Final Audit Report COWASH 26.9.2017

Performance Audit of The
Support to Community-Led
Accelerated Water, Hygiene
and Sanitation, COWASH
July 2014 – July 2016
Ministry for Foreign Affairs of Finland
Document Classification - KPMG Confidential

Performance Audit of COWASH, July 2014 - July 2016
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Glossary
ACSI Amhara Credit and Saving Institution

BG Benishangul-Gumuz Region
BGCSI Benishangul-Gumuz Credit and Saving Institution
BoFEC Regional Bureau of Finance and Economic Cooperation in Amhara region
BoFED Regional Bureau of Finance and Economic Development
CBS Capacity Building Specialist
CIS Crosscutting Issues Specialist
CO Communication Officer
CMP Community Managed Project
COWASH Community-Led Accelerated WASH
CTA Chief Technical Advisor
EFY Ethiopian Fiscal Year
FinnWASH The Government of Finland supported bi-lateral project FinnWaSH-BG
FTAT Federal Technical Assistance Team
GIS Geographic Information Specialist
GoF Government of Finland
GoE Government of Ethiopia
HO Ramboll Home Office
HOC Home Office Coordinator
HRDP Human Resource Development Specialist
JPO Junior Professional Officer
CMPS Community Managed Project Specialist
M&E Monitoring and Evaluation
MES Monitoring and Evaluation Specialist
MFA Ministry for Foreign Affairs of Finland
MFI Micro Finance Institution
MoE Ministry of Education
MoFEC Ministry of Finance and Economic Cooperation
MoFED/C Ministry of Finance & Economic Development
MoH Ministry of Health
MoWE Ministry of Water and Energy (Phase I)
MoWIE Ministry of Water, Irrigation and Energy (Phase II)
MoWIE Ministry of Water, Irrigation and Electricity (Phase III)
MTE Mid Term Evaluation
NWCO National WaSH Coordination Office
NWMU National WaSH Management Unit
NWSC National WaSH Steering Committee
OCSSCO Oromia Credit and Saving Shareholder Company
OMA Office Management Assistant
OMO Micro-Finance Institution in SNNPR
O&M Operation and Maintenance
OWNP One WASH National Programme
PD Project Document
PMP Performance Monitoring Plan
RSC Regional Steering Committee
RSU Regional Support Unit
RWMU Regional WaSH Management 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
TA Technical Assistance
UAP Universal Access Plan
WaSH Water, Hygiene and Sanitation
WASHCO Water Supply, Sanitation and Hygiene Committee
WIF WASH Implementation Framework
WoFED Woreda Level Finance Bureau
WSSD Water Supply and Sanitation Directorate
WYCB Women, Youth and Children Bureau
WTT WaSH Technical Team
ZoFED Zone Level Finance Bureau
Document Classification - KPMG Confidential 1

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Calendar Converter
Ethiopian Fiscal Year Gregorian Period

EFY 2007 8 July 2014 - 7 July 2015
EFY 2008 8 July 2015 - 7 July 2016
EFY 2009 8 July 2016 - 7 July 2017
Tables
Table 1 Phase I & II Budget, Component One Budget

Table 2 Phase I & II Budget, Component Two Budget
Table 3 Project Targets Versus Actual Performance
Table 4 Component One Phase I & II Budget and Utilisation
Table 5 Component Two Utilisation Phase II
Table 6 Total Component Two Utilisation Phase II
Table 7 Average Direct Costs per Water Scheme
Table 8 Technical Assistance Budget Follow-Up Phase II
Table 9 Technical Assistance Fees Follow-Up in Phase II
Table 10 Regional Budget Utilisation, Oromia EFY 2007
Table 11 Regional Budget Utilisation, Oromia EFY 2008
Table 12 Regional Budget Utilisation, SNNPR EFY 2007
Table 13 Regional Budget Utilisation, SNNPR EFY 2008
Table 14 Amhara Region Budget Versus Actual Comparison EFY 2007 in ETB
Table 15 Amhara Region Budget Versus Actual Comparison EFY 2008 in ETB
Table 16 Benishangul-Gumuz Region Budget Versus Actual Comparison EFY 2007 in ETB
Table 18 Differences in ETB between the BG Financial Report Q4 2008 Versions
Table 19 BG Vehicle Procurement / Allocation of Payments and Expenditure
Annexes
Annex 1 Follow-Up Table to Address Recommendations

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Contents
1 Executive Summary 4
2 Introduction 8
2.1 Scope and Execution 8
2.2 List of Interviewed Persons 9
3 Background and Structure 13
3.1 Background of Project 13
3.2 Project Structure 14
4 Performance 16
4.1 Project Budget 16
4.2 Performance and Utilisation of Funds 17
4.3 Cost-effectiveness of Implementation 19
4.4 Project Reporting 21
4.5 Monitoring 22
4.6 Compliance with Agreements 23
4.7 Review of Project Activities 24
4.8 Risk Management 27
5 Financial Administration 29
5.1 Fund Flows 29
5.2 Accounting of Technical Assistance Budget 32
6 Administration and Financial Management in Regions 37
6.1 Administration and Financial Management in Oromia Region 37
6.2 Administration and Financial Management in Southern Nations, Nationalities and Peoples’
Region 42
6.3 Administration and Financial Management in Amhara Region 46
6.4 Administration and Financial Management in Benishangul-Gumuz Region 51

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1 Executive Summary
The Community-Led Accelerated Water, Hygiene and Sanitation Project, COWASH, is a
bilateral project aiming to support rural areas’ water supply and sanitation in Ethiopia. Its
objective is to support the acceleration of the Universal Access Plan (UAP) in rural water and
sanitation targets attainment through the establishment of an enabling environment and the
implementation of Community Managed Projects (CMPs).
Phase I of COWASH started in July 2011 and Phase II in October 2014. Phase II was finalised
in July 2016. Phase III (2016-2019) is currently ongoing. On a total level COWASH has
achieved and even overachieved some of its targets and thus the overall cost efficiency can
be considered higher than initially planned. During 2011-2016 COWASH was able to construct
10,628 communal and institutional water supply schemes which is 119% of the targeted.
Water points and institutional latrines in rural areas are constructed based on the Community
Managed Project (CMP) approach developed under the Project. The CMP approach
emphasises community involvement and commitment throughout the construction process
from the planning phase to finalisation and maintenance. COWASH provides training to
community members, schools and local health facility committees related to construction and
maintenance of water points and institutional latrines. COWASH also provides training to the
regional, zonal and woreda level organisations involved in implementation.
The total budget for the COWASH Phases I and II was 55 million euro and Phase III budget is
40.0 million euro. In Phase I and II the Government of Finland (GoF) contribution to the Project
was 22.0 million euro and the Government of Ethiopia (GoE) contribution was 23.0 million
euro. Local communities contributed 5.0 million euro. A significant part of the GoF funding,
18.3 million euro, was channelled to regions for capacity building and 3.7 million euro was used
for technical assistance (TA) at federal level. The GoE provided funding for investment costs
of water points and institutional latrines and a minor funding to the operational costs of the
regional, zonal and woreda level offices.
Project Structure
The management structure of COWASH is organised on several different levels and includes
multiple stakeholders. The structure consists of federal level management and regional level
management. At the federal level, National WaSH (Water, Sanitation and Hygiene) Steering
Committee (NWSC) is the highest decision making body. It provides strategic guidance to the
Ethiopian One WaSH National Programme (OWNP) including COWASH. The federal
Technical Assistance team (FTAT) of COWASH consists of international and national
consultants and it provides TA to the Project. FTAT works in Addis Ababa under the Water
Supply and Sanitation Directorate (WSSD) situated in the Ministry of Water, Irrigation and
Energy (MoWIE).
The funding from the Ministry for Foreign Affairs of Finland is mainly allocated to capacity
building and Project equipment and is channelled through the Regional Bureau of Finance and
Economic Development (BoFEDs) to RSU and other pertinent regional, zonal and woreda level
bureaus and offices. The funding from GoE is allocated to investments (an exception is the
Benishangul Gumuz Region where GoF funding is used for investments) and is channelled
through BoFEDs that transfer the funds to the regional Micro Finance Institution (MFI).
WASHCOs are established in the communities to manage the construction and maintenance
of the water and institutional latrine projects.

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Performance
The Project has steadily broadened since the beginning. COWASH operated in three regions
and in 31 woredas in 2011. At the end of the Phase II, COWASH operated in all five regions
and in 76 woredas. The total number of constructed water points by the end of the Phase II
was 10,022 and exceeded the target by 24%.COWASH achieved 130% of the target to
improve beneficiaries’ access to water supply in rural areas. The targets related to institutional
water supply and latrine constructions were however not achieved and the main was that
higher priority was given to the community water supply on woreda level. The self-contribution
in form of in-kind and cash for the school and health facility water and sanitation constructions
was also a challenge.
The construction of the water points using the CMP modality requires considerable amount of
resources to ensure the capacity of the WASHCOs in an early stage and to support them
throughout the Project cycle. The actual costs for investments and capacity building at the end
of the Phase II amount to 34.5 million euro from which capacity building costs are 16.2 million
euro and investment costs are 18.3 million euro. TA costs amounted to 3.7 million euro during
Phases I and II. In addition, communities contributed cash and in-kind. The value of
communities’ contribution is defined in the financial agreements but has not been included in
the Project reporting.
Financial Management and Reporting

Component One
Fund flow of TA-support under component one is channelled through the contracted
consultancy company Ramboll. Ramboll invoices the TA fees and reimbursable costs from
MFA on monthly basis. The accounting of the TA budget and actual expenses is maintained
by Ramboll Home Office (HO) in Finland. Overall the TA costs are in line with the MFA standard
terms. However minor discrepancies were noted in following the MFA Standard terms. Half-
day per diems have not been fully in accordance with the Standard Terms and invoiced fixed
fees for consultancy services exceeded the standard terms by 4,256 euro.
Component Two
Component Two consists of the GoF support to capacity building in all regions and the GoE
support to water points and latrines investment costs. An exception is the Benishangul-Gumuz
(BG) Region where the GoF funding is also channelled to investment costs for water points
and institutional latrines. The amount of the GoF funding allocated to investments in
Benishangul-Gumuz during the Phase II was ETB 11,411,400 (456,456 euro).
Component Two, Government of Finland Funding for Capacity Building
Capacity building support is paid by the MFA to regional BoFEDs based on their fund requests
and annual plans. BoFEDs provide funding further to RSUs, other regional bureaus and zone
and woreda level finance bureaus (WoFED) and zonal level finance bureaus (ZoFED). The
accounting and financial administration of the capacity building component is maintained by
the respective bureaus. They report on a quarterly basis COWASH related expenses to
BoFEDs. RSUs assist in consolidation and preparing the regional annual progress and
financial report. Financial reporting for capacity building costs follows the GoE reporting
processes. The financial reporting processes for capacity building are in place and structured.
KPMG however recognised that some of the bureaus and offices had limited capacity and have
not complied with the reporting process. In the Oromia Region there were inconsistencies in
the reporting of expenses and the expenditures from some of the bureaus has not been
consolidated during Phase II. In Benishangul-Gumuz, Oromia and Southern Nations,

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Nationalities and Peoples’ (SNNPR) regions, end balances have not been brought forward in
the financial reporting, thus there is a risk that the cumulative financial reporting is not accurate.
In the reporting process, the discrepancies were mainly caused by inadequate accounting
capacity and competence. This can be mitigated by providing more systematic on-the-job
training and closer monitoring carried out by the RSU. The Financial Management Specialists
from the Regional Support Unit could be used more extensively to provide training. In Amhara,
the Financial Management Specialist had been active in providing small-scale training and
support in daily financial management matters in woredas and zones. The practise has proven
to reduce risks and improve quality, and the replication of the practice in other regions should
be considered.
Component Two, Government of Ethiopia Funding for Investments
The GoE funds for investments are channelled through the regional Micro Finance Institutions
(MFIs). In the Benishangul-Gumuz and in the SNNPR regions, BoFED transfers funds to each
regional MFI headquarters based on the annual plans. In Amhara and Oromia regions, BoFED
transfers the investment funds to the sector bureaus and the bureaus enters into agreements
with MFIs and transfers funds to MFIs. The amounts to be paid to each woreda are indicated
in the annual plans. MFI headquarters further transfer funding to MFIs’ branch offices to be
disbursed to WASHCOs on woreda level. The disbursements to WASHCOs are approved by
two WaSH Technical Team (WTT) members.
KPMG observed significant weaknesses in the reliability of the investment fund management,
accounting and financial reporting. The funds disbursed to WASHCOs from the MFI branch
offices are reported to the Water Bureaus and RSU by the woreda CMP Supervisors. KPMG
observed that the CMP Supervisor is a position of a technical water expert and their financial
management and accounting capacity is limited. The level on financial management expertise
in the Water Offices was found not to be on adequate level.
The costs incurred for WASHCOs have not been reported accurately in all respects. Reported
actual expenditures and balances are not reconciled with the total amounts of funding initially
transferred to the regional MFI Headquarters. MFIs do not comply with sufficient controls in
determining and reconciling the balances in each office through which funds have been
transferred on a monthly basis. Many MFIs have not opened separate CMP accounts (bank
books) at the branch office level for each WASHCO as the contracts between the Water
Bureaus and MFIs would require. KPMG observed that reported expenditure and balance
accounts for a particular woreda did not reconcile with the amounts on the bank account of
MFI. In Amhara, one woreda water Bureau had no bookkeeping or proper follow-up of the
investment funds. The MFI in Amhara (ACSI) has not submitted any reporting to the Water
Bureau. KPMG observed that in the Oromia region’s MFI, the Credit and Saving Shareholder
Company (OCSSCO), there was a lack in the audit trail as the general ledger for the CMP
account. The missing beginning balance not brought forward was ETB 2,987,503
(approximately 129,891 euro). In the Benishangul-Gumuz Region, the Project accounting for
the Project funds showed a balance of ETB 170,000 (7,391 euro), whereas actual balance in
MFI was ETB 887,688 (approximately 38,595 euro). Overall the observations indicate a
significant risk that funds are not properly used by WASHCOs as the accounting is not
reconciled with the bank account and actual funds available.
For the GoF funding for investments in Benishangul-Gumuz region, KPMG observed that
accounted GoF funds were later reported as utilisation of GoE funds. This was due the fact

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that GoF funds could be brought forward to the following fiscal year while the GoE funds could
not be transferred.
To conclude, investment fund flow from the GoE source, management, accounting and
financial reporting is complex and significant weaknesses in the financial reporting and
reconciliation routines were observed.
Risk Management and Audits
The Project risks have been described in the Project Document. During implementation, the
risks have been to some extent reported to and considered by the Steering Committee. The
risk management procedures have however not been systematically documented and updated
during the Project Phases I and II.
Technical assistance costs have not been annually audited although the agreement between
the consultant and the MFA states that the consultant is to submit the audited statements of
the Project accounts to the MFA. Audits for the capacity building costs in component two have
been conducted by the regional BoFED internal auditor. The investment funds channelled
through MFIs have not been audited by the internal auditors in the Oromia region.

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2 Introduction
2.1 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 COWASH Project,
focusing particularly on various management and administration related issues, such as the
implementation of the 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 years: July 2014 – July 2016, Ethiopian fiscal years (EFY)
2007-2008. The audit has been carried out according to the principles of the International
Standards on Auditing. The Assignment specifically focuses on financial/accounting issues,
performance issues and administration/governance issues.
Execution
The Assignment was conducted by KPMG Finland. Anders Lundin, Authorised Public
Accountant and Lauri Tuomaala, 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 Home Office in Espoo, Finland, Federal
Technical Assistance Team Office in Addis Ababa, Ethiopia and in the Project implementation
areas in Amhara, Benishangul-Gumuz, Oromia and SNNPR regions, Ethiopia. The field work
took place in May-June 2017.
The report presents the main observations and risks identified during the Assignment as well
as recommendations to improve the management procedures. We have 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 audit report is for the
MFA’s internal use only.

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2.2 List of Interviewed Persons

Name Position Organisation
Federal Technical Assistance Team
Arto Suominen CTA FTAT
Ato Melaku Worku Capacity Development Specialist FTAT
Aino Himanen Junior Professional Officer FTAT
Ato Abebaw Getachew M&E Specialist FTAT
Ato Yohannes Melaku CMP Specialist FTAT
Climate & Environmental Risk and Water Safety
Mussie Hailegeorgis Specialist FTAT
Benti Ejeta Communication and Knowledge Specialist FTAT
Birtukan Asmamaw Office Management Assistance FTAT
MoWIE
Kebede Gerba State Minister MoWIE
Amhara Region
Abrham Kebede Team Leader COWASH RSU / Amhara
Muluneh Genetu Planning, Monitoring and Evaluation Specialist COWASH RSU / Amhara
Abebu Mulu Executive Secretary & Cashier COWASH RSU / Amhara
Asnakew Yehuala Treasury Director BoFED in Amhara
Region
Mengistu Tesfa Head of Procurement and Finance BoFED in Amhara
Region
Bizuayehu Teshome Accountant BoFED in Amhara
Region
Tibebu Kumlachew Business and Data Management Senior Officer ACSI
Mulu Tebabal Director of Internal Audit BoFED
Mintwah Ayehew Accountant South Gondar ZoFED
Asmare Jembeh Deputy ZoFED head South Gondar ZoFED
Abeje Mekonen Focal Person South Gondar Zone
Water Office
Abro Gedefaw Accountant Dera WoFED
Zeyinu Essa Water Office Head & CMP Supervisor Dera Water Office
Tsedei Kassa ACSI Sub-branch head Dera ACSI
Yenenesh Gznet Accountant Awi ZoFED
Bassena Simenen Accountant Awi ZoFED
Meseret Beriwie WoFED Head Guagusa Shikudad
WoFED
Alemhu Andarew Accountant Guagusa Shikudad
WoFED
Mahtemu Asmare Accountant Guagusa Shikudad
WoFED
Tadesse Biten Water Office Head Guagusa Shikudad
Water Office
Tsegaye Adane CMP Supervisor Guagusa Shikudad
Water Office
Benishangul-Gumuz Region
Melkamu Dibaba Team Leader COWASH RSU / BG
Melkamu Gemeda CB Specialist COWASH RSU / BG

