Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF19256, IFAD-C1360, IDA 65740, IDA0220 Financial Statements For the Year Ended 31st December 2017 Table of Contents Page Report of the Executing Agency 1 Auditors Report 2 Balance Sheet 3 Statement of Income and Expenditures 4-5 Notes to and forming parts of the Accounts 6-10 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TFI9256, IFAD-C1360, IDA 55740, IDA0220 Financial Statements For the Year Ended 31st December 2017 Report of the Executing Agency Under the terms of my contract, I have the mandate from the World Bank and the Ministry of Development Planning and Aid Coordination, as Executing Agency, to supervise and manage the funds provided for the Solomon islands Rural Development Program lI (SIRDP 1I) funded by the World Bank, DFAT and the International Fund for Agriculture Development (IFAD). I certify that the attached Financial Statements which has been prepared under my supervision presents a true and fair view of the state of affairs of SIRDP for the year ended 31st December 2017, Dated at Honiara this t day of 2018 Mrgadrach %nega Permanent S etary Executing Agency Representative Ministry of Development Planning and Aid Coordination 1 Morris Sojnocki CHARTERED ACCOUNTANTS Morris & Sojnocki City Centre Building - Mendana Avenue Honiara SolomOn Islands postal address PC[ ox 70 Independent Auditor's Report Telephone (677, 21851 Facsimile 1677) 23342 Report on the Financial Statement ofSolomon Islands Rural Development Program - Phase II We have audited the accompanying financial statements of Solomon Islands Rural Development Program which comprise the balance sheet as at 3l" December 2017 and the statement of income and expenditures for the year ended 31 December 2017 and a summary of significant accounting policies and other explanatory notes as set out on pages 3 to 10. Responsibilitv for the Financial Statements The Ministry of Development Planning and AID Coordination as the Executi Agency,. and management of Solomon Islands Rural Development are responsible for the preparation and fair presentation of these financial statements in accordance with applicable Accountina Standards in Solomon Islands arid the Grant AgreeMnert IDA 55740, I)A0220, TFI9256,and C1 360 dated 29"' January 2015 between Solomon Islands and the World lank and for such internal control as management determines is necessary to enable the preparation of a statement that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statemen.ts based on our audit, We conducted our audit in accordance with applicahle Auditing Standards in Solomon Islands. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free fror material misstaternert_ An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. In making those risk assessments. the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are aeappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controL. A I audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by manacement, as well as evaluating the overall presentation of the financial statements. The audit also involved evaluating the project's compliance with the requirements of the Grant Agreement IDA 55740, IDAO220, TF9256. and C 1360 dated 29: January 20 15 We do not, in giving this opinion, accept or assume responsibility or any other purpose or to any other person to whom this report is shown or in to whose hands it may come save where expressly agreed by our prior consent in writing. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion: (a) the financial staternTLs present fairly the financial position of Solonr Islands Rural Development Program - Phase I as at 31` December 2017 and the results of its operations for the year ended. in accordance with the accounting policies set out i: note I ofrthe Finarncial statements. (b) project funds provided by the World Bank, have, in all material respects, been used in accordance with the conditions olthe financing agreement, and only for the purposes for which they were provided and adequate documentation exists to support the expenditure incurred as detailed in the Statement of Income and Expenditures. (c) the designated accounts have been used and maintained in accordarre with the provisions of the financing agreement and cash at bank balances at 31 December 2017 are correctly stated. MORRIS & SOJNOCKI Chartered Accountants Date:>6 >z r .2 % II oniara r BY WAYNE F MORRIS PARTNER Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF1 9256, IFAD-C1 360, IDA 55740, IDA0220 BALANCE SHEET AS AT 31 DECEMBER 2017 Notes 2017 2016 CURRENT