Marine Conservation and Climate Adaptation Project No. TF018449 Special Purpose Project Financial Statements March 31, 2019 International Public Sector Accounting Standards (IPSAS) Marine Conservation and Climate Adaptation Project (MCCAP) Contents Page No. Independent Auditor's Report on Financial Statements 1 Statement of Financial Position 3 Statement of Sources and Uses of Funds 4 Statement of Cumulative Investment 5 Statement of Designated Account Reconciliation 6 Notes to Special Purpose Project Financial Statements 7 a. General Information 7 b. Project Description 7 c. Significant Accounting Policies and Basis of Preparation 8 d. Cash and Cash Equivalents 9 e. Commitments and Contingencies 10 Independent Auditor's Report on Statements of Expenditures (SOEs) 11 Summary of Statements of Expenditures 12 Independent Auditor's Report on Compliance with Terms of Agreement 13 Summary of Key Compliance Areas 14 INDEPENDENT AUDITOR’S REPORT To the Board of Directors of Protected Areas Conservation Trust, Fiduciary Managers of: Marine Conservation and Climate Adaptation Project No. TF018449 Report on the Financial Statements We have audited the accompanying special purpose project financial statements of the Marine Conservation and Climate Adaptation Project (MCCAP) which comprise the statement of financial position as of March 31, 2019, the statement of sources and uses of funds for the year ended March 31, 2019, the statement of cumulative investment and, the statement of the designated account at March 31, 2019 and a summary of significant accounting policies and other explanatory notes (collectively referred to as the “special purpose project financial statements”). Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these special purpose project financial statements in accordance with International Public Sector Accounting Standard “Financial Reporting under the Cash Basis of Accounting” and in conformity with the World Bank Guidelines, and for such internal control as management determines is necessary to enable the preparation of special purpose project financial statements that are free from misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these special purpose project financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 judgement, 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 controls relevant to the Project’s preparation and fair presentation of the special purpose project financial statements 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 controls. Independent Auditor’s Report (continued) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the special purpose project financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Unqualified Opinion In our opinion, the special purpose project financial statements present fairly, in all material respects, the financial position of the Marine Conservation and Climate Adaptation Project as of March 31, 2019, its sources and uses of funds for the year then ended, and its cumulative investment and designated account position at March 31, 2019, in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting, and the World Bank Guidelines. Certified Public Accountant June 14, 2019 Belize City 02 Marine Conservation and Climate Adaptation Project No. TF018449 Statement of Financial Position March 31, 2019 March 31, 2019 Notes US$ ASSETS AND EXPENDITURES Cash and cash equivalents 410,306 Cumulative project expenditures 3,052,552 Foreign exchange losses 6,225 Other expenditures 5 57,591 TOTAL ASSETS AND EXPENDITURES 3,526,674 FINANCING Financing received 3,466,611 Other receipts 6 60,063 TOTAL FINANCING 3,526,674 The special purpose project financial statements for the year ended March 31, 2019 were approved and authorized for issue on by the management of the Project. On behalf of the Management: Project Coordinator Director - PACT Date: Date: 03 Marine Conservation and Climate Adaptation Project No. TF018449 Statement of Sources and Uses of Funds Year Ended Cumulative to March 31, 2019 March 31, 2019 Notes US$ US$ RECEIPTS FROM WORLD BANK Advances 1,166,557 3,260,402 Reimbursements - 140,351 Direct Payments - 65,858 OTHER RECEIPTS 6 - 60,063 TOTAL RECEIPTS 1,166,557 3,526,674 PROJECT AND OTHER EXPENDITURES Component 1: Improving Protection Regime 489,788 1,631,187 Component 2: Promotion of Viable Alternative Livelihoods 517,884 850,413 Component 3: Raising Awareness and Building Local Capacity 162,028 346,061 Component 4: Project Management (87,294) 224,891 Foreign Exchange Losses 2,216 6,225 Other Expenditures 5 - 57,591 TOTAL EXPENDITURES 1,084,622 3,116,368 NET RECEIPTS 81,935 410,306 Plus: Beginning Cash Balance 328,371 - CLOSING