Eaux de Beyrouth et de Mont LibanEtablissemeni Public E.S.M.L

Beirut, August 29h, 2016

Ms. Amal TalbiSenior Water Resources Specialist

Mrs. Rima KoteicheSenior Financial Management Specialist

Mr. Rock Jabbour

The World BankLebanon Country OfficeBeirut, Lebanon

Subject: LB-P 103063 Greater Beirut Water Supply ProjectFinal Audit Report and Management Letter for the GBWSP for the year ending December 31", 2015

Dear Ms. Talbi,

Kindly find attached to this letter the Final Audit Report and the Management Letter for the GBWSP forthe year ending December 31st, 2015.

Sincerely yours

Beirut & t Lebanon Water Establishment

eirr sident General Director

BEYROUTH - BADARO - RUE SAM[ EL SOLH - IMMEUBLE CHIDRAWI[- Tel. 01 386760 - 01 386761 - 01 386762

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Audit of the Financial Statement of the"Greater Beirut Water Supply Project

Loan Number 7967-LE"Beirut - Republic of Lebanon

For the Year Ended December 31, 2015

Talal Abu-Ghazaleh & CoMember of Talal Abu-Ghazaleh Organization

Index

Contents: Page

Independent Auditor's Report 1

Project Statement of Cash Receipts and Payments by Category 2

Notes to the Project Statement of Cash Receipts and Payments 3-9

(P81_ Y. TAGkWdorsTalal Abu-Ghazaleh & Co.

Global Company for Auditing and Accounting 4. sAi t . ll t . l

Alliance with Russell Bedford International More than 120 member & correspondent firmsand 280 offices in Europe, the Americas & Asia-Pacific

Societe Civile (R.C. 67) zlf'ou

Certified Public Accountants

Independent Auditor's Report

To Messrs. Beirut and Mount Lebanon Water EstablishmentBeirut - Republic of LebanonWorld Bank Loan Number 7967-LE

We have audited the accompanying financial statement compromising of the Statement of CashReceipts and Payments by category of the Greater Beirut Water Supply Project for the year ending andcumulatively as at December 31, 2015.

We have also audited compliance with the laws, regulations, guidelines and provisions governed bythe Loan Agreement for the year ended December 31, 2015.

We conducted our audit in accordance with International Standards on Auditing (ISA). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement and about whether the Greater Beirut WaterSupply Project has complied with laws, regulations, guidelines and provisions governed by the GrantAgreement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statement. An audit also includes assessing the accounting principles usedas well as evaluating the overall statement presentation. We believe that our audit provides areasonable basis for our opinion.

In our Opinion:(a) the Project Financial Statement (PFS) present fairly, in all material respects, the cash

receipts and payments of the Greater Beirut Water Supply Project for the year endingDecember 31, 2015 and showing cumulative balances as at December 31, 2015 inaccordance with the International Public Sector Accounting Standards (IPSAS), under thecash basis of accounting;

(b) internal control over financial reporting involved in the preparation of replenishments, directpayments, payments through special commitments , and reimbursements i.e. expendituresreimbursed on the basis of statements of Expenditures can be relied upon to support therelated withdrawals as of December 31, 2015;

(c) The project was in all material respects in compliance with the laws, regulations, guidelinesand provisions governed by the L Agreement.

Waref Kumayha(License # 1927)

Beirut on August 22, 2016

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Notes to the Project Statement of Cash Receipts and Payment

"Greater Beirut Water Supply Project Loan Number 7967-LE"For the the year ended December 31, 2015

(Amounts are expressed in US Dollar)

Note 1: Project Description:

The objective of the Project is to increase the provision of potable water to theresidents in the Project area within the greater Beirut region, including those in thelow-income neighborhoods of southern Beirut, and to strengthen the capacity of theBML-WE in utility operations.

The Project consists of the following parts:

Part 1. Bulk Water Supply Infrastructure

(a) Construction and construction supervision of bulk water supplyinfrastructure consisting of:

(i) water tunnel conveyors, including related intake, flow regulationand washout structures, and related vent and surge shafts anddistribution chamber;

(ii) twin transmission pipelines; and(iii) water storage reservoirs.

(b) Design, construction, construction supervision and operation of awater treatment plant.

