GOJ/IBRD LOAN CONTRACT NO. 8007 - JM ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT (ESEEP) PERIOD APRIL 1, 2017 - February 28, 2018 GOJ/IBRD LOAN CONTRACT NO. 8007 - JM ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT (ESEEP) PERIOD APRIL 1, 2017 - February 28,2018 TABLE OF CONTENTS Page Audit Report on Financial Statements Statement of Sources and Uses of Funds 1 Statement of Cumulative Investments 2 Designated Bank Account Reconciliation Statement -A 3 Designated Bank Account Reconciliation Statement -B 4 Statement of Requests for Disbursement 5 Notes to Financial Statements 6-8 AUDITOR GENERALS DEPARTMENT 40 KNUTSFORD BOULEVARD Q1 "M"^ P.O. BOX 455 KINGSTON 5 JAMAICA Tel. No.: 926-8309/926-5963/926-5846 Fax Number: 968-4690 uuiren@audioeeneral. August 15, 1018 INDEPENDENT AUDITOR'S REPORT To the Permanent Secretary Ministry of Science Energy and Technology GO1/IBRD LOAN No. 8007-M Energy Security and Efficiency Enhancement Project (ESEEPI Period April 1, 2017- February 28, 2018 Opinion I have audited the accompanying Financial Statements of the Energy Security and Efficiency Enhancement Project, set out on pages 1 to 8, which comprise the Statement of Sources and Uses of Funds, as at February 28, 2018, Statement of Cumulative Investments, Designated Accounts (A & B) Reconciliation Statements for the period then ended, and a summary of significant accounting policies and other explanatory notes. In my opinion, the appended Statements 1-2 and Supplementary Financial Information reflect a true and fair view of the transactions of the Project for the period under review and the transactions conformed to the terms of the Loan Agreement and complied with the International Public Sector Accounting Standards (IPSAS) Cash Basis Basis for Opinion The audit of the Project was conducted in accordance with: * Article V Section 5.09 (b) (i) of General Conditions of the Loan Agreement between the Government of Jamaica (GOJ) and the International Bank for Reconstruction and Development (IBRD] dated May 19, 2011. * International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under ISSAIs are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of this report. My staff and I are independent of the Project in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. The following key matter was brought to the attention of management by way of the Audit Completion Report dated May 15, 2018. 1 . We observed that expenditure under We compared budgeted expenditure in Categories 1 and 3 exceeded the budget the loan agreement and with actual outlined in the loan agreement by US$ cumulative expenditure at the end of the 2,330,767. Conversely, the project under- reporting period for the categories of utilized the budgetary allocations under expense. Categories 2, 4 and 5 by US$1,968,50935. We made enquiries of management to provide explanations for the variances identified. We performed reconciliation of designated bank account balance and obtained confirmation from the World Bank for amounts disbursed for each category of expense. Management's Responsibility for the Financial Statements The executing agency, the Ministry of Science, Energy and Technology, is responsible for the preparation and fair presentation of these financial statements, in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis. This responsibility includes: designing, implementing and maintaining internal controls, relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether, due to fraud or error; selecting and applying appropriate accounting policies that are reasonable in the circumstances. The Ministry of Science, Energy and Technology is also required to present audited financial statements to the IBRD. The attached financial statements and supplementary financial information which are described hereunder were submitted to me by the Project Implementing Unit (PIU) in accordance with