene coverage and usage, increased functionality and sustainability of built WASH facilities through improved service delivery and women´s empowerment through WASH related activities.

During COWASH Phase III the Project is implemented in the same five COWASH Regions (Amhara, Tigray, Oromia, SNNP and BG) as in the previous Phase. The Project continues working mainly in the woredas where CMP implementation has already started in the earlier phases of COWASH to ensure effectiveness and maximum results during the Project period. The Regional WASH Steering Committees have decided the woredas for the Project implementation at the beginning of the Phase III.

5.1 Management Structure in Regions

The Regional WASH Steering Committees (RWSCs) and the Regional WaSH Technical Teams (RWTTs) are the highest decision making bodies in the regions. At the regional level, the responsibility for the implementation of the COWASH lies with the Bureaus of Finance and Economic Development (BoFED), the Water Bureaus, the Bureau of Health (BoH), the Bureau of Education (BoE) and the Bureau of Women, Youth and Children. There are specific support teams, Regional Support Units (RSUs), established to support the CMP implementation of the regions. The RSUs are established at the Water Sector Bureau and they work as independent sub-units. The main tasks of the RSUs and the job descriptions of the RSU Experts are outlined in the annexes of the COWASH Project Document. The composition of the RSU varies in different regions according to the scale of the COWASH and CMP implementation in the region. The specialists work in the Regional Support Unit on a full time basis for the COWASH and CMP implementation. The RSUs manage and implement their own Annual Work Plan and Budgets that are approved by the Regional WASH Steering Committees. The RSUs report their operations and progress to the Regional Water Sector Bureau Head, and on their financial progress to the BoFED.

5.2 Financial Management and Reporting

The Project Document with the signed funding agreements outline the funds available for each region and annual activity plans and budgets are prepared accordingly. Each Regional WASH Steering Committee approves the COWASH annual plan and budget as well as the annual report of their region.

The bookkeeping of the Project in the bureaus at regional level is maintained in accounting software called Integrated Budget and Expenditure System (IBEX), which is used in all governmental organisations and units. IBEX software would enable budget follow-up in the system, but it is not used for the COWASH Project. The COWASH transactions are recorded and followed-up in the accounting system. The budget follow-up is performed manually by the RSU teams.

The bookkeeping in woreda level is mostly maintained manually in Excel or in paper ledgers in the Woreda Level Finance Bureaus (WoFEDs). Water Offices do not maintain bookkeeping


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but they follow up Project costs separately from other funds. The Project funds in the MFI sub branches are monitored in manual account statements or ledgers and saving cards.

The financial reporting of the Project is in line with the fund flow. The agreements on the COWASH III between the GoF and the regions include guidelines for submission of progress and financial reports. The implementing units report their expenses quarterly to the BoFED/RSU for consolidation. The RSU Financial Specialist prepares the quarterly financial reporting based on the consolidated information received from BoFED.

As a part of the audit procedures, the annual reporting for the EFY2009 and EFY2010 submitted by the visited regions was reviewed. To verify the utilisation of the GoF funding, the financial reporting received from the implementing bureaus, zones and woredas was reconciled with the Annual Regional Reporting of the Region and the reported remaining fund balance was verified by reconciling the reported fund balance with actual bank statements. To verify the GoE funding allocated for investments, a sample of financial reporting from implementing units in woredas was reviewed.

The existence of an audit trail from the reported expenditure to the bookkeeping and onward to the individual supporting documentation was reviewed. Expenditure was reviewed by sample basis and compared with the annual approved activity plans and budgets and with the actual operational outputs. Also the fund flows from the government to the implementing entities was reviewed. KPMG observed that expenditure vouchers were not stamped as paid in any of the regions visited, as stipulated in the Internal Audit Guidelines. More detailed observations are presented in the following chapters presenting the observations of the individual regions.


Observation Expenditure vouchers are not stamped as paid in any of the regions visited.

Risk There is a risk of double recording of expenditure and double funding. Moderate.

Recommendation All expenses should be stamped as paid by COWASH funds.

5.3 Oromia Region

5.3.1 Fund Utilisation and Performance

Realisation of Outputs

In Oromia, COWASH is implemented in 12 woredas and five zones. Regional COWASH annual plan for the EFY2009 was prepared and approved by the Regional WASH Steering Committee 6 December, 2016 and on 30 November, 2017 for the EFY2010. The Table 4 below presents the key planned outputs and actual realisation.


