PKF Accountants & business advisers Belize Electricity Limited Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project GEF Grant Numbers TF0A2887 and TF0A2888 Financial Statements for the year ended 31 December 2019 Contents Pages SECTION I FINANCIAL STATEMENTS 1 -20 Statement of the Management 2 - 3 Independent auditor's report 4-6 Statement of financial position 7 Statement of sources and uses of funds 8 Statement of designated account 9 Statement of use of funds by disbursement category 10 Statement of use of funds by project component 11 Notes to the financial statements 12 - 18 SECTION II INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL 19 -21 SECTION III INDEPENDENT ASSURANCE REPORT ON 22-24 COMPLIANCE APPENDIX I MANAGEMENT LETTER 1 -9 PKF Belize Global expertise with local knowledge Accountants & business advisers Chief Executive Officer Belize Electricity Limited 2 YV MIes Philip Goldson Highway Belize City, Belize Attention: Mr. Jose Moreno 14 July 2020 Dear Sir: We have completed our audit of the Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project for the year ended 31 December 2019. Our audit included: 1. An audit of the financial statements for the ERCAP In Belize project 2. An audit of internal control structure of Belize Electricity Limited (BEL) 3. An audit on BEL's compliance with the terms of the loan and grant agreements and applicable laws, guidelines, and regulations related to BEL's financial activities Enclosed you will find the following audit reports required by the ERCAP In Belize Project terms of reference: 1. Independent auditor's report on the financial report 2. Independent assurance report on the effectiveness of internal controls 3. Independent assurance report on compliance 4. Management letter, including management's comments If you have any questions about this submission or if additional information is necessary, feel free to contact us. Regards, Jc 4e 6rtez "KF 'elize ,hartered accountants and business advisers PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * Belize Tel: (501) 227-7428 * (501) 227-7222 * Email: info@pkfbefize.com * Webste: pkfcaribbean.com/belize Partners: J.A. Bautista * J. Ortez PKF Beitze iSa member firm of the PKF Inernational Limited family of legally indepenoent firms and does not accept any responsibility or liabilfty for the actions or inactions ofanyindividual memberorcorrespondentfirmorfirms. SECTION I FINANCIAL STATEMENTS Page 1 BELIZE ELECTRICITY LIMITED 2 1/ Miles Philip Coldson Highway R P0 Box 327 Belize City, Belize C.A. Telephone: 501.2270954 Fax: 501.223.0891 STATEMENT OF THE MANAGEMENT The Management of Belize Electricity Limited ("BEL") presents this report together with the financial statements of Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project, GEF Grant Numbers TFOA2887 and TF0A2888, implemented by the BEL ("the Project") as at 31 December 2019 and for the year then ended. The Project Steering Committee The members of the Project Steering Committee during the year and at the date of this report are as follows: Entity Main Representative Alternate Representative Belize Electricity Mr. Jeffrey Locke - Chief Mr. Derek Davis - Senior Limited Executive Officer Manager, Systems Planning and Engineering Ministry of Transport and Ms. Catherine Mr. Derrick Rudon - National Emergency Cumberbatch Deputy Chief Management - Chief Meteorologist Meteorologist Ministry of Public Service Dr. Peter Allen - Mr. Ryan Cobb - Chief Executive Energy Director, Officer Energy Unit Ministry of Finance Mrs. Yvette Alvarez Ms. Maria Cooper - - Senior Advisor Economist Ministry of Forestry, Dr. Percival Cho - Dr. Lennox Gladden - Fisheries, the Chief Executive Chief Climate Change Environment and Officer Officer Sustainable Development Ministry of Economic Mrs. Yvonne Hyde - Mr. Carlos Pol - Director, Development Chief Executive Officer Policy and Planning Unit Ministry of Works Mr. Simeon Herrera- Mr. Trevor Garcia - Executive Engineer Executive Engineer Mr. Jeffrey Locke tenure as CEO of BEL came to an end in March 2019. Mr. John Mencias was appointed as the new CEO of BEL immediately thereafter. Page 2 vvwvv.bel.com.bz info@bel.com.bz 0.800.235.2273 STATEMENT OF THE MANAGEMENT (continued) The Management's responsibility in respect of the financial statements The Management is responsible for preparing the financial statements of the Project, which comprise the statement of financial positions as at 31 December 2019, the statement of sources and uses of funds, the statement of designated account and the statement of use of funds by category, and the statement of use of funds by project component for the year then ended, and the notes to the financial statements, which give a true and fair view of the financial position of the Project as at 31 December 