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Tilahun Abebe Financial Specialist COWASH RSU / BG
Getahun Abdisa Bureau Head Water Bureau in BG
Region
Tsegayensh Bishaw Head of Finance BoFED in BG Region
Ambissa Belay Accountant BoFED
Semeneh Mosissa Internal Auditor BoFED
Abebe Berhie Accountant MFI in BG
Yeshiwas Eijgu COWASH Focal Person WYCB
Eyeberu Sitot Finance Director WYCB
Seid Molla Mekonnen Accountant WYCB
Olana Dufera Finance Sub Process Owner Education Bureau
Aschale Ayele Accountant Education Bureau
Shawoll Tessema EPI Officer Health Bureau
Hayelom Birhanu One WASH TA Health Bureau
Kolu Senbeta Finance Officer Health Bureau
Takele Geleta Chief Accountant Assosa ZoFED
Getanesh Eibissa Accountant Assosa ZoFED
Atana Habbe Focal Person Assosa ZoFED
Girma Zewudie Cashier Assosa ZoFED
Ashenafi Ambaw Accountant Bambasi WoFED
Murad Assabir Cashier Bambasi WoFED
Yakub Abdulahi Water Office Head Bambasi Water Office
Atsbaha Kassu CMP Supervisor Bambasi Water Office
Habtamu Kase BGCSI Sub-branch head Bambasi BGCSI
Laka Muwam Accountant Bambasi BGCSI
Ato Etiso Ebba Accountant Oda WoFED
Ato Alemayehu Dafassa Focal person Oda WoFED
Ato Ahmed Ali Water Office Head Oda Water Office
Ato Tsetita Jirata CMP Supervisor Oda Water Office
Ato Osman Abdularim CMP Supervisor Oda Water Office
Ato Solomon Kitessa Oda BGCSI Head Oda BGCSI
Ato Ahmed Ebrahim Accountant Oda BGCSI
Oromia Region
Malkamu Dalju Team Leader RSU, Water Bureau,
Oromia
Tibebu Telila Eda’a Director of Community Participation Water Bureau, Oromia
Kefyalew Kebede Soboka Financial Management Specialist RSU, Water Bureau,
Oromia
Tibeku Abeba Planning, M&E Head OSCCSO
Tefera Lachisa COWASH focal person OCSSCO
Batria Bedniya Hasen Accountant Bureau of Education,
Oromia
Gemechu Asfaw Director of Finance and Procurement Bureau of Health, Oromia
Daba Hunde Accountant Bureau of Health, Oromia
Dr. Mengistu Bekele Debuty Bureau Head Bureau of Health, Oromia
Tayitu Hunidto Accountant Hadiya ZoFED

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Birhamu Elias Accountant Hadiya ZoFED
Solomon Seyoum Zonal Process Owner Fitche ZoFED
Mulvelem Diba Focal Person Fitche ZoFED
Tibebu Hailu Senior Accountant Fitche ZoFED
Fayssa Tesema Water office head Abichu Gena Water
Office
Tesfaye Kemsi Process Owner Abichu Gena Water
Office
Alemu Jitar Water Office Deputy Head Abichu Gena Water
Office
Girma Dechasa Branch Manager Abichu Gena OCSSCO
Branch
Aklilu Abera Director Abichu Gena WoFED
Gebreyes Getu CMP Supervisor Abichu Gena WoFED
Yemesersch Getachew Storekeeper Abichu Gena WoFED
Makadu Tesfa Process Owner Abichu Gena WoFED
Askale Abera Accountant Abichu Gena WoFED
Mulugeta Demisse Administrator Jida Water Office
Cheru Gedefa Office Expert Jida Water Office
Yosef Mekonnen CMP Supervisor Jida Water Office
Feyisse Tekele Branch Manager Jida OCSSCO Branch
Office
Gadisa Nagu Senior Accountant Jida OCSSCO Branch
Office
Getnet Abeba Process Owner for Finance, Property and Jida WoFED
Administration
Yosef Mekonnen CMP supervisor Jida WoFED
Shelema Geletu Accountant Jida WoFED
SNNP Region
Gete Melese Team Leader, Accounting BoFED Hawassa
Paulos Moja Financial Manager RSU / Water Bureau
Hawassa
Dereje Milkias COWASH Accountant BoFED Hawassa
Letta Yotamo Huriso Team Leader RSU / Water Bureau
Hawassa
Birhanu Debiso CMP Specialist RSU / Water Bureau
Hawassa
Teferi Ekile CB & M&E Specialist RSU / Water Bureau
Hawassa
Dil Legesse One Wash Accountant / COWASH Bureau of Health,
Hawassa
Gileno Tegegn Talie Finance Department Director OMO Microfinance
Institution
Sinshaw Negash Project Accountant Bureau of Education,
Hawassa
Bekele Kassaye WaSH PMU Coordinator Bureau of Water, SNNPR
Girma Lambebo WoFED Head Duna WoFED
Tigist Tedesse Accountant Duna WoFED
Misgana Azazh Water Office Head Duna Water Office

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Deneba Lerore CMP Supervisor Duna Water Office
Amanuel Handiso Technical CMP Advisor Duna Water Office
Admasu Lechamo Manager Duna OMO Branch
Temesgen Workineh Administrator Duna OMO Branch
Berhamu Negash Focal person Misha Water Office
Ayalew Sileshi Technical Advisor Misha Water Office
Meseret Mamu Accountant Misha WoFED
Alemayehu Eliusas Finance Head Misha WoFED
Dogu Biykaso Branch Manager Misha OMO Branch
Anu Eskonheimo Desk Officer Ministry for Foreign
Affairs of Finland
Tiina Byring-Ilboudo Councelor Embassy of Finland in
Ethiopia
Gezahegn Alemu Tadesse Advisor Embassy of Finland in
Ethiopia
In addition to this, KPMG interviewed WASHCO members, community members and other
Project beneficiaries in Amhara, Benishangul-Gumuz, Oromia and Southern Nations,
Nationalities and Peoples’ regions.

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3 Background and Structure

3.1 Background of Project
The Support to Community-Led Accelerated Water, Hygiene and Sanitation, COWASH is a
bilateral Project that has been established to support the attainment of the Universal Access
Plan and Millennium Development Goal targets in Ethiopia with acceleration of the WaSH
implementation through Community Managed Projects (CMP) approach. The overall objective
from the Phases I and II was to achieve universal access to WaSH in the rural areas of
Ethiopia. Within the framework of the overall objective the Project purpose was: “Support the
acceleration of Universal Access Plan (UAP) rural water and sanitation targets attainment
through the establishment of an enabling environment and the implementation of CMP
interventions in selected rural areas of Ethiopia”. It has been planned that COWASH will merge
into the One WaSH National Programme (OWNP) once the OWNP has a Consolidated WaSH
Account at federal level. It is also required that CMP implementation modality and the CMP
financial management guideline are approved as part of the Consolidated WaSH Account.
The key feature of CMP funding mechanism is that it transfers funds and the Project
management responsibilities for physical construction or rehabilitation directly to communities.
The transfer of investment funds (grant) is carried out by a regional micro finance institutions.
Communities are fully responsible for the water supply development process, through
planning, implementation and maintenance. The respective woredas provide technical
assistance and organise capacity building for the communities. CMP has been widely
recognized in Ethiopia as the best approach for community engagement in WaSH and
delivering effectively sustainable systems at low cost.
COWASH Phase I implementation was started in 2011. The planning of the Phase I was done
based on the experiences from previous Rural Water Supply and Environmental Programme,
RWSEP. During 2011-2013 national WASH Implementation Framework (WIF) was developed
aiming to harmonise existing water projects under WASH Implementation Framework (WIF)
umbrella. WIF included four modalities to improve rural water supply and sanitation
development:
1. Woreda Managed Project (Woreda is the implementer)

2. Community Managed Project (Community is the implementer)
3. Self-Supply (Household is the implementer)
4. NGO Managed Project (NGO is the implementer)
COWASH focuses on Community Managed Project (CMP) modality where local community
level has full responsibility in planning, designing, constructing and maintaining the water
points. In the beginning of the Phase II, CMP implementation was already replicated in
Amhara, SNNPR, Oromia and Tigray with investment funds allocated by the Regions and
capacity building funds predominantly provided by Government of Finland. The regions had
agreed their CMP funding commitments until June 2016 (2004-2008 EFY), until the end of the
Phase II. The Government of Finland supported bi-lateral project FinnWaSH-BG in
Benishangul-Gumuz region, also replicating CMP approach. Due to GoF internal strategic
development support decisions in Ethiopia, four new woredas in the Benishangul-Gumuz
region were included into COWASH support for the remaining years of COWASH Phase II. In
order to ensure adequate funds for investments in Benishangul-Gumuz region, a considerable
amount (456,456 euro) of investment funds from the GoF was recognised as an exception.

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CMP approach was originally planned to be implemented in 30 woredas by COWASH.

According to the revised Project Document the total number of planned COWASH intervention
woredas increased to 64 and at the end of the Phase II, the total amount of woredas was 76.
The Project is divided into two independent but inter-linked components, each specifically
determined by a related set of results further described by outputs and verifiable indicators.
Component 1: Strengthening the Federal Capacity to Implement Community Managed

Projects with a Support to the Establishment of One WaSH National Programme.
Main results of Component 1 are:

a) Community Managed Project Approach Scaled up at National level
b) CMP Implementation Capacity at the Federal and Regional Levels Developed.
c) Development and Implementation of One WaSH National Programme Supported
Component 2: Establishing and Strengthening the Capacity in Regions to Scale-up the

Implementation of Community Managed Projects
Main results of Component 2 are:
a) Target Regions, Zones and Woredas Capable to Plan, Manage, Monitor and
Implement Rural WaSH interventions using CMP approach
b) Financial and Procurement Services Delivered for CMP Interventions at All Levels in
the Selected Regions
c) Sustainable Community and Institutional Access to Safe Water, Sanitation and Hygiene
in the Target Woredas increased
3.2 Project Structure

COWASH has been supporting the One WaSH National Programme (OWNP) and acceleration
of the WaSH implementation through CMP approach. COWASH is fully integrated to the
mandatory national and regional WaSH structures. The implementation of the Project is
supported by the Federal Technical Assistance Team (FTAT) at the federal level and by
Regional Support Units (RSUs) at the regional level.
Federal Management Structures
The federal management structure consist of The National WaSH Steering Committee
(NWSC) that is the highest decision making body of COWASH providing overall governance
and guidance in COWASH implementation. The members of NWSC are a Minister from
Ministry of Water, Irrigation and Energy (MoWIE) and state ministers from Ministry of Finance
& Economic Development (MoFED), Ministry of Water and Energy (MoWIE), Ministry of Health
(MoH) and Ministry of Education (MoE). As a subset of the NWSC, COWASH has its Steering
Committee, which is led by the State Minister of MoWIE and has representatives from MoFEC,
MoH MoE and the MFA. The quorum for decision making is fulfilled when the representatives
from the MFA, MoFED and MoWIE are present. NWSC related to COWASH meets twice a
year to provide guidance and decision making based on jointly prepared agenda. Each
member has a veto-right.
National WaSH Technical Team (NWTT) provides managerial oversight to the One WaSH
Programme and to COWASH. The responsibility of NWTT related to COWASH is to review

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the annual plans, budgets and reports and to make recommendations to the NWSC. The
NWTT meets prior to the NWSC meetings to handle issues of COWASH implementation.
NWTT also acts as a body to manage and develop CMP approach as a part of National WaSH
implementation and acts as a Management Committee to submit COWASH related plans and
strategic decisions for the approval of NWSC.
The responsibility of the implementation of COWASH lies with the Water Supply and Sanitation
Directorate (WSSD) of the MoWIE. The WSSD provides guidance to FTAT in daily
management. FTAT has close cooperation with the National WaSH Coordination Office
(NWCO) and the National WaSH Management Unit (NWMU) in providing practical support to
the WaSH coordination and implementation. NWCO ensures that National WaSH Programme
plans, reports, monitoring and evaluation, and capacity building are coordinated, harmonized
and aligned with all WaSH stakeholders. NWMUs ensure also that RWMUs, Woreda sector
offices and town water boards have the directions, information, systems, skills and resources
to fill their WaSH mandate and achieve the expected results of the Project.
Federal Technical Assistance Team
FTAT is housed by the WSSD at MoWIE. WSSD and NWCO facilitates the provision of support
to regions, donors and other stakeholders with the assistance of FTAT. WSSD supervises the
activities of FTAT and facilitates its work through providing necessary logistic support. FTAT
is accountable to the Director of WSSD, works with the Federal WaSH structures, responds to
their needs, identifies potential support areas and facilitates relationship with other ministries.
FTAT consist of the following nine members; Chief Technical Advisor (CTA), Human Resource
Development Specialist (HRDP), Junior Professional Officer (JPO), Community Managed
Project Specialist (CMPS), Capacity Building Specialist (CBS), Monitoring and Evaluation
Specialist (MES), Crosscutting Issues Specialist (CIS) Communication Officer (CO) and Office
Management Assistant (OMA). CTA, HRDP and JPO are international consultants, whereas
others are locals. In addition, FTAT has own drivers. The international technical assistance
(TA) team selects and recruits the local federal level TA team specialists based on the approval
of MoWIE and the Embassy of Finland. FTAT also supports the selection of the RSU staff with
BoFED and Water Bureau. FTAT does not have any power or authority to the regional RSUs
or any regional bureaus.
Management Structure in Regions
At the regional level, the responsibility of the implementation of COWASH activities is under
the Bureau of Finance and Economic Development (BoFED) and Water Bureau in association
with Regional WaSH partners, the Health Bureau and the Education Bureau. As in the federal
level, the regional level WaSH bodies have the responsibility of coordinating and managing
the WaSH implementation in the Regions. The highest decision making body in the regions
are the Regional WaSH Steering Committee (RWSC) and the Regional WaSH Technical Team
(RWTT).
Regional Support Units (RSUs) are specific support teams established in regional levels to
support the regions CMP implementation. The RSUs are established at the Water Bureau. The
tasks of RSUs are to facilitate COWASH implementation and scale-up the CMP
implementation regionally. The RSUs teams normally have about 6 members consisting
director, team leader and different specialist or advisors. The specialists work on full time basis
for COWASH and CMP implementation. RSU’s CMP implementation support is provided for
the regional and zonal CMP partners and for the woreda partners in order to create and
maintain their capacity.

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4 Performance
4.1 Project Budget
Total funding for The Phase I and II was 55.0 million euro consisting of GoF funding 22.0 million
euro and GoE funding ETB 503.0 million (approximately 23.0 million euro). COWASH budget
is divided in two components. Component one includes costs for federal level technical
assistance and is funded by the Government of Finland. From GoF funding 3.7 million euro is
for technical assistance and 18.3 million euro is for capacity building in regional, zone and
woreda levels. Through Component two is channelled the funding for capacity building in
region, zone and woreda levels and the funding for investment costs of the water points. GoF
provides funding to capacity building and GoE provides funding for investments. In
Benishangul-Gumuz region (BG), GoF funding is also channelled for investments. GoE
provides also some funding for organisations operational costs.
Table 1. Phase I & II Component One Budget, Euro Phase I Actual Initial Phase II Budget Phase I & II
International long term TA 848 548 366 000 1 214 548
Home office Coordination 36 400 0 36 400
International short term consultants 84 648 105 000 189 648
National Short Term Consultants 120 794 57 000 177 794
National Specialists 134 873 299 250 434 123
JPO 14 040 98 100 112 140
Total Fees 1 239 303 925 350 2 164 652
Reimbursable 740 283 359 100 1 099 383
Sector Support / Capacity Building 237 260 229 097 466 357
Total 2 216 846 1 513 547 3 730 393
Budget for component two is approximately 40.1 million euro consisting of GoF funding to
capacity building and GoE funding to investment costs and operational costs. GoF funding is
used to establish Regional Support Units (RSU) in each region, equip the RSU offices and
support salaries for the RSU staff. GoF funding is additionally used for training finance persons
in regional, zone and woreda levels, train zone and woreda water, health and education
technical personnel on CMP processes, train water experts in operation and maintenance
management, support communities in planning, designing and maintaining the water points
and train artisans in construction, rehabilitation and practical maintenance and repair.
GoE funding is for investment costs of the water points and institutional latrines. In water point
construction, funding is channelled to WASHCOs for procuring materials and construction
services. WASHCOs withdraw funding from the micro finance institutions branch offices. Minor
funding from GoE is used also for operational costs in region, zone and woreda level offices
except for the RSUs.

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Table 2. Phase I & II,

Phase I & II GoF, Euro Phase I & II GoE, ETB GoE Euro Total Euro
Component 2 Budget
Amhara 10 310 578 239 634 780 10 418 903 20 729 481
Tigray 2 184 299 92 838 635 4 036 462 6 220 761
SNNPR 1 746 084 77 400 262 3 365 229 5 111 313
Oromia 1 766 000 72 153 550 3 137 111 4 903 111
BG 2 262 629 20 800 000 904 348 3 166 977
Total 18 269 590 502 827 227 21 862 053 40 131 643
Annual planning process is applied during implementation. For the capacity building (GoF),
operational costs (GoE) and investment costs (GoE) woreda level annual plans and budgets
are prepared. The Annual Plans are approved by the Regional Steering Committees.
4.2 Performance and Utilisation of Funds

In overall, COWASH has achieved its objectives until the end of The Phase II with some
deviations. From targeted 8,071 community water supply constructions, 10,022 were
constructed. Institutional water supply constructions was achieved 73% and institutional
latrines, 65% was constructed against target. The challenges in institutional latrines related to
completing the investments, locations of the institutions and due to the priority at the woreda
level was given to the community water supply and because it was a challenge to obtain
contribution (in-kind and cash) from the community for the school and health facility water and
sanitation constructions.
Table 3. Project Targets Versus Actual Performance

Target Actual %
Indicator
Number of Community Water Supply Construction 8 071 10 022 124 %
Actual Community water supply beneficiaries 1 757 000 2 290 163 130 %
Number of Institutional Water Supply Constructions 828 606 73 %
Number of Institutional Latrine Constructions 333 217 65 %
Component One
Component one budget was fully utilized by the end of The Phase II. The total budget allocated
for Component 1 for The Phase I and II (June 2011-July 2016) was 3,730,393 euro. The
utilisation of component one was 3,730,064 euro consisting international long term and short
term technical assistance costs 1.4 million euro, national long and short term consultants 0.6
million euro and reimbursable costs amounting to 1.1 million euro. Annual utilisation from the
beginning of the Phase I, five years is 0.8 million euro. Further observations related to
Component one have been described in the chapter 5.2.
Table 4. Component I Phase I & II Budget and Utilisation, Euro

Initial Phase II Budget Phase I &
Phase I actual Actual Phase I & II
Budget II
International long term TA 848 548 366 000 1 214 548 1 210 500
Home office Coordination 36 400 0 36 400 36 400
International short term
84 648 105 000 189 648 154 331
consultants
National Short Term Consultants 120 794 57 000 177 794 226 024
National Specialists 134 873 299 250 434 123 421 073
JPO 14 040 98 100 112 140 107 057
Total Fees 1 239 303 925 350 2 164 653 2 155 385
Reimbursable 740 283 359 100 1 099 383 1 131 721
Sector Support / Capacity
237 260 229 097 466 357 442 958
Building
Total 2 216 846 1 513 547 3 730 393 3 730 064

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Component Two
Total cumulative utilisation of component two amounted to 34.0 million euro at the end of the
Phase II (86 % of the total budgeted amount). Amhara represents most of the utilisation, 67%.
Tigray, SNNPR and Oromia utilisation was 3.0 – 3.4 million euro and BSG 1.5 million euro.
The utilisation of funds is aligned with the volumes of the constructed water points and progress
of activities.
Table 5. Component Two Utilisation, Phase II

GoF Funds Actual GoF Funds Actual GoE Funds GoE Funds GoF + GoE GoF + GoE
ETB Euro Actual ETB Actual Euro Actual ETB Actual Euro
Amhara 242 923 655 10 561 898 287 425 402 12 496 757 530 349 057 23 058 655
Tigray 34 808 699 1 513 422 46 905 609 2 039 374 81 714 308 3 552 796
SNNPR 31 808 801 1 382 991 37 283 060 1 621 003 69 091 861 3 003 994
Oromia 33 211 549 1 443 980 43 742 384 1 901 843 76 953 933 3 345 823
BG 28 264 331 1 228 884 5 791 332 251 797 34 055 663 1 480 681
Total 371 017 035 16 131 175 421 147 787 18 310 773 792 164 822 34 441 949
The GoF source utilisation has been relatively equal (43% - 46%) in Amhara, Tigray, SNNPR
and Oromia whereas in BG, the utilisation of capacity building has been 84%. The high
percentage in BG is due to the slow start in the implementation and thus investment costs are
also paid from GoF funds in BG, thus figures are not comparative with other regions. At the
end of The Phase II, COWASH was being implemented in 76 woredas from which 40 in
Amhara, 12 in Oromia, 8 in SNNPR, 9 in BG and 7 in Tigray.
Table 6. Total Component Two Utilisation,

Phase II
GoF Funds GoE Funds
Total Euro GoF % GoE %
Actual Euro Actual Euro
Amhara 10 561 898 12 496 757 23 058 655 46 % 54 %
Tigray 1 513 422 2 039 374 3 552 796 43 % 57 %
SNNPR 1 382 991 1 621 003 3 003 994 46 % 54 %
Oromia 1 443 980 1 901 843 3 345 823 43 % 57 %
BG 1 228 884 251 797 1 480 681 83 % 17 %
Total 16 131 175 18 310 773 34 441 949 47 % 53 %
Sustainability
COWASH modality to construct water points aims to commit the community level from the
beginning. The planning, applying funding, contracting the artisans and procuring equipment
and providing in kind contribution show commitment from community level. On the other hand,
the process is heavier comparing to other One Wash modalities where responsibility is with
the Woreda level authorities and communities are not so much involved from the beginning. In
CMP model, communities also commit to maintain the water points and they are trained during
the implementation in maintenance. The commitment at the community level is monitored also
through community contributions. Community contributions reflect the willingness and
commitment. The contribution from the communities vary in each region and in Amhara region,
the community contribution for the water supply investment costs was over 30 % during the
Phase I and II.
The governmental sector bureaus are responsible for the Project implementation. The RSUs
are separate project organisations established especially for COWASH. The RSUs are vested
with the tasks of regionally facilitating COWASH implementation. In practice, the
implementation has been and still is heavily depending on the capacity and activity of RSUs.

