THE WORLD BANK FINANCIAL STATEMENTS FOR THE VANUATU RURAL ELECTRIFICATION PROJECT (VREP) II TFA5406 (PRIF GRANT) TFA4979 (SREP GRANT) IDA D1930 (IDA GRANT) IDA 60720 (IDA CREDIT) IN VANUATU For the Year Ended 31 December 2019 Prepared Under IPSAS: Financial Reporting Under the Cash Basis Accounting I Vanuatu Rural Electrification Project I! - Financial Statements, 2019 TABLE OF CONTENTS PR O JEC T BA C KG R O U N D ................................. ....... ....... ...............................3 A U D IT O R 'S R E P O R T ........................................................................................................5 STATEMENT OF CASH RECEIPTS AND PAYMENTS......................................................................7 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL.........................................................8 STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS........................... 11 1. A cco u nting P o licies ................................................................................................................ ll 2 . G overnm ent counterpart funding........................................ ..... ...................................................13 3. D onor grant assistance ...............sit1....................................... . ........... ............................ 14 4 . O perating E xpenditure pe.......................................................................... ....................... 14 5 . C a p ita E x p e nd itu re ......................................... .........................................Eu................................ 15 6 . C lo sing cash ba la nce .......................... ...........................................................................lanc. 15 7. Revenue variance between budget and actual......................................................................1 8. Expenditure variance between budget and actual........ ..........................................................15 9 . Im p re st A cc o u nt............................................................................................................................. 15 10. P ay m e nts to T hird P a rtie s ..................................................................a__.................... ............... 5 1 1. R e la te d P a rtie s ...................................................................... ..........................................._ ......1 2 1 Vanuatu Rural Electrification Project II - Financial Statements, 2019 PROJECT BACKGROUND Vanuatu Rural Electrification Project II (VREP II) provides Grant Funding and Loan of USD14,220,000 ( SREP Grant of USD6,770,000, PRIF Grant of USD3,450,000, IDA Grant of USD2,000,000 and IDA Credit of USD2,000,000) to the Department of Energy (DoE) to support access to electrification of households, businesses and public facilities throughout rural areas of Vanuatu. The objective of the project is to support increased penetration of renewable energy and increased access to electricity services in the dispersed off-grid areas of Vanuatu. VREP lI is aimed at supporting the Vanuatu Government's objective to increase access to sustainable electricity services for rural households, public institutions and businesses located in dispersed off-grid areas. It is an expansion of VREP I which is currently underway targeting 17,500 households, 2,000 community halls and 230 aid posts throughout the country. VREP II has three (3) components: Component 1. Provision of Solar Home Systems (SHS) and micro grids systems in rural areas of Vanuatu: This component will support expansion of access to reliable electricity service in rural Vanuatu through SHS and micro grid configurations where mini grid configurations are unlikely to be economically viable and which are not earmarked for mini grids under this or other donor, government projects or are the least cost solution. SHS and micro grids will be available to rural households and public institutions. This component will target approximately 37 public institutions and 8,400 rural households which equates to approximately 42,000 people. Component 2. Construction of Mini Grids systems in rural areas of Vanuatu: This component will support the expansion of access to reliable electricity services for rural communities through support for the design, supply, installation and commissioning of mini grid systems. The project will finance the construction of five mini grids, based on initial cost estimates. The criteria for selection of sites with potential to support a mini grid is : (i) community household numbers greater than 75 households; and (ii) business and public institutions load greater than 50 percent of the total load. This component will support electricity service provision to approximately 550 rural households, which equates to around 2,750 people, and public institutions and businesses. Component 3. Technical Assistance and Project Management: This component addresses three key areas of the project, the first focusing on the vendor registration model for component one, the second focusing on Owners' Engineer for Component two and the third focusing on project management. 