2019 and its receipts, disbursements, and expenditures for the year then ended, in accordance with the accounting policies set out in Note 3 to the financial statements and the Project Operational Manual. In preparing these financial statements, the Management is required to: * select suitable accounting policies and then apply them consistently; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the financial statements; and * design and maintain effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimize errors and frauds; and take responsibility for its assertion as to the effectiveness of such internal control. * ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Project and that the financial statements comply with the accounting policies set out in Note 3 to the financial statements; * using the Project's funds as intended for the Project and for complying with the Project Operational Manual as well as laws and regulations applicable to the Project; and * safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Management confirms that they have complied with the above requirements in prep 1hese financial statements. For a o e alf of the Management: John e ias Chief xecutive Officer 15 J y 2020 Page 3 PKF Belize Global expertise with local knowledge Accountants & business advisers INDEPENDENT AUDITOR'S REPORT TO THE MANAGEMENT OF BELIZE ELECTRICITY LIMITED Opinion We have audited the accompanying financial statements of the Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project, GEF Grant Numbers TF0A2887 and TF0A2888 ("the Project"), as set out on page 7 to page 18, which comprises the statement of financial position as at 31 December 2019, the statement of sources and uses of funds, the statement of designated account, the statement of use of funds by disbursement category and the statement of use of funds by project component for the year then ended and the notes thereto. The financial statements have been prepared by the management of Belize Electricity Limited ("the Company") in accordance with the accounting policies as described in Note 3 to the financial statements and the Project's Operational Manual. In our opinion, the financial statements of the Project as at 31 December 2019 and for the year then ended, give a true and fair view, in accordance with the accounting policies as described in Note 3 to the financial statements and the Project's Operational Manual. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the financial statement section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Belize, and we have fulfilled our ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Emphasis of matter - Accounting Policies We draw attention to Note 3 to the financial statements which describe the accounting policies. Our opinion is not modified in respect of this matter. PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * Belize Tel: (501) 227-7428 * (501) 227-7222 * Email: info@pkfbelize.com * Website: pkfcaribbean.com/belize Partners: J,A. Bautista * J. Ortez Page 4 PKF Belize is a member firm of the PKF International Limited farmiy of legally ridependent firms and does not accept ay responsibility or jabily for the actions or inactions of any individual member or correspondentfirm or firms. PKF Accountants & business advisers INDEPENDENT AUDITOR'S REPORT (continued) Responsibilities of Management for the Financial Statement Management is responsible for the preparation of the financial statements in accordance with the accounting policies as described in Note 3 to the financial statements and the Project's Operational Manual, and for such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statement Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken based on this financial statement. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statement, 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 our 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 and for the purpose of expressing an opinion on the effectiveness of the Company's internal control, on which we have reported in a separate section of our report. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Page 5 PKF Accountants & business advisers INDEPENDENT AUDITOR'S REPORT (continued) Auditor's Responsibilities for the Audit of the Financial Statement (continued) * Evaluate the overall presentation, structure and content of the financial statements, including the corresponding notes and supplementary information, and whether the financial statement represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PKF Belize Chartered Accountants Belize City 15 July 2020 Page 6 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 STATEMENT OF FINANCIAL POSITION as at 31 December 2019 (in US dollars) ASSETS Notes CURRENT ASSETS Cash and cash equivalents: Deposits held with the bank 4 2,265,891 Prepayments 6 61,774 2,327,665 NON-CURRENT ASSETS Cumulative project expenditures: Component 1 41,197 Component 2 9,012 Component 3 24,309 74,518 TOTAL ASSETS 2,402,183 FUNDS Financing received from the World Bank: TF 2887 965,800 TF 2888 1,402,160 Other receipts 5 34,223 TOTAL FINANCING 2,402,183 The special-purpose project financial statements for the year ended 31 December 2019 were ap roved and authorized for issue on 15 July 2020 by the management of the 0 ' alf he Management: SExecutive Officer Project Manager T notes on pages 12 - 18 form an integral part of these financial statements. Page 7 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 STATEMENT OF SOURCES AND USES OF FUNDS for the year ended 31 December 2019 (in US dollars) Notes RECEIPTS FROM WORLD BANK Advances: TF 2887 965,800 TF 2888 1,402,160 Receipts from BEL 5 34,223 TOTAL RECEIPTS $2,402,183 PROJECT AND OTHER EXPENDITURES Component 1: 41,197 Component 2: 9,012 Component 3: 24,309 Prepayments 6 61,774 TOTAL EXPENDITURES $ 136,292 EXCESS OF RECEIPTS OVER DISBURSEMENTS $2,265,891 OPENING BALANCE CLOSING BALANCE @ DECEMBER 31,2019 4 $2,265,891 The notes on pages 12 - 18 form an integral part of these financial statements. Page 8 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 STATEMENT DESIGNATED ACCOUNT for the year ended 31 December 2019 (in US dollars) Notes Designated Account, opening balance $ - WB Grant Funds advanced during period: TF 2887 965,800 TF 2888 1,402,160 Outsanding amount advanced to designated account $ 2,367,960 Eligible expenditures paid: Component 1: 41,197 Component 2: 9,012 Component 3: 24,309 Prepayments 6 61,774 Receipts from BEL 5 (34,223) Total funds disbursed 102,069 Account balance, end of period 4 $2,265,891 The notes on pages 12 - 18 form an integral part of these financial statements. Page 9 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A288712888 STATEMENT OF USE OF FUNDS BY DISBURSEMENT CATEGORY for the year ended 31 December 2019 (in US dollars) Year to Date CATEGORY Jan - Jun Jul - Sep Oct - Dec Jan- Dec 2019 2019 2019 2019 Trust Fund - 2887 1. Consultancy Service - 3,841 5,171 9,012 2. Goods - - . 3. Works 3,763 115 12,013 15,891 TOTAL $ 3,763 $ 3,956 $ 17,184 $ 24,903 Trust Fund - 2888 1. Consultancy Service - - 5,989 5,989 2. Goods - - 35,208 35,208 3. Works 3,050 3,210 2,158 8,418 TOTAL $ 3,050 $ 3,210 $ 43,355 $ 49,615 The notes on pages 12 - 18 form an integral part of these financial statements. Page 10 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 USE OF FUNDS BY PROJECT COMPONENT for the year ended 31 December 2019 (in US dollars) PROJECT Year to Date COMPONENT Jan - Jun Jul - Sep Oct - Dec Jan- Dec 2019 2019 2019 2019 Trust Fund - 2887 Component 1 - . Component 2 - 9,012 9,012 Component 3 - 15,891 15,891 TOTAL $ - $ - $ 24,903 $ 24,903 Trust Fund - 2888 Component 1 - - 41,197 41,197 Component 2 - - - . Component 3 - - 8,418 8,418 T O TA L $ - $ - $ 49,615 $ 49,615 The notes on pages 12 - 18 form an integral part of these financial statements. Page 11 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 1. GENERAL INFORMATION Under the Energy Resilience form Climate Adaptation Project (ERCAP), the Government of Belize (GoB) has received a USD 8 million Grant from The Global Environment Facility (GEF) through their Special Climate Change Fund (SCCF). ERCAP is comprised of two separate Grant Agreements as shown below: 1. The first agreement is between the GoB and the International Bank for Reconstruction and Development (World Bank) acting as implementing agency on behalf of the GEF. The total grant amount under this agreement is USD 2.38 million. 2. The second agreement is between the Belize Electricity Limited (BEL) and the World Bank. The total grant under this agreement is USD 5.62 million. In addition to the GEF grant contribution, there is a USD 3.375 million in-cash counterpart contribution from BEL towards the execution of a few projects and initiatives under ERCAP, plus a USD 600 thousand in-kind contribution from the GoB. The Grant agreement was signed on 27 September 2016 and the Project closing date is 31 July 2020. The ERCAP is designed to demonstrate measures that enhance the resilience of the energy system to adverse weather and climate change impacts in Belize. It covers a comprehensive set of areas for enhancing resiliency in the energy sector, particularly as it pertains to electricity supply. The project is divided into three components: 1. Component 1: Long Term Energy Planning and Capacity Building for Climate Change Adaptation: The long-term success of climate adaptation in Belize rests on well-informed, evidence-based planning that mainstreams measures that enhance energy resilience. To achieve this end, it will require strategic planning, data collection, as well as strengthening the adaptive capacity of the energy sector in Belize. 