CASH BALANCE, MARCH 31, 2019 410,306 410,306 04 Marine Conservation and Climate Adaptation Project No. TF018449 Statement of Cumulative Investment Year Ended Cumulative to March 31, 2019 March 31, 2019 US$ US$ CATEGORY 1 Goods, Works, Non-consulting services, training and monitoring and compliance activities, except for part two of the Project 651,816 1,977,248 CATEGORY 2 Goods, Works, Non-consulting services and training for part two of the Project 517,884 850,413 CATEGORY 3 Operating Costs (87,294) 224,891 OTHER EXPENDITURES Foreign exchange losses 2,216 6,225 Other expenditures - 57,591 TOTAL 1,084,622 3,116,368 05 Marine Conservation and Climate Adaptation Project No. TF018449 Statement of Designated Account Reconciliation Year Ended Cumulative to March 31, 2019 March 31, 2019 US$ US$ Designated Account, opening balance 328,371 - Grant Funds advanced during period 1,166,557 3,260,402 Reimbursement of expenses - 140,351 Other receipts - 60,063 Total Funds Available for Disbursements 1,494,928 3,460,816 Eligible expenditures paid (1,082,406) (2,986,694) Foreign exchange losses (2,216) (6,225) Other payments - (57,591) CLOSING BALANCE (See Note 4) 410,306 410,306 06 Marine Conservation and Climate Adaptation Project No. TF018449 Notes to Special Purpose Project Financial Statements For the year ended March 31, 2019 (expressed in United States Dollars) 1.0 GENERAL INFORMATION 1.2 On June 3, 2015, the Government of Belize (the Recipient) entered into Grant Agreement No. TF018449 with International Bank for Reconstruction and Development (IBRD), acting as Implementing Entity for grant funds provided by the Adaptation Fund for financing costs of the Marine Conservation and Climate Adaptation Project (MCCAP). 1.4 By a Subsidiary Agreement dated June 10, 2015, the Recipient, represented by the Ministry of Finance, formalized arrangements with the Protected Areas Conservation Trust (PACT) to carry out the fiduciary functions of the MCCAP on its behalf, in accordance with the terms and conditions set out in the Grant Agreement. 1.6 In accordance with the terms of the Subsidiary Agreement, the Recipient shall make available to PACT, on a non- reimbursement basis, an amount equivalent to five million, five hundred thirty thousand United States dollars (US$5,530,000), the total amount of the proceeds made available to the Recipient by the IBRD under the Grant Agreement. 1.8 As fiduciary manager for the grant funds, PACT shall apply the proceeds of the grant solely to finance the reasonable costs of eligible expenditures required for the implementation of the Project. 2.0 MCCAP PROJECT DESCRIPTION 2.2 The objective of the MCCAP Project is to implement priority ecosystem-based marine conservation and climate adaptation measures to strengthen the climate resilience of the Belize Barrier Reef System. 2.4 The Project consists of the following parts: A. Improving the Protection Regime of Marine and Coastal Ecosystems; B. Promotion of Viable Alternative Livelihoods; C. Raising Awareness and Building Local Capacity; and D. Project Management, Monitoring and Assessment. 07 Marine Conservation and Climate Adaptation Project No. TF018449 Notes to Special Purpose Project Financial Statements For the year ended March 31, 2019 (expressed in United States Dollars) 3.0 SIGNIFICANT ACCOUNTING POLICIES 3.2 Basis of Preparation These special purpose project financial statements have been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) “Financial Reporting under the Cash Basis of Accounting” issued by the International Federation of Accountants (IFAC) and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with “Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities”. 3.4 Cash Basis of Accounting The special purpose project financial statements have been prepared on a cash basis of accounting. The cash basis of accounting recognizes transactions and events only when cash is received or paid by the entity. The special purpose project financial statements prepared under the cash basis of accounting provide readers with information about the sources of cash, the purpose for which cash was used and cash balances at reporting date. 3.6 Reporting Currency a. The Project’s reporting currency is United States dollars (USD). All information is presented in USD, except when otherwise indicated. b. Project expenditures made in Belize dollars (BZD) are converted at the exchange rate of one USD to two BZD ($US 1.00 to $BZ 2.00). Exchange losses are reported on the statement of sources and uses of funds. 