ASSETS Cash at Bank & On Hand 2 5,836,069 11,836,602 Other Debtors & Prepayments 9 15,134,708 24,311,232 TOTAL CURRENT ASSETS 20,970,777 36,147,834 TOTAL ASSETS 20,970,777 36,147, 834 CURRENT LIABILITIES Creditors & Accruals 10 285,171 2,020,724 TOTAL CURRENT LIABILITIES 285,171 2,020724 TOTAL LIABILITIES 285,171 2'020,724 NET ASSETS 20,685,606 34,127,110 CAPITAL & RESERVES Accumulated Surplus 20,685,606 34,127,110 TOTAL CAPITAL & RESERVES 20,685,606 34,127,110 The balance sheet is to read in conjunction with the notes to and forming part of the accounts set out on pages 6 to 10 3 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF19256, IFAD-C1360, IDA 55740, IDA0220 Statement of Income and Expenditures For the Year Ended 31st December 2017 Income I Incomel Expenditures Expenditures by Third 2016 Note Parties 2017 Total Total JSBD) (SBD) (SBD) (SBD) Income External Assistance - Multilateral Agencies World Bank - Grants Received 3 19,573,919 19,573,919 68,381,894 IFAD - Grants Received 3 22,965,979 22,965,979 4,000,000 Other Grants and Aid Solomon Islands Government 4 6,753,950 6,753,950 - Total Receipts 42,539,898 6,753,950 49,293,848 72,381,894 EXPENSES Operations Audit Fees - 155,000 155,000 140,000 Bad Debts 11,998,895 11,998,895 - Bank Fees 83,623 83,623 45,869 Conferences and Meetings 444,961 444,961 2,453,020 Consulting on Subprojects/Participative Rural Appraisal 40,500 40,500 32,533 C2 Disaster Recovery - Materials 3,004,623 3,004,623 1,552,903 C2 Disaster Recovery - Livestock 948,842 948,842 625,452 Consulting on Sub-projects 180,595 180,595 243,524 Contracting on Sub-projects 1,337,722 1,337,722 780,041 Electricity and Gas - 158,203 158,203 200,092 Entertainment 116,200 116,200 58,131 Eradication and Containment 16,320 16,320 - Freight 530,405 530,405 686,190 Fuel 1,863,674 1,863,674 3,022,071 Grants to Rural Businesses - C2 524,800 524,800 329,600 Hire 3,650,102 3,650,102 5,374,768 Insurance 67,651 67,651 42,768 Maintenance 878,611 878,611 740,497 Materials - C2 Disaster Recovery 6,011,782 6,011,782 7,249,565 Monitoring & Evaluation 233,490 233,490 - National Provident Fund Employer's Contributions 408,122 408,122 431,640 Office Supplies & Stationery 221,253 221,253 708,962 Partnership - Agribusiness 11,247,887 11,247,887 - Per diems Subsistence 5 1,532,376 1,532,376 2,619,234 Printing 190,804 190,804 356,223 Publicity & Advertising 1 1 83,050 1 83,050 72,350 4 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF1 9256, IFAD-CI 360, IDA 55740, IDA0220 Statement of Income and Expenditures For the Year Ended 31st December 2017 Income / Expenditures Expenditures by Third 2016 Notes Parties 2017 Total Total (SBD) (SBD) (SBD) (SBD) EXPENSES (cont) Rent - 494,445 494,445 498,700 Research & Development 275,502 275,502 215,755 Salaries 6 12,729,668 12,729,668 13,877,502 Telephone Internet & Fax 451,246 451,246 561,123 Training - - 281,200 Travel and Accommodation 7 2,201,213 2,201,213 5,490,835 Travel & Accommodation Sub project - 130,247 Water - 10,851 10,851 16,048 Wages - Sub project 4,500 4,500 - Capital Purchase of capital items 8 638,436 - 638,436 925,959 Total Expenses 49,917,958 12,817,394 62,735,352 49,762,800 Net Surplusl(Deficit) (7,378,060) (6,063,444) (13,441,504) 22,619,094 This Statement is to be read in conjunction with the Notes forming part of the Financial Statements on pages 6 to 10. 5 Solomon Islands Rural Development Program - Phase Ii P149282-SOL (TF) TF19256, IFAD-C1360, IDA 55740, IDA0220 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the Year Ended 31st December 2017 1. Statement of Accounting Policies a Basis of Preparation The Financial Statements have been prepared in accordance with laws of Solomon Islands and applicable Accounting Standards in the Solomon Islands. They have been prepared under historical costs and do not take into account changing money values, except where stated. b Accounting Policies The accounting policies adopted by SIRDP are based on the Accrual Basis of Accounting. c Reporting entity The Financial Statements are for the Solomon Islands Rural Development Program II (SIRDP 11), which is a government program managed by the Ministry of Development Planning and Aid Coordination (MDPAC). The original Financing Agreement for SIRDP 11 between the Solomon Islands Government (SIG) and the International Development Association (IDA - a division of the World Bank) (signed on January 29th 2015), stipulates that SIRDP 11 will operate for the period 1st March 2015 to 28th February 2020.The Project Appraisal Document indicates that funding of USD 46.9m excluding