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Output

2016/2017 2017/2018

Planned Realised % Planned Realised %

Community Water Supply Schemes 312 290 92,9 % 285 267 93,7 %

School Water Supply Schemes 11 6 54,5 % 11 6 54,5 % Health Facility Water Supply Schemes 10 4 40,0 % 6 1 16,7 %

Latrine Facilities 35 15 42,9 % 43 18 41,9 %

Trainings 5 018 5 386 107,3 % 5 910 5 902 99,9 % Table 4: Oromia Realisation of Planned Activities for EFY2009 and EFY2010

In the EFY2009, none of the outputs were fully achieved as planned. According to the Annual Regional Report, the main reason for the low realisation during the first year was mainly due to late endorsement of the EFY2009 Annual Plan. The lowest realisation rates for the year were in health facility and school water supply schemes and latrine facilities. According to the Annual Regional Report, the rest of the planned latrines were in different stages of construction at the year end. In the EFY2010, the planned number of trainings was achieved. Other outputs were realised lower than planned. The lowest realisation rate for the year was in health facility water supply schemes. According to Annual Regional Report, this was due to inadequate promotional activities. KPMG observed that there were inconsistencies between outputs reported in the tables and text of the Annual Regional Reports for example concerning the number of people trained in CMP Related trainings in EFY2009 annual report (total number of people trained in the table 6,053 while in the text 5,386). According to the Regional WASH Steering Committee meeting minutes, reason for difference between planned procurements and made procurements was due to the difficulties in the procurement process related to water quality test kits and chlorine. As these items are not available for purchases in all the project woredas, the procurement process is time consuming. For those woredas where procurement of the water quality test kits was not completed, also the related trainings were postponed to the following financial year. Also, the procurement plan for the EFY2010 included procurement of six motorbikes. However, eleven motorbikes have been procured. Due to the price escalation of planned Japanese motorbikes and lack of foreign currency, it was decided to procure cheaper Chinese motorbikes, which made it possible to procure more than planned with the same amount.

During the audit, KPMG visited two woredas in the Oromia Region: Abichugena and Jeldu. KPMG physically verified one spring development, one hand dug well and two latrines. All visited schemes were constructed during the Phase III. Type of the water scheme depends on the local conditions. On the two Woredas visited in the Oromia Region, hand dug well and spring were the most common types.

According to the interviews with local communities/beneficiaries and Water Office staff, the quality of the construction and material has been adequate and constructed schemes are currently functional. The community has participated to the construction of the water scheme and latrines starting from the planning phase. Training has been provided to them for example concerning construction and supervision. In addition, community members have been trained or will be trained for maintenance of the water point. The community has provided labour and local material for construction of the schemes.

In the water points visited, the water could only be fetched in shifts: morning and evening. The households pay a monthly water usage fee which was deposited to Oromia Credit and Saving


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Shareholder Company (OCSSCO) savings account. Interviews indicate that a public audit was conducted in the community after the scheme was constructed and no major observations or recommendations were made. According to the Water Office staff, the difficulties that the Project has faced during the Phase III include limited resources and follow-up of the functionality of the water schemes as well as knowledge and commitment of the communities.

Left: Latrine constructed at a health post.

Right: A community member fetching water in Gimbii spring development.

The plan for the current financial year includes construction of 241 water schemes, of which 67 are rolled from the previous year. The plan includes the construction of water schemes of 187 community water supply, 5 school water supply scheme and 19 school latrine as well as 7 health institution water supply scheme and 24 health institution latrine.

Budget utilisation

The total budget for the COWASH Phase III to be implemented in the Oromia Region is estimated to be EUR 4,938,428 including the contributions of the GoF and the Oromia National Regional State (ONRS). The contribution of ONRS is allocated to investments and operational costs, while the contribution from the GoF is earmarked for capacity building and operational costs. According to the agreement between the MFA and ONRS, the maximum contribution of the GoF is EUR 1,556,610, which includes unused contribution of EUR 136,610 from the COWASH Phase II. The budget utilisation for the years 2016–2017 (EFY2009) and 2017–2018 (EFY2010) is presented in the Table 5 below.


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Table 5: Oromia Fund Utilisation for FY2016/2017 and FY2017/2018

In the EFY2009, 70% of the GoF and 57% of the GoE budget was used indicating a total utilisation rate of 61%. According to the Annual Performance Report, the reasons for underutilisation of the budget were related to late endorsement of the annual work plan as well as reporting challenges. In addition, inadequate response and attention by the OCSSCO has created difficulties to smooth Project implementation in the EFY2009. Budget utilisation rate in the EFY2010 was 84% for the GoF funding and 63% for the GoE funding indicating an utilisation rate of 72%. Main reasons for the budget deviations are related to inadequate promotional activities, difficulties in the procurement process as well as remaining payment for the construction activities. KPMG sample tested the Phase III expenditure both in region and woreda level bureaus and offices. In conclusion, expenditure was related to the Project and was relevant and reasonable compared to actual operational outputs.

5.3.2 Administration and Financial Management

At regional level the annual regional report for the EFY2009 and EFY2010 was reviewed, the reported expenses were reconciled with individual reports received from the implementing units and the reported remaining fund balance was reconciled with the actual funds in hand and in bank.

KPMG noted the following differences in the fund balance reconciliation prepared by the BoFED and the annual report prepared by the RSU concerning the EFY2009:

- The GoF funds received reported in the annual report ETB 274,070.94 (EUR 12,458) more than actually received

- The GoE funds received reported in the annual report ETB 541,445.96 (EUR 24,611) less than actually received

- The total remaining fund balance was reported to be ETB 13,492,925.87 while the actual remaining fund balance according to the fund balance reconciliation was ETB 13,658,622.45. Thus, the reported balance is ETB 165,696.58 less than actual balance available.