Article V Section 5.09 (b) (ii) of the aforementioned General Conditions of the Loan Agreement to reflect the transactions of the Project from its inception in May 19, 2011 to the close of the financial period at February 28, 2018. Statement 1 Statement of Sources and Uses of Funds Statement 2 Statement of Cumulative Investments Designated Account -A Reconciliation Designated Account -1B Reconciliation Statement of Requests for Disbursements Notes to the Financial Statements In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there are plans to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Auditor's Responsibility for the audit of the Financial Statements My responsibility is to express an opinion on these Financial Statements based on my audit. I conducted my audit in accordance with the auditing standards issued by the International Organization of Supreme Audit Institutions (INTOSAI) Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, I exercise professional judgment and maintain professional scepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. The conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that presents a true and fair view. I have communicated with the World Bank regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that was identified during the audit. REPORT ON ADDITIONAL REQUIREMENTS OF LOAN AGREEMENT NO 8007-JM. COMPLIANCE WITH APPLICABLE LAWS. REGUlATIONS AND FINANCIAL CLAUSES OF THE LOAN CONTRACT During the period under review, I examined compliance by the Project Implementing Unit of the Executing Agency with the applicable laws and regulations related to the Programme's financial activities and with the accounting/financial/ management clauses of the Loan Agreement to. 8007- JM. There was general compliance with following schedules of the Loan Agreement, with the exception of the Steering Committee's failure to meet quarterly as required (Project Appraisal Document, Annex 5, Section 1.4) COMPLIANCE WITH APPLICABLE LAWS. REGULATIONS AND FINANCIAL CLAUSES OF THE LOAN CONTRACT (CONT'D) Schedule 1 Part C: Project Description: Project Management, Monitoring and Evaluation Schedule 2 Section 1- A2: Project Execution: Project Steering Committee Section 1-8; Project Execution - Subsidiary Agreement Section II-A1: Project Execution: Project Monitoring, Reporting and Evaluation Schedule 4 Section I-B: Terms and Condition of the DBJ Subsidiary Agreement OPINION - GENERAL In my opinion, the Project Implementing Unit maintained an adequate accounting system based on separate and clearly identifiable accounts which enabled the recording, monitoring and reporting of the operations and costs under the project in accordance with satisfactory accounting/financial/management practices and standards as required by Article V Section 5.09 (a) of the General Conditions of the Loan Agreement. AUDIT OF THE SPECIAL BANK ACCOUNT I have examined the appended Designated Account Reconciliation Statement, reflecting the movement in the Designated Bank Account for the period ended February 28, 2018. The Designated Bank Account No. 234 289 977 is maintained in United States Dollars in the name of the Ministry of Finance No. 8007-JM. My examination was made in accordance with the standards of the International Organisation of Supreme Audit Institutions (INTOSAI) and accordingly included such tests of the accounting records and other procedures I considered necessary. OPINION - SPECIAL BANK ACCOUNT In my opinion, the Designated Account Reconciliation Statement reflects the total amount advanced to the Designated Account at February 28, 2018 as reconciled to the outstanding (undocumented) amount advanced to the account as at February 28, 2018 in conformity with IPSAS Cash Basis and IBRD guidelines. Auditor General of Jamaica Date AUDITOR GENERALS DEPARTMENT o o 40 KNUTSFORD BOULEVARD P.O. BOX 455 KINGSTON 5 JAMAICA Tel. No.: 926-8309/926-59631926-5846 Fax Number: 968-4690 Email: audgen@auditorgenera1.gov.jm August 15, 2018 GOj/IBRD LOAN No. 8007-IM Energy Security and Efficiency Enhancement Project (ESEEP) Period April 1. 