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To increase sustainability, the governmental organisations’ role in implementation and

monitoring in CMP modality should be increased towards the end of the Phase III.
According to the Mid Term Evaluation (MTE), the strong and independent RSU of Amhara has
achieved the greatest results but as the overall direction is towards a programmatic approach
the RSUs should be more clearly integrated to the regional bureaus and possibly with the One
WASH National Programme (OWNP) structure in the future support.
Observation, Risk and Recommendation
Observation
The governmental sector bureaus are responsible for the Project implementation
but they have not been involved as agreed. The role of the RSUs has been
significant.
Risk
Sector bureaus may not be capable to implement the CMP modality without the
RSU support. There is a risk that implementation is not sufficiently incorporated
into the Ethiopian governmental structures. Moderate.
Recommendation
Regional Sector Bureaus must take the responsibility of the Project
implementation in order to ensure sustainability.
4.3 Cost-effectiveness of Implementation

The detail level indicators for the cost efficiency of construction of the water points and latrines
is not specifically indicated in the logical framework. Thus, it is challenging to assess the cost
effectiveness against targets. However the method used in CMP modality can generally be
considered as a low cost. The direct expenses have remained relatively low by selecting
carefully the CMP’s and assuring they are committed and able to provide in-kind and financial
contribution for the construction.
Despite limited cost-effectiveness indicators available in the logframe per water scheme, on a
total level COWASH has achieved and even overachieved its targets and thus the cost
efficiency can be considered overall higher than initially planned. During 2011-2016 COWASH
was able to construct 10,628 communal and institutional water supply schemes which is 119%
of the targeted.
According to the Mid Term Evaluation (MTE) conducted 2015, COWASH is implementing
water points at considerably lower unit cost per water point than other WASH modalities.
According to the MTR, the costs in Amhara and Oromia are approximately one-third of the cost
of other modalities in Amhara and Oromia.
Water Points
Constructed CMP water points amounted to 10,022 in the end of The Phase II. In the total
COWASH Project level, there are both direct and indirect costs. Direct costs of water points
consist of the purchased equipment to particular water point, construction material, work (i.e.
artisans) and in kind work provided by the community (e.g. digging, building fences and
providing local materials). Indirect costs are the capacity building costs in Federal level
(component one) and capacity building through Region Water Bureaus, Zone Water Bureaus
and Woreda Water Offices.

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Water points have been categorized according to the technique that has been used thus the
construction costs vary depending on the technique. The technique has always been assessed
during the planning so that it meets best the local conditions such as whether gravity springs
be built or mechanical pumps etc. In COWASH, the water points have been categorized in
seven;
1) Hand dug well

2) Rope pump
3) Shallow well
4) Deep well with distribution
5) Protected spring
6) Spring with distribution
7) Other (roof catchment, household water treatment, etc.)
There is significant variation in techniques used in different regions and woredas depending
on the local circumstances. For example in Jida Woreda in Oromia, all water points are hand
dug wells. In Misha Woreda in SNNPR nearly all water points are protected springs (protected
springs do not require digging whereas hand dug well needs to be dug during dry season).
The average total construction costs of water schemes in Misa, Duna, Dera, Gusgusha
Shikudad, Oda, Bambasi and Jida woreda is presented below. Average direct costs for hand
dug wells is ETB 49,335 (approximately 2,000 euro) ranging from ETB 32,892 (approximately
1,430 euro) to ETB 62,233 (approximately 2,705 euro). Average direct costs for Protected
Springs is ETB 63,709, for Shallow Wells ETB 239,257 and for spring with distribution ETB
102,818. Interviews indicate that the average direct cost of hand dug well in CMP modality is
approximately ETB 70,000 in SNNPR region. The table below includes also communities’ in-
kind contribution, in all regions approximately 15% from the total direct costs.
When comparing the unit costs of water points from the RWSEP phase I to COWASH phase
I, the unit costs have reduced significantly. In RWSEP phase I (started in 1994) unit costs were
over 8.0 thousand euro and in COWASH phase I, unit costs have reduced to 2.4 thousand
euro.

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Table 7. Average Direct Costs per Water Scheme
Region Woreda Technique Quantity Population using Average Average

the scheme direct direct
regardless of costs, ETB costs, Euro
distance
SNNPR Misa Shallow well 2 582 300 000 13 043
SNNPR Misa Spring with distribution 1 1 887 90 000 3 913
SNNPR Misa Protected spring 110 414 50 550 2 198
SNNPR Duna Hand dug well 4 447 58 264 2 533
SNNPR Duna Shallow well 2 402 242 920 10 562
SNNPR Duna Protected spring 89 380 50 767 2 207
SNNPR Duna Spring with distribution 17 645 112 680 4 899
Amhara Dera Hand dug well 251 172 45 886 1 995
Amhara Dera Protected spring 28 185 69 172 3 007
Amhara Dera Shallow well 1 1 124 293 137 12 745
Gusgusha
Amhara Hand dug well 214 104 62 233 2 706
Shikudad
Gusgusha
Amhara Rope pump 15 26 9 363 407
Shikudad
Gusgusha
Amhara Protected spring 9 211 83 058 3 611
Shikudad
BG Oda Hand dug well 9 231 56 154 2 441
BG Oda Spring with distribution 1 129 820 5 644
BG Bambasi Hand dug well 36 287 47 647 2 072
BG Bambasi Protected Spring 3 438 48 816 2 122
Oromia Jida Hand dug well 135 162 32 892 1 430
Oromia Jida Protected spring 3 226 93 000 4 043
Oromia Jida Spring with distribution 3 241 78 772 3 425
Oromia Abichu Gena Hand dug well 90 120 42 272 1 838
Oromia Abichu Gena Shallow well 5 208 120 971 5 260
Oromia Abichu Gena Protected spring 24 137 50 602 2 200
Source: COWASH Monitoring data / FTAT
Efficiency of Fund Flow
GoF funding for regional and woreda level capacity building is channelled through regional
BoFED’s. BoFED disburses funds to other regional bureaus for capacity building activities and
to Zonal and Woreda Finance Offices (ZoFED and WoFED) for capacity building costs. From
GoE funding is disbursed funds from BoFED to other regional bureaus for operational costs.
Investment funds from GoE are channelled through regional Micro Finance Institutions (MFIs);
Amhara Credit and Saving Institution (ACSI), Benishangul-Gumuz Credit and Saving
Institution (BGCSI), Oromia Credit and Saving Shareholder Company (OCSSCO), SNNPR
Micro-Finance Institution (OMO). The advantage of fund flow through MFI’s is that MFI has
wide branch office network and through MFI structure the distances to provide funding have
been short. According to KPMG review, the disbursements by MFI to woreda level have been
made without significant delays. There have been delays in approving regional annual plans.
Interviews indicate the GoE budgets have not been approved on time thus the preparation of
annual plans has delayed. For instance in SNNPR, annual plan for the EFY 2009 (8 July 2016
– 7 July 2017) was approved in January 2017.
4.4 Project Reporting

COWASH reporting process is described in the Project Document. According to the COWASH
Project Document, the Federal TA team has responsibility to compile COWASH quarterly and

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annual reports and submit them to relevant national WaSH structures and to the MFA. In the
quarterly and annual reports, components one and two are reported. Component one is mainly
implemented by the TA team and component two, water site and latrine constructions, is
implemented in community level supported by Woreda Water Offices and regional project
organisations.
According to the Project Document, in component two, physical progress reporting flows from
communities to the woreda level through Woreda Water Office and is compiled at the regional
level by Water Bureau, which will compile the regional reports and produce quarterly progress
reports for the region to be further submitted to MoWIE and the MFA.
Financial reporting (capacity building and operational costs) at the woreda level is compiled by
the Financial Offices who report to BoFED. BoFED also compiles financial reports from
Regional Bureaus, Zone Finance Departments and Woreda Finance Offices. Financial
intermediaries (regional micro finance institutions) report to BoFED. BoFED consolidates
reports and submits them to the MFA. FTAT is consolidating the regional reports into one
report and submits this consolidated report to MoFEC.
Interviews and documentation indicate that in the Project level reporting, responsibilities
described in the Project Document have been followed. In practice, in the Project level financial
reporting, annual expenses for component two were derived from regions’ annual reports.
However there were discrepancies noted in the accuracy of the reporting. These are described
in the chapter 6 where each region’s financial reporting is separately analysed.
4.5 Monitoring
Monitoring plan
COWASH has implemented Performance Monitoring Plan (PMP) that incorporates number of
factors related to the Project’s goal, results and sub-results. These factors include five different
types: 1) indicators, 2) benchmarks and targets of indicators, 3) type of data to be collected
and frequency of data collection, 4) source of data required for the baseline, and 5)
responsibility/accountability for collection of benchmark information and reporting of the
progress. Depending on indicator, they are regularly followed - mostly on quarterly basis. The
performance review meetings of zonal sector offices and woredas are held at the zonal level
quarterly with the presence of Woreda Wash Team. The regional performance is reviewed
quarterly at the regional level with other non-COWASH activities. At the end of the fiscal year,
regional level will hold annual review meetings with the presence of the federal technical team
and the woreda, zonal and regional level bureaus. At the federal level, the performance and
achievements are reviewed by NWSC biannually. The indicators are divided to federal,
regional, zonal and woreda levels.
According to the plan, the Project shall assign a number of staff for coordinating the Monitoring
and Evaluation (M&E) activities. The whole M&E system is coordinated by a federal level M&E
Specialist and regional, zonal and woreda level coordination is managed by Capacity Building
and M&E Specialists hired by regional water bureaus that work in the RSUs. In the zones and
woredas, beneficiary sector offices should assign focal persons for the coordination of M&E
activities.
Indicators
There are five indicators related to the Project overall objective, including: 1) access to safe
rural water; 2) rate of functionality of rural water supplies; 3) percentage of open defecation

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free kebeles (neighbourhoods of woredas); 4) percentage of institutions (schools and health

facilities) accessing water supply; and 5) percentage of institutions (schools and health
facilities) accessing sanitation.
There are five indicators related to the Project intermediate results including: 1) percentage of
regions implementing CMP approach; 2) percentage of woredas of targeted regions
implementing CMP approach; 3) percentage of kebeles of targeted woredas implementing
COWASH; 4) percentage of rural population that has access to potable water through CMP
under COWASH; and 5) amount of regional budget allocated for COWASH.
There are also sub-intermediate results that are reviewed at each point of the Project’s activity
milestones. There are in total 16 indicators, that are divided to six groups: 1) CMP approach
scaled up at National level; 2) CMP implementation capacity at the federal and regional levels
developed; 3) development and implementation of One WaSH national programme supported;
4) target regions, zones and woredas capable to plan, manage, monitor and implement rural
WaSH interventions using CMP approach; 5) financial and procurement services delivered for
CMP interventions at all levels in the selected regions; and 6) Sustainable community and
institutional access to safe water, sanitation and hygiene in the target woredas increased.
Monitoring Data
The Project has implemented the monitoring framework structure according to the plan by
creating an Excel sheet including the necessary data. The Excel framework includes also
additional indicators to the plan. KPMG observed that some of the results are shown as
cumulative over years and not showing the annual results. There is a risk that the results of
the indicators are difficult to analyse as well as to make corrective actions if the results are too
aggregate. In addition, the large amount of indicators requires excessive amount of data to be
collected, that may result in less focus for the most critical indicators that show critical
development areas of the Project.
KPMG noted some minor discrepancies in water point costs between the monitoring data and
the actual reported amount in woreda level. For example in Oda woreda Aba Urgessa water
point, the amount used for building a hand dug well has been according to the bookkeeping
documentation and supporting material, ETB 62,969, when the same well has been reported
in the monitoring data to have cost ETB 59,107. In Bambasi woreda, the expenses of
Qashmando health centre latrine construction have been in the bookkeeping documentation
ETB 57,172, when the monitoring data states they would have been ETB 54,432.
4.6 Compliance with Agreements

Agreement between Government of Finland and Government of Ethiopia
Ethiopian and Finnish Governments signed The COWASH Phase II agreement on November
2014. Contribution of GoF is 11.0 million euro for The Phase II activities and 4.6 million euro
is transferred from the Phase I. Ethiopian Government commits to ETB 502.1 billion (20.1
euro). According to the agreement, The COWASH Phase II will be implemented in accordance
with the Project Document.
For the Phase II, the contracted TA fees amount to 1,243,450 euro and reimbursable costs
amount to 318,100 euro. The contract between the MFA and the consultant for the Phase II
was signed on September 2014. The contract period is November 2014 – June 2016. The
contract consists of the Project Document and in implementation is applied the MFA Standard
Terms of Payment Fees and Reimbursement Costs dated on 1 June, 2012 (MFA Standard

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terms) and State Travelling Regulations 2014. Fees are to be applied according to the price
tender.
Agreement between Government of Finland and Regions
The MFA and regional BoFED’s have agreements for funding provided to BoFED’s. In the
agreements is stated the administrative and financial fund flow mechanism for component two.
In the agreements is stated total budget for the Phase II for the particular region including GoE
funding for investments and capacity building activities funded by GoF. The community
contributions are indicated in the agreement. For example for SNNPR it is 20%.
Agreements indicate BoFED’s ensure effective functioning regional management structures

and decision making as described in the Project Document. BoFED’s are to enter in Fund
Management Agreements with MFI’s for channelling the investment funds. BoFED shall
prepare a consolidated quarterly financial report based on the reports received from each of
the regional bureaus, zone and woreda offices and MFl.
Reporting on the Project, i.e. the submission of progress and financial reports as well as
completion report, shall be carried out following the guidelines in the Project Document until
harmonized regional CMP reporting has been established and endorsed. Thereafter reporting
shall follow jointly agreed rules and guidelines of the OWNP.
BoFED shall monitor that the bureaus and offices have prepared their monthly reconciliation
and financial reports and that MFI has prepared a CMP report on its head office transaction
related to CMP.
4.7 Review of Project Activities

KPMG visited the Project areas and WaSH Facilities in four out of the five regions
implementing the Project: Amhara, Benishangul-Gumuz, Oromia and SNNPR regions. During
the visits, direct beneficiaries and Community and School Water Supply, Sanitation and
Hygiene Committee (WASHCO) members were interviewed and 19 schemes observed. The
visited schemes consisted of hand dug wells, shallow wells and springs in communities and
institutional latrines and water points at schools and health posts. Almost all (18 out of 19) of
the visited facilities were built during the Phase II. One visited latrine was built already during
the Phase I.
According to the interviews, the communities have provided money, labour and local materials
for building the schemes. There are one or more maintenance workers named in each water
scheme to maintain the scheme. Some of the latrines did not have maintenance workers and
the interviews indicated the maintenance had been agreed with the local Education Office.
According to the WASCHOs, maintenance workers and community members interviewed, the
maintenance workers had all required tools and spare parts for the maintenance or it was
agreed with the local Water Office that they would provide them when needed.
KPMG noted that the communities have their own operation and maintenance accounts in the
woreda MFI for purchasing larger spare parts for the schemes. Interviews indicate that each
WASHCO operation and maintenance account is supposed to have at least ETB 1,000 for
sudden expenses. The deposit of ETB 1,000 was supposed to be at the Operation &
Maintenance (O&M) account before starting the construction. KPMG noted that not all
WASHCOs had that much on the O&M accounts. The money at the O&M account was
collected in most of the communities by collecting monthly water usage fee, the amount of
which varies between ETB 2 and ETB 5 per household. Also the water usage fee was planned

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to be deposited in MFI monthly but we noted that many WASCHOs had deposited the fee once
or twice after starting the scheme construction work.
Left: WASHCO Operation and Maintenance account ledger with an end balance of ETB 314.48.
Right: Water point Wuste Gelda.
WASHCO and the community members were given trainings by the Project. In Amhara,
Oromia and SNNPR the trainings have focused on the usage and maintenance of the facilities
when in Benishangul-Gumuz there have been multiple trainings given, e.g. in WASCHO
financial management, operation and maintenance management, hygiene and sanitation,
water quality monitoring and afforestation as well as spring management.
According to the interviews, an appropriate amount of water point users would be maximum of
50 households. The amount of people in one household varied between 4 and 8 members. In
most of the visited water points there was not more than 50 households using the water,
however, at some of the water points the amount of user households was over 50 and even
up to 200 households. In these water points, a lack of water had been a problem. In many of
the water points visited, the water could only be fetched in shifts: mornings and afternoons.
This was also a way to control the usage of water that the daily water yield would last longer.
In some of the wells even limiting the water usage was not enough to have enough water for
all users.

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Left: Students in front of EFY 2008 (July 2015-July 2016) finished latrine buildings. The 2,060 students
and 7 teachers of Gilimesk Primary School have now in total 10 latrines to use.
Right: Community members fetching water from Waterpoint Makesgne.
KPMG observed that the water points and the area around the water point had been build
using a similar model. The wells had fences around the water point and water point handle
was locked when the well was not in use. At one water scheme visited, the water point handle
had been left open so that the community members and school students nearby could also
use the water.
KPMG observed that in some of the visited water schemes, the water quality had not been
tested or the test had been made once after the construction but the results had not reached
the community using the water. According to the interviews, main reasons for inadequate water
quality testing are unavailability of the testing kits, lack of training, lack of region and woreda
attention to water quality monitoring and lack of reagents. Water quality testing kits are bought
by the regional water bureaus as per the specifications provided by the Water Bureau Water
Quality Experts. KPMG also observed problems with the usage of the testing kits, as there
were problems with the battery or/and the electricity needed for the testing. Most of the visited
water points chlorinate the water regularly or when they have a belief that there might be
something wrong with the quality of the water. According to the interviews of the communities
and the Water Offices, there had not been any major sicknesses spread through contaminated
water in the woredas and communities visited.
In some of the communities, there had been a public audit held after the scheme was
constructed. However according to the interviews, many communities visited hold monthly
community meetings where they also discuss matters regarding to the schemes. The
interviews indicate that there is overall satisfaction with the schemes and how they have been
managed since the construction using CMP approach. However there have been some
problems faced besides the lack of water mentioned before: some trouble with breaking pump
components, conflicts inside communities and one of the latrines visited was not accessible
for the disabled. In some communities the conflicts have lead into a situation where not all
community members are allowed to use the water scheme, instead in some, the conflict is still
ongoing and has lead into other kind of problems, for example to disregarding the spring water
quality.