3.8 Sources of Funds a. Project funds are provided by the IBRD through advances to the Designated Account of the Recipient established with the Central Bank of Belize to finance eligible project expenditures. b. Payments for expenditures are made from a Project Operating Account held with a local bank. The IBRD may also make payments, at the Recipient’s request, directly to third parties for eligible project expenditures. 3.10 Method of Withdrawal of Funds The Recipient has established a Designated Account with the Central Bank of Belize in accordance with the Grant Agreement. Withdrawals from the Designated Account are done by the Recipient upon a request initiated by PACT, in accordance with the provisions of the Grant Agreement. 08 Marine Conservation and Climate Adaptation Project No. TF018449 Notes to Special Purpose Project Financial Statements For the year ended March 31, 2019 (expressed in United States Dollars) 4.0 CASH AND CASH EQUIVALENTS Cash and cash equivalents cash comprised the following: March 31, 2019 $ US Central Bank of Belize, Designated Account No.311091 169,879 Bank of Nova Scotia Account No.9142068 (Project Operating Account) 240,427 Total 410,306 Year Ended Cumulative to March 31, 2019 March 31, 2019 US$ US$ 5.0 OTHER EXPENDITURES Project vehicle replacement - 38,500 Other vehicle replacement cost - 300 Belize Environmental Technologies - 18,053 PACT withdrawal - 738 Total - 57,591 6.0 OTHER RECEIPTS Reimbursement from PACT - 30,000 Social Security payment to Project - 238 Insurance payment to Project - 300 Other receipts - 143 Excess deposits prior year - 29,382 Total - 60,063 09 Marine Conservation and Climate Adaptation Project No. TF018449 Notes to Special Purpose Project Financial Statements For the year ended March 31, 2019 (expressed in United States Dollars) 7.0 COMMITMENTS AND CONTINGENCIES 7.01 Contracts In the normal course of activities, the Project concludes agreements with suppliers of goods and services in accordance with the established budget and procurement plan. Existing contract values as of March 31, 2019 were as follows: Remaining Party Date of Contract Contract Value Amount to be Paid $ US $ US a. Sandra Grant March 10, 2017 111,047 36,300 b. Nidia Chacon October 24, 2017 60,600 16,976 c. Andrea Tillett August 11, 2017 33,325 13,595 d. Fragments of Hope June 19, 2016 340,592 81,085 e. Josef Van Eijs February 19, 2018 71,145 62,265 f. Praxi5 Advisory Group June 19, 2017 417,492 282,787 g. Nextera Environ/Eng Consultants July 3, 2017 145,192 131,277 h. Ellis Reuena April 1, 2018 19,217 9,608 i Gilbert Andrews April 18, 2018 25,777 13,200 j. Sherlene Tablada May 14, 2018 30,200 11,950 k. Ann Gordon May 21, 2018 39,775 20,651 l. BEST July 1, 2018 99,600 61,074 m. ITVET OrangeWalk July 28, 2018 17,416 2,613 n. Aligraphics Aug 22, 2018 27,576 14,121 o. Winston Coleman Nov 20, 2018 28,905 1,829 p. The Nature Conservancy Nov 28, 2018 232,670 151,236 q. 501 Enterprise Jan 15, 2019 7,034 3,517 r. George Dueck Jan 25, 2019 7,367 3,684 s. Belize Hook & Tackle Ltd. Feb 1, 2019 22,499 14,625 t. Georgetown Technical February 2, 2019 31,800 17,490 u. Ritchies Bus Service February 2, 2019 8,350 7,533 v. William Quan Feb 12, 2019 9,852 4,926 w. Ecology Project February 18, 2019 16,659 12,494 x. Ecofriendly Solutions Ltd. Feb 28, 2019 3,656 1,828 y. ITVET Orange Walk March 1, 2019 25,000 13,750 z. Benny's Enterprise Ltd. March 21, 2019 5,184 5,184 7.02 Legal Matters There were no pending or threatened legal claims related to the Project. 10 Marine Conservation and Climate Adaptation Project No. TF018449 INDEPENDENT AUDITOR’S REPORT ON STATEMENTS OF EXENDITURES To the Board of Directors of Protected Areas Conservation Trust, Fiduciary Manager of: Marine Conservation and Climate Adaptation Project No. TF018449 Report on Statements of Expenditures We have audited the Statements of Expenditures (SOEs) submitted to the International Bank for Reconstruction and Development during the year ended March 31, 2019, in support of withdrawals of funds under Grant Agreement No. TF018449, which are summarized on page 12. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the SOE’s can be relied upon to support the applications for withdrawals of funds. 