TUVALU AVIATION INVESTMENT PROJECT Funded by: World Bank (International Development Association - IDA) Pacific Region Infrastructure Facility (PRIF) Government of Tuvalu (GoT) FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2016 1 TUVALU AVIATION INVESTMENT PROJECT Contents Statement by the Tuvalu Aviation Investment Project 3 Statement of Funds Received and Expenditures - By Component by Source 4 Statement of Funds Received and Expenditures - By Category by Source 5 Statement of Balances 6 Notes to the Financial Statement 7-8 Audit Opinion 9-10 2 TUVALU AVIATION INVESTMENT PROJECT Statement by the Tuvalu Aviation investment Project FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2016 behalf of the Tuvalu Aviation Investment Project, we state that in our opinion the accompanying financial statement of the project set out in pages 4 to 9 for the year ended 31t December 2016 are drawn up so as to (1) give a true and fair view of state of affairs of the project and the result of its operation and statement of balances, (2) in accordance with the accounting policies described in Notes to the financial statement. We are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate. Mr. Vitoli F losefa Mr. Falasese Tupau Secretary for Communications & Transport and Project Manager, Tuvalu Aviation Investment Project Chairman National Steering Committee Date: Date: :RV46 7c93 3 TUVALU AVIATION INVESTMENT PROJECT YEAR ENDED 31 DECEMBER 2016 Statement of Funds Received and Expenditures - By Component (in AUD $) 2016 2015 Total All Total All IDA PRIF AF IDA PRIF AF Sources Sources Project Funding Opening Balances 150,898 1,566 85,473 63,859 355,296 213,383 96,554 45,35 Funding to TvAlP Bank Accounts 1,892,643 1,435,395 51,307 405,941 5,663,249 3,987,536 - 1,675,71 Direct Payments by World Bank 4,113,628 3,820,234 - 293,394 1,886,552 1,342,375 - 544,17 6,157,169 5,257,195 136,780 763,194 7,905,098 5,543,294 96,554 2,265,250 Project Expenditure: Component A - International Airport Infrastructure 4,995,593 4,417,061 - 578,532 7,394,690 5,194,301 - 2,200,38 Investments - Terminal Building improvement 2,597,109 2,597,109 -- - - - Airfield Maintenance Equipments - - - - Fuelling Equipments -- - - 512,453 512,453 - - -ADS-B Broadcast 11,427 11,427 - - - - - - Automatic Weather Station 258,686 258,686 - 55,044 55,044 - - - Air Traffic Control Equipment 302,360 302,360 - 82,398 82,398 - - Removal of Solid Waste - - - 11,962 - - 11,9E - Fire Tender Vehicle 70,736 70,736 - - - - - Resurface Runway & Markings 410,988 410,988 - - 4,150,642 4,150,642 - - VSAT Supply & Installation 201,989 201,989 - - - - - - VSAT Management & Design 8,201 8,201 - - - - Design & Supervision Aviation 555,565 In'ment 555,565 393,764 393,764 - Tuvalu Road improvement 471,193 - - 471,193 2,188,427 - 2,188,42 - Removal of Solid Waste 107,338 - - 107,338 -- - - Component B - Sector Reform anmTaning B 165,202 48,497 116,705 - 57,127 46,046 11,081 and Trainmng - Support to Civil Aviation & Line Min - - - - 9,995 9,995 - - Industry Training 16,149 16,149 - - - - PASO Safety/Security Oversight 116,705 - 116,705 - 11,081 - 11,081 - Meeting & Training Aviation Staff 29,734 29,734 - - 14,641 14,641 - - Training Line Ministry for Plan Investment 2,614 2,614 - - 21,410 21,410 - Component D - Project Support 458,404 457,932 473 302,383 301,381 - 1,00 - Country-Project Operating Costs 119,644 119,644 100,004 99,002 -1,00 - Project Operating Costs (PRiF)(AF) 671 199 - 473 4 4 - - - TFSU-Program Operating Costs 33,347 33,347 - - 10,852 10,852 - - -Project Support Team 115,740 115,740 - - 112,204 112,204 - - - Internship Program 7,760 7,760 - - - - - - - Financial Audit 7,847 7,847 - - 9,829 9,829 - - - TFSU Costs 173,395 173,395 - - 69,492 69,492 - - Total Project Expenditure 5,619,199 4,923,489 116,705 579,005 7,754,199 5,541,728 11,081 2,201,39 Closing Balances 537,969 333,705 20,075 184,189 150,898 1,566 85,473 63,85 4 TUVALU AVIATION INVESTMENT PROJECT Statement of Funds Received and Expenditures - By Category (in AUD $) YEAR ENDED 31 DECEMBER 2016 2016 2015 $ $ Total All IDA PRIF AF Total All IDA PRIF AF Sources Sources Project Funding Opening Balances 150,898 1,566 85,473 63,859 355,296 213,383 96,554 45,359 Funding to TvAIP Bank Accounts 1,892,643 1,435.395 51,307 405,941 5,663,249 3,987,536 - 1,675,713 Direct Payments by World Bank 4,113,628 3,820,234 - 293,394 1,886,552 1,342,375 - 544,178 6,157,169 5,257,195 136,780 763,194 7,905,098 5,543,294 96,554 2,265,250 Project Expenditure: By Category 1. Goods, works, training, operating costs, TFSU costs and consultants' 5,619,199 4,923,489 116,705 579,005 7,754,199 5,541,728 11,081 2,201,391 services Total Project Expenditure 5,619,199 4,923,489 116,705 579,005 7,754,199 5,541,728 11,081 2,201,391 