2017 - February 28, 2018 AUDIT OF STATEMENTS OF EXPENDITURE (SQE) PROCEDURES In the course of the Audit of the Energy Security and Efficiency Enhancement Project (ESEEP) for the period ended February 28, 2018, 1 examined the following statements of expenditure submitted to the IBRD during the financial year under review in support of applications for reimbursement of funds from the Loan Account in accordance with the Loan Agreement: Application Date Reimbursed Amount Number (USD) Approved Administration Account 15 July 7, 2017 700,000.00 Administration Account 16 October 27, 2017 429,300.00 Total 1,129,300.00 The examination was done in accordance with the generally accepted auditing standards and procedures prescribed by INTOSAI and accordingly, included such tests as the verification of the internal control systems and of the accounting records, tests of the origin and eligibility of expenditures, certification and procurement procedures for services, filing of support documents and such other auditing procedures as I considered necessary in the circumstances. Opinion In my opinion, the statements of expenditure and the annexes submitted in support of them, together with the internal controls procedures used in their preparation can be relied upon to support the applications for reimbursement in conforming to the requirements of the Loan Agreement. Auditor General of Jamaica Date Government of Jamaica Loan # 8007-JM Jamaica Energy Security and Efficiency Enhancement Project Sources and Uses of Funds For the 11 Months Ended on February 28, 2018 Cumulative to February28. Cumulative to March 31, Current Period 2018 201Z Sources of Funds World Bank Financing Designated Account -A 5,384,766.43 5,384,766.43 Designated Account - E 1,129,300.00 9,402,794.64 8,273,494.64 Fror End Fee 37,50000 37,500.0 Total Receipts 1,129,300100 ,,825,061.07 13,695,761.07 UsesofFunds Comp 1: Strengthening Institutional and Regulatory Environment 1,113,927.77 3,253,618 01 2,139,690.24 Comp 11: Energy Efficiency and Renewable Energy 995,852.98 5,052,684.63 4,056,831.65 Comp IlA: Line of Credit- DBJ 432,17596 5,384,766.41 4,952590.45 Comp ilk Project Management Monitoring and Evaluation 129,175.52 750,081 036620,88555 TOTAL PROJECT INVESTMENTS 2,671,132.23 14,441,1308 11,769,997.85 Front End Fee 37,5000.00 37,500 00 TOTAL PROJECT INVESTMENTS AND FEES 2,671,132.23 14,47630.08 11,807, 4917,. Refund of Designated Account balance - 8 (346,289.36) (346,289.36) Funds Retalned - DBJ (17,693.54) (141.63) 17,551 91 Net Cash Movement (1905,815.13 MOVEMENT IN BANK BALANCES: Opening Balances Word Ban - B 1,45,187,44 Line of Crecit DA-A 449,627.69 1.905,815.13 Closing Balances World Bank DA - B 1,456,187.44 Line of Credit DA-A - 449 627.69 Total Closing Balances 1,905,815.13 NetChange in Bank Balances 1,905,81513 Nevil'e Cadogan (Mr) Fit cy Vdal (Mr) Financial Management Specialist Principal Director: Energy Ministry of Science, Energy and Technology 1-lillary Alexander (Ms.) Permanent Secretary MiNWstry of Science, Energy and Technology 1. GOVERNMENT OF JAMAICA LOAN#8007-JM ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT STATEMENT OF CUMULATIVE INVESTMENTS FOR THE ELEVEN MONTH PERIOD ENDED FEBRUARY 28, 2018 Cumulative to February 28, Cumulative to March 31, Current Period 2018 2017 Category 1: GO. CS,Non-Cs, Pts Al, A4, A5,C 1,590,216.72 4,408,973.17 2,818,756.45 Category 2: GO. CS, Non-Cs-Pts A2, A3 0.00 303,177.13 303,177.13 Category 3: CWp GO, Cs, Non-Cs, Pt 81 648,739.55 3,405,855.13 2,757,115.58 Category 4: GO, Cs, Non-Cs, Pt 82, B3, CW, Cs,Non-Cs Sub projects 0.00 938,358.24 938,358.24 Category 5: Pt 84 432,175,96 5,384,766.41 4,952,590.45 Front End Fee 37,500.00 37,500.00 TOTAL PROJECT INVESTMENTS AND FEES 