2. Component 2: Demonstrate measures to enhance resilience of energy sector: This component will include a comprehensive set of no-regrets strategic and investment activities that are focused around the power sector transmission and distribution systems and infrastructure. Page 12 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 1. GENERAL INFORMATION (continue) 3. Component 3: Project Implementation Support and Information Dissemination for Knowledge Sharing: This component includes a knowledge-sharing activity to maximize the impacts of lessons learned from the proposed project, and to provide incremental support to the respective agencies for implementing ERCAP. As a part of the ERCAP financial management and risk mitigation measure, BEL is responsible for the fiduciary functions that covers all ERCAP activities for both the GoB and BEL respective activities. This includes coordination of the annual external audits of the project financial statements and a compilation and submission of all quarterly unaudited interim financial report (IFR). This Financial Statement covers the period from 1 January 2019 to 31 December 2019. Details of the financial statements along with associated notes can be viewed on the subsequent pages. 2. BASIS OF PREPARATION ERCAP accounting function will be guided by the existing financial procedure of BEL, which uses the accrual basis of accounting to ensure that project funds and activities are correctly recorded, safeguarded and reported to the World Bank. BEL currently uses Microsoft Great Plains (MGP) accounting software to assist with its financial management. All ERCAP expenditures are captured in the MGP accounting software. Budget allocation and accounting codes are customized to separate ERCAP finances by categories and components, so as to separately monitor the accounts of and reports for the ERCAP. Various project numbers have been assigned specifically for the different ERCAP activities and are used to record project expenditures within MGP (See note 3). Page 13 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 3. SUMMARY OF ACCOUNTING POLICIES 3.1.Reporting Currency All information is presented in United States Dollars (USD) currency; except, where otherwise indicated. Project Expenditures made in Belize dollar currency (BZD) are converted at the exchange rate of one USD to two BZD (USD 1 to BZD 2). Exchange losses are reported on the statement of sources and uses of funds. 3.2. Contribution from IBRD and World Bank Contribution from IBRD and the World Bank is recognized when IBRD fund is deposited to the Project's designated account which is managed by BEL. 3.3. Contribution from Counterpart Fund Receipts of Counterpart funds are recognized when disbursements are made through the bank accounts of BEL and its project management steering committee on behalf of the Project. 3.4. Disbursements Disbursements are recognized when advances or payments are made by the Project to contractors, suppliers or beneficiaries for the Project's activities. 3.5. Project Implementing Expenditure Project implementing expenditure is recognized for amounts paid and to be paid in the future for goods and services received, whether or not billed to the Project, and interest expenses during implementation. 3.6. Cash Cash includes cash at the designated account. Page 14 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A2887/2888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 3. SUMMARY OF ACCOUNTING POLICIES (continued) 3.7.Advance to Suppliers and other Prepayments Advances to suppliers are carried at the disbursed amount and recognized in the balance sheet until subsequent liquidation or realization is made and approved. 3.8. Payables Payables to suppliers represent the amounts to be paid to suppliers for goods and services received but remain unpaid by the Project as at the period end. 3.9. Sources of Funds Grant Funds are provided by the IBRD through advances to the pooled designated USD Accounts established by BEL at the Belize Bank Limited to finance eligible project expenditures for both trust funds (TF2887 and TF 2888). These advances are made based on periodic forecasts of project cash flow needs through the Unaudited Interim Financial Reports (IFR's). In addition to the USD account, BEL has opened a separate pooled local currency account at the Belize Bank Limited for eligible local expenditures under ERCAP. Balances in the designated accounts are tracked manually by the use of a cash flow spreadsheet in BEL's Finance department. The IBRD may also make payments, at BEL's request, directly to third parties for eligible project expenditures. 