3 Vanuatu Rural Electrification Project II - Financial Stateients, 2019 PROJECT STATUS The Grant funding and loan for the Project is USD14, 220,000. From the start of the Project up to 31 December 2019 only PRIF Grant, SREP Grant and IDA Grant has been expensed. A total of USD421, 533.92 was disbursed for PRIF Grant. For SREP Grant amount of USD376, 967.30 was disbursed. IDA Grant a total amount of XDR129, 418.10 was disbursed and IDA Credit amount of XDR 129,864.40 was disbursed. The PRIF Grant total undisbursed was USD3,028,466.08 SREP Grant total undisbursed was USD6,393,032.70, IDA Grant total undisbursed was XDR1, 370,581.90 and IDA Credit total undisbursed was XDR1,370,135.60 these funds will be expensed later in 2020 to 2022 This report provides the financial statements for the Vanuatu Rural Electrification Project II for the year ended 31 December 20 oject commenced in July 2017 and will end on 30 June 2022. z. 3 C 1.S o E V~A,% K ) Mrs. Esline Garaebi p s e%tO io / Director General Ministry of Climate Change Adioitn, Meteorology, Geo-Hazards, Environment & Energy 30th June 2020 4 Vauati Ritral Electrification Project II - Financial Statements, 2019 Barrett & Partners PO Box 240 Ch6rleredAccountans & Business Advisers I" Floor, B&P House Kumul Highway Port Vita, Vanuatu Tel: (+678) 22280 Fax: (+678) 22317 Email: service@bapcom.vu www.bap-international.com B&P Independent Auditors' Report Vanuatu Rural Electrification Project Phase II Unqualified Audit Opinion on the Vanuatu Rural Electrification Project Phase II (VREP II) for the Year Ended 31 December 2019 The Auditor-General is the auditor of all public funds and public entities. The Auditor- General has appointed Barrett & Partners as auditors pursuant to Section 24(1) of the Expenditure Review and Audit Act [CAP241]. The funds received from the World Bank are held in the Government of Vanuatu Development Fund Account and are administered by the Government of Vanuatu's Meteorological and Geo-hazards Department. It is the responsibility of the Government to ensure funds are managed in accordance with Government financial regulation and in accordance with the finance agreement. Our audit is to provide an opinion on: (1) Whether the Financial Statements for Vanuatu Rural Electrification Project Phase 11 are complete, accurate and valid; (2) The general management of the fund including whether the systems and processes used for procuring goods and services comply with relevant Vanuatu legislation; and (3) Whether the financial statement is fairly stated in accordance with International Public Sector Accounting Standards; financial reporting under Cash Basis of Accounting (IPSAS CASH) In forming our opinion we carried out appropriate tests with regard to materiality in accordance with the audit objectives and in conjunction with Financial Regulations, World Bank requirements and grant agreement to provide opinions in relation to matters in the above paragraph. 5 Vanuatu Rural Electrification Project II - Financial Statements, 2019 Partners: Lindsay D. Barrett Adrian Sinclair Mark Stafford Barrett & Partners PO Box 240 Chanered Account6nts & Business Advisers lW Floor, B&P House Kumul Highway Port Vila, Vanuatu Tel: (+678) 22280 Fax: (+678) 22317 Email: service@cbapom.vyu www.bap-international.com B&P Audit Opinion In our opinion we are satisfied: a) with the completeness, accuracy and validity of the Financial Statements for the Vanuatu Rural Electrification Project Phase II (VREPII) for the year ended 31 December 2019; b) with the general management of the fund including compliance of the systems and processes used for procuring goods and services in accordance with relevant Vanuatu Legislation; and c) that the Financial Statements for the Vanuatu Rural Electrification Project Phase II (VREPII), for the year ended 31 December 2019, have been stated fairly in accordance with International Public Sector Accounting Standards: Financial Reporting under Cash basis of Accounting (IPSAS). Mar Staff F.C. Barrett & Partners Enga ement Partner Chartered Accountants Qualified auditors under Section 130 of the Port Vila, July 2020 Companies Act No.25 of 2012 6 Vanuatu Rural Electrification Project II - Financial Statements 2019 Partners: Lindsay D. Barrett Adrian Sinclair Mark Stafford VANUATU RURAL ELECTRIFICATION PROJECT II STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (Expressed in Vanuatu Vatu) 2019 July 2017 to Dec 2018 Total Consolidated Notes Receip (Payment) Receipt! (Payment) Project i(VU) 12 Months 18 Months 30 Months GRANTS PRIFGRANT SREPGRANT IDAGRANT IDACREDIT PRiFGRANT SREPGRANT IDAGRANT IDACREDIT CASH RECEIPTS Word Bank Grarts Received 3 2.427 194 - 42,612,438 40,000.000 20,000,000 20,00,000 125 039,632 Word Bark-iFas Transfer directy to F Development Fridn WorI Bark - Paiments made direcy to tird parbes 10 - - - - TOTAL CASH RECEIPTS 2,427.1942-1--- 42,612 438 40,00C.000 20000000 20.000.000 125.039.632 CASH PAYMENTS Goods- Suppy and irstal Mirignds 5 143,218 - - - - - 143,218 CorutingSeNces 5,157,867 2,589,762 2589763 3,116,751 635224 - 14089.367 Operating Cosis, Trainng & Workshops 917.529 - 999.405 76.452 1993,386 SubsidyPaymerts 2355.950 - - - - - - - 2.355,950 TOTAL CASH PAYMENTS 4& 5 8,574,564 2,589,762 2.589,763 4,116,156 711 676 - 18,581,921 CASH RECEIPTS LESS CASH 6,147,370 -2,589,062 -2,58973 38,496,282 39,288,324 20,000,000 20,000000 106,457,711 PAYMENTS INCREASEJDECREASE) IN CASH (6,147,370) (2,589,762) (2,589,763) 38,496,282 39,280,324 20,000,000 20,000,000 106,457,711 Cash ati January 38,496,282 39,288,324 20,000,000 20,000.0000-.