Component Annual Budget

GoF EFY2009

Utilised % Annual Budget

GoE EFY2009

Utilised % TOTAL

EFY2009

Utilised %

Investment Cost 30 354 088 16 222 808 53 % 30 354 088 16 222 808 53 %

Physical Capacity

Building 2 541 552 1 048 242 41 %

2 541 552 1 048 242 41 %

Human Capacity

Building 10 493 449 8 275 793 79 %

10 493 449 8 275 793 79 %

Operational Cost 2 240 060 1 386 279 62 % 2 261 267 2 443 866 108 % 4 501 327 3 830 145 85 %

TOTAL 15 275 061 10 710 314 70 % 32 615 355 18 666 674 57 % 47 890 416 29 376 988 61 %


22 Birr) 694 321 486 832 2 176 837 1 335 318


GoF EFY2010


GoE EFY2010

Utilised % TOTAL

EFY2010

Utilised %

Investment Cost 33 703 535 19 668 463 58 % 33 703 535 19 668 463 58 %

Physical Capacity

Building 3 973 273 1 504 063 38 %

3 973 273 1 504 063 38 %

Human Capacity

Building 17 358 168 16 246 670

94 % 17 358 168 16 246 670 94 %


TOTAL 25 473 143 21 415 510 84 % 36 189 064 22 934 441 63 % 61 662 207 44 349 951 72 %


30 Birr) 849 105 713 850 2 055 407 1 478 332


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The RSU had detected part of the reporting errors and corrected them in the annual financial report for the EFY2010. However, KPMG detected the following uncorrected errors in the annual financial report for the EFY2010:

- The GoF cumulative fund utilisation to date was reported to be ETB 32,159,743.77 whereas the actual utilisation to date according to bookkeeping was ETB 32,125,823.46, thus the reported use of funds was ETB 33,920.31 more than actual cumulative utilisation has been to date. That said, the reported remaining GoF fund balance reported ETB 33,920.31 less than actual amount available.

In Oromia, the project woredas were initially using one common bank account for the GoE operational budget and the GoF funds. This complicated the separate reporting of use of funds. Due to this reason, it was decided to establish separate bank accounts for both funding sources from the beginning of the EFY2010.

Based on the planned activities and the annual budgets, the following implementing units were visited: Bureau of Water (BoW), Mineral and Energy (BoWME) including the RSU, Bureau of BoE as well as the Abichugena and Jeldu WoFEDs, Water Offices and OCSSCO branch offices.

In general, the financial management in regional bureaus was well organised. Accounting records reconciled with the reported expenses, there was documented bank reconciliations prepared and the audit trail from the accounting records to the individual expenditure vouchers was in place.

In the woreda level, KPMG reviewed annual reports for the visited woredas for the EFYs 2009 and 2010 and reconciled the reported expenses with the WoFED bookkeeping. The reported remaining fund balance was reconciled with the actual funds in cash and at bank. The bookkeeping of the GoF capacity building costs was maintained in Excel or in paper ledgers by a method of double-entry bookkeeping in WoFEDs. Bank and fund balance reconciliations were prepared on a monthly basis by the accountants. KPMG reviewed bank reconciliations for the last months of the EFYs 2009 and 2010 and no discrepancies were noted. KPMG observed that in the EFY2009, the GoF and GoE capacity building costs in the woredas per cost category were reported as one sum and followed up separately with trial balances. This was however changed and starting from the EFY2010, the GoF and GoE capacity building costs were presented individually per cost category in the financial report.

Woreda Water Offices did not maintain bookkeeping for the investment costs funded by the GoE. KPMG observed that the expenditure was followed up as a lump sum per each site, but the vouchers were not numbered/referenced and no breakdown identifying each separate cost as per the vouchers was prepared. Therefore, audit trail from the voucher to financial reporting of the Water Office was difficult to trace.

The investment costs are paid to WASHCOs and suppliers through the OCSSCO branch offices. KPMG observed that in the two woredas visited, the OCSSCO had separate ledgers to follow-up fund balances per each WASHCO and sector. The letters approved by the Water office indicating the sum that can be used by the WASHCO were also filed in the OCSSCO branch offices. In addition, WASHCO O&M funds were followed up with separate savings card which also included pictures of the signatories of the account. KPMG also noted that both Woreda Water Offices and the OCSSCO branch offices had started to prepare monthly fund balance reconciliations presenting beginning balance, fund transfers, expenditure and ending balance for the period from July 2018. Before this no fund balance reconciliations were made


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and interviews indicate that fund balances according to the OCSSCO and Woreda Water Office records were not reconciled.

The WoFEDs are audited internally by their office and externally by the Regional/Zonal office annually. Interviews however indicate that in the Jeldu Woreda audits are not conducted regularly with the exception of ZoFED.