2,671,132E23E 14,478,60.08 11,807,497.85 Nev!Ie Cadogan (Mr- Financial nagement Speciaist FitzroyVia Mr- Pnncipai Director- Energy HiPlary Alexanaei (Mr) Permanent Secretary Ministy of Science, Energy & Technology 2 GOVERNMENT OF JAMAICA Loan #8007-Jm ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT DESIGNATED ACCOUNT RECONCILIATION as at February 28, 2018 Account #214139502 with National Commercial Bank - Oxford Rd. 1 TOTAL ADVANCED BY WORLD BANK 5,384,766.43 2 Less: TOTAL AMOUNT DOCUMENTED BY WORLD BANK 5,107,439.24 PRESENT AND OUTSTANDING AMOUNT ADVANCED TO THE 3 DESOGNATED ACCOUNT 277,327.19 Balance of Designated Account per Bank Reconciliation Statement as at 4 February 20, 2018 1.46 5 Plus: Amount Claimed in Application #DBJ 014 277,327.17 6 Plus: Amount Withdrawn and not yet claimed Plus: Amount Claimed in Previous Applications not yet Credited at Date of 7 Bank Statement - 8 Less: Interest Earned 9 Tota Advance Accounted for (#4 through #9) 277,328.63 10 Discrepancies between (#3 and #9) - (1.44) 11 * The difference shown in line 10 relates to: Balance on account owned by DBJ Nevile Cadogan (Mr) inan gaement Specialist Fitzroy Vidal (Mr) Principal Director - Energy Hillary Alexander (Ms) Permanent Secretary Ministry of Science, Energy & technology 3 GOVERNMENT OF JAMAICA Loan #8007-Jm ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT DESIGNATED ACCOUNT RECONCILIATION as at February 28, 2018 Account #234289977 with National Commercial Bank- Cross Roads 1 TOTAL ADVANCED BY WORLD BANK 9,402,794 64 2 Less: TOTAL AMOUNT DOCUMENTED BY WORLD BANK 6,951.206 69 3 PRESENT AND OUTSTANDING AMOUNT ADVANCED TO THE DESOGNATED ACCOUNT 2,451,587.95 4(a) Balance of Designated Account per attached Bank Reconciliaon Statement as at February 28, 2018 - (b) Amount Refunded to World Bank 346,289.36 5 Plus: Amount Claimed in Application # 18 2,105,056.78 6 Plus: Amount Withdrawn and not yet claimed 7 Plus : Amount Claimed in Previous Applications not yet Credited at Date of Bank Statement 8 Less Interest Earned 9 Total Advance Accounted for (#4 through #9) 2,451,346.14 10 Discrepancies between (#3 and #9)- 241-81 11 * The difference shown in line 10 relates to: Bank charges erroneously deducted from bank account Neie doga r) Fin gem t Speciaht Fitzr yVdal(M%r) Principal Director - Energy Ministry of Science, Energy & Technology I I Hillary Alexander (Ms) Permanent Secretary Ministry of Science, Energy & Technology 4 Government of Jamaica Loan # 8007-JM Jamaica EneMy Security and Efficiency Enhancement Proect Statement of Request for Disbursement For the 11 Months Ended February 28, 2018 Disbursement Category Retroactive DATE Number Advance Financing Front End Fee US$ Disbursement Request Designated Acct. "A" DBJ # - Designated Acct. "B" 07/07/2017 015 700,000.00 700,000,00 27/10/2017 016 429,300.00 429,300 00 subtotal "A' 1,129,300.00 1. 129,300 00 Requests pending Reimbursement ------ _ _ _ _ TOTAL AMOUNT REQUESTED DURING THE YEAR 2017/2018 1,129,30000 Neville Cadogan (Mr) Finanl ent Speciarist F it zfda (M -77 Ir) Principal Director - Energy Ministry of Science, Energy & Technology Hillary Alexander (Ms) Permanent Secretary Ministry of Science, Energy & Technology 5 MINISTRY OF SCIENCE, ENERGY AND TECHNOLOGY ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT (ESEEP) LOAN#8007-JM NOTES TO THE FINANCIAL STATEMENTS FOR THE 11 MONTH PERIOD ENDED FEBRUARY 28, 2018 1. General information The Energy Security and Efficiency Enhancement Project (ESEEP) is one of the key initiatives to ensure the implementation of the National Energy policy and as such the World Bank and the Government of Jamaica (GOJ) have agreed to provide the appropriate financial, technical and institutional support to ensure that the policy target and indicators are achieved, within the context of the country's Medium Term Economic strategy. The National Energy policy creates the framework for Jamaica to significantly transform its energy situation and position the country to move on a trajectory of sustainable growth. The objective of the Project is to increase energy efficiency and security through the implementation of the GOJ National Energy Policy. 