-.- Cash at 31 December 6 32,348,912 36,698,562 17,410,237 20,000,000 38490,282 39,288,324 20,000,000 20,000,000 106,457,711 This statement is to be read in conjunction with the accompanying notes and accounting policies. 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О r ©� j г k t� й г�{ ш а`xi, й�л н � �'`�у' е, rn м. $ � � � U Q'' � м � с, а .- ю т м т � � N � С 'у.'� г т ш � °- � О т � .�,' � "- � � W 1.L О ш о г ы pU � V) ❑ � � SY а г � . м " о г' ,� � ш (i � � '^ 'i `� � � � ш � s^ ° ш р а � s � � � � �i ш M1 ю � � а,�� � .4 ° �, � 'т � F Р и ~ а � °' � й " � � � а ш �� � °n и � г. у� � г �. а � LL7 � Ш °' � й�s � в и � � � � L9 � `� j � Q J $ � � д � ° �7 '� ш= С rЛ о�, F с7 й ьз и F � �� �' '+1 а' _ у в S. � и .Z Q [L 'С � LL � ° � � и ? И� С3 Ш й и°- е� r°. С' Н VANUATU RURAL ELECTRIFICATION PROJECT 11 STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 1. Accounting Policies a. Reporting Entity The Vanuatu Rural Electrification Project (VREP) 11 is administered by the Department of Energy (DoE). The objective of the project is to support increased penetration of renewable energy and increased access to electricity services in the dispersed off-grid areasof Vanuatu. VREP 11 is aimed at supporting the Vanuatu Government's objective to increase access to sustainable electricity services for rural households, public institutions and businesses located in dispersed off-grid areas. It is an expansion of VREP I which is currently underway targeting 17,500 households, 2,000 community halls and 230 aid posts throughout the country. The VREP 11 project has 3 Components: (i) Provision of Solar Home Systems (SHS) in rural areas of Vanuatu. (ii) Construction of Mini Grids systems in rural areas of Vanuatu. (iii) Technical Assistance and Project Management. b. Authorization Date The financial statements of the Grants TFA5406. TFA4979, IDA D1 930 and Loan IDA 60720 is for the year ended 31 December 2019 and was authorized for issue on 30 th June 2020 by Mrs. Esline Garaebiti for the Department of Energy. No other body has the power to amend these financial statements once they have been issued. c. Basis of Preparation The financial statements of the Grants and Loan have been prepared in accordance with requirements of the Public Finance and Economic Management Act [CAP.244] which includes the requirement to comply with generally accepted accounting practice. The financial statements comply with IPSAS "Financial Reporting under the Cash Basis of Accounting" for the year ended 31 December 2019. d. Presentation currency The financial statements are presented in Vanuatu Vatu (VLIV). if 2019`,_-,-- VANUATU RURAL ELECTRIFICATION PROJECT II STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 e. Foreign currency The grants funding and loan payment received from the World Bank are in USD and XDR and have been converted by the Reserve Bank of Vanuatu at the rate on the day of the transaction. f. Cash and Cash equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Department of Energy receives the grants and Loan from the World Bank which is managed through the centralized Smart stream system. Under this arrangement, the Department of Energy does not control the grants and Loan as their own bank account but rather the central entity will make payments on behalf of the department after appropriate authorization and documentation. These transactions have been disclosed in a separate column in the "Statement of cash receipts and payments". g. Property, Plant & Equipment Purchases of fixed assets have been included in the Statement of cash receipts and payments under Goods. Separate disclosure has been disclosed in Note 5 of these accounts. Fixed assets are stated at cost at the date of purchase. There are no fixed assets purchased on hire purchase schemes and no depreciation is being charged. 