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4.8 Risk Management

Identified Risks
The Project Document (PD) identifies main risks and assumptions for the Project. The
assumptions have been categorized as general and critical assumptions. The assumptions are
more internal and are expected to take place during the Project implementation. The risks
identified are external and serious for the Project implementation. According to the PD, the
most significant risk is the exposure to natural disasters, such as long-term drought,
earthquakes, massive flooding and subsequent landslides. Emergency situations could affect
the Project in several ways up to complete disruption of the Project activities. Another external
factor is unexpected significant deterioration of the economy of the country. Any socio-
economic and macro-economic crisis in the country would also affect the Project in various
ways, including lack of public resources and reduced ability of communities’ to share costs,
and could seriously affect the capacity of local administrative units to support communities.
Another identified risk in the PD is the possible devaluation of euro against ETB that could
reduce the outputs of the Finnish financing, particularly the number of water points. The impact
of this risk would be seen on the quantity of the outputs, not in the quality. As a mitigation
measure, price escalation has been taken into account in the cost estimates to some extent.
There is also a contingency line in the Project budget.
It is also evaluated in the PD that absence or poor functioning of WaSH co-ordination structures
at different levels would affect the outputs of the Project. Also a substantial risk identified has
been neglecting crosscutting issues related to WaSH such as gender equality, environment,
vulnerable groups and water quality. The crosscutting issues are supporting the overall
objective of the Project and are vital factors in strengthening the sustainability of the impact of
WaSH.
Other risks identified were delaying signing of the key documents (One National WaSH
Programme Financing Agreements) beyond the EFY 2006 so that the Project could in extreme
case lack foundation and would need to be reoriented, and if the CMP approach management
models tested in Amhara and Benishangul-Gumuz regions would be modified without careful
consideration of impacts, the risks grow for lost efficiency.
During the audit period, the Steering Committee reviewed risks regarding the Project
implementation. A risk identified in one of the Steering Committee meetings during the EFY
2007 was a consideration of CMP modality being a fiduciary risk in the One WaSH National
Programme. A mitigation measure to that was a preparation of the CMP Implementation
Manual as per the Public Finance Management System (PFMS) and explaining that to the
audience. The second risk identified by the Steering Committee was limited attention and
coordination in water resources management in WaSH implementation. According to the
meeting minutes, without attention and actions the improved water resources management
and the sustainability of the constructed water schemes would have been jeopardised. In order
to address this issue, SC decided that introduction of the Water Safety Planning (WSP) and
Climate Risk Screening in planning the COWASH Project should initiate.
According to the interviews, risk analysis in The Phase I and II was done using the "challenge
analysis" approach. The challenge analysis means that the FTAT has reviewed The Project
related challenges in each quarterly and annual report.

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Reporting of Risks
In the Phase I and II Completion Report, the identified risks and their realization from the Phase
I and II were reviewed. The realisation of the risks identified was not severe according to the
Completion Report: Ethiopia had experienced severe drought in 2015/2016 but risks
associated were not serious in majority of the COWASH woredas. The negative impact of the
absence of coordination was mitigated through active COWASH-led coordination by the FTAT
and RSUs and Woreda WaSH Team trainings. The commitment to support CMP
implementation was extremely high in the COWASH woredas and regions. One major risk
mitigation measure was to get the Ministry of Finance & Economic Cooperation’s (MoFEC’s)
commitment for CMP implementation modality. This was not achieved in the Phase I and II
according to the Phase I & II Completion Report. The delay in MoFED’s approval of the CMP
manual affected the scaling-up of the CMP approach.
Graphic: Realisation of risks after the Phase II i.e. audit period. Source: Project Phase I & II Completion
Report
As a conclusion, during the Phase II, the risk management has not been fully carried out
according to the MFA guidance. Interviews indicate risk management has been systemised in
the Phase III.
Observation, Risk and Recommendation
Observation
The commitment for the CMP implementation modality was not obtained from
the Ministry of Finance & Economic Cooperation (MoFEC) in the Phase I nor in
the Phase II.
Risk
Lack of commitment may effect on the sustainability of the Project. Moderate.
Recommendation
COWASH should continue in cooperation with the Finnish Embassy to solve the
problem in commitment for the CMP modality to be gained from MoFEC.

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5 Financial Administration
5.1 Fund Flows
COWASH fund flow consists of Technical Assistance and capacity building funded by GoF and
investment fund flow funded by GoE.
GoF Fund Flow
GoF fund flow and financial reporting follows Ethiopian Governmental systems. Capacity
building funded by GoF is channelled through Regional Bureaus of Finance and Economic
Development (BoFEDs). BoFEDs provide funding further to the Regional Support Units,
regional education, water, health and women affairs bureaus, to zone and woreda level finance
offices. Funds are disbursed to regional sector bureaus, zone and woreda finance offices
according to the Annual Plans. BoFEDs request funds from the MFA. The Embassy of Finland
comments and approves the fund requests and submits them to the MFA for payment. When
the funds arrive to Ethiopia, BoFEDs inform the arrival 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 late approval of annual budgets have, however, caused delays
in fund transfers. Delays in approving annual plans are mainly due to Ethiopian budgeting
processes. As both GoE and GoF funding are approved in the annual plans, the delay has
affected both sources of funding.
The financial reporting of GoF follows the fund flow. The expenses are annually reported to
BoFED/Regional Support Units for consolidation. Observations related to financial reporting in
each region have been made and described in the Chapter 6.

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GoE Fund Flow
Regional Governments of Ethiopia provide funding for the investment of the water points and
latrines and funding for regional, zonal and woreda bureaus operational costs. Investment
costs consist of artisans and contractor costs and materials. Funding is channelled through
regional Micro Finance Institutions (MFIs) in three ways:
 In SNNPR and Tigray regions, BoFED transfers funds to MFI.
 In BG and Oromia regions, BoFED transfers funds to Water Bureau who transfers funds
to MFI.
 In Amhara region, BoFED transfers funds to Water Bureau, Health Bureau and
Education Bureau, who transfers funds to MFI.
Regional MFIs distribute funding further to MFI woreda level branch offices. From branch
offices, funding is paid to WASHCOs. MFIs then distribute funding further to woreda level.
Several observations were noted related to the investment fund flow. MFIs and Water Bureaus
have not complied with the agreement in any of the regions visited. According to the agreement
MFI should have opened CMP accounts in its Head Quarter, Area Offices and Branch Offices
in the pertinent woredas. The branch offices in the woredas should have opened own MFI
accounts for each WASHCO. Regional MFIs had opened own CMP accounts for the Project
accounts except for the MFI in Amhara region, ACSI. However, there were no separate CMP
account, bank book or any other follow-up method for the investment funds per each WASHCO
in some branch offices. The withdrawals and expenses are reported by woreda CMP
Supervisors to the Water Bureaus and Regional Support Units. Withdrawals from branch
offices on woreda level are not reconciled with the funds paid from BoFED to MFIs’
headquarters. The expenses are reported to the Regional Support Unit, however the total level
consolidation is not conducted. There are several weaknesses in the controls of the investment
funds and the use of total funds paid to MFI’s is not verified. Some of the weaknesses can be
mitigated by closer monitoring and systematic financial management and reporting. Financial
management training to woreda level should also be more systematic.
A Technical Water Expert holds the position of woreda CMP Supervisor who prepares the
financial reporting of the Investment funds. The interviewed CMP Supervisors did not have
sufficient level of capacity in financial management even though they prepare the financial
reporting of the investment funding. High turnover of staff has partly caused the lack of
capacity.
The Project has been considering the solutions mentioned below to solve the problem with the
lack of financial management skills in the Water Office / CMP Supervisor:
a) Intensify the financial training of the CMP supervisors to manage the CMP fund
monitoring;
b) Employ financial specialist to Water Office (contract employee) and train him/her for
the CMP financial monitoring;
c) Transfer the financial monitoring of the MFI/WASHCO accounts to Finance Office
experts and train for the task (this may require also contract employment as woreda
finance office staffs are reluctant to accept any additional tasks out of their job
description); and
d) Transfer the investment funds to WASHCOs via BoFED and WoFED. This option may
require employment of a finance expert to WoFED by the Project (not very sustainable
solution also) for the CMP funds monitoring.

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According to the Project, the options a, b and c can be implemented during the Phase III. The
option d would require termination of the MFI agreements and modifications to the federal and
regional agreements and may not be feasible to be implemented during the Phase III.
Internal Audits
The expenditure incurred is audited in regional, zonal and woreda level by BoFED Internal
Auditors. However, KPMG noted some weaknesses in the audits: Not all audit reports (SNNPR
regions) mentioned the coverage GoE funded investments, even though the investment
funding is a major source of the Project funding. In BG the investment funds are funded by
both GoE and GoF and the funds are being audited. We also noted some delays in the time
frames of the audits and in providing the audit reports to the audited organisations. The audit
reports were noted having different standards and scope regarding to the content of the audits.
Observations, Risks and Recommendations
Observation
MFIs and Regional Bureaus have not complied with the agreement in any of the
regions visited.
MFI has not systematically accounted fund movements and balances and has
not provided statements for use of investment funds per woreda and per
WASHCO. Balances brought forward have not been properly followed and
reconciled.
Regional MFI accounts have not been reconciled to investment funds
bookkeeping in regional level. Reconciliations between woreda level offices (that
captures and reports expenditure) and MFI (that operates as a bank) have not
been made.
Risk
Failure to reconcile expenses with fund movements constitutes a risk for
misappropriation of cash as well as risk of accounting and reporting errors. There
is a risk to fail cost monitoring. Critical.

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Recommendation
The agreement between the Regional Bureaus and MFIs needs to be complied
with.
MFIs must capture all transactions including balances brought forward and
provide monthly statements at every level (headquarter, zonal, branch and sub-
branch).
MFI accounts must be reconciled to investment funds bookkeeping in regions,
woredas and WASHCOs on monthly basis.
Observation
The level on financial management knowledge in the Woreda Water Offices is
not adequate. The Project has already considered options to solve the problem.
Risk
The bookkeeping and financial reporting of the investment funds contain errors
and is not reliable. Significant.
Recommendation The Project must select and implement an appropriate option/s to improve the
financial management capacity for the investment funds. KPMG recommends
intensifying the financial training of the CMP supervisors to manage the CMP
fund monitoring in order to improve control functions and reliability of financial
management.
Observation
The scope and reporting of the audits carried out by the BoFED’s internal
auditors varied between the regions.
The auditor’s report issued by the SNNPR BoFED internal auditor did not capture
audit measures related to investment funding (GoE source).
Risk
There is a risk that not all funding of the Project is audited. Level of cost
monitoring may vary and be ineffective. Moderate.
Recommendation
The Project audits carried out by the BoFED’s internal auditors should cover all
the funding related to the Project. The particular financial report under audit
should be attached to the audit report.
The audits should be performed with similar standards and scope in all regions
to an appropriate extent.
5.2 Accounting of Technical Assistance Budget

The MFA and Ramboll Finland Oy executed a Consultancy Contract signed on 23 September,
2014 for the implementation of the COWASH Phase II during the period of October 2014 to
June 2016. The Contract was amended on 27 October 2014 (1st Amendment), 9 November
2015 (2nd Amendment) and 8 June 2016 (3rd Amendment). In the first amendment, the
reimbursable budget was raised to a maximum of 588,197 euro from 318,099 euro, however
only 359,100 have been budgeted. In the second amendment, the unspent remaining Finland's
contribution to the FinnWASH Programme, maximum of ETB 10,261,930 were transferred
under the management of the COWASH II Project in November 2015. In the third amendment,
the duration of the contact was extended until 31 July 2016.

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Ramboll has entered into a Consortium Contract for Consultancy Services with Niras Finland
Oy 1 October 2014 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 the JPO in the FTAT are consultants contracted from Niras.
At the Ramboll Home Office (HO) there are two people contributing for the Project: The Home
Office Coordinator (HOC) and the Project Controller. In addition the Ramboll Chief Accountant
approves larger payments and Ramboll Accounting Department makes the actual entries to
the bookkeeping software. HOC has been acting as a liaison to the MFA. The HOC visits the
FTAT for coordination and monitoring purposes almost annually, at the time of significant
stages of the Project implementation.
The Project has an ETB bank account where the funding from Ramboll is received. The FTAT
receives payments from the HO monthly according to an estimate of costs prepared by the
CTA. 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 FTAT has no access to the accounting
software and instead the Project Controller makes a budget follow-up in an Excel file for the
CTA monthly. The Project Controller invoices the MFA monthly 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. As per KPMG review, one
month fee invoice amounting to 40,264.29 euro has been booked at the MFA bookkeeping
incorrectly to the value added tax account. Due to this, the Project as per the MFA follow-up
has this amount of excess unused granted funds.
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 FTAT from 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
Technical Assistance in the Project reporting is followed as Component 1. The comparison
between the total TA budget and the cumulative expenditure according to the accounting
records for the entire Project period as shown as in the COWASH Phase I & II Completion
Report from November 2016, is as presented in the Table 8 below.
The TA expenditure has been used according to the budget with the exception of overruns in
National Short-Term Consultants and in reimbursable costs. The allocation of the National
Short-Term Consultants in working days has however been only slightly exceeded. The budget
has been exceeded with 85 % due to too optimistic budgeting concerning price categories of
the used consultants. The price categories have been separately accepted by the MFA in
addition to the price tender. Balancing was also agreed with the MFA between the
reimbursable budget and sector support budget lines.
KPMG observed that the amounts invoiced from the MFA have not been checked in the HO.
According to KPMG review, there has been discrepancies between the invoiced per diems of
the TA-staff and the MFA Standard terms chapter 3.2. According to the KPMG sample check,
the invoiced per diems have included half-day per diems that were invoiced in violation to the
Standard terms. The national per diems were unified by the FTAT by 30 October 2015 and 7
November 2016. Prior to that separate agreements and local regional regulations were applied
which had led to the use of multiple per diem rates in the Project.

26 September, 2017
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Table 8. Technical Assistance Budget Follow-Up Phase II
Utilisation Phase II End

Budget Line Budget Actual
% balance
Fees 925 350 916 082 99 % 9 268
International Long-Term TA 366 000 361 951 99 % 4 049
HO Coordination 0
International Short-Term Consultants 105 000 69 684 66 % 35 316
National Short-Term Consultants 57 000 105 230 185 % -48 230
National Long-Term TA 299 250 286 200 96 % 13 050
Junior Expert 98 100 93 017 95 % 5 083
Reimbursable Costs 359 100 391 438 109 % -32 338
Sector Support 229 097 205 697 90 % 23 400
Total 1 513 547 1 513 217 100 % 330
Source Phase I & II Completion Report
KPMG also noted that there has been marginal profit invoiced from the MFA in a few fixed fee
consultancy service expenses of the reimbursable costs, which is neither according to the MFA
Standard terms nor the Consultancy Contract. The amount of the invoiced marginal profit is
4,256 euro.
KPMG reviewed by 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. However, KPMG
observed some deficiencies in the approvals of the timesheets: the timesheets of the CTA
were not always approved by the HOC. Based on the interviews, the time sheets have been
approved but the approval has not been documented. Other timesheets were noted to be
approved. The amount of paid fees was followed at the FTAT. The Phase II consists 21 months
and according to the Completion Report, the working days used and charged per month have
not exceeded the contracted fixed fees or the standard terms for the payment of fees and
reimbursement of costs. The allocated working days have been calculated according to the
contracted.
Table 9. Technical Assistance Fees Follow-Up in Phase II (10/2014-7/2016)
Days Days used

Allocated end of July Days not used Utilisation %
for Phase II 2016
Long Term International 777 758 19 98 %
Chief Technical Advisor 399 400 -1 100 %
Junior Expert 378 358 20 95 %
Short Term International TA 312 305 7 98 %
GIS Expert 270 269 1 100 %
HRD Specialist 42 36 6 86 %
Short Term National TA 252 314 -62 125 %

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Long Term National TA 1995 1908 87 96 %
CMP Specialist 409,5 405 4,5 99 %
CB Specialist 409,5 411 -1,5 100 %
M&E Specialist 409,5 395 14,5 96 %
Crosscutting Specialist 378 334 44 88 %
Communication Specialist 388,5 363 25,5 93 %
Total 3336 3285 51 98 %
Source: Phase I & II Completion Report
Niras Finland Oy invoices the salaries and travel expenses of the JPO from Ramboll once a
month. The invoices go through the Basware software which Ramboll uses for processing
purchase invoices. The expenses are checked by the Project Controller, approved by HOC
and then recorded to the Project bookkeeping.
The documentation for the expenses incurred in Finland are archived at the HO. The
documentation for the TA expenses incurred in Ethiopia are sent to HO annually for archiving.
An external auditor has not been engaged to perform a reasonable assurance engagement on
the Project support. There has not been audit coverage during the Project period.
Observation TA component has not been annually audited.
Risk The terms and conditions of the agreement between the MFA and the consultant
is not fully applied. Significant.
Recommendation The consultant has to arrange annual audits as stated in the agreement.
Observation KPMG noted that there has been marginal profit invoiced from the MFA in a few
fixed fee consultancy service expenses of the reimbursable costs. The practice
is neither according to the MFA Standard terms nor the Consultancy Contract.
The amount of the invoiced marginal profit is 4,256 euro.
Risk The MFA Standard terms and the Consultancy Contract may not be followed.
Moderate.
Recommendation The MFA Standard terms should be applied to. The consultant should resolve
the handling of the invoiced marginal profit of 4,256 euro with the MFA.
Observation The invoiced per diems have included half-day per diems that are in violation
with the MFA Standard terms.
Risk Ineligible costs are reimbursed from the MFA. Moderate.
Recommendation The MFA Standard terms should be applied to. The consultant should resolve
the handling of the invoiced half-day per diems with the MFA.

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Observation All the timesheets were not approved as per the Project regulations or the
approval was not documented.
Risk Failure to follow the Project guidelines. Minor.
Recommendation The approval of time sheets should be documented according to the Standard
terms.