SIG contribufion of about USD7.Om will be provided in the following proportions: IDAT Grant USD 2.5m (5.3%), AusAID USD 13.3m (28.4%), IDA USD 2.5m (5.3%), IFAD USD4.6m (9.8%), IDA loan USD20m (42.7%), IDAW-lDA credit from Crw USD2.5m (5.3%) and IDWT-IDA grant from Crw USD1.5m (3.2%). The program is required to apply the provisions of the Solomon Islands Financial Instructions 2006. d Reporting Currencies The annual accounts are presented in the currency of the Solomon Islands, the Solomon Islands dollar (SBD), e Foreign Currency Transactions Transactions in foreign currencies are recorded at the exchange rate at the date of the transaction. Foreign exchange adjustments arise when initial advances made at one rate of exchange are invoiced by the contractor using a different rate of exchange. f Budget The SIRDP budget is activity based. As a result, budgeted amounts are not presented. 6 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF19256, IFAD-C1360, IDA 55740, IDA0220 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (Continue) For the Year Ended 31st December 2017 2. Cash Cash and cash equivalents comprise cash balances, call deposits, un-acquitted imprest accounts and restricted cash balances. Bank overdrafts that are repayable on demand and form an integral part of SIRDP's cash management are included as a component of cash. 2017 2016 (SBD) LSBD) Cash balances with bank - ANZ 1,526,595 2,929,864 Cash on hand - Petty cash 3,000 3,000 Imprest account cash at bank (Program Support Unit) 275,174 402,253 SIC account cash at bank (Projects Accounts) 4,031,300 8,501,485 Total 5836.069 __ 11.,836,602 3. External Assistance - Multilateral Agencies - Grants Received While the grants received this financial year are coming via the World Bank, the amounts are now being shared among three donors - DFAT, World Bank and IFAD. DFAT provides funding to the World Bank, who in turn makes the payments to SIRDP, whilst IFAD made direct payments to DA Account via the commercial banks. 7 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF1 9256, IFAD-C1360, IDA 55740, 1DA0220 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (Continue) For the Year Ended 31st December 2017 4 Other Grants and Aid - Solomon Islands Government/Beneficiaries The Solomon Islands Government had committed to contribute SBD 50M over five years from February, 2015 to support RDP 11 projects and by providing office accommodation and administrative support. During 2017, S8D5,3M Grant support was provided by.SIG and an additional SBD1.4M was received under the RWASH program to supplement a number of water related community projects. From the SBD50M SIG grant, the project so far have received SBD15.3M since 2015 hence an outstanding commitment of SBD34.7M to the proiect as at 31st December 2017. 5 Per Diems I Subsistence 2017 2016 isaDI tD National Staff 1,516,076 2,580,984 International 16,300 38,250 Total 1,532,376 2,619,234 6 Salaries 2017 2016 IS@Q1 (S13D) National Staff 8,804,868 8,873,125 International Staff 3,924,800 5,004,377 Total 12,729,668 13,877,502 7 Travel and Accommodation 2017 2016 LaBD) (SBD) National Staff 2,112,664 5,388,494 Internationals 88,549 102,340 Total 2,201,213 5,490,834 8 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF1 9256, IFAD-C1 360, IDA 55740, IDA0220 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (Continue) For the Year Ended 31st December 2017 8 Purchase of Capital Items 2017 2016 SBD SBD Buildings 153,757 81,215 Computers 240,623 574,775 Office Equipment & Furniture 35,938 56,175 Special Equipment 106,599 17,709 Tools 101,519 196,085 Total 638,436 925,959 9 Other Debtors and Prepayments These amount are advances disbursed but yet to be acquitted to the project at year end. For PSU the un- acquitted amount include PSU bank balances in their respective Imprest bank account. 2017 2016 SBD SBD Advances - Staff 717,086 450,710 Advances - Provincial Support Units (PSU) 556,913 1,142,335 Advances - SubProjects 15,650,968 10,856,474 Advances - Agribusiness Partnership 10,060,046 11,245,054 Deposits 15,000 15,000 Receivables - 321,475 Prepayments 133,590 280,184 Provision for Bad Debts (11,998,895) - Total 15,134,708 24,311,232 9 Solomon Islands Rural Development Program - Phase II P149282-SOL (TF) TF19256, IFAD-C1360, IDA 55740, 1DAO220 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (Continue) For the Year Ended 31st December 2017 10 Creditors and Accruals 2017 2016 SBD SBD Creditors and Accruals 279,741 1,940,927 NPF and PAYE payable - 11,797 Leave Travel Payable 5,430 68,000 Total 285,171 2,020,724 10