In the previous Performance Audit conducted by KPMG, seven observations were made concerning the administration and financial management in the Oromia Region. This included two critical, three significant and two moderate level risks. The two critical risks were related to opening balance not brought forward to the following year in OCSSCO and accruals reported as expenditure. The significant risks were related to follow-up of funds per each WASHCO in OCSSCO branch offices, inconsistent reporting as well as lack of bank reconciliations in the Health Bureau. A mitigation plan to respond to these observations, risks and recommendations was prepared by RSU. KPMG reviewed the mitigation and observed that adequate plans and measures were made to address the recommendations. However, as noted earlier, deficiencies in the fund balance reconciliation and reporting at regional level was noted.


Observation Investment costs in Woreda Water Offices were followed up as a lump sum per each site, but the vouchers were not numbered/referenced and no breakdown identifying each separate cost as per the vouchers was prepared. Therefore, audit trail from the voucher to financial reporting of the Water Office was difficult to trace.

Risk Without audit trail from actual expenses and supporting documents to financial reporting, there is a risk of false reporting and misuse of funds. Significant.

Recommendation Vouchers should be referenced and breakdown of individual costs as per the vouchers should be prepared. The total amount of expenditure according to the breakdown of costs should reconcile to the quarterly and annual reports provided to the region.

Observation KPMG noted errors in the reported regional level fund balance and reported expenses and income.

Risk Without documented reconciliations between the accounting and the Project financial reporting, there is a risk of false reporting and misuse of funds. Significant.

Recommendation Reconciliations between the accounting records, actual funds available (cash at bank and in hand) and the Project financial reporting should be done with due care and documented.

5.4 Tigray Region


Realisation of Outputs

In Tigray, COWASH is implemented in all the seven woredas and all four zones. Regional COWASH annual plan and budget for the EFY2009 plan was approved by the Regional WASH Steering Committee 8 November, 2016 and for EFY2010 on 26 October, 2017. The Table 6 below presents the key planned outputs and actual realisation.


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Output

2016/2017 2017/2018


Water Supply Schemes 155 102 65,8 % 179 79 44,1 %

School Water Supply Schemes 13 7 53,8 % 25 6 24,0 % Health Facility Water Supply Schemes 7 5 71,4 % 22 0 0,0 %


Trainings 5 357 5 499 102,7 % 8 095 10 578 130,7 % Table 6: Tigray Realisation of Planned Activities for EFY2009 and EFY2010

According to the Annual Regional Report, the main reason for the low realisation during the first year was due to reluctant bidding and contractual administration process of the BoW which caused delays in construction. The reason for the low realisation for the second year is not explained in the Annual Regional Report. According to interviews with the RSU staff members, the main reason for the low realisation for the second year is that the construction plans prepared by the woredas have been too ambitious and the planned sites have proven not to be suitable for construction. KPMG observed that there were inconsistencies between outputs reported in the tables and text of the Annual Regional Reports. Two examples of these inconsistencies in the EFY2010 report are described below.

- The Table 1.1.2. No of People Trained in CMP is not complete and seems to be missing some parts.

- Table 1.2.2. No of Community Water Supply Schemes Constructed: Number of constructed schemes in this quarter is 110 but the cumulative number is only 79.

During the audit, KPMG visited two woredas in the Tigray Region: Degua Temben and Endamehoni. KPMG physically verified one spring expansion and two latrines, which were constructed to local schools. The type of the water scheme depends on the local conditions. On the two Woredas visited in the Tigray Region, a spring water scheme was the most common type.

According to interviews with local communities/beneficiaries and Water Office staff, the quality of the construction and material had been adequate and most of the schemes are currently functional. The community has participated to the construction of the water scheme and latrines starting from the planning phase. Training has been provided to the community members for example concerning construction and supervision. The community has provided labour and local material for construction of the schemes.

In the water point visited, the water could only be fetched in shifts: in the morning and during school breaks. The households did not pay a water usage fee yet but they were planning to charge a monthly fee starting from the next EFY. Interviews indicate that a public audit was conducted in the community after the scheme was constructed and no major observations or recommendations were made. According to Water Office staff, some of the challenges faced during the Phase III include long distances (between the site and Water Office) and topography.


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Left: Masuati Secondaru School spring expansion.

Right: Mai Gua Primary School latrine.

The plan for the current financial year includes the construction of 168 water supply schemes, 18 school water supply schemes, 10 health facility water supply schemes and 21 latrine facilities. The plan also include trainings for 6,000 persons.

Budget Utilisation

The total budget for COWASH Phase III to be implemented in the Tigray Region is estimated to be EUR 5,482,377.71 including the contributions of the GoF and the Tigray National Regional State (TNRS). The contribution of TNRS is allocated to investments and operational costs, while the contribution from the GoF is earmarked for capacity building and operational costs. According to the agreement between the MFA and TNRS, the maximum contribution of the GoF is EUR 1,596,013, which includes unused contribution of EUR 706,103 from COWASH Phase II. The budget utilisation for the years 2016–2017 (EFY2009) and 2017–2018 (EFY2010) is presented in the table below.


