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REPORT OF AN EXPENDITURE VERIFICATION OF A GRANT CONTRACT EXTERNAL ACTIONS OF THE EUROPEAN UNION

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"SUPPORT TO EFFICIENT UTIlJZATION OF ALTERNATIVE ENERGY SOURCES TO IMPROVE THE lJVELIHOQD OF PASTORAL AND AGRO PASTORAL COMMUNITIES IN SOUTHERN ETHIOPIA"

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FED/2011/268 - 372

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GETACHEW KASSAYE &
Tel: 55137 11,5511708
P.O. Box 1432 Addis Ababa, Ethiopia

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Chartered Certified Accountants

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TABLE OF CONTENTS

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REPORT OF FACTUAL FINDINGS

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INFORMATION ABOUT THE GRANT CONTRACT

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2. PROCEDURES PERFORMED AND FACTUAL FINDINGS 8

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ANNEX 1

FINANCIAL REPORT FOR THE GRANT CONTRACT

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ANNEX 2

TERMS OF REFERENCE EXPENDITURE VERIFICATION...16

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Tel. 011 - 5513711 011 - 551 1708 011 - 551 7447 011 - 551 72 76 Fax. 251-11- 551 0220

P.O. Box 1432 ADDIS ABABA ETHIOPIA

Report of Factual Findings

Roberto Orcaado Head of Mission COOPI- Ethiopia Addis Ababa, Ethiopia February 16,2013 Dear Roberto Orcaado, In accordance with the terms of reference dated January 08,2013 that you have agreed with us, we provided our Report of Factual Findings ("the Report"), with respect to the accompanying Financial Report for the period covering from August 04,2011 to August 31,2012 (Annex 1 of this report). You requested certain procedures to be carried out in connection with your Financial Report and the European Union financed Grant Contract concerning support to efficient utilization of alternative energy sources to improve the livelihood of Pastoral and Agro Pastoral Communities in Southern Ethiopia FED /2011/ 268 - 372,the "Grant Contract", Objective Our engagement was an expenditure verification which is an engagement to perform certain agreed-upon procedures with regard to the Financial Report for the Grant Contract between you and the European Commission, the 'Contracting Authority'. The objective of this expenditure verification is for us to carry out certain procedures to which we have agreed and to submit to you a report of factual findings with regard to the procedures performed. Standards and Ethics
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Our engagement was undertaken in accordance with:
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• International Standard on Related Services ("ISRS") 4400 Engagements to perform Agree-upon Procedures regarding Financial Information as promulgated by the International Federation of Accountants ('IFAC');

E-mail: getachewkassaye@ethionet.et

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• The Code of Ethics for Professional Accountants issued by the IFAC. Although ISRS 4400 provides that independence is not a requirement for agreed-upon procedures engagements, the Contracting Authority requires that the auditor also complies with the independence requirements of the Code ofEthics for Professional Accountants;
Procedures Performed

As requested, we have only performed the procedures set out in the terms of reference for this engagement and we have reported our factual findings on those procedures in Chapter 2 of this report. These procedures have been determined solely by the Contracting Authority and the procedures were performed solely to assist the Contracting Authority in evaluating whether the expenditure claimed by you in the financial Report is eligible in accordance with the terms and conditions of the Grant C o n t r a c t . ' Because the procedures performed by us did not constitute either an audit or a review made in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the accompanying Financial Report. Had we performed additional procedures or had we performed an audit or review of the financial statements of the Beneficiary in accordance with International Standards on Auditing, other matters might have come to our attention that would have been reported to you.
Sources on Information

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The Report sets out information provided to us by you in response to specific questions or as obtained and extracted from your accounts and records.
Factual Findings

The total expenditure which is the subject of this expenditure verification amounts to Euro 146,231.61 (One Hundred Forty Six Thousand Two Hundred Thirty One and Sixty One cents). The Expenditure coverage Ratio is 72%. This ratio represents the total amount of expenditure verified by us expressed as a percentage of the total expenditure which has been subject of this expenditure verification. The latter amount is equal to the total amount of expenditure reported by you in the Financial Report and claimed by you for deduction from the total sum of prefinancing under the Grant Contract as per your Request for Payment.
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We reported the details of our factual findings which result from the procedures that we performed in Chapter 2 on this report
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Use of this Report