12 Vontaati Rural Electrification Project II - Financial Statements, 2019 VANUATU RURAL ELECTRIFICATION PROJECT II STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 h. Budget The budget is prepared on a cash basis when cash is expected to be received and paid. The classification of the budget is prepared on the common revenue sources and expenditure is classified on the nature of expenditure normally incurred by the Project. Goods are treated as part of normal operational expenditure. The final budget is the budget that was approved by the World Bank dated 23 July 2017. The approved budget is developed on the same accounting basis, classification basis, as the financial statements. The final budget is for the whole project period of 60 months which is different to the 12- month period prepared for these financial statements. The Grants and Loan Agreement identified the budget categories according to the following components to be procured under the project. It encompasses the same entities as the financial statement. Component 1: Provision of Solar Home Systems and micro grids in rural areas of Vanuatu. Component 2: Construction of mini grids in rural areas of Vanuatu. Component 3: Technical Assistance and Project Management The budget was originally designed in USD and XDR and was converted into VUV at the rate of USD 1= VUV107 and XDR 1 = USD1.35389 as per summary of disbursements. i. Changes in accounting policies There have been no changes in accounting policies during the financial year. 2. Government counterpart funding The Project does not receive any funds from the Vanuatu Government as this Project is fully funded by the World Bank. 13 1 Vanuatu Rural Electrification Project II - Financial Statenents, 2019 VANUATU RURAL ELECTRIFICATION PROJECT 1I STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 3. Donor grant assistance In 2017, the Department of Energy signed grant agreement and Credit (World Bank Grant No. TFA5406- PRIF, TFA4979 - SREP, IDA D1930- IDA Grant and IDA 60720- IDA Credit) with the World Bank. The grants being composed of SREP Grant of USD6,770,000, PRIF Grant of USD3,450,000, IDA Grant equivalent of USD2,000,000, and IDA Credit equivalent of USD2,000,00OThe purpose of the project is to support increased penetration of renewable energy and increased access to electricity services in the dispersed off-grid areas of Vanuatu and the agreement was for the equivalent of USD14,220,000 from 2017 to 2022. The grant agreement specifically sets out the areas for spending of which USD5, 386,167 allocated for Component 1, USD6,834,288.40 allocated for Component 2 and USD1,999,544.60 allocated for Component 3. For the year ended 31st December 2019, actual grant received is USD21, 220.44 (VUV2, 427,194). As at 31 December 2019, the equivalent of USD1,008,554.84 (VUV106,457,71 1) has been disbursed since the inception of the project with a remaining equivalent balance of total grant and loan of USD13,211,445.16 to be disbursed from 2020 to 2022. 4. Operating Expenditure 2019 2017-2018 12 MONTHS 18 MONThS PRIFGRANT SREPGRANT IDAGRANT IDACREDIT PRFGRANT $REPORANT 1AGRANT IDACREDIT Promdert Furd 106971 - - - 66221 24667 - LocalCourses . - - - 45 Cons ulant Fees 5044996 2589762 2.50 763 3 3025330 611557 - Adverting-Commnicabans (4348) - - 175000 35652 - Pdnbng -Communicatirs 26.087 - 27600 TeecphoieFax-Comnuncaions 81,00 - - 6000- Equiprct-Aidfloral Genera 0Nci; Entetaimert - 1 1 Lcca Pavel 427 543 204A9411- lcidetal 7 250 - S4bs sIeneraA ovearces 230 000 - Slta rey.Ccmn uncations 110000 - Subs dis 2.355950 . BankCiarges 3900 - Total 8,431,346 2,589,762 2,589,763 - 4 ,1 1 6 ,1 5 6 7,676 - 14 Vanuatu Raral Electrification Project II - Financial Statements, 2019 VANUATU RURAL ELECTRIFICATION PROJECT II STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 5. Capital Expenditure 2019 2017-2018 12 MONTHS 18 MONTHS PRIFGRANT SREPGRANT IDAGRANT IDACREDIT PRIFGRANT SREPGRANT IDAGRANT 10ACREDIT Equipment-Computer 105870 - - - - - - Furniture- Ofce Fu iture 37,348 - - - - - Total 143.218 - - - - 6. Closing cash balance 2019 2017-2018 12 MONTHS 18 MONTHS PRIF GRANT SREP GRANT IDA GRANT IDA CREDIT PRIFCRANT SREPGRANT IDAGRANT IDACREDIT Nlade upas f0l"ws St.artreamentralAccount 32.345,912 36.69 562 17.410 237 20,000.000 396,282 39 240 324 2i,0,0J0 20,0000 World Bank- Fends Transer eecily t. Deveopment FuId - !oLnt 32,48,912 36,95.82 17,41o,237 28,888,088 8,496,282 39,288,324 20,000,000 20,00000 7. Revenue variance between budget and actual The project had a shortfall funding variance of VUV303,247,624 against the annual budget of VUV305,674,818. The variance relates to the funding from the World Bank that was delayed due to the Project starting later than anticipated and also the different exchange rate used in the final budget w% hich is USDI = VUV I10 and the actuals that used the exchange rate on the transaction date. 8. Expenditure variance between budget and actual The Project underspent VUV291,920,729 against the annual budget of VUV305,674,8 18. This is due to the late commencement of the Project which required the establishment of new sysrems, processes and procedures compliant with World Bank requirements. These have now been established and many of the grant activities are progressing well. 9. Imprest Account As at 31st December 2019, there are no outstanding Imprest for the Trust Funds. 10. Payments to Third Parties For the year ended 31 December 2019, there were no direct payments made to third parties for the Trust Funds. 11. Related Parties There were no related party transactions during the year. 15 Vanuatu Rural Electrification Project II - Financial Statements, 2019