Closing Balances 537,969 333,705 20,075 184,189 150,898 1,566 85,473 63,859 5 TUVALU AVIATION INVESTMENT PROJECT Statement of Balances (in AUD $) YEAR ENDED 31 DECEMBER 2016 2016 2015 $$ Total All Total All IDA PRIF AF Sources Sources Cash at Bank 546,399 306,526 19,977 219,996 129,587 34,192 69,997 25,399 Account Payables - 46,690 46,690 - - (73,959) (73,959) - - Account Receivables 38,261 38,261 - 95,270 42,252 15,477 37,541 Adjustment re IDA/PRIF *} - 199 199 - - (919) - 919 Adjustment re IDA/AF (#) 35,807 - 35,807 Total Balance per Statement 537,970 333,705 20,076 184.189 150,899 1.567 85,473 63,859 of Funds Received and Expenditure Account Receivables Aliluki lonatano 19 19 - Vitoli'losefh - - 295 295- Monise Loafai - 59 59 Taukave Poolo - - 4,599 4,699 - Consumption Tax 3,358 3,358 - - 2,317 2,317 - PASO - - - 15,477 15,477 Office Rent 1,000 1,000 - 1,000 1,000 - Energy 33,883 33,883 33,883 33,883 - Additional Finance - - 37,541 - - 37,541 Total Receivables 38,261 38,261 95,270 42,252 15,477 37,541 Account Payables Income Tax 45,956 45,956 - 35,817 35,817 - Provident Fund 734 734 - 598 598 - Payable re: Additional Finance - - 37,541 37,541 Payable re: PRIF - 4 4 Consumption Tax Total Payables 46,690 46,690 73,959 73,959 (*) identified misposting in prior year which the expense relates to the PRIF which has been mis-posted into the IDA account. This has been amended in the 2016 year to reflect the correct balances. (#) Identified misposting in prior year which the expense relates to the IDA which has been mis-posted into the AF account. This has been amended in the 2016 year to reflect the correct balances. 6 TUVALU AVIATION INVESTMENT PROJECT Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2016 Funding of the TvAIP The Tuvalu Aviation investment Project (TvAIP) officially commenced in May 2012, being the date when the IDA grant was made available. The closing date has been extended to 30 June 2018. TvAIP is funded jointly by the World Bank (WB; through its International Development Association - IDA), the Pacific Region Infrastructure Facility (PRIF) and the Government of Tuvalu (GoT), as follows: * IDA - Grant H7490-TV of Special Drawing Rights (SDR) 7.50 million (with estimated AUD$ equivalent of AUD$ 11.85 million) established through a Financing Agreement dated 17 February 2012; and IDA - Grant H8960-TV Additional Grant to support the activities of the original project. The additional grant of Special Drawing Right (SDR) of 4 million (with an estimated AUD$6million) was established through a Financing Agreement dated 5rh December 2013. * PRIF - Grant of US$ 0.17 million (with estimated AUD$ equivalent of AUD$ 0.17 million); established through a Financing Agreement dated 30 July 2012. * AF (additional funding) IDA - Grant D1090-TV the 2nd Additional Grant to support the activities of the original project. The 2nd additional grant of Special Drawing Right (SDR) of 2.1 million (with an estimated AUD$3.90million) was established through a Financing Agreement dated 20th May 2016. * GoT - estimated contribution of US$ 2.7 million (with estimated AUD$ equivalent of AUD$ 2.7 million). GoT funding is provided to cover tax revenue offsets, and does not form part of the core funding of TvAIP upon which the Financial Statements are based. Objective of the TvAIP The objective of TvAIP is to improve operational safety and oversight of international air transport infrastructure. There are four Parts to TvAIP, as follows: * Part A - International Airport Infrastructure Investments: carrying out of aviation infrastructure improvements at the Funafuti airport, construction of a fire tender shelter, resurfacing & maintenance of road network (including installation of solar street lighting) and removal of solid waste. * Part B - Sector Reform and Training: provision of technical assistance to the Ministry of Transport and Communications and line ministries. * Part C - Strengthening Airport Operations and Management Capacity: provision of technical assistance to the Civil Aviation Authority. * Part D - Project Support. 