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Table 7: Tigray Fund Utilisation for EFY2009 and EFY2010

In the EFY2009, 79% of the GoF and 50% of the GoE budget was used (total utilisation 61%). Budget utilisation rate in the EFY2010 was 77% for the GoF funding and 21% for the GoE funding (total utilisation 40%). According to interviews the main reason for the underutilisation of the investment budget is too ambitious plans.

KPMG sample tested the Phase III expenditure both in region and woreda level bureaus and offices. In conclusion, expenditure was related to the Project and was relevant and reasonable compared to actual operational outputs.


At regional level the annual regional report for the EFY2009 and EFY2010 was reviewed, the reported expenses were reconciled with individual reports received from the implementing units and the reported remaining fund balance was reconciled with the actual funds in hand and at bank. KPMG has no remarks with the consolidated regional reporting and reported fund balance.

Regarding the utilisation of the GoF budget, KPMG observed that there were separate bank accounts established for the COWASH activities in all woredas, but not in any of the zones or bureaus, except for BoW. The funds for the Project are held in Treasury.

Based on the planned activities and the annual budgets, the following implementing units were visited: BoW, including the RSU, BoE, BoH, Bureau of Women Affairs (BoWA), Bureau of Micro and Small Enterprises (BoMSE) as well as the Endamehoni and Degua Temben WoFEDs, Water Offices and Dedebit Credit and Savings Institution (DECSI) branch offices.

In general, the accounting in regional bureaus was well organised. The accounting records reconciled with the reported expenses, there were documented bank reconciliations prepared, and the audit trail from the accounting records to the individual expenditure vouchers was in place with the exception of BoWA. The audit trail from financial report of BoWA to accounting report and supporting expenditure vouchers was partly missing. KPMG noted the following differences:


GoF EFY2009


GoE EFY2009

Utilised % TOTAL

EFY2009

Utilised %

Investment Cost 25 065 250 12 402 817 49 % 25 065 250 12 402 817 49 %Physical Capacity

Building 3 564 000 2 586 836 73 % 3 564 000 2 586 836 73 %Human Capacity

Building 9 807 935 8 084 016 82 % 9 807 935 8 084 016 82 %

Operational Cost 2 211 350 1 683 916 76 % 1 413 330 917 022 65 % 3 624 680 2 600 938 72 %

TOTAL 15 583 285 12 354 768 79 % 26 478 580 13 319 839 50 % 42 061 865 25 674 607 61 %


22 Birr) 708 331 561 580 1 911 903 1 167 028


GoF EFY2010


GoE EFY2010

Utilised % TOTAL

EFY2010

Utilised %

Investment Cost 40 434 233 8 528 522 21 % 40 434 233 8 528 522 21 %Physical Capacity

Building 1 683 575 1 226 040 73 % 1 683 575 1 226 040 73 %

Human Capacity

Building 16 289 235 12 563 409 77 % 16 289 235 12 563 409 77 %Operational Cost 3 633 260 2 925 760 81 % 1 109 200 0 0 % 4 742 460 2 925 760 62 %

TOTAL 21 606 070 16 715 209 77 % 41 543 433 8 528 522 21 % 63 149 503 25 243 731 40 %


30 Birr) 720 202 557 174 2 104 983 841 458


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- EFY2009: The reported expenses of the BoWA was ETB 197,500 while according to the accounting system there was no expenses during the financial year. KPMG was able to justify and reconcile total amount of ETB 139,297.60 of the reported expenses with sufficient supporting documentation.

- EFY2010: The reported expenses of the BoWA was ETB 1,402,600.00 while the actual expenses according to the accounting system was only ETB 1,341,142.30. Thus, the reported expenses is ETB 61,457.70 more than actual expenses according to the accounting. KMPG was able to justify and reconcile total amount of ETB 1,015,000.03 of the reported expenses with sufficient supporting documentation.

According to interviews, the reasons for these differences were changes in the accounting staff and recording expenses to wrong cost center codes.

At the woreda level, KPMG reviewed annual reports for the visited woredas for the EFY2009 and EFY2010 and reconciled the reported expenses with the WoFED bookkeeping. The reported remaining fund balance was reconciled with the actual funds in bank and no discrepancies were noted. The bookkeeping of the GoF capacity building costs was maintained either in IBEX or manually in Excel (double entry bookkeeping) in WoFEDs. Bank and fund balance reconciliations were prepared on a monthly basis. In Woreda Water Offices, double entry bookkeeping was not maintained but an annual follow-up of individual costs/receipts was maintained. KPMG however observed that there was no separate fixed assets register for COWASH assets in the Endamehoni Woreda and in the Degua Temben WoFED.

KPMG observed that there were differences in fund balances at the end of EFY2009 and EFY2010 between the DECSI branch offices and Woreda Water Offices. These differences were later adjusted in DECSI records to reconcile with the Water Office reports. In addition, interviews indicate that DECSI branch offices did not have a follow-up of the fund balances per each WASHCO and sector. The letters approved by the Water office indicating the sum that can be used by the WASHCO were however filed in the DECSI branch offices.