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6 Administration and Financial

Management in Regions
6.1 Administration and Financial Management in Oromia Region
GoF Funding
In the Oromia Region, the GoF funds have been allocated to the Capacity Building activities in
the Phase II. GoF funds are channelled through the regional Bureau of Finance and Economic
Development, BoFED. BoFED receives funding from the MFA and channels it further to other
regional bureaus namely Education Bureau, Water Bureau and Health Bureau. Funding is also
transferred to five zone level finance departments (ZoFEDs) and twelve woreda level finance
departments (WoFEDs) for capacity development. Each ZoFED has been taking care of the
finances of all zonal sector bureaus and each WoFED of all woreda level sector bureaus.
Salaries are paid for Regional Support Staff, Team Leader, Capacity Building Specialist and
Financial Management Specialist that are working in RSU.
Progress and Financial Reporting
Accounting is kept by the particular bureaus that have received COWASH funding from GoF
source. The financial reporting format is the same for all, a trial balance and bank account
reconciliations is provided to BoFED for consolidation. In general level, KPMG reviewed that
the financial reporting provided by BoFED, Education Bureau, Water Bureau and Health
Bureau could be derived from the accounting of the particular bureaus and audit trail exists
with some exceptions. Expenses incurred in WoFEDs and ZoFEDs were derived from annual
reporting from particular zonal and woreda bureaus. The reviewed woredas reconciled with
the annual reporting provided to BoFED. Although trial balances were annually provided to
BoFED for consolidations, the preparation of trial balances was not systematic in the Health
Bureau. Health Bureau had provided also bank account reconciliations to BoFED but they were
not correctly prepared and differences were observed. KPMG observed, that the RSU
Financial Management Specialist has a significant role in collecting, monitoring and
consolidating the reporting. This might cause lack of sustainability in the long run.
Capacity Building in Zone and Woreda Level
In Oromia, the physical capacity building resulted as fixed assets maintained in Woreda Water
Office. The fixed assets procured in the Phase I and the Phase II contain mostly cars,
motorbikes, computers, water testing kits and office materials (for example files and file
cabinets). KPMG reviewed the fixed assets registers in the visited woredas and noted that
there were shortcomings in maintaining the fixed asset registers. KPMG observed that fixed
asset monitoring in WoFEDs and Woreda Water Offices have not been done systematically
and the identification codes were not always attached to the assets. In many cases, the assets
were without an identification code or only equipped with a CMP sticker. The approvals,
segregation of duties and petty cash handling procedures were sufficient in WoFEDs and
ZoFEDs. KPMG observed that that petty cash has a major role in Woreda level.
In Fiche ZoFED, observations were related to inadequate supporting documentation for per
diem expenses to specify the purpose of travel and to verify it belonged to the COWASH
Project. In addition, KPMG observed that the WoFED in Abichu Gena did not perform bank
reconciliations systematically.

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Investment Funding
GoE funding for CMP investments are channelled through Oromia Credit and Saving
Shareholder Company (OCSSCO). Funds to OCSSCO are paid according to Annual Work
Plans. From OCSSCO headquarter, funds are transferred to OCSSCO sub-branches in
woreda level based on transfer letter requests provided by the Water Bureau. In the transfer
letter is indicated amounts per particular woreda. Amounts are according to the Oromia region
annual plan.
In the regional annual reporting is presented GoE utilisation in total level. Reporting does not
show GoE investment funds used per woreda. GoE investment fund utilisation have been
reported according to the fund transfers made to OCSSCO. Thus the reporting does not reflect
the amounts paid to WASHCOs or utilised by WASHCOs.
KPMG observed that in OCSSCO general ledgers for CMP account, the closing balance was
not fully brought forward to following year. According to the OCSSCO June 2016 report,
balance of CMP account per 30 June 2016 is ETB 3,107,148 (135,100 euro). According to the
OCSSCO June 2017 report, opening balance per 1 July 2016 is ETB 119,646 (5,200 euro).
The difference is ETB 2,987,503 (129,900 euro) that has not been documented on any way.
Investment Funding in Zone and Woreda Level
In woredas, funds are received to OCSSCO sub-branch offices current account. In the sub-
branch, separate ledger for CMP investments are kept but no separate bank accounts for
WASHCO’s. WASHCOs withdraw money after receiving approval from woreda authorities.
CMP Supervisor facilitates the process.
There are no reconciliations documented for OCSSCO sub-branch office for each WASHCOs
ledger. The Project funds were not reconciled to the financial reporting. Interviews indicate that
the use of the Project funds in Jida woreda were followed at OCSSCO separately, however no
systematic budget follow-up was made in the OCCSCO branches.
Fund Utilisation EFY 2007 (2014/2015)
In the EFY 2007 actual GoF expenses reported by BoFED amounted to ETB 8.8 million
(382,609 euro) and GoE expenses amounted to ETB 11.3 million (491,304 euro). Physical
capacity budget utilisation was 49%, as procurement of vehicle was not conducted in the EFY
2007. Human capacity budget utilization was only 34%. Main reasons for low utilisation is that
participation on trainings remained significantly lower than planned. In the EFY 2007 was
planned to train 4,183 WASHCO members from 568 water points in post construction activities
and only 1,999 were trained.
According to KPMG review, there are discrepancies in the reported amounts related to GoF
funding. Incurred expenses in Health Bureau and Education Bureau were not included in the
total amounts reported to the COWASH Project in the EFY 2007. Health Bureau and Education
Bureau have provided annual reports to RSU but interviews indicate that due to staff turnover,
expenses were not included in the consolidated regional COWASH report.

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Table 10. Regional Budget Utilisation, Oromia EFY 2007 (ETB)
Annual Budget
Component Annual Budget GoF Utilised GoF % Utilised GoE %
GoE
Investment 13 152 618 10 412 876 79 %
Physical Capacity
7 664 250 3 775 644 49 %
Building
Human Capacity Building 12 788 460 4 341 596 34 %
Operational 758 400 732 048 97 % 1 259 272 896 886 71 %
Total 21 211 110 8 849 288 42 % 14 411 890 11 309 762 78 %
Fund Utilisation EFY 2008 2015/2016
In the EFY 2008 total GoF expenses reported by BoFED amounted to ETB 11.7 million
(508,696 euro) and GoE expenses amounted to ETB 9.5 million (413,043 euro).
Physical capacity building amounted ETB 2.6 million (113,043 euro) representing 55% from
the respective budget. Investment utilisation was 51%. The vehicle procurement that was
rolled from the EFY 2007 was conducted, however the planned water quality testing equipment
were not purchased as planned. Less artisan hand tools were also procured than what had
originally been planned. The construction of water points was planned to reach 302 water
points from which 281 actualised, representing 93% of the budgeted amount. This is not in line
with the investments utilisation rate which was only 51%.
According to KPMG review, there are discrepancies in the reported amounts related to GoF
funding. Incurred expenses in Jimma Zone were not included in the total amounts reported to
the COWASH Project. Jimma Zone reported annual expenses ETB 118,234 (5,140 euro) to
RSU.
According to the Regional Annual Report the EFY 2008, total utilisation of GoF funds in Oromia
to date is ETB 35,526,318 (1,544,623 euro) and balance at the end of the Phase II is ETB
3,546,092 (154,178 euro). It was observed that the total utilisation could not be verified with
annual expenses in comparison to annual reporting. Expenses calculated from bureaus, zone
and woreda offices annual reporting amounts to ETB 29,137,342 (1,266,841 euro) and the
difference is ETB 6,388,976 (277,782 euro). Interviews indicate the total expenditure reported
in the Regional Annual Report is bigger because it includes commitments, advances and
receivables from the regional, zonal and woreda at that time. Thus the total utilised amount
reported in the Annual Report the EFY 2008 does not reflect the actual expenses. The
commitments, advances and receivables should not have been reported as expenditure. The
expenditure should reflect the actual expenditure accounted in the bookkeeping.
Table 11. Regional Budget Utilisation, Oromia EFY 2008 (ETB).

Annual Budget
Component Annual Budget GoF Utilised GoF % Utilised GoE %
GoE
Investment 15 874 742 8 103 246 51 %
Physical Capacity
4 768 078 2 607 522 55 %
Building
Operational 1 568 174 971 142 62 % 2 075 037 1 445 413 70 %
Total 18 857 190 11 712 933 62 % 17 949 779 9 548 659 53 %

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Internal Audit
Internal Audit of the COWASH funds has been carried out by BoFED. The woredas’
expenditures in Oromia were audited for the EFY 2006 and the EFY 2007. The EFY 2008
(2015/2016) has not been audited at the time of KPMG review. KPMG was not provided
separate audit reports from each woreda but auditors’ observations were reported with a
consolidated report where observations from each woreda were listed. KPMG was not
provided audit reports that would indicate the total expenses reported for the COWASH Project
from GoF and GoE source.
To enable appropriate verification of the annual expenses, the audit reports should indicate
the same reporting period and same expenses that have been annually reported to BoFED
and RSU.
Observation According to the OCSSCO general ledgers of the CMP account, the closing
balance of ETB 2,987,503 (129,900 euro) at the end of the EFY 2007 has
not been brought forward to the following year (EFY 2008).
Risk If there are deviations in the opening and closing balances, there is a risk of
misuse of funds. Critical.
Recommendation Closing balances from the previous year must be brought forward to the
following year. The issue identified in OCSSCO must be investigated and
settled.
Observation OCSSCO branch (MFI branch) in Oromia Jida woreda did not have own bank
account for COWASH funds. Reconciliations of the use of investment funds
between Jida woreda Water Office and OCSSCO branch have not been
made.
Risk Failure to reconcile expenses with fund movements 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 agreement between the Water Bureau and the OCSSCO needs to be
complied with. OCSSCO branch must capture all transactions including
balances brought forward and provide monthly statements at branch level.
OCSSCO branch accounts must be reconciled to investment funds
bookkeeping in woredas and WASHCOs on a monthly basis.
Observation As reported in the Regional Annual Report, total expenses from GoF source
at the end of the Phase II in Oromia included accruals and commitments of
ETB 6,388,976 (277,782 euro). This amount has not been recognised as
expenditure in the bookkeeping.
Risk Expense reporting is not transparent nor coherent. There is a risk of misuse
of funds. Critical.
Recommendation BoFED Oromia needs to correct the reported expenses in the EFY 2008
(2015/2016) to reconcile with actual expenses.

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Observation Consolidated Oromia Regional EFY 2007 (2014/2015) Annual Report was not
consistent with the underlying documentation. In the regional annual report
Health Bureau expenses were not included in the Report although Health
Bureau reported expenses amounting ETB 232,805 (10,122 euro) in the EFY
2007 (2014/2015). Also Education Bureau reported expenses ETB 17,500
(761 euro) were not included in consolidated report EFY 2007 (2014/2015).
Risk The reporting is inaccurate. Significant.
Recommendation Oromia BoFED has to establish written policy for financial reporting
processes. Financial calculations should be verified and approved by another
person before submitting reports.
Observation In Oromia Health Bureau, the provided bank account reconciliations were not
properly done, balance of the bank account did not reconcile with
bookkeeping.
Risk If bank reconciliations are not properly done, they do not provide assurance
that bank account and bookkeeping reconciles and might indicate errors in
accounting. Significant.
Recommendation In the bank reconciliations, Oromia Health Bureau has to document the bank
account statement and ledger and any differences must be clarified.
Observation In Fiche ZoFED, inadequate supporting documentation of per diem expenses

did not specify the purpose of travel and justification that the expense
belonged to the COWASH Project.
Risk The expenses recorded may not be based on actual expenses or that it
belongs to the Project. Moderate.
Recommendation All expenditure need to be filed with adequate supporting material and to
specify that it belongs to the Project.
Observation Fixed asset monitoring in WoFEDs and Woreda Water Offices have not been
done systematically and the identification codes were not always attached to
the assets in visited woredas. In many cases, the assets were without an
identification code or only equipped with a CMP sticker.
Risk If the fixed assets are not monitored and identified 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.

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6.2 Administration and Financial Management in Southern

Nations, Nationalities and Peoples’ Region
GoF Funding
In the SNNPR Region, the GoF funds have been allocated to the Capacity Building activities
in the Phase II. GoF funds are channelled through the regional finance bureau, BoFED. BoFED
receives funding from the MFA and channels it further to other regional bureaus namely
Education Bureau, Water Bureau and Health Bureau. Funding is also transferred to four zone
level finance offices (ZoFEDs) and eight woreda level finance offices (WoFEDs). Each ZoFED
has been taking care of the finances of all woreda sector offices. The funding is mainly for
training costs. Salaries are paid for RSU staff, RSU staff Team Leader, CMP Specialist, CB & M&E
Specialist and Financial Management Specialist and Woreda CMP Advisors in eight woredas. SNNPR
In general level, KPMG reviewed that the financial reporting provided by BoFED, Education
Bureau, Water Bureau and Health Bureau could be derived from the accounting of the
particular bureaus and audit trail exists with exception to minor observations. The reporting
format is the same for all, a trial balance and bank account reconciliations is provided to BoFED
for consolidation the region level annual reports. KPMG noted that funds have been transferred
to Health Bureau according to annual plans although previous year’s transfer had not been
utilised and reported. KPMG also observed, that the RSU Financial Management Specialist
has a significant role in collecting, monitoring and consolidating the reporting that may cause
sustainability risk.
Expenses incurred in WoFEDs and ZoFEDs were derived from annual reporting from particular
zonal and woreda offices and no major discrepancies in reporting were observed. In Hadiya
ZoFED there were some costs incurred ETB 13,800 (600 euro) that were not in the action plan
of a particular training. These costs were related to refreshments and food. Generally,
refreshments are allowed and not food. However, these should be stated in the action plan.
KPMG also observed that the general level of documentation was weak in Hadiya ZoFED and
in Misha and Duna WoFEDs where KPMG visited, since supporting documentation was not
organised adequately in sequential order and some of the documents did not have codes to
identify that they were related to COWASH. This weakened the transparency of the
documentation. In addition, Duna WoFED did not have supporting documentation related to
the received GoF funds.
In SNNPR, the physical capacity building resulted as fixed assets maintained in Woreda Water
there were shortcomings in maintaining the fixed asset registers. KPMG observed that fixed
asset monitoring in WoFEDs and Woreda Water Offices have not been done systematically
and the identification codes were not always attached to the assets. In many cases, the assets
were without an identification code or only equipped with a CMP sticker. The approvals,
segregation of duties and petty cash handling procedures were sufficient in WoFEDs and
ZoFEDs. KPMG observed that petty cash has a major role in Woreda level.

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Investment Funding
GoE funding for CMP investments are channelled through SNNPR Microfinance Institution
(OMO). Funds to OMO are paid according to 2007 and 2008 Annual Work Plans. OMO
headquarter transfers funds to woreda level OMO sub-branch offices as well according to the
Annual Work Plans. OMO reports the fund transfers to BoFED. RSU assist to consolidate
amounts to annual reports provided to the MFA. From the OMO sub-branch office, funds are
disbursed to WASHCOs after approval from woreda wash team (WWT). Woreda CMP
Supervisor facilitates the process.
Investment Funding in Zone and Woreda Level
Funds paid to WASHCOs are reported by the Woreda CMP Supervisor to the SNNPR Water
Bureau in Hawassa. The settlement KPMG reviewed had inconsistencies and amounts
presented in the settlement did not agree to OMOs report. Interviews and documentation
indicate there is limited financial management capacity at the woreda level and discrepancies
in reporting the WASHCOs funding is due to lack of capacity in accounting. Challenges are
also caused due to the fact that in GoE funding to CMP investments, the fund flow is through
OMO but financial reporting is provided from Woreda Water Office to regional RSU. In OMO
sub-branch level, there are no reconciliations documented for each WASHCOs account. In
addition, no systematic budget follow-up was made in the OMO branch offices.
In particular, Misha and Duna OMO branch offices did not have financial reports for utilised
funds, and Duna OMO did not have documentation for received funds as well. KPMG also
observed that the general level of documentation was weak in Misha and Duna OMOs where
KPMG visited, since supporting documentation was not organised adequately in sequential
order. Also, few documents in Duna OMO did not have codes to identify that they were related
to COWASH nor had authorization signatures in every payment vouchers that weakened the
transparency of the documentation.
Physical capacity building expenses were mainly according to the budget for the EFY 2007 in
SNNPR region. Physical capacity building costs consist of laptops, desk top computers,
photocopy machines, scanners, motorbikes, artisan tools, water quality test equipment and
other office equipment. Human capacity building utilisation remained only 48% because
several trainings that had been planned, were not conducted and some trainings the amount
of participants was less than planned. For example WASHCO CMP implementation
management refresher training was planned to be given for 1,095 WASHCO members and
actual amount of participants was 510. This was partly due to delay in the MFA fund transfer.
Investment budget utilisation remained low, only 51%. Total 449 water points were planned to
be constructed and 340 were constructed in the EFY 2007 and from the planned fourteen
school latrines, two were constructed.

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Table 12. Regional Budget Utilisation, SNNPR EFY 2007 (ETB).

Annual Budget Annual Budget
Component Utilised GoF % Utilised GoE %
GoF GoE
Investment 27 192 766 13 943 468 51 %
Physical Capacity
3 866 150 3 661 565 95 % 1 744 885 1 386 206 79 %
Building
Operational 2 140 296 1 709 142 80 % 1 195 843 422 433 35 %
Total 17 224 007 10 810 087 63 % 30 133 494 15 752 107 52 %
The utilisation of funds on the EFY 2008 did not have significant variation to the annual plan.
In the EFY 2008, it was planned for 245 water points to be constructed from which 195 were
constructed.
Table 13. Regional Budget Utilisation, SNNPR EFY 2008 (ETB).

Annual Budget Annual Budget
Component Utilised GoF % Utilised GoE %
GoF GoE
Investment 13 888 551 11 536 339 83 %
Physical Capacity
2 422 122 2 392 443 99 % 15 000 77 220 515 %
Building
Operational 2 578 252 2 180 648 85 % 1 323 600 857 850 65 %
Total 13 757 222 10 574 290 77 % 15 227 151 12 471 409 82 %
Internal Audit
Internal Audit of the COWASH funds has been carried out by BoFED. According to the
reviewed audit reports for GoF source we noted that auditor’s reports agreed to the particular
annual financial reports. However the annual financial report from particular WoFED is not
attached to the audit report. It would give clear audit trail if the auditor’s attach the annual
financial reporting (trial balance) to the audit report. GoE source was not included in the audit
reports. .
Observation The investment funds provided to WASHCOs have been reported based on
the fund transfers from OMO HQ to OMO branch offices. The reconciliations
of funds paid to WASHCOs have not been done and there are inconsistencies
in financial reporting.
Risk If fund reconciliations are not systematically done, there is a risk to fail cost
monitoring. Significant.
Recommendation COWASH must provide further financial management training to woreda level
and RSU Financial Specialist should give more hands-on training for financial
management and reporting in woreda level. The MFI ledger must be regularly
reconciled with the WASHCO accounting.
Observation Accounts are not held separately for the COWASH Project in Hawassa
BoFED. The trial balances are manually prepared and the sum of credit and
debit do not equal.

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Risk The correctness of the accounting is questionable. In addition, there is a risk

of expenses for other projects being considered as COWASH expense.
Significant.
Recommendation A separate account have to be held for the COWASH Project in BoFED.
Expenses need to be allocated to projects as per annual plans.
Observation In the EFY 2007 (2014/2015) BoFED financial reporting was inaccurate. In
the EFY 2007 (2014/2015) BoFED reported expenses total ETB 171,601
(7,461 euro). In the accounting, expenses amounted ETB 165,928 (7,214
euro) since office furniture ETB 4,690 (204 euro) belonging to other donor for
One Wash was mistakenly reported as COWASH expenses.
Risk If the allocation of expenses is not clearly instructed and applied, there is a
risk to duplicate reporting. Significant.
Recommendation ETB 4,690 (204 euro) must be corrected in the following financial reporting.
Observation Calculations for the expenses in SNNPR Annual Reports (GoF) expenses
have not been adequately documented.
Risk If calculations are not documented, there is a risk to errors in reporting.