2. Loan Restructuring The Project received approval for an amendment to the loan agreement by way of letter dated February 23, 2016. Consequently, the Project was extended to October 31, 2017. 3. Project Component There are three (3) components under the Energy Security and Efficiency Enhancement Project:- Component 1: Strengthening the regulatory and institutional framework to improve the energy sector performance, increase private investment and support transition to cleaner fuels such as Natural Gas; Component 2: Developing Jamaica's Energy Efficiency (EE) potential and Renewable Energy (RE) potential through private sector investment and consumer education/information.; Component 3: Project Management, Monitoring and Evaluation including compliance with fiduciary requirements and appropriate Monitoring and Evaluating activities. 6 MINISTRY OF SCIENCE, ENERGY AND TECHNOLOGY ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT (ESEEP) LOAN#8007-JM NOTES TO THE FINANCIAL STATEMENTS FOR THE 11 MONTH PERIOD ENDED FEBRUARY 28, 2018 Implementing Partners The implementing partners are: 4. The Ministry of Science, Energy and Technology (MSET) 5. Office of Utilities Regulation (OUR) 6. Petroleum Corporation of Jamaica (PCJ) 7. Bureau of Standards Jamaica (BSJ) 8. Development Bank of Jamaica 3. The Budget The budgeted expenditure for Project for the fiscal year ended March 31, 2018 was US$ 1,684,543M as stated in the National Budget of Jamaica. 4. Management Responsibility The responsibility for preparing the financial statements for the eleven (11) months ended February 28, 2018 is that of the management of the Energy Security and Efficiency Enhancement Project. 5. Summary of Accounting Policies 1) Basis of Preparation The Project Implementing Unit (PIU) uses the International Public Sector Accounting Standards (IPSAS) Cash basis of accounting to records for the project's transactions. Under this basis, income is recognised when funds are received rather than when requested and expenses are recognised when payment is made rather than when obligations are incurred. The main objective of these financial statements is to disclose the sources and uses of funds. Therefore, it is not necessary to present information adjusted for inflation. 7 MINISTRY OF SCIENCE, ENERGY AND TECHNOLOGY ENERGY SECURITY AND EFFICIENCY ENHANCEMENT PROJECT (ESEEP) LOAN#8007-JM NOTES TO THE FINANCIAL STATEMENTS FOR THE 11 MONTH PERIOD ENDED FEBRUARY 28, 2018 11) Recording of Transactions Transactions are recorded in United States Dollars (USD). Where transactions occur in local currency they are converted for the purposes of these financial statements. Transactions are translated to USD by applying the commercial bank's exchange rate at the transaction date. 1/l) Equipment and other fixed Assets Equipment and other fixed assets procured with project resources are recorded at their acquisition cost at the date of purchase. Depreciation is not charged on these assets and as such, no depreciation charge is reflected in these financial statements. 6. Cash availability The cash available as at February 28, 2018, expressed in US dollars was: 2018 2017 LIS$ US$ Designated Account - A 1.44 449,627.69 Designated Account - A - 1,456,815.13 Total Closing Balances 1.44 1,905,815.13 1) Designated Account "A"- Funds in this account was fully utilised at February 28, 2018 11) Designated Account "B"- the balance in this account at February 28, 2018 has been refunded to the World Bank (as specified in the loan agreement) 7. Fixed Assets Furniture and Equipment Computer Total ss LIS iSl Cumulative at February 28, 2018 15649.10 10,996.53 26,645.63 8