3.10. Method of Withdrawal of Funds BEL has established two designated pooled accounts at the Belize Bank Limited to be used exclusively for ERCAP related transactions in accordance with the Grant Agreement. Withdrawal from the Designated Account are done by authorized personnel from BEL's Finance department via direct online bank transfer to the associated vendors, contractors and employees upon a request initiated by the ERCAP Project Management Unit via BEL's internal accounting system for Goods, Works or Services rendered under the project and in accordance with the Grant Agreement. Page 15 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A288712888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 4. CASH AND CASH EQUIVALENTS 2019 Deposits in the designated account Project Account BBL - 133333010120000 199,094 Project/Designated Account BBL - 133333020120000 2,066,797 - 24265.891 5. AMOUNT DUE TO BEL (OTHER RECEIPTS) An amount of USD 34,223 is currently outstanding to be paid to Belize Electricity Limited (BEL). This amount was paid by BEL on behalf of World Bank for those activities eligible for payment under the financing institution grant funds during 2019. These funds will be reimbursed to BEL in 2020 as a means of financial reconciliation from the relevant funds in the designated account. The total sum includes: * USD 170 bank charges which will be reconciled at the end of the project * USD 34,053 for payments towards procurement consultant remuneration, project management, and other eligible expenses. 6. ADVANCES TO SUPPLIERS AND OTHER PREPAYMENTS A total prepayment of $61,774 was made from the designated ERCAP accounts as follows: 2019 Peco International Inc. (see note a below) 51,023 WKC Enterprise (see note b below) 10,751 $61,774 a. The amount was paid to Peco International Inc. in November 2019 for the purchase of two (2) amphibious equipment in accordance with the procurement plan established under the grant agreement and the payment terms under the associated contract. b. The amount was paid to WKC Enterprise in December 2019 for the purchase of a computer server and software for the Ministry of Energy, Energy Planning Unit, in accordance with the procurement plan established under the grant agreement and the payment terms under the associated contract. Page 16 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A288712888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 7. COMMITMENTS 7.1. Contracts This project includes agreements with suppliers of goods, services, and works in accordance with the established budgets and procurement plan. Subsequent to BEL's fulfillment of the conditions precedent listed under the grant amendment letter from the World Bank, the Project Management Unit commenced with the procurement process for those approved activities. Consequently, a total of seven contracts were established under ERCAP during the 2019 period. The table below shows a list of those contract commitments and details of their status as at 31 December 2019. Energy Resilience for Climate Adaption Project TF - A2887/2888 CONTRACTS December 31st 2019 a Amount Remaining No. Contracting ERCAP Activity Date of Contract Amount To Notes Party contract value (US$) Paid Be Paid USS (US) Trust Fund - 2888 Carolyn Procurement 1 Crawford Consultant 29/07/2019 21,500 9,012 12,488 5 Peco Procurement of International Amphibious 2 Electric Inc. Equipment 04/11/2019 101,866 - 101,866 6 Total Trust Fund - 2887 123,366 9,012 114,354 Trust Fund - 2888 1 Deon Kelly Energy Planner 14/10/2019 27,650 5,988 21,662 Belize Diesel Purchase of off- 2 and Equipment road vehicle 30/09/2019 35,207 35,207 - Equipment & Software for Data 3 Elligence Intergration 05/12/2019 87,000 - 87,000 Lightning Detection 4 EarthNetworks System 18/12/2019 100,000 - 100,000 Computer Server WKC and Software for 5 Enterprise Energy Planning 22/11/2019 21,500 - 21,500 6 Total Trust Fund - 2887 271,357 41,195 230,162 Grand total 394,723 50,207 344,516 Page 17 Belize Electricity Limited Energy Resilience for Climate Adaption Project TF - A288712888 NOTES TO THE FINANCIAL REPORTS 31 December 2019 7. COMMITMENTS 7.1. Legal Matters There were no pending or threatened legal claims related to the Project as at 31 December 2019. 8. EVENTS OCCURRING AFTER THE REPORTING PERIOD 8.1. ERCAP closing date The ERCAP closing date as established in the grant agreement is 31 July 2020. The Project Steering Committee will submit a request for project extension to the World Bank to facilitate successful execution and achievement of all the project's objectives. 