Moderate.
Recommendation BoFED should prepare calculations to all reporting that is not directly derived
from accounting.
Observation The BoFED in SNNPR compiles large amount of financial reports from
beneficiaries on the GoF capacity building budget every quarter. There is no
systematic mechanism to follow up submission and completeness of the
reports from beneficiaries.
Risk Follow-up mechanism of the quarterly reports is time consuming and
inefficient. Moderate.
Recommendation The BoFED in SNNPR should establish a monitoring table in Excel to follow
up timely submission of the reports from beneficiaries.
The general level of documentation was weak in Duna OMO branch, Hadiya
ZoFED and in Misha and Duna WoFEDs, since supporting documentation
Observation was not organised adequately. Also, few documents in Duna OMO branch
did not have information to identify that they were related to COWASH nor
had authorization signatures for payment vouchers that weakened the
transparency of the documentation.
Risk The audit trail may not be ensured. Moderate.
Recommendation All vouchers should have clear information how they are related to COWASH,
have adequate supporting documentation and be duly approved.

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Observation Fixed asset monitoring in WoFEDs and Woreda Water Offices have not been
done systematically and the identification codes were not always attached to
the physical assets in visited woredas. In many cases, the assets were
without an identification code or only equipped with a CMP sticker.
Risk If the fixed assets are not monitored and identified 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 Funds have been transferred to Health Bureau according to annual plans
although previous year’s transfer had not been utilised and reported.
Risk If fund transfers are not aligned with the actual progress, there is a risk to
inefficient fund flow. Minor.
Recommendation Annual Plans should be prepared based on reasonable and detailed

information.
6.3 Administration and Financial Management in Amhara Region

GoF Funding
In the Amhara Region, the GoF funds have been allocated to the Capacity Building activities
in the Phase II. The GoF funds have been channelled through BoFED. BoFED in Amhara has
been recently renamed as Regional Bureau of Finance and Economic Cooperation, BoFEC.
BoFEC has channelled funds further to regional Water Bureau, the RSU, BoFEC, 10 ZoFEDs
and 40 WoFEDs. Each ZoFED has been taking care of the finances of all zonal sector bureaus
and each WoFED of all woreda level sector bureaus. During the Phase I, BoFEC and MFI had
an agreement of channelling the GoF investment funds through Amhara Credit and Savings
Institute (ACSI), but not anymore in the Phases II and III. According to the Financial Report of
the COWASH Project for the EFY 2008, there is still a balance of ETB 811,060 for the GoF
investment funds. The balance is remaining in ACSI, and it includes a balance of ETB 102,680
that WASHCOs have not accounted for.
In general level, the financial management processes are in place in the implementing
bureaus. However, observations were done related to accuracy of accounting and filing and
documenting. BoFEC collects and consolidates 55 financial reports every quarter. KPMG
observed, that the RSU Financial Management Specialist has a significant role in collecting,
monitoring and consolidating the reporting. This might cause lack of sustainability in the long
run. It would be important to contribute capacity building and allocate respective
responsibilities to BoFEC towards the end of the Phase III. Furthermore, KPMG observed that
there is no systematic mechanism to follow up submission and completeness of the reports
from beneficiaries.
In the RSU, KPMG carried out a review of the management of the RSU budget funds. The
Monitoring and Evaluations Specialist maintains bookkeeping records in Excel. The principle
of double-entry bookkeeping is not followed. KPMG carried out a sample check of vouchers.
Payroll was adequately maintained. Vouchers included supporting documents and they were
appropriately approved. Per diems were paid according to the guidelines. Transactions were

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numbered in Excel, but the respective numbers were not included in the vouchers. The bank
reconciliations of the RSU were prepared but not duly documented and approved.
KPMG reviewed the progress reporting prepared by the RSU. The reports were drawn up in
accordance with the reporting outline provided by the FTAT. KPMG verified in practise how
the monitoring data presented in the progress reports is compiled. Data was collected from
many sources by many means (hardcopies, softcopies and by phone). Data is documented in
separate zonal level and woreda level Excel spreadsheets and summary sheets. Some pieces
of data were sample checked by KPMG. Data presented in the progress report was traceable
to Excel spreadsheets except for one error found. However, source data to support all
monitoring data in Excel spreadsheets was comprehensively filed.
KPMG reviewed and was able to prove the audit trail from the financial reporting to the source
data such as reports submitted by the implementing organisations.
The financial reporting for expenses incurred at zonal level are produced in ZoFEDs and at
woreda level in WoFEDs. In the audited woredas, the financial reporting reconciled with the
annual reporting provided to BoFEC. The reporting format is the same for all, a trial balance
and bank account reconciliations is provided to BoFEC for consolidation. The audited WoFED
and ZoFEDs in Amhara region did acknowledge the balances brought forward from the
previous fiscal years. The balances brought forward reconciled with the bank accounts and
petty cash ledgers of WoFEDs and ZoFEDs. The expenses incurred in woreda and zone level
were reviewed on sample basis. The review indicate the costs belonged to the Project and
were supported with adequate supporting documentation and approved according to the
finance office correct form of procedure. The approvals, segregation of duties and petty cash
handling procedures were sufficient in WoFEDs and ZoFEDs. No advance payments were
allowed in Amhara region WoFEDs or ZoFEDs.
KPMG observed that in Amhara, the RSU Financial Management Specialist visits the woredas
and zones frequently, giving the personnel of the WoFEDs, ZoFEDs and Woreda Water
Offices hands-on training and guidance in financial management. As a positive observation,
KPMG reviewed this being a valuable and efficient practice in attaining a sufficient level in
financial management expertise in woreda and zone level and should be further replicated
within COWASH. We reviewed the BoFEC Internal Auditors reports and there were no
significant findings regarding to the Project.
Investment Funding
The GoE funding for the CMP investments are channelled through Amhara Credit and Savings
Institute (ACSI), which in Amhara regions MFI. ACSI has agreements with the Water Bureau,
Health Bureau and Education Bureau. Based on the KPMG observations, the contracting
parties have not complied with all contract terms. Some of the terms seem to be from the time
when the GoF funds were spent on investments thus those terms are no longer applicable.
Examples of terms and obligations that are applicable but are not followed include:
— Water Bureau shall prepare quarterly reports on the implementation of the use of funds to
BoFED. KPMG observed that the RSU has prepared the reports on behalf of Water Bureau.

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— ACSI shall open CMP accounts in its Head Quarter, Area (Zonal) Offices and Branch
Offices in the COWASH Woredas. The GoE investment funds have been transferred from
Water Bureau to ACSIs general bank account, and ACSI has not opened any bank
accounts dedicated to COWASH.
— ACSI shall prepare consolidated CMP reports per area office and branch offices,
consolidate reports on its head office transactions related to CMP, following the reporting
formats provided by Water Bureau. During the KPMG´s audit visit, ACSI head office was
not able to present a consolidated CMP report. The ACSI representative explained that
there are differences in the reconciliation and that the reconciliation is being attempted to
be done with the help of the RSU.
— ACSI shall submit all of the above mentioned reports to WI&ERDB quarterly. ACSI has not
submitted any reports to Water Bureau.
— One of the most important, ACSI shall maintain a separate ledger by the Project at its
branch level and reconcile monthly with Woreda Water Office. This practise had not been
respected in the audited ACSI branch offices.
Zone and Woreda Level
In woreda MFI branches, ACSIs, funds are received in bookkeeping to branch current account.
WASHCO’s withdraw money from WASHCO account after receiving approval from woreda
CMP Supervisor and Woreda Water Office.
The procedure of follow-up of funds varied between woredas. In Dera woreda ACSI branch
office, the usage of the Investment funds was followed in a paper account ledger. The
WASHCOs did not have separate bank accounts for the investment funds to be withdrawn. In
Gusgusha Shikudad woreda branch office of ACSI, the GoE funding was not followed
separately from the entire ledger of the entire ACSI branch office. The beginning and end
balances were followed on a hand-written paper where none of the transactions were recorded
and the beginning and end balances of each fiscal year could not be verified. During the audit
mission, at the zonal MFI area office, the end balance of the EFY 2008 Project funds was not
yet clear (11 months after the EFY 2008 had ended). No budget follow-up was made in the
ACSI branches.
The Woreda Water Office follows the use of investment funds per each WASHCO. The
balances were not reconciled between the Woreda Water Office and ACSI.
In Amhara, the physical capacity building resulted as fixed assets maintained in Woreda Water
there were shortcomings in maintaining the fixed asset registers. In Gusgusha Shikudad
woreda, the fixed assets register was sufficiently maintained but in Dera woreda, there were
no Project related fixed assets register and motorbikes procured with the Project funds were
not even in the overall fixed assets register of the Water Office.
Fund Utilisation in EFY 2007 (2014/2015)
In the EFY 2007 (2014/2015) most of the planned activities have been implemented. For
physical capacity building 31 vehicles and 22 motor cycles were procured. Human capacity

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building activities included trainings related to the CMP management, promotion, application
preparation and appraisal of the applications. Initial planned water points for the EFY 2007
was 1,590 from but it was increased by 717. In total 2,307 water points were completed. Water
quality tests were conducted in 368 water points which indicate the tests are not done as
systematically as planned. From the 46 planned institutional latrines 33 were completed. The
communities’ contribution in-kind in water points was 33% on average (minimum 20% and
maximum 47%).
Table 14. Amhara Region Budget Versus Actual Comparison EFY 2007 in ETB.
Budget Utilised Budget Utilised
Component Used % Used %
GoF GoF GoE GoE
Investment 648 223 112 373 17 % 93 336 812 96 392 880 103 %
Physical Capacity Building 63 635 920 51 499 021 81 %
Operational 2 728 800 22 436 1% 7 548 450 6 908 443 92 %
BoFED Treasury & Contingency 565 389 2 282 0%
RSU Costs 4 473 960 3 790 812 85 %
Total 95 900 000 76 054 982 79 % 100 885 262 103 301 323 102 %
In the year 2015/2016 (the EFY 2008), most of the planned activities have been implemented.
Major physical capacity building activities were mainly conducted according to the annual plan
except for the procurement of chlorine for purification of wells. Trainings were also conducted
without significant deviations from the annual plan. Initial planned water points for the EFY
2008 was 1,148 from but it was increased by 338. In total 1,751 water points were completed.
After the end of the Phase II, in total 8,202 water points have been constructed in Amhara
region. During the EFY 2008, 23 latrines for schools and health institutions were completed
when the plan was 30.
Table 15. Amhara Region Budget Versus Actual Comparison EFY 2008 in ETB
Budget Utilised Budget Utilised Used
Component Used %
GoF GoF GoE GoE %
Investment 471 145 713 873 84 524 441 74 310 093 88 %
Physical Capacity Building 9 434 000 5 770 566 61 %
Operational 3 414 366 9 000 07 % 6 359 655 6 922 924 109 %
RSU Operational Costs 4 569 055 3 657 020 80 %
BoFED Treasury & Contingency 1 971 164 0 0%
Total 44 867 959 36 184 770 81 % 90 884 096 81 233 017 89 %

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Observation In Gusgusha Shikudad woreda branch office of ACSI, the GoE funding was
not followed separately from the entire ledger of the entire ACSI branch office.
The beginning and end balances were followed on a hand-written A4-paper,
where none of the transactions were recorded and the beginning and end
balances of each fiscal year could not be verified. During the audit mission,
at the zonal MFI branch office, the end balance of the Project funds was not
yet clear for the EFY 2008.
Risk
There is no bookkeeping or follow-up kept for the Project funds at the
Gusgusha Shikudad ACSI. Critical.
Recommendation The received and used funds need to be recorded into an account ledger or
other bookkeeping maintained by the ACSI.
Observation In Amhara the agreement between Water Bureau and Amhara Credit and
Saving Institution (ACSI) was not followed. Separate CMP accounts have not
been opened at woreda level and ACSI has not reported to Water Office as
stated in the agreement.
Risk If Water Office does not follow that the agreement is followed, there is a risk
to fail monitoring the use of WASHCOs funding. Significant.
Recommendation ACSI need to provide reports on use of CMP funds to Water office.
Observation According to the Financial Report EFY 2008, there are unused GoF
investment funds of ETB 811,060 remaining in ACSI from the Phase I.
Risk There is a risk that unused funds are not properly accounted for/refunded.
Moderate.
Recommendation ACSI must refund any unused remaining GoF investment funds remaining at
ACSI or WASHCOs to BoFEC.
Observation The BoFED in Amhara compiles 55 financial reports from beneficiaries on the
GoF capacity building budget every quarter. There is no systematic
mechanism to follow up submission and completeness of the reports from
beneficiaries.
Risk Follow-up mechanism of the quarterly reports is time consuming and
inefficient. Moderate.
Recommendation The BoFED in Amhara should establish a monitoring table in Excel to follow
up timely submission of the reports from beneficiaries.
Observation The Amhara RSU performs many tasks on behalf of WI&ERDB related to
gathering and compiling the reporting on the use of the GoE funds.

26 September, 2017
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Risk It is problematic from the perspective of handing over and sustainability if the
GoE staff does not gain experience and know-how in compilation and quality
check of reporting. Moderate.
Recommendation The WI&ERDB staff should participate in compilation of the GoE reporting.
Observation The bank reconciliations of the RSU Amhara are prepared but not duly
documented and approved.
Risk Internal control weakness may lead to inaccuracies in financial reporting.

Moderate.
Recommendation Bank reconciliation needs be duly documented and approved on a monthly

basis.
Observation In the RSU Amhara, there are some deficiencies in systematic filing of the
monitoring data obtained in diverse formats (hard copy, soft copy and verbal
format).
Risk Accuracy of progress reported cannot be ensured without access to complete

source of information = monitoring data. Moderate.
Recommendation All monitoring data collected must be filed into logical and easy to find
categories.
Observation No proper fixed assets register is maintained in all woredas.
Risk Internal control relating to the fixed assets may not be efficient. Moderate.
Recommendation Fixed assets registers should be kept and maintained systematically.
6.4 Administration and Financial Management in Benishangul-

Gumuz Region
Fund Flows
In the Benishangul-Gumuz Region, the GoF funds have been allocated in addition to the
Capacity Building activities also to Operational costs and Investments. The allocation of GoF
to operational costs and investments were due to a late implementation of the Project in
Benishangul-Gumuz region.
The GoF funds for Capacity Building and Operational costs have been channelled through the
Treasury of the Regional Finance Bureau (BoFED). BoFED has channelled funds further to
The Water Bureau, the RSU, BoFED, The Bureau of Health, The Bureau of Education and The
Bureau of Women, Youth and Children Affairs Bureau, two COWASH ZoFEDs, one
FinnWASH ZoFED, four COWASH WoFEDs and five FINNWASH WoFEDs.
Both the GoF and GoE funding for the CMP investments are channelled through Benishangul-
Gumuz Credit and Saving Institution (BGCSI), which is the BG regional MFI.

26 September, 2017
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In the year 2014/2015 (the EFY 2007), only some of the planned activities have been
implemented. The Project implementation started in Benishangul-Gumuz in the EFY 2007
which led into a slow implementation during the first year of activities. For physical capacity
building, computers and other small electronics were procured. None of the planned vehicle
procurements were made. Human capacity building activities included trainings related to the
CMP management, implementation, promotion, application preparation and appraisal of the
applications. From the planned 70 water points, 18 were finalised in the EFY 2007. However
additional 15 water points were under construction at the end of the EFY 2007. Out of eight
planned institutional latrines none were completed by the end of the EFY 2007.
Table 16. Benishangul-Gumuz Region Budget Versus Actual Comparison EFY 2007 in ETB
Component Budget Utilised Used % Budget Utilised Used %
GoF GoF GoE GoE

Investment 3 843 000 399 842 10 % 2 845 500 150 000 5%
Physical Capacity Building 13 840 900 1 104 683 8% 734013 0 0%
Human Capacity Building 3 085 195 1 058 607 34 % 9000 0 0%
Operational 3 809 758 1 578 399 41 % 411 487 0 0%
Total 24 578 853 4 141 531 17 % 4 000 000 150 000 4%
Fund Utilisation in 2015/2016
In the EFY 2008 (2015/2016), most of the planned activities have been implemented. For
physical capacity building, computers, other small electronics and motorbikes were procured.
A procurement of one vehicle for the RSU and four vehicles for woredas was rolled over from
the EFY 2007. Human capacity building activities included trainings related to the CMP
management, implementation and appraisal of the applications, financial management training,
water point O&M training and sanitation training. From the planned 131 water points, 99 were
finalised in the EFY 2008. Additionally, 20 of the schemes were not started at the end of the
EFY 2008 and 12 were abandoned. The abandoning of the schemes was due to a lack of
water or other setbacks in the construction process.
Component Budget Utilised Used % Budget Utilised Used %
GoF GoF GoE GoE

Investment 7 568 400 3 268 035 43 % 14 669 550 4 850 000 33 %
Physical Capacity Building 10 762 356 12 212 917 113 % 19500 7914 41 %
Human Capacity Building 6 232 000 2 738 492 44 % 367456 166361 45 %
Operational 3 957 244 5 903 356 149 % 1 743 494 617 057 35 %
Total 28 520 000 24 122 800 85 % 16 800 000 5 641 332 34 %
In the Bureau of Education, the EFY 2008, the total expenditure of the Capacity Building budget
was ETB 182,540. ETB 51,406 was recorded under cost category “Entertainment”. The
amount consists of one purchase invoice for refreshments. Based on the supporting
documentation and interview, a training was organised for 21 woredas, out of which four
COWASH, five FinnWASH woredas and 12 non-COWASH related woredas. All refreshment
costs were covered by the GoF COWASH funds. COWASH did not pay for any other costs for
the training, which were covered by other sources of funding. The specific training and cost
allocation arrangements were not detailed in the Annual Work Plan.

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KPMG reviewed the progress reporting prepared by the RSU. The reports were mainly drawn
up in accordance with the reporting outline provided by the FTAT. Compared with the outline,
some annexes were missing or included deficiencies. Furthermore, the numbering of the
annexes was not the same as in the outline. KPMG verified in practise, how the monitoring
data presented in the progress reports is compiled. Data was collected from many sources by
many means (hardcopies, softcopies and by phone). Based on a sample check, monitoring
data presented in the progress report was traceable to some of the source documents.
However, source data to support all monitoring data in Excel spreadsheets was not fully
comprehensively filed, and KPMG was not able to verify all data reported.
Regarding the financial reporting, BoFED and the RSU had difference of opinion regarding
which version of the Financial Report Q4 2008 is final. There were two versions stamped with
a BOFED stamp but they included material deviations in terms of expenditure reported.
Examples of the deviations are presented in the Table 18 below:
Table 18. Differences in ETB between the BG Financial Report Q4 2008 Versions
BOFED stamped report Reported RSU total Reported FINNWASH
received from expenditure total expenditure
BoFED 2 598 186 7 852 199
RSU 3 815 618 9 146 431
Difference -1 217 432 -1 294 232
Review of financial reporting process pointed out that the financial report is prepared in Word.
Using Word makes the financial reporting process vulnerable to human errors.
KPMG considered the version provided by BoFED final and reviewed the audit trail from the
financial reporting to the source data such as reports submitted by the implementing
organisations.
The following deviations were observed:
— Five FinnWASH woredas and two COWASH woredas had only submitted narrative report
indicating the total expenditure to Water Bureau. The expenditure was not supported by
any bookkeeping records or reconciliation with the records of BGCSI. The opening balance
from the EFY 2007, received funds in the EFY 2008 or balance at the end of the EFY 2008
were not recognised in the reports.
— A discrepancy between the actual expenditure reported by Wombera woreda and
expenditure captured in the Financial Report Q4/2008 was observed. Wombera woreda
reported having used ETB 146,443, and the Financial Report Q4/2008 captured
expenditure of ETB 217,000. Too much expenditure, value ETB 70,557, was reported to
the MFA.
— A discrepancy between the actual GoF expenditure reported by Oda woreda and
expenditure captured in the Financial Report Q4/2008 was observed. Oda woreda reported
having used ETB 1,454,270, and the Financial Report Q4/2008 captured expenditure of
ETB 906,442, difference being ETB 547,828. According to the RSU Financial Specialist,
the GoE budget expires at the end of the financial year, and for the reporting purposes,
ETB 547,828 of the GoF expenditure was shifted to the GoE expenditure. Refer to the
photocopy of the Oda Woreda Financial Report Q4/2008 below.