In the EFY2010, one four-day financial training was conducted. All financial focal persons, CMP supervisors and auditors were invited to the training. A total of 73 persons participated in the training. The topics were related to the CMP financial manual, budget utilisation and CMP audit issues.

The WoFEDs are audited internally by their office and externally by the regional/zonal office bi-annually. Interviews indicate that there has not been any critical observations in the audit. Some minor recommendations have been given for example concerning ledger handling in the Degua Temben Woreda.


Observation The BoWA bookkeeping did not reconcile to the annual report for the EFY2009 and EFY2010.

Risk If the audit trail from the accounting to the project financial reporting is missing, there is a risk of incorrect reporting and misuse of funds. Significant.

Recommendation The bookkeeping needs to be reconciled to the project financial reports and any differences are to be investigated and explained.


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Observation Monitoring of Fixed Assets in the Endamehoni Woreda and in the Degua Temben WoFED has not been performed systematically. There is no separate Fixed Assets Register for the COWASH assets.

Risk If the fixed assets are not identified and monitored properly, there is a risk of misuse or fraud related to usage of the assets. Moderate.

Recommendation The WoFEDs and woreda Water Offices should be trained on systematic monitoring and identifying the Project’s fixed assets appropriately.

Observation There were differences in fund balances at the end of the EFY2009 and EFY2010 between the DECSI branch offices and woreda Water Offices. These differences were later adjusted in DECSI records to reconcile with the Water Office reports. In addition, DECSI branch offices did not have a follow-up of the fund balances per each WASHCO and sector.

Risk Failure to reconcile fund movements and balances between different organisations constitutes a risk for misappropriation of cash as well as risk of accounting and reporting errors. There is a risk to fail cost monitoring. Significant.

Recommendation The fund movements and balances between the DECSI branch office and Woreda Water Office should be reconciled regularly. Possible discrepancies should be sorted out and corrected.

5.5 Amhara Region


Realisation of outputs

In Amhara, COWASH is implemented in 40 woredas and 10 zones. The planning in Amhara has followed annual planning procedures defined in the Project guidelines and the annual plans for the EFY2009 and EFY2010 were approved by the Regional Steering Committee. The Table 8 below presents the key planned outputs and actual realisation for the EFY2009 and EFY2010.

Table 8: Amhara Realisation of Planned Activities for EFY2009 and EFY2010

In the EFY2009, a total of 1,242 Water Supply Schemes were constructed exceeding the annual plan by 50%. Of all the 1,242 Water Supply Schemes constructed, 851 were hand dug wells, 61 spring developments on spot, 251 spring developments with collection chamber, 18 shallow wells, nine rural pipe systems and 52 expansions. A total of 2,176 applications were submitted, of which the Woreda WASH Team (WWT) approved 1,520. Mainly due to shortage


Water Supply Schemes 827 1 242 150,2 % 658 947 143,9 %

School Water Supply Schemes 85 62 72,9 % 80 44 55,0 %

Health Facility Water Supply Schemes 77 19 24,7 % 83 20 24,1 %


Trainings 26 645 36 350 136,4 % 36 452 41 116 112,8 %

2017/20182016/2017

Output


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of budget, all applications were not approved. The total number of population who got access within 1 kilometre radius for the Water Supply Schemes was 222,510.

In the EFY2010, 947 water supply schemes were constructed, which exceeded the plan by 44%. In the EFY2010, a total of 1,832 applications were submitted, of which 1,225 were approved by the WWTs. A total of 160,253 rural people benefitted from the new water points. For the Health Facility Water Supply Schemes, 58 applications was received from which 36 were approved and 20 actually constructed.

Both the EFY2009 and EFY2010, construction of the School Water Supply Schemes and Health Facility Water Supply Schemes was significantly delayed from the respective annual plans. Interviews indicate the institutional latrines are more complex to manage than the community water points. According to interviews, school and health latrines are not seen as important as the water points in the communities. Communities are more reluctant to provide community contribution to the institutional latrines. Also the design of the institutional latrines is more complex than water points in the communities (hand dug wells etc.). Education Office needs to be involved in the latrines construction in the schools and according to interviews there is lack of coordination between the WoEs, WoHs and woreda Water Offices. The design for school latrines is very rigorous and there is a detailed instruction book to demonstrate how to construct school latrines. The instruction book provides good way to procure the whole construction as a full package. However, the COWASH school latrines are constructed by the communities and to be able to include community contribution, the design is broken down by materials and artisan work needed. The Amhara RSU Team Leader has prepared a breakdown of the latrine design to demonstrate the process done by the community in-kind and quantities of all the required materials (cement, sand and roof). The RSU needs to support the construction of the school latrines since they are not procured as a full package but require several sub-processes that need to consolidate community work (in-kind), procurement of materials and artisan works. However, interviews indicate the CMP modality is more cost efficient than woreda approach. With CMP modality average school latrine cost is ETB 360,000 and in Woreda modality approximately ETB 600,000.