7 TUVALU AVIATION INVESTMENT PROJECT Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 315T DECEMBER 2016 Project Implementation and Administration TvAlP is implemented under the overall guidance, coordination and monitoring of the National Steering Committee, and the Program Steering Committee as part of the regional program of aviation investments (which currently includes the Kingdom of Tonga, Republic of Vanuatu, Republic of Samoa, and the Republic of Kiribati). TvAIP is supported by the Technical and Fiduciary Services Unit (TFSU); based in Tonga, and tasked to support the regional program, with cost sharing arrangements agreed as per the Program Operations Manual (POM). A Project Support Team (PST) has been established in Tuvalu, to provide project management support to TvAIP. WB administers the IDA original Grant H7490-TV, the IDA Additional Grant (H8960-TV), the IDA 2nd Additional Grant (D1090-TV) and PRIF funding (TF 12703). Three bank accounts ("Designated Accounts") have been established in Tuvalu - one for the IDA Original Grant, one for the IDA Additional Grant and one for the PRIF funding. Each of the IDA and PRIF grants fund have specific and separate costs; there is no joint funding of any costs. Costs are charged to the respective grants in the respective grant currency at exchange rates applied by WB. Accounting Policies The Financial Statements are prepared by TvAIP under the historical cost convention and in accordance with the modified cash basis of accounting; expenditures are charged when paid except: Advances (which are given for approved official purposes only) are charged against a Receivables Account initially, and are charged to expenditure based on advance acquittals with supporting documents; and * Payables are taken up for income tax and provident fund liabilities at the time of payment of salaries and are cleared through the settlement of the liabilities to the respective authorities, on a monthly basis. The reporting currency is Australian Dollars (AUD$). Transactions in currencies other than AUD$ are translated into AUD$ using the actual exchange rate applied by the bank (where the transaction are paid from the Designated Accounts) or at the applicable rate (where the transactions are paid directly by W8). This is the fifth year of operation for TvAIP and the Financial Statements therefore include figures from Prior Year. 8 GOVERNMENT OF TUVALU Office of the Auditor-General Private Mail Bag, Vaiaku, Funafuti, TUVALU Email: auditorgeneral@gov.ty, Phone No + (688)20131, 20132: Fax No: + (688) 20133 30 June 2017 The Project Manager Tuvalu Aviation Investment Project Department of Aviation Government Building Funafuti. a) Audit opinion of the TvAIP Financial Statements We have audited the accompanying Financial Statements comprising Statement of Funds Received and Expenditures, Statement of Balances and the accompanying notes of the Tuvalu Aviation Investment Project for the year ended 31 December 2016. These statements are the responsibility of the Tuvalu Aviation Investment Project (TvAIP) and management is responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Our responsibility is to express an opinion thereon based on our audit. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall statement presentation. We believe our audit provides a reasonable basis for our opinion. The Tuvalu Aviation Investment Project management's policy is to prepare the accompanying statements on the cash receipts and payments basis in conformity with the modified cash basis of accounting. On this basis, cash receipts are recognized when received and cash expenditures are recognized when paid rather than when incurred except for advances and payables. In our opinion, the financial statements present fairly the cash receipts and payments of the project during the year ended 31 December 2016 in accordance with the modified cash basis. b) Audit opinion on the accuracy and propriety of Expenditures We have audited the accompanying Statement of Funds Received and Expenditures for the year ended 31 December 2016. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions that accordingly included examination, on a test basis, of evidence supporting the amounts and disclosures in the Statement of Funds Received and Expenditure. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Funds Received and Expenditures is fairly presented. 9 c) Audit Opinion on the Operation of the Designated Accounts We have audited the operation of the Designated Accounts with its balance shown in the accompanying Statement of Balances under "Cash at Bank" for the year ended 31 December 2016. We conducted our audit in accordance with International Standards of Supreme Audit Institutions that accordingly included examination, on a test basis, of evidence supporting the amounts and disclosures in the Statement of Balances. Our testing also includes ensuring that funds in the designated accounts were used on project related purposes in an effective and efficient manner. In our opinion, the designated account is presented fairly and is operating with appropriate internal controls. d) Key internal control weaknesses and non-compliance with the Financing agreement terms. No key internal control weaknesses were noted during the audit. No instances of non-compliance with the Financing agreement terms were noted during the audit. opati Auditor General of Tuvalu Vaiaku, Funafuti, Tuvalu. 10