26 September, 2017
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— KPMG observed that reporting template did not have a separate field for reporting of
contribution in kind. There is a risk that the reported GoF and GoE expenditure includes a
share of the contribution in kind. Refer to the photocopy of the Oda Woreda Financial
Report Q4/2008 below.
Picture: Oda Woreda Financial Report Q4/2008
RSU Funds
In the RSU, KPMG carried out a review of the management of the RSU budget funds.
Computerised accounting software is in use and the principle of double-entry bookkeeping is
followed. KPMG carried out a sample check of vouchers. Payroll was adequately maintained
except for a transport allowance paid to the RSU Team Leader. According to the employment
contract, ETB 800 per month should be paid, but in practice ETB 1,000 per month has been
paid. Per diems were paid according to the guidelines. Expenditure vouchers included
supporting documents and they were appropriately approved except for a vehicle procurement,
which involved a substantial misallocation of payments and expenditure between the Water
Bureau and the RSU. Water Bureau had paid ETB 624,351 of the vehicle of the RSU. The
Table 19 below clarifies the allocation in detail.

26 September, 2017
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Table 19. BG Vehicle Procurement / Allocation of Payments and Expenditure

Water
in ETB RSU Bureau Total
1 vehicle 4 vehicles 5 vehicles
Total invoiced 2 166 451 4 724 000 6 890 451
Expenditure recognised and paid 1 542 100 5 348 351 6 890 451
Difference 624 351 -624 351 0
Water Bureau paid and reported expenditure amounting to ETB 624,351 for the vehicle
purchase for the RSU. Procurement and payment were not planned and budgeted for Water
Bureau for this share, therefore there is improper use of funds and reporting between the
entities.
The bank reconciliations of the RSU were prepared but not duly documented and approved.
Internal Audit
Internal Audit of the COWASH funds at regional level has been carried out for the EFYs 2007
and 2008 by The BG National Regional State Bureaus of Finance & Economic Development.
The Audit Report for the EFY 2007 was submitted to the MFA on 4 April 2016, which is nine
months after the end of the Ethiopian financial year. The Audit Report for the EFY 2008 was
submitted on 19 May 2017, which is 10 months after the end of the financial year.
Interviews indicate the BoFED Internal Auditors have audited the Project accounts but most of
the WoFEDs or ZoFEDs visited had not received the auditors’ statements. According to
Bambasi woreda auditors’ statement, an immaterial amount (ETB 2,000, equal appr. 80 euro)
of the Project funds had been misused to other WoFEDs activities.
The financial reporting for expenses incurred in zonal and woreda level are produced in woreda
and zone WoFEDs and ZoFEDs. The audited woredas mostly reconciled with the annual
reporting provided to BoFED. The reporting format is the same for all, a trial balance is provided
to BoFED for consolidation. The visited WoFED and ZoFEDs in Benishangul-Gumuz region
did not acknowledge the balances brought forward from the previous fiscal years: only income
and expenditure of each fiscal year was reported. The expenses incurred in woreda and zone
level were reviewed by sampling method: all reviewed vouchers belonged to the Projects, were
supported with adequate supporting documentation and approved according to the finance
office correct form of procedure. The approvals, segregation of duties and current petty cash
handling procedures were noted being sufficient in WoFEDs and ZoFEDs.
In visited Benishangul-Gumuz woredas, petty cash has a significant role in all the transactions
because the commercial banks are not easily accessible. In Bambasi woreda KPMG
conducted a cash count of the Project petty cash at the time of the audit: the petty cash ledger
reconciled with the current petty cash bookkeeping. The balances brought forward reconciled
with the bank accounts and petty cash ledger with the auditors calculated amount of the
WoFED. In Oda woreda, bank account reconciliations had not been made during the audit
period. The WoFED had not requested any bank statements from the bank and there were no
bank statements for the entire Phase II in the WoFED. However, the end balance difference
of 0 euro at the end of the EFY 2008 was minor to the beginning balance at the bank statement
of the EFY 2009, ETB 940 (41 euro). However, the petty cash ledger of the EFY 2008 was
missing at the time of the audit and KPMG could not review whether there had been petty cash
balance at the end of the EFY 2008.

26 September, 2017
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In all visited WoFEDs and ZoFEDs, large amounts of advance payments had been given to
government employees working for the Project. Interviews indicate the advances are settled
within 10 days. The reviewed advance payment documentation was sufficient and the
advances were not significantly old.
Investment funds in Zone and Woreda Level
In woreda MFI branches, BGCSIs, GoF and GoE investment funds are received to branch
current account. WASHCO’s withdraw money from WASHCO account after receiving approval
from Woreda Water Office. KPMG visited BGCSI branches and the procedure of follow-up of
funds varied between woredas. All visited BGCSI branches had own bank accounts for the
Project funds. In Bambasi woreda, all WASHCOs had own account ledgers where the usage
of funds of each WASHCO was followed. However, BGCSI did not follow how much was
budgeted for each WASHCO to use. KPMG noted that BGCSI follows the monthly usage of
investment funds at a reporting made for the regional BGCSI MFI. In Oda woreda, the use of
funds was not followed at WASHCO level.
The Woreda WaSH Team is the authority to release all the investment funds to the usage of
the WASHCOs. The Water Office CMP Supervisor follows the use of investment funds per
each WASHCO and prepares the financial reporting to regional Water Bureau and RSU. For
example, in Bambasi woreda, the CMP Supervisor keeps a separate fund usage ledger
comparing actual expenditure to the amounts budgeted per each WASHCO. This was noted
being an efficient way of keeping track of the use of funds. The final approval for the use of
investment funds goes through the Woreda Water, Education or Health Office Heads.
KPMG observed that reconciliations between the Woreda Water Offices and BGCSIs were not
conducted. For example, in Bambasi Water Office, they had tried to reconcile the balance to
bring forward to the EFY 2009 in the Water Office: they had received an amount orally from
the BGCSI that there would be at the Project bank account ETB 170,000 (7,391 euro) in the
end of the EFY 2008. However that did not match with the income and expenditure incurred
during the EFY 2008, when taken into account also the balance brought forward from the EFY
2007 amounting to ETB 57,838 (2,515 euro). The end balance was recorded according to the
amount received from the BGCSI. At the time of the audit, KPMG observed that the actual
amount that had been in the BGCSI account as per the bank statement at the end of the EFY
2008, was ETB 887,688 (38,595 euro). Thus the bookkeeping does not reconcile with the bank
statement. This results that in the official reporting of the investment funds, there was a balance
of ETB 170,000 even though there were actually ETB 887,688 at the Project BGCSI account.
If the Project would have ended after the Phase II, there would have been ETB 717,699
(31,204 euro) investment funds at the BGCSI account that may have not been refunded from
the woreda.
In Benishangul-Gumuz, fixed assets procured with physical capacity building funds are
maintained in WoFED office. KPMG reviewed the fixed assets registers in the visited woredas
and noted that they were sufficiently maintained with the exception of the current condition of
each asset.

26 September, 2017
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Observation Reconciliations between the Woreda Water Offices and BGCSIs (as in all
regions) were not conducted and the balances brought forward could not be
reconciled to financial reporting. In Bambasi Water Office, they had tried to
reconcile the balance to bring forward to the EFY 2009 in the Water Office: they
had received an amount orally from the woreda BGCSI that there would be ETB
170,000 (EUR 6,800) at the Project bank account. That however did not match
to the amount the EFYs income and expenditure would total (ETB 57,838, EUR
2,314) taken account the balance brought forward from the EFY 2007. The end
balance was recorded according to the amount received from the BGCSI. At the
time of the audit, KPMG observed that the amount that had been in the BGCSI
account at the end of the EFY 2008 was ETB 887,688 (EUR 35,508). The
bookkeeping does not reconcile in the bank statement.
Risk In the official reporting of the investment funds, there was a balance of ETB
170,000 even though there were actually ETB 887,688 at the Project BGCSI
account. If the Project would have ended after the Phase II, there would have
been ETB 717,699 investment funds at the BGCSI account that may have not
been refunded from the woreda. There may be balance in BGCSI that is not
acknowledged in the Water Office that proceeds in the Project reporting. Critical.
Recommendation Reconciliations between BGCSI and Water Office must be made to actual bank
statements accordingly and variations to be cleared.
Observation A discrepancy between the actual GoF expenditure reported by the Oda Woreda
and expenditure captured in the Financial Report Q4/2008 was observed. The
Oda Woreda reported having used ETB 1,454,270, and the Financial Report
Q4/2008 captured expenditure of ETB 906,442, difference being ETB 547,828.
According to the RSU Financial Specialist, the GoE budget expires at the end of
the financial year, and for the reporting purposes, ETB 547,828 of the GoF
expenditure was shifted to the GoE expenditure.
Risk Alteration of expenditure reported leads to incorrect reporting. Critical.
Recommendation Observed mistake must be corrected. Alteration of expenditure allocations must

not be made in the future.
Observation Five FinnWASH woredas and two COWASH woredas have only submitted
narrative report indicating the total expenditure to Water Bureau. The
expenditure was not supported by any bookkeeping records or reconciliation with
the records of BGCSI. The opening balance from the EFY 2007, received funds
in the EFY 2008 or balance at the end of the EFY 2008 was not recognised in
the reports.
Risk Reliability of financial reporting regarding investment funds submitted by

woredas is poor, since consistency cannot be verified by Water Bureau.
Significant.
Recommendation Woredas need to submit financial reports. The expenditure is to be supported by
bookkeeping records or reconciliation with the records of BGCSI. The opening
balance, received funds and ending balance are to be recognised in the reports.

26 September, 2017
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Observation Regional Water Bureau paid and reported expenditure amounting to ETB 624
thousand for the vehicle purchase for RSU. Procurement and payment not
planned and budgeted for Regional Water Bureau.
Risk Improper use of funds and reporting between entities. Significant.
Recommendation Improper financial transaction is to be rectified in bookkeeping and reporting, and

the respective amount is to be transferred from RSU to Regional Water Bureau.
In the future, improper use of funds between the entities is not allowed.
Observation The petty cash ledger of Bambasi woreda from the EFY 2008 was missing at the
time of the audit and KPMG could not review whether there had been petty cash
balance at the end of the EFY 2008.
Risk The petty cash balance could not be verified. Moderate.
Recommendation The petty cash books should be securely stored also from previous Ethiopian
fiscal years.
Observation During the KPMG audit visit, BoFED and the RSU had different views which
version of the Financial Report Q4 2008 was final. There were major differences
in expenses between the versions.
Risk Decisions might be made based on draft versions. Moderate.
Recommendation Draft and final versions should be clearly named and dated. Final version
(approved by the Regional Steering Committee) must include final versions of
the progress and financial reports.
Observation Financial report to the MFA is prepared in Word, numbering of annexes does not
follow the outline and some of the annexes defined in the outline were missing
or information provided was incomplete.
Risk Financial report prepared in Word is vulnerable for calculation errors. Different
numbering of annexes and incomplete information provided adversely affect
compilation of reports at federal level. Moderate.
Recommendation Financial report should be prepared in Excel. Numbering of annexes should
follow the outline. All annexes defined in the outline should be included in the
report and contain sufficient information.
Observation In the Bureau of Education, the total expenditure of the GOF Capacity Building
budget was ETB 182,540 in the EFY 2008. ETB 51,406 was recorded under cost
category “Entertainment”. The amount consists of one purchase invoice for
refreshments. Based on the supporting documentation and interview, a training
was organised for 21 woredas, out of which four COWASH, five FINNWASH
woredas and 12 non-COWASH related woredas. All refreshment costs were
covered by the GoF COWASH funds. COWASH did not pay for any other costs
for the training, which were covered by other sources of funding. Cost allocation
arrangements were not detailed in the Annual Work Plan. Inclusive report of the
total costs of the training was not prepared.

26 September, 2017
Report 10/2017
Risk Ineligible expenses may be funded by COWASH. Moderate.
Recommendation Planning, budgeting and reporting must be transparent and inclusive, in case
COWASH funds are used to cover part of the expenses belonging to itself and
costs belonging to others.
Observation Regional Water Bureau paid and reported expenditure amounting to ETB 624
thousand for the vehicle purchase for RSU. Procurement and payment not
planned and budgeted for Regional Water Bureau.
Risk Improper use of funds and reporting between entities. Moderate.
Recommendation Improper financial transaction is to be rectified in bookkeeping and reporting, and

the respective amount is to be transferred from RSU to Regional Water Bureau.
In the future, improper use of funds between the entities is not allowed.
Observation Internal Audit of the COWASH funds has been carried out for the EFYs 2007 and
2008 by The BG National Regional State Bureaus of Finance & Economic
Development. The Audit Report for the EFY 2007 was submitted to the MFA on
4 April 2016, which is nine months after the end of the Ethiopian financial year.
The Audit Report for the EFY 2008 was submitted on 19 May 2017.
Risk Late delivery of audit report reduces the relevance of information provided in the
audit report. The auditees cannot take reconciliations into account without delay
and readers of the audit reports cannot use information in decision making.
Moderate.
Recommendation Preparation of financial report and execution of audit and reporting should take
place without any delays.
Observation According to the employment contract, a transport allowance for the RSU Team
Leader is ETB 800 per month. In practice, ETB 1,000 per month has been paid.
Risk Unauthorised allowances can be paid. Minor.
Recommendation Incorrect payments are to be rectified. In the future, transport allowance is to be

paid according to the employment contract.
Helsinki, 26 September, 2017
Anders Lundin Lauri Tuomaala

Authorised Public Accountant, KHT Authorised Public Accountant, KHT

26 September, 2017
Report 10/2017
Contact us
Anders Lundin
Partner, Authorised Public Accountant
International Development Assistance Services
T +358 (0)20 760 3000
E anders.lundin@kpmg.fi
Carina Hedberg-Kivistö
Partner
T +358 (0)20 760 3000
E carina.hedberg-kivisto@kpmg.fi
Lauri Tuomaala
Senior Manager, Authorised Public Accountant
T +358 (0)20 760 3000
E lauri.tuomaala@kpmg.fi
www.kpmg.fi
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26 September, 2017
Report 10/2017
Annex 1 Follow-Up Table to Address Recommendations

Performance Audit of the Support to Community-Led Accelerated Water, Hygiene and Sanitation (COWASH)
Follow up Table and Action Plan to Address the KPMG Recommendations
KPMG 26.09.2017
The report presents the main observations and risks identified during the Assignment as well as recommendations to improve the management
procedures. 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.
No. Observation Risk & Category Recommendation Comments Action Plan Timetable
4.2 Performance and Utilisation of Funds
1 The governmental sector Sector bureaus may not Regional Sector
bureaus are responsible for be capable to implement Bureaus must take the
the Project implementation the CMP modality responsibility of the
but they have not been without the RSU support. Project implementation
involved as agreed. The There is a risk that in order to ensure
role of the RSUs has been implementation is not sustainability.
significant. sufficiently incorporated
into the Ethiopian
governmental structures.
Moderate.

26 September, 2017
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4.8 Risk Management

2 The commitment for the Lack of commitment may The COWASH should
CMP implementation effect on the continue in cooperation
modality was not obtained sustainability of the with the Finnish
from the Ministry of Finance Project. Moderate. Embassy to solve the
& Economic Cooperation problem in commitment
(MoFEC) in the Phase I nor for the CMP modality to
in the Phase II. be gained from MoFEC.
5.1 Fund Flows
3 MFIs and Regional Bureaus Failure to reconcile The agreement
have not complied with the expenses with fund between the Regional
agreement in any of the movements constitutes a Bureaus and the MFIs
regions visited. risk for misappropriation needs to be complied
of cash as well as risk of with.
accounting and reporting
MFI has not systematically
errors. There is a risk to
accounted fund movements MFIs must capture all
fail cost monitoring.
and balances and has not transactions including
Critical.
provided statements for use balances brought
of investment funds per forward and provide
woreda and per WASHCO. monthly statements at
Balances brought forward every level
have not been properly (headquarter, zonal,
followed and reconciled. branch and sub-
branch).
Regional MFI accounts
have not been reconciled to MFI accounts must be
investment funds reconciled to
bookkeeping in regional investment funds
level. Reconciliations bookkeeping in regions,
between woreda level woredas and
offices (that captures and WASHCOs on monthly
reports expenditure) and basis.

26 September, 2017
Report 10/2017
MFI (that operates as a

bank) have not been made.
4 The level on financial The bookkeeping and The Project must select
management knowledge in financial reporting of the and implement an
the Woreda Water Offices is investment funds contain appropriate option/s to
not adequate. The Project errors and is not reliable. improve the financial
has already considered Significant. management capacity
options to solve the for the investment
problem. funds. KPMG
recommends
intensifying the financial
training of the CMP
supervisors to manage
the CMP fund
monitoring in order to
improve control
functions and reliability
of financial
management.
5 The scope and reporting of There is a risk that not all The Project audits
the audits carried out by the funding of the Project is carried out by the
BoFED’s internal auditors audited. Level of cost BoFED’s internal
varied between the regions. monitoring may vary and auditors should cover
be ineffective. Moderate. all the funding related
The auditor’s report issued to the Project. The
by the SNNPR BoFED particular financial
internal auditor did not report under audit
capture audit measures should be attached to
related to investment the audit report.
funding (GoE source).
The audits should be
performed with similar
standards and scope in
all regions to an
appropriate extent.