Parent Teacher Committees are also involved in the school latrine planning and construction. The committees are responsible to procure the material and contract artisans and follow the digging and other community contribution. This also requires more coordination and support from the RSU than the water points constructed by the communities.

During the woreda audit, KPMG conducted a field visit to some of the water points constructed during COWASH Phase III. In the Gusgusha Shikudad Woreda, field visit covered one institutional latrine and four wells, and in the Yilmana Densa Woreda four wells and three spring water points. The visited sites were operational, however the water needs to be rationed in general to two twenty-litre canisters per day and the number of the well users is limited. The WASHCOs have received the intended trainings for operating and maintenance of the water points. The WASHCO members stated they were aware of the amount of savings they have in ACSI.

Budget Utilisation

In the EFY2009, the GoE annual budget amounted to ETB 106.5 million from which ETB 17.0 million was for the construction of rural pipe systems and ETB 89.5 million for investment and operational costs. The utilisation of the GoE budget in the EFY2009 was 91% and in the EFY2010 the utilisation was 61%. The utilisation of the GoF budget decreased from 91% in the EFY2009 to 81% in the EFY2010. The utilisation rates reflect the actual construction of the water points and institutional latrines. The utilisation of the GoF funds has remained higher


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than the GoE budget utilisation. The training targets have been achieved adequately in Amhara, which is also reflected by a high utilisation rate of the human capacity building costs.

Table 9: Amhara Fund Utilisation for EFY2009 and EFY2010

According to the interviews and documentation, there are adequate recording and follow-up of the expenses. For WASHCO withdrawals and recording of the expenses in Water Office, KPMG did not make any significant observations. The co-operation between WASCOs and Water Office is regular especially during the construction phase. The biggest challenges are related to the staff turnover, which has an effect on the quality of the reporting and thus highlights the need for continuous presence and capacity building on woreda level to ensure the credibility of accounting and reporting.

During the audit, two woredas were visited. The visit covered both the GoE and GoF fund flow, and included visits to the microfinance institution ACSI branch office, Water Office and WoFED.

As a general observation, there is a noticeable progress since the last performance audit, especially in the procedures between ACSI and Water Office.

Photo: Women fetching water in Yilmana Densa Woreda


In Amhara, KPMG reviewed the annual regional reports for the EFY2009 and EFY2010. The reported expenses were reconciled with individual reports received from the implementing


GoF 2016/2017


GoE 2016/2017

Utilised % TOTAL

2016/2017

Utilised %

Investment Cost 97 255 546 89 247 316 92 % 97 255 546 89 247 316 92 %

Physical Capacity Building Cost 4 880 000 3 942 364 81 % 4 880 000 3 942 364 81 %

Human Capacity Building Cost 36 859 365 34 425 661 93 % 36 859 365 34 425 661 93 %

Contingency 117 910


TOTAL 47 689 397 43 294 659 91 % 106 519 600 97 097 672 91 % 154 091 087 140 392 331 91 %

Total in EUR (1 EUR = 22 Birr) 2 167 700 1 967 939 7 004 140 6 381 470


GoF 2017/2018


GoE 2017/2018

Utilised % TOTAL

2017/2018

Utilised %

Investment Cost 109 111 371 69 070 550 63,30 % 109 111 371 69 070 550 63 %

Physical Capacity Building Cost 1 923 930 1 138 265 59 % 1 923 930 1 138 265 59 %

Oprational 314 000 312 938 100 % 13 395 495 6 557 521 48,95 % 13 709 495 6 870 459 50 %

Human Capacity Building Cost 40 366 602 38 149 911 95 % 40 366 602 38 149 911 95 %

Operational Cost RSU 6 992 071 5 236 36975 % 6 992 071 5 236 369 75 %

TOTAL 49 596 603 44 837 483 90 % 122 506 866 75 628 071 61,73 % 172 103 469 120 465 554 70 %

Total in EUR (1 EUR = 30 Birr) 1 653 220 1 494 583 5 736 782 4 015 518


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organisations and the reported remaining fund balance was reconciled with the actual funds in hand and in bank. In Amhara, the annual financial reporting from the implementing agencies and woredas did reconcile to the consolidated annual reports the EFY2009 and EFY2010.

The RSU Amhara expenses are mainly RSU staff salaries, per diem, RSU vehicles maintenance, fuel and lubricant and training costs. The accounting is kept in Excel, but no double entry bookkeeping is applied. The Planning and Monitoring Specialist is in charge of accounting in addition to his other duties. According to our review, there are adequate financial management system in place in the RSU. Based on our review, there are controls in place including segregation of duties in approving the expenses and in final release of funds. The petty cash is adequately kept and there is a segregation of duties in approving, recording and handling the cash. Salaries were appropriately calculated and per diems were aligned with local regulations. In the cash count we noted the cashbook is up to date and balance agree to the cash. The Fixed Assets Register is adequately maintained. KPMG made a physical verification of the fixed assets and no observations were made. KPMG observed the BoW Deputy Bureau Head have been paid additional salary top up from the COWASH GoF budget since he is acting as Project Director for COWASH. This has been approved by the Steering Committee.