(c) Financing of equipment associated with the bulk water supplyinfrastructure including pumps and valves.

(d) Support to CDR for Project management related to the bulk watersupply infrastructure through the financing of consultants services.

Part 2. Supply Reservoirs, Distribution Network and Metering

(a) Design, construction and construction supervision of supply reservoirsand associated pumping stations.

(b) Design, construction and construction supervision of water supplydistribution networks of pipelines across southern Beirut and parts ofthe Metn, Baabda and Aley areas.

(c) Installation of household water meters in selected areas.

(d) Installation of bulk water meters at the reservoirs and distributionchambers.

Part 3. Project Management, Utility Strengthening and National Studies

(a) Establishment and operation of the PMU, including the financing ofIncremental Operating Costs.

(b) Capacity building and technical assistance to strengthen BMLWE'scapacity, and MOEW's capacity for project oversight, and financingof consultants' services for the BMLWE special purpose audits.

(c) Provision of equipment to strengthen BMLWE, such as telemetry orsupervision control and data acquisition systems, geographicalinformation system, customer information system and internationalaccounting system.

(d) Carrying out high priority national studies on key sector areas, such aswastewater management, utility operations and regulation of thewater, sanitation and irrigation sectors, water resource management,water supply augmentation and inter-basin transfers, to be selectedwith the agreement of the bank, in alignment with the priorities setforth in the National Water Sector Strategy currently underpreparation by the Borrower.

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Note 3: Designated Account Reconciliation Statement PMU-AWALI:

USD

1. Beginning balance of S/A per PMU records 279,850

2. Add: Total replenishment for S/A from the WB 680,257

3. Balance 960,107

4. Less: Total expenditures made for this year 660,290

5. Less: Difference of PV-amount incurred but not recorded in the PMU records -

6. Less: Bank charges/other payment not financed by this counterpart -

7. Ending balance of S/A Rep PMU records 299,817

8. Balance of special account per attached Bank Statement as of date 12/31/2015 342,106

9. Less: Total checks issued not yet withdrawn/BDL 42,289

10. Less: Total wire transfer not yet withdrawn -

11. Total amount account after adjustments 299,817

Note 4: Special Designated Account Reconciliation Statement CDR:

USD

1. Beginning balance of S/A per CDR records 363,879

2. Add: Total replenishment for S/A from the WB 88,294

3. Balance 452,173

4. Less: Total expenditures made for the year 103,519

5. Less: Difference of PV-amount incurred but not recorded in the PMY records -

6. Less: Bank charges/other payment not financed by this counterpart -

7. Ending balance of S/A Rep CDR records 348,654

8. Balance of special account per attached Bank Statement as of date 12/31/2015 348,654

9. Less: total checks issued not yet withdrawn/BDL -

10. Less: Total wire transfer not yet withdrawn

11. Total amount accounted after adjustments 348,654

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Note 6: List of Fixed Assets:

Asset ReE No. Asset DgaK[jRjjM Date of Purchase Purchase Value $

PCI FIN Desktop PC Acer + Screen I O-Oct- 10 600.00

PC2 Proc Desktop PC Acer + Screen I O-Oct- 10 600.00

Phonesyst Phone System, Central, Wiring I O-Oct- 10 1,964.84

LJP1005 HP laseriet 10-Oct-10 154.00

OJHP7000 A3 HP laterjet A3 10-Oct-10 280.00

WATCOOLI Water Cooler 22-Dec- 10 165.00

COR Coffee Machine 28-Dec-10 990.00

Laptop PD Toshiba Laptop + Case 31-Dec-10 1,980.00

MeeTABLEI Meeting Table 2-Feb- 11 614.93

AE2013HW 3 Acron Charis 2-Feb- 11 4,640.80

DskP D Desk for Project Coo 2-Feb- 11 1,754.16

HC90/200 High Cabinet 2-Feb- 11 555.29

Darina 4 Chairs 2-Feb- 11 2,239.50

FAX1 Samsung Colored multi-use I -Aug- 11 676.62

Fax2 Panasonic Fax Mach 2-Feb-14 270-00

Laptops HP-Toshiba-printer 27-Oct-14 5,960.00

Total 23,445.14

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