This Report is solely for the purpose set forth in the above objective. This report is prepared solely for your own confidential use and solely for the purpose of submission by you to the contracting Authority in connection with the requirements as set out in Article 15 of the General Conditions of the Grant Contract. This report may not be relied upon by you for any other purpose, nor may it be distributed to any other parties. The Contracting Authority is not a party to the agreement (the terms of reference) between you and us and therefore we do not owe or assume a duty of care to the Contracting Authority who may rely upon this expenditure verification report at its own risk and discretion. The Contracting Authority can assess for itself the procedures and findings reported by us'and draw its own conclusions from the factual findings reported by us. The Contracting Authority may only disclose this Report to others who have regulatory rights of access to it in particular the European Anti Fraud Office and the European Court of Auditors. This Report relates only to the Financial Report specified above and does not extend to any of your financial statements. We look forward to discussing our Report with you and would be pleased to provide any further information or assistance which may be required.

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Yours faithfully

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Addis Ababa February 21, 2013

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1.

INFORMATION ABOUT THE GRANT CONTRACT The Grant Contract was signed between European commission (E.C) as a contracting authority and Cooperazione International (CaaPI), as an implementing nongovernmental organization (NGO). The purpose of this contract is the award of a grant by the Contracting Authority for the implementation of the Action entitled "support to efficient utilization of alternative energy sources to improve the livelihood of pastoral and agro pastoral. The overall objectives of the project is to provide supportive actions to efficient utilization of alternative energy sources to improve the livelihood of pastoralftnd Agro Pastoral communities in southern Ethiopia. The total eligible cost of the action is set as Euro 146,231.61 the duration of the action is set from 4/812011 to 31/8/2012.
Information about the Subject ofthe Expenditure Verification Reference number and date of the Grant Contract Grant contract title

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FED/2011/268 - 372 dated 03/08/11 Support to efficient utilization energy source to improve the livelihood of Pastoral and Agro Pastoral'communities in Southern Ethiopia Ethiopia

Country Beneficiary

COOPERAZIONE INTERNAZTONALE (COOPI)Via Francesco De Lemene, 50 20151 Milan, Italy Or Ethiopia Programs Coordination Gerji, Adwa Park P.O, Box 2204 Addis Ababa, Ethiopia

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Legal basis for the Grant Contract Start date of the Action End date of the Action Total cost of the Action Grant maximum amount Total amount received to date by the Beneficiary from Contracting Authority 4 August, 2011 3 August ,2014 Euro 1,109,537 Euro 832,152.75

Euro 154,782.59

Total amount of the payment request European Commission

Euro 297,077.58 Micheline Kocak Head, Finance & Contracts section Delegation of the European Commission to Ethiopia POBox 5570 Cape Verde Street Addis Ababa, Ethiopia

Auditor

GETACHEW KASSAYE AND CO., P.O. Box 1432 Addis Ababa, Ethiopia

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PROCEDURES PERFORMED AND FACTUAL FINDINGS We have performed the specific procedures listed in Annex 2A of the Terms of Reference for the expenditure verification of the Grant Contract ('ToR). These procedures cover. 1. General Procedures, 2. Procedures to verify conformity of expenditure with the Budget and Analytical Review, 3. Procedures to verify selected expenditure. We have applied the rules for selection of expenditure and the principles and criteria for verification coverage as set out in Annex 2B (sections 3 and 4) of the ToR for this expenditure verification. The total expenditures verified by us amount to "Euro 136,665.06" and is summarized in the table below. The overall expenditure coverage ratio is 78%.

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Expenditure Heading 1. 2. 3. 4. 5. 6. Human resources Travel Equipment, Vehicles and supplies Local office Other costs, services Other Total

Total Expenditure Reported by the Beneficiary (Euro) 72,975.19 1,807.67 29,687.29 17,8f5,46 13,160.84 1,218.61 136.665.06

Total Expenditure Verified (Euro) 49,405.59 1,294.43 27,089.31 14,579.99 13,091.10 825.37 ]06.285.79

Percentage of Expenditure Covered 68 72 91 82 99 68 78

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We have verified the selected expenditure as shown in the above summary table and we have carried out, for each expenditure item selected, the verification procedures specified at point 3.1 to 3.7 of Annex 2A of the 'ToR' for this expenditure verification.