BoFED has two bank accounts for COWASH. One is to receive funds from the MFA from which funds are disbursed to implementing regional, zonal and woreda level organisations. The other bank account is established for BoFED expenses for capacity building costs. BoFED has kept bookkeeping manually. The annual financial reporting is done using the GoE reporting templates. The financial reporting is compiled manually by using the source documentation and there is no double entry bookkeeping in use.

KPMG reviewed the financial reporting from the period of July 2016 – December 2018. According to the KPMG review, financial reporting is accurately reflecting the incurred expenditure and balances and there are adequate controls in place. Particularly KPMG observed adequate segregation of duties in approving the expenditure and in issuing cheques. KPMG observed the expenditure documents include sufficient supporting documentation, beginning and ending balances are followed and bank reconciliations are included in the annual financial reporting. Bank statements are attached to the reconciliations. The audit trail to the financial reporting between BoFED is in place.

The reviewed voucher sample from the audit period included trainings for woreda and zonal finance officers. Costs consisted of per diems (ETB 300 per day), transportation costs and refreshments. The trainings were in line with the annual plans and cost were reasonable and relevant for the Project.

The capacity building funding on woreda level is channelled through woreda Financial Office, WoFED. The woreda accounting records reconciled with the annual reporting to BoFED, which includes a standard template trial balance and a bank account reconciliation. In the Gusgusha Shikudad and Yilmana Densa Woredas the trial balances do not indicate petty cash balance, but the petty cash is however utilised but deposited at the bank account in the year-end. There is a separate cash book for the GoF funding, but in the Yilmana Densa Woreda the cash book was not up to date as it showed balance at the year-end of the EFY2010.

The balances brought forward from the previous fiscal years were acknowledged and they reconciled with the bank account statement. As a control point, the balances brought forward are verified by the RSU Financial Specialist, and the remaining balance is deducted from the annual budgeted disbursements. The expenses incurred in WoFED were reviewed on a


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sample basis. KPMG observed that the costs belonged to the Project and the audit trail from the accounting records to the individual expenditure vouchers was in place.

KPMG visited the BoE and the BoW and noted the accounting was adequately kept and there was an audit trail in COWASH funds, and reconciliations are adequately conducted. The financial reporting of the EFY2009 and EFY2010 was derived from the bookkeeping. There was an adequate segregation of duties in place in the approval processes.

The CMP investment funding is channelled through Amhara Credit and Savings Institute (ACSI), which is the MFI of the Amhara Region. The use of the investment funding is coordinated in the Water Office that authorises the WASCOs´ construction costs and keeps the WASHO files. In ACSIs, funds are received into the branch main account. There was an observation in the previous KPMG performance audit that the Gusgusha Shikudad ACSI didn’t have a separate bookkeeping for the GoE funding. During the field visit KPMG observed that the bookkeeping was now in place and it reconciled to the disbursement letters from the GoE and with the withdrawal requests. According to the previous audit report, in the Yilmana Densa ACSI, the withdrawals were recorded as a lump sum and the withdrawal requests were not systematically archived. As an improvement to the previous audit, the Water Office and ACSI now reconcile their balances on a monthly basis. KPMG observed ACSI Head Office had adequate follow-up for the GoE investment funds. We reconciled on a sample basis the disbursement follow-up in ACSI and did not make observations related to information recorded at the Woreda Water Office.

In Amhara, the fixed assets procured from the physical capacity building budget line are physically maintained in Woreda Water Office. The fixed assets procured in the Phases I and II consist mostly cars, motorbikes, computers, water testing kits and office materials. Some computers and printers have been procured during the Phase III. In both woredas, the Fixed Assets Registers were up to date.

In the previous Performance Audit conducted by KPMG, eight observations were made concerning the administration and financial management in Amhara Region. This included one critical, one significant and six moderate observations. The critical observation related to ACSI branch office bookkeeping for the GoE channel of funding. It was also observed that ACSI had not reported the GoE funds adequately to the Regional Water Bureau. According to KPMG review, the observations of the previous audit have been adequately addressed.


Observation In the Yilmana Densa Woreda, the movements in cash were not adequately recorded and a cash book was not adequately maintained.

Risk There is a risk that cash on hand is not adequately recorded. Moderate.

Recommendation The cash book needs to be kept and cash transactions recorded immediately when there is a change in petty cash.


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Helsinki, 31 May 2019

Anders Lundin, Kati Nikunen, Authorised Public Accountant, KHT Authorised Public Accountant, KHT


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Contact us Anders Lundin Partner, Authorised Public Accountant International Development Assistance Services T +358 (0)20 760 3000 E [email protected] Carina Hedberg Partner International Development Assistance Services T +358 (0)20 760 3000 E [email protected] Kati Nikunen Senior Manager, Authorised Public Accountant International Development Assistance Services T +358 (0)20 760 3000 E [email protected]

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