26 September, 2017
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5.2 Accounting of Technical Assistance Budget

6 TA component has not The terms and conditions The consultant has to
been annually audited. of the agreement arrange annual audits
between the MFA and as stated in the
the consultant is not fully agreement.
applied. Significant.
7 KPMG noted that there has The MFA Standard terms The MFA Standard
been marginal profit and the Consultancy terms should be applied
invoiced from the MFA in a Contract may not be to. The consultant
few fixed fee consultancy followed. Moderate. should resolve the
service expenses of the handling of the invoiced
reimbursable costs. The marginal profit of 4,256
practice is neither according euro with the MFA.
to the MFA Standard terms
nor the Consultancy
Contract. The amount of the
invoiced marginal profit is
4,256 euro.
8 The invoiced per diems Ineligible costs are The MFA Standard
have included half-day per reimbursed from the terms should be applied
diems that are in violation MFA. Moderate. to. The consultant
with the MFA Standard should resolve the
terms. handling of the invoiced
half-day per diems with
the MFA.
9 All the timesheets were not Failure to follow the The approval of time
approved as per Project Project guidelines. Minor. sheets should be
regulations or the approval documented according
was not documented. to the Standard terms.
6.1 Administration and Financial Management in Oromia Region
10 According to the OCSSCO If there are deviations in Closing balances from
general ledgers of the CMP the opening and closing the previous year must
account, the closing balances, there is a risk be brought forward to
balance of ETB 2,987,503 of misuse of funds. the following year. The
(129,900 euro) at the end of Critical. issue identified in

26 September, 2017
Report 10/2017
the EFY 2007 has not been OCSSCO must be

brought forward to the investigated and
following year (EFY 2008). settled.
11 OCSSCO branch (MFI Failure to reconcile The agreement
branch) in Oromia Jida expenses with fund between the Water
woreda did not have own movements constitutes a Bureau and the
bank account for COWASH risk for misappropriation OCSSCO needs to be
funds. Reconciliations of the of cash as well as risk of complied with.
use of investment funds accounting and reporting
OCSSCO branch must
between Jida woreda Water errors. There is a risk to
capture all transactions
Office and OCSSCO branch fail cost monitoring.
including balances
have not been made. Significant.
brought forward and
provide monthly
statements at branch
level.
OCSSCO branch
accounts must be
reconciled to
investment funds
bookkeeping in
woredas and
WASHCOs on a
monthly basis.
12 As reported in the Regional Expense reporting is not BoFED Oromia needs
Annual Report, total transparent nor coherent. to correct the reported
expenses from GoF source There is a risk of misuse expenses in the EFY
at the end of the Phase II in of funds. Critical. 2008 (2015/2016) to
Oromia included accruals reconcile with actual
and commitments of ETB expenses.
6,388,976 (277,782 euro).
This amount has not been
recognised as expenditure
in the bookkeeping.

26 September, 2017
Report 10/2017
13 Consolidated Oromia The reporting is Oromia BoFED has to

Regional EFY 2007 inaccurate. Significant. establish written policy
(2014/2015) Annual Report for financial reporting
was not consistent with the processes. Financial
underlying documentation. calculations should be
In the regional annual report verified and approved
Health Bureau expenses by another person
were not included in the before submitting
Report although Health reports.
Bureau reported expenses
amounting ETB 232,805
(10,122 euro) in the EFY
2007 (2014/2015). Also
Education Bureau reported
expenses ETB 17,500 (761
euro) were not included in
consolidated report EFY
2007 (2014/2015).
14 In Oromia Health Bureau, If bank reconciliations In the bank
the provided bank account are not properly done, reconciliations, Oromia
reconciliations were not they do not provide Health Bureau has to
properly done, balance of assurance that bank document the bank
the bank account did not account and account statement and
reconcile with bookkeeping. bookkeeping reconciles ledger and any
and might indicate errors differences must be
in accounting. clarified.
Significant.
15 In Fiche ZoFED, inadequate The expenses recorded All expenditure need to
supporting documentation may not be based on be filed with adequate
of per diem expenses did actual expenses or that it supporting material and
not specify the purpose of belongs to the Project. to specify that it
travel and justification that Moderate. belongs to the Project.

26 September, 2017
Report 10/2017
the expense belonged to

the COWASH Project.
16 Fixed asset monitoring in If the fixed assets are not The WoFEDs and
WoFEDs and Woreda monitored and identified Woreda Water Offices
Water Offices have not properly, there is a risk of should be trained on
been done systematically misuse or fraud related systematic monitoring
and the identification codes to usage of the assets. and identifying the
were not always attached to Moderate. Project’s fixed assets
the assets in visited appropriately.
woredas. In many cases,
the assets were without an
identification code or only
equipped with a CMP
sticker.
6.2 Administration and Financial Management in Southern Nations, Nationalities and Peoples’ Region
17 The investment funds If fund reconciliations are The COWASH must
provided to WASHCOs not systematically done, provide further financial
have been reported based there is a risk to fail cost management training to
on the fund transfers from monitoring. Significant. woreda level and RSU
OMO HQ to OMO branch Financial Specialist
offices. The reconciliations should give more
of funds paid to WASHCOs hands-on training for
have not been done and financial management
there are inconsistencies in and reporting in woreda
financial reporting. level. The MFI ledger
must be regularly
reconciled with the
WASHCO accounting.
18 Accounts are not held The correctness of the A separate account
separately for COWASH accounting is have to be held for
project in Hawassa BoFED. questionable. In addition, COWASH project in
The trial balances are there is a risk of BoFED. Expenses
manually prepared and the expenses for other need to be allocated to

26 September, 2017
Report 10/2017
sum of credit and debit do projects being considered projects as per annual
not equal. as COWASH expense. plans.
Significant.
19 In the EFY 2007 If the allocation of ETB 4,690 (204 euro)
(2014/2015) BoFED expenses is not clearly must be corrected in
financial reporting was instructed and applied, the following financial
inaccurate. In the EFY 2007 there is a risk to duplicate reporting.
(2014/2015) BoFED reporting. Significant.
reported expenses total
ETB 171,601 (7,461 euro).
In the accounting, expenses
amounted ETB 165,928
(7,214 euro) since office
furniture ETB 4,690 (204
euro) belonging to other
donor for One Wash was
mistakenly reported as
COWASH expenses.
20 Calculations for the If calculations are not BoFED should prepare
expenses in SNNPR Annual documented, there is a calculations to all
Reports (GoF) expenses risk to errors in reporting. reporting that is not
have not been adequately Moderate. directly derived from
documented. accounting.
21 The BoFED in SNNPR Follow-up mechanism of The BoFED in SNNPR
compiles large amount of the quarterly reports is should establish a
financial reports from time consuming and monitoring table in
beneficiaries on the GoF inefficient. Moderate. Excel to follow up
capacity building budget timely submission of
every quarter. There is no the reports from
systematic mechanism to beneficiaries.
follow up submission and
completeness of the reports
from beneficiaries.

26 September, 2017
Report 10/2017
22 The general level of The audit trail may not All vouchers should
documentation was weak in be ensured. Moderate. have clear information
Duna OMO branch, Hadiya how they are related to
ZoFED and in Misha and the COWASH, have
Duna WoFEDs, since adequate supporting
supporting documentation documentation and be
was not organised duly approved.
adequately. Also, few
documents in Duna OMO
branch did not have
information to identify that
they were related to
COWASH nor had
authorization signatures for
payment vouchers that
weakened the transparency
of the documentation.
23 Fixed asset monitoring in If the fixed assets are not The WoFEDs and
WoFEDs and Woreda monitored and identified Woreda Water Offices
Water Offices have not properly, there is a risk of should be trained on
been done systematically misuse or fraud related systematic monitoring
and the identification codes to usage of the assets. and identifying the
were not always attached to Moderate. Project’s fixed assets
the physical assets in appropriately.
visited woredas. In many
cases, the assets were
without an identification
code or only equipped with
a CMP sticker.
24 Funds have been If fund transfers are not Annual Plans should be
transferred to Health aligned with the actual prepared based on
Bureau according to annual progress, there is a risk reasonable and
plans although previous to inefficient fund flow. detailed information.
Minor.

26 September, 2017
Report 10/2017
year’s transfer had not been

utilised and reported.
6.3 Administration and Financial Management in Amhara Region
25 In Gusgusha Shikudad There is no bookkeeping The received and used
woreda branch office of or follow-up kept for the funds need to be
ACSI, the GoE funding was Project funds at the recorded into an
not followed separately from Gusgusha Shikudad account ledger or other
the entire ledger of the ACSI. Critical. bookkeeping
entire ACSI branch office. maintained by the
The beginning and end ACSI.
balances were followed on
a hand-written A4-paper,
where none of the
transactions were recorded
and the beginning and end
balances of each fiscal year
could not be verified. During
the audit mission, at the
zonal MFI branch office, the
end balance of the Project
funds was not yet clear for
the EFY 2008.
26 In Amhara the agreement If Water Office does not ACSI need to provide
between Water Bureau and follow that the agreement reports on use of CMP
Amhara Credit and Saving is followed, there is a risk funds to Water office.
Institution (ACSI) was not to fail monitoring the use
followed. Separate CMP of WASHCOs funding.
accounts have not been Significant.
opened at woreda level and
ACSI has not reported to
Water Office as stated in
the agreement.
27 According to the Financial There is a risk that ACSI must refund any
Report EFY 2008, there are unused funds are not unused remaining GoF
26 September, 2017
Report 10/2017
unused GoF investment properly accounted investment funds

funds of ETB 811,060 for/refunded. Moderate. remaining at ACSI or
remaining in ACSI from the WASHCOs to BoFEC.
Phase I.
28 The BoFED in Amhara Follow-up mechanism of The BoFED in Amhara
compiles 55 financial the quarterly reports is should establish a
reports from beneficiaries time consuming and monitoring table in
on the GoF capacity inefficient. Moderate. Excel to follow up
building budget every timely submission of
quarter. There is no the reports from
systematic mechanism to beneficiaries.
follow up submission and
completeness of the reports
from beneficiaries.
29 The Amhara RSU performs It is problematic from the The WI&ERDB staff
many tasks on behalf of perspective of handing should participate in
WI&ERDB related to over and sustainability if compilation of the GoE
gathering and compiling the the GoE staff does not reporting.
reporting on the use of the gain experience and
GoE funds. know-how in compilation
and quality check of
reporting. Moderate.
30 The bank reconciliations of Internal control Bank reconciliation
the RSU Amhara are weakness may lead to needs be duly
prepared but not duly inaccuracies in financial documented and
documented and approved. reporting. Moderate. approved on a monthly
basis.
31 In the RSU Amhara, there Accuracy of progress All monitoring data
are some deficiencies in reported cannot be collected must be filed
systematic filing of the ensured without access into logical and easy to
monitoring data obtained in to complete source of find categories.
diverse formats (hard copy, information = monitoring
data. Moderate.

26 September, 2017
Report 10/2017
soft copy and verbal

format).
32 No proper fixed assets Internal control relating Fixed assets registers
register is maintained in allto the fixed assets may should be kept and
woredas. not be efficient. maintained
Moderate. systematically.
6.4 Administration and Financial Management in Benishangul-Gumuz Region
33 Reconciliations between the In the official reporting of Reconciliations
Woreda Water Offices and the investment funds, between BGCSI and
BGCSIs (as in all regions) there was a balance of Water Office must be
were not conducted and the ETB 170,000 even made to actual bank
balances brought forward though there were statements accordingly
could not be reconciled to actually ETB 887,688 at and variations to be
financial reporting. In the Project BGCSI cleared.
Bambasi Water Office, they account. If the Project
had tried to reconcile the would have ended after
balance to bring forward to the Phase II, there would
the EFY 2009 in the Water have been ETB 717,699
Office: they had received an investment funds at the
amount orally from the BGCSI account that may
woreda BGCSI that there have not been refunded
would be ETB 170,000 from the woreda. There
(EUR 6,800) at the Project may be balance in
bank account. That BGCSI that is not
however did not match to acknowledged in the
the amount the EFYs Water Office that
income and expenditure proceeds in the Project
would total (ETB 57,838, reporting. Critical.
EUR 2,314) taken account
the balance brought forward
from the EFY 2007. The
end balance was recorded
according to the amount
received from the BGCSI.

26 September, 2017
Report 10/2017
At the time of the audit,

KPMG observed that the
amount that had been in the
BGCSI account at the end
of the EFY 2008 was ETB
887,688 (EUR 35,508). The
bookkeeping does not
reconcile in the bank
statement.
34 A discrepancy between the Alteration of expenditure Observed mistake must
actual GoF expenditure reported leads to be corrected. Alteration
reported by the Oda incorrect reporting. of expenditure
Woreda and expenditure Critical. allocations must not be
captured in the Financial made in the future.
Report Q4/2008 was
observed. The Oda Woreda
reported having used ETB
1,454,270, and the
Financial Report Q4/2008
captured expenditure of
ETB 906,442, difference
being ETB 547,828.
According to the RSU
Financial Specialist, the
GoE budget expires at the
end of the financial year,
and for the reporting
purposes, ETB 547,828 of
the GoF expenditure was
shifted to the GoE
expenditure.
35 Five FinnWASH woredas Reliability of financial Woredas need to
and two COWASH woredas reporting regarding submit financial reports.
have only submitted investment funds The expenditure is to

26 September, 2017
Report 10/2017
narrative report indicating submitted by woredas is be supported by

the total expenditure to poor, since consistency bookkeeping records or
Water Bureau. The cannot be verified by reconciliation with the
expenditure was not Water Bureau. records of BGCSI. The
supported by any Significant. opening balance,
bookkeeping records or received funds and
reconciliation with the ending balance are to
records of BGCSI. The be recognised in the
opening balance from the reports.
EFY 2007, received funds
in the EFY 2008 or balance
at the end of the EFY 2008
was not recognised in the
reports.
36 Regional Water Bureau Improper use of funds Improper financial
paid and reported and reporting between transaction is to be
expenditure amounting to entities. Significant. rectified in bookkeeping
ETB 624 thousand for the and reporting, and the
vehicle purchase for RSU. respective amount is to
Procurement and payment be transferred from
not planned and budgeted RSU to Regional Water
for Regional Water Bureau. Bureau. In the future,
improper use of funds
between the entities is
not allowed.
37 The petty cash ledger of The petty cash balance The petty cash books
Bambasi woreda from the could not be verified. should be securely
EFY 2008 was missing at Moderate. stored also from
the time of the audit and previous Ethiopian
KPMG could not review fiscal years.
whether there had been
petty cash balance at the
end of the EFY 2008.

26 September, 2017
Report 10/2017
38 During the KPMG audit Decisions might be made Draft and final versions
visit, BoFED and the RSU based on draft versions. should be clearly
had different views which Moderate. named and dated. Final
version of the Financial version (approved by
Report Q4 2008 was final. the Regional Steering
There were major Committee) must
differences in expenses include final versions of
between the versions. the progress and
financial reports.
39 Financial report to the MFA Financial report prepared Financial report should
is prepared in Word, in Word is vulnerable for be prepared in Excel.
numbering of annexes does calculation errors. Numbering of annexes
not follow the outline and Different numbering of should follow the
some of the annexes annexes and incomplete outline. All annexes
defined in the outline were information provided defined in the outline
missing or information adversely affect should be included in
provided was incomplete. compilation of reports at the report and contain
federal level. Moderate. sufficient information.
40 In the Bureau of Education, Ineligible expenses may Planning, budgeting
the total expenditure of the be funded by COWASH. and reporting must be
GOF Capacity Building Moderate. transparent and
budget was ETB 182,540 in inclusive, in case
the EFY 2008. ETB 51,406 COWASH funds are
was recorded under cost used to cover part of
category “Entertainment”. the expenses belonging
The amount consists of one to itself and costs
purchase invoice for belonging to others.
refreshments. Based on the
supporting documentation
and interview, a training
was organised for 21
woredas, out of which four
COWASH, five FINNWASH
woredas and 12 non-

26 September, 2017
Report 10/2017
COWASH related woredas.

All refreshment costs were
covered by the GoF
COWASH funds. COWASH
did not pay for any other
costs for the training, which
were covered by other
sources of funding. Cost
allocation arrangements
were not detailed in the
Annual Work Plan. Inclusive
report of the total costs of
the training was not
prepared.
41 Regional Water Bureau Improper use of funds Improper financial
paid and reported and reporting between transaction is to be
expenditure amounting to entities. Moderate. rectified in bookkeeping
ETB 624 thousand for the and reporting, and the
vehicle purchase for RSU. respective amount is to
Procurement and payment be transferred from
not planned and budgeted RSU to Regional Water
for Regional Water Bureau. Bureau. In the future,
improper use of funds
between the entities is
not allowed.
42 Internal Audit of the Late delivery of audit Preparation of financial
COWASH funds has been report reduces the report and execution of
carried out for the EFYs relevance of information audit and reporting
2007 and 2008 by The BG provided in the audit should take place
National Regional State report. The auditees without any delays.
Bureaus of Finance & cannot take
Economic Development. reconciliations into
The Audit Report for the account without delay
EFY 2007 was submitted to and readers of the audit

26 September, 2017
Report 10/2017
the MFA on 4 April 2016, reports cannot use

which is nine months after information in decision
the end of the Ethiopian making. Moderate.
financial year. The Audit
Report for the EFY 2008
was submitted on 19 May
2017.
43 According to the Unauthorised allowances Incorrect payments are
employment contract, a can be paid. Minor. to be rectified. In the
transport allowance for the future, transport
RSU Team Leader is ETB allowance is to be paid
800 per month. In practice, according to the
ETB 1,000 per month has employment contract.
been paid.

Final Audit Report COWASH 26.9.2017

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Final Audit Report COWASH 26.9.2017

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Performance Audit of The

Ministry for Foreign Affairs of Finland

Document Classification - KPMG Confidential

ACSI Amhara Credit and Saving Institution

Document Classification - KPMG Confidential 1

Ethiopian Fiscal Year Gregorian Period

Table 1 Phase I & II Budget, Component One Budget

Annex 1 Follow-Up Table to Address Recommendations

Document Classification - KPMG Confidential 2

2.1 Scope and Execution 8

2.2 List of Interviewed Persons 9

3 Background and Structure 13

3.1 Background of Project 13

3.2 Project Structure 14

4.1 Project Budget 16

4.2 Performance and Utilisation of Funds 17

4.3 Cost-effectiveness of Implementation 19

4.4 Project Reporting 21

4.6 Compliance with Agreements 23

4.7 Review of Project Activities 24

4.8 Risk Management 27

5.1 Fund Flows 29

5.2 Accounting of Technical Assistance Budget 32

6 Administration and Financial Management in Regions 37

6.1 Administration and Financial Management in Oromia Region 37

6.3 Administration and Financial Management in Amhara Region 46

6.4 Administration and Financial Management in Benishangul-Gumuz Region 51

Document Classification - KPMG Confidential 3

Document Classification - KPMG Confidential 4

Financial Management and Reporting

Component Two, Government of Finland Funding for Capacity Building

Document Classification - KPMG Confidential 5

Component Two, Government of Ethiopia Funding for Investments

Document Classification - KPMG Confidential 6

Risk Management and Audits

Document Classification - KPMG Confidential 7

Critical Risk Corrective actions are required immediately.

Significant Risk Corrective actions are required as soon as possible.

Document Classification - KPMG Confidential 8

2.2 List of Interviewed Persons

Document Classification - KPMG Confidential 9

Name Position Organisation

Document Classification - KPMG Confidential 10

Name Position Organisation

Document Classification - KPMG Confidential 11

Name Position Organisation

Document Classification - KPMG Confidential 12

3 Background and Structure

1. Woreda Managed Project (Woreda is the implementer)

Document Classification - KPMG Confidential 13

CMP approach was originally planned to be implemented in 30 woredas by COWASH.

Component 1: Strengthening the Federal Capacity to Implement Community Managed

Main results of Component 1 are:

Component 2: Establishing and Strengthening the Capacity in Regions to Scale-up the

3.2 Project Structure

Federal Management Structures

Document Classification - KPMG Confidential 14

Federal Technical Assistance Team

Management Structure in Regions

Document Classification - KPMG Confidential 15

Document Classification - KPMG Confidential 16

Table 2. Phase I & II,

4.2 Performance and Utilisation of Funds

Table 3. Project Targets Versus Actual Performance