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We report our factual findings resulting from these procedures below:

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General Procedures
1.1. Terms and Conditions of the Grant Contract We have obtained an understanding of the terms and conditions of the Grant Contract by reviewing the Grant Contract and its annexes and other relevant information, and by inquiry of the Beneficiary. We have obtained a copy of the original Grant Contract (signed by the Beneficiary and the Contracting Authority) with its annexes. We have also obtained and reviewed the Report (which includes a narrative and a financial section) as per Article 2.1 of the General Conditions. ,

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No exceptions were found as a result of this procedure.

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1.2.

Financial Report for the Grant Contract We have verified that the Financial Report complies with the following conditions of Article 2 of the General Conditions the Grant Contract: • The Financial Report conforms to the model in Annex VI of the Grant Contract; • The Financial Report covers the Action as a whole, regardless of which part of it is financed by the Contracting Authority; . • The Financial report is drawn up iq the language of the Grant Contract; • The proof of the transfers of ownership of equipment, vehicles and supplies (Article 7.3 of the General Conditions of the Grant Contract) is annexed to the final Financial Report;
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No exceptions were found as a result of this procedure.

1.3.

Rules for Accounting and Record Keeping We have examined - when performing the procedures listed in this Annex whether the Beneficiary has complied with the following rules for accounting and record keeping of Article 16 ofthe General Conditions the Grant Contract: • The accounts kept by the Beneficiary for the implementation of the Action must be accurate and up-to-date; • The Beneficiary must have a double-entry book-keeping system;

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• The accounts and expenditure relating to the Action must be easily identifiable and verifiable; • The accounts must provide details of interest accrued on funds paid by the Contracting Authority
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No exceptions were found as a result of this procedure.

Reconciling the Financial Report to the Beneficiary's Accounting system and Records We have reconciled the information in the Financial Report to the Beneficiary's accounting system and records (e.g. trial balance, general ledger accounts, sub ledgers etc.) (See Article 16.1)
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No exceptions were found as a result of this procedure.

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1.5.

Exchange Rates We have verified that amounts of expenditure incurred in a currency other than the Euro have been converted at the exchange rate which is made up of the average of the rates published in InforEuro for the months covered by the Financial Report, unless otherwise provided in the special conditions of the Grant Contract (Article 15.9 of the general conditions).
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2.

No exceptions were found as a result of this procedure.

Procedures to verify conformity of Expenditure with the Budget and Analytical Review
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Budget of the Grant Contract We have carried out an analytical review of the expenditure headings in the Financial Report. We have verified that the budget in the Financial Report corresponds with the budget of the Grant contract (authenticity and authorization of the initial budget) and that the expenditure incurred was indicated in the budget of the Grant Contract.
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No exceptions were found as a result of this procedure.

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2.2.

Amendments to the Budget of the Grant Contract We have verified whether there have been amendments to the budget of the Grant contract. Where this is the case we have verified that the Beneficiary has: • Requested an amendment to budget and obtained an addendum to the Grant Contract if such an addendum was required (Article 9.1 of the General Conditions). • Informed the Contracting Authority about the amendment in case the amendment was limited (Article 9.2 of the General Conditions) and an addendum to the Grant Contract was not required.

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No exceptions were found as a result of this procedure.

Procedures to verify selected Expenditure
Eligibility of Costs We have verified, for each expenditure item selected, the eligibility criteria set out below:1.

Costs actually incurred (Article 14.1) We have verified that the expenditure for a selected item was actually incurred by and pertains to the Beneficiary. For this purpose we have examined supporting documents (e.g. invoices, contracts) and proof of payment. We have also examined proof of work done, goods received or services rendered and verified the existence of assets if applicable.

» ii. No exceptions were found as a result of this procedure. Cut-off-implementation period (Article 14.1 a) We have verified that the expenditure for a selected item was incurred during the implementation period of the Action.

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No exceptions were found as a result of this procedure. Budget(Article 14.1 b) We have verified that the expenditure for a selected item was indicated in the action budget.

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No exceptions were found as a result of this procedure.

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