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, the Statements of Expenditures, together with the internal controls and procedures involved in their preparation can be relied upon to support the applications for withdrawals of funds under Grant Agreement No. TF018449. Certified Public Accountant June 14, 2019 Belize City Statements of Expenditures (SOEs) Summary MCCAP Quarter Ended TF018449 Amount SOE Number US$ June 30, 2018 No. 18 202,798.73 September 30, 2018 No. 19 221,080.85 December 31, 2018 No. 20 210,003.68 March 31, 2019 No. 21-23 448,524.02 Total Expenditures 1,082,407.28 12 Marine Conservation and Climate Adaptation Project No. TF018449 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH AGREEMENT To the Board of Directors of Protected Areas Conservation Trust (PACT), Fiduciary Manager of: Marine Conservation and Climate Adaptation Project No. TF018449 Report on Compliance We have audited PACT’s compliance, as of March 31, 2019, with the terms and conditions described in Grant Agreement No. TF018449 and summarized on pages 14 and 15, in respect of the Marine Conservation and Climate Adaptation Project (MCCAP). Compliance with the terms and conditions of the agreement is the responsibility of the Fiduciary Manager of the MCCAP. Our responsibility is to express an opinion on compliance based on our audit. We conducted our audit of compliance in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Fiduciary Manager complied with the terms and conditions of the grant agreement referred to above. 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, except for the matters marked “No” on the enclosed summary on page 15, PACT was in compliance, at March 31, 2019, in all material respects, with the terms and conditions described in Grant Agreement No. TF018449. Certified Public Accountant June 14, 2019 Belize City Summary of Key Compliance Areas Year Ended March 31, 2019 Compliance? Article No. Description of Obligation/Requirement Yes / No / N/A* Project Execution - Institutional and Other Implementation Arrangements Sec I A 1 f PACT to maintain appropriate staff at the PIAG for duration of Project. Yes Sec I A 1 h(i) Maintain a financial management system and prepare financial statements. Planning and Budgeting - Timely preparation and submission of budgets Yes Appropriate Internal Control System - Effective segregation of duties Yes - Proper oversight and review of the accounting function Yes - Proper safeguard of assets Yes - Proper authorization of transactions Yes - Adequate documentation to support transactions Yes Accounting System and Reporting - Appropriate accounting policy and procedures manual Yes - Calendar and timetable of key activities Yes - Appropriate review of reports submitted to the Bank Yes - Timely independent audits Yes Sec I A 1 h(ii) Annual audit of financial statements by Independent Auditors. Yes Sec I B 1 Operate and maintain the Project Steering Committee for duration of Project. Yes Sec I B 2 Operate and maintain the Technical Advisory Committee for duration of Project. Yes Sec I B 3 Operate and maintain the PIAG for duration of Project. Yes *N/A Not applicable to the period under review Continued . . . . . . 14 Marine Conservation and Climate Adaptation Project No. TF018449 Summary of Key Compliance Areas (Cont'd.) Year Ended March 31, 2019 Compliance? Article No. Description of Obligation/Requirement Yes / No / N/A* Carry out Project in accordance with Project Operational Manual without amendments or Sec I B 4 changes. - Monthly sub-project reports N/A - Mid-term evaluation by end of second year Yes - A senior Accounts Clerk from PACT to assist project with procurement Yes - Procurement in accordance with world Bank Guidelines Yes - Submission of documentation to Contractor General for "no objection" Yes - Project not to exceed total annual budget without approval Yes - Quarterly Interim Financial Reports due no later than 45 days after Yes - All IFR's on a cash basis in US dollars Yes - Vehicle log book to be used to record use of Project Vehicles Yes Sec I B 5 Prepare consolidated Annual Work Plan by February 28 of each year. No SUB-PROJECTS Sec I C 2 b PACT to remain responsible for all fiduciary functions of each Subproject. N/A ANTI-CORRUPTION Sec I E The Project shall be carried out in accordance with the provisions of the Anti-Corruption Guidelines. Yes MONITORING REPORTING AND EVALUATION Prepare progress reports in accordance with Sec 2.06 of standard conditions and submit to World Sec II A 1 Bank not later than one month after the end of the period. Yes Sec II B 2 PACT to prepare unaudited financial reports and submit not later than one month after each quarter. Yes PACT to have financial statements of the Project audited and submitted to the Bank not later than Sec II B 3 July 31st. Yes Sec II B 4 PACT's financial statements to be audited and submitted to the Bank not later than July 31st. Yes Sec II B 5 PACT's audited financial statements to be made publicly available. Yes PROCUREMENT Sec III A 1 a. Procurement to be done in accordance with the Procurement Guidelines. Yes Annual update of Procurement Plan Yes *N/A Not applicable to the period under review 15 Marine Conservation and Climate Adaptation Project No. TF018449