8.2. Effect of Covid-19 pandemic At the commencement of 2020, the rapid spread of the Covid-1 9 global pandemic brought with it various challenges that had a direct effect on the management and execution of ERCAP. The execution of ERCAP continues with the relevant project and support staff working mostly in a remote mode and is expected to continue until global conditions improve. This mode of working has a direct effect on consultancy services from foreign firms and the purchase of materials and equipment as global production lines have witnessed unprecedented back-logs due to the extensive closure of factories worldwide. 8.3. Appointment of new Project Manager for ERCAP As the tenure of the previous Project Manager (Mr. Derek Davis) came to an end in February 2020, the request for appointment of a new Project Manager (Mr. Jose Moreno) was issued to the World Bank immediately thereafter for consideration and approval. In the interim ERCAP was managed by the remaining Project unit staff under the guidance and governance of the BEL management team and Steering Committee respectively. Appointment of the new Project Manager became effective on 6 April 2020. Page 18 SECTION II INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL Page 19 PKF Belize Global expertise with local knowledge P K F Accountants & business advisers INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL TO THE MANAGEMENT OF BELIZE ELECTRICITY LIMITED We have audited the design and operating effectiveness of the internal control of the Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project, GEF Grant Numbers TF0A2887 and TF0A2888 ("the Project"), as operated by Belize Electricity Limited ("the Company") which existed during the year ended 31 December 2019. The internal control was set up for the purpose of managing risks to the achievement of the Project's objectives, including the reasonable prevention and detection of errors, irregularities and fraud. The internal control is the responsibility of the management of the Company. Auditor's responsibility Our responsibility is to express an opinion, based on our audit, on the effectiveness of the internal control that could have a direct and material financial effect on the financial statements of the Project during the year ended 31 December 2019. We conducted our audit in accordance with the principles of International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information ("ISAE 3000') insofar as this standard could be usefully applied in this audit and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the internal control for the Project is adequately designed for the purpose of the Project and was operating effectively during the period covered by the audit. Our audit included obtaining a sufficient understanding of the Project and the internal control for the Project; assessing the risk that a material weakness exists that could have a direct and material financial effect to the financial statements of the Project,- testing and evaluating, on a sample basis, the design and operating effectiveness of internal control based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the effectiveness of the internal control: * the requirements for design and implementation of internal controls in the Project's Operational Manual; * the appropriateness of internal controls for the Project's activities and objectives; PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * Belize Tel: (501) 227-7428 * (501) 227-7222 * Email: info@pkfbelize.com * Website: pkfcaribbean.com/belize Partners: JA. Bautista * J. Ortez Page 20 PKF BIze is a remberfirti of the PKF Inernaion a Lmited family of legalIy independent firms aid does not accept any responsibiI ry or fiability for the actions or nactions ofeany irdjvjduar Irmamber or correspondentfirm or frme. PKr Accountants & business advisers INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL (continued) Auditor's responsibility (continued) * the implementation of internal controls by the Company to achieve its objective of prevention and detection of errors, irregularities and fraud that could have a direct and material financial effect on the financial statements of the Project; * the significance on the financial statements where one control or several controls did not operate as designed; and * that a weakness or a deficiency existed where a control or several controls did not reasonably prevent or detect risks that could have an adverse impact on the objectives of those internal controls which are to provide reasonable assurance that the financial statements are prepared, in all material respects, in accordance with the adopted accounting policies and Operational Manual, that the funds are utilized for the purposes defined in the Grant Agreements and that the Project complies with the Grant Agreements, the Operational Manual and other laws and regulations applicable to the Project. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the Project's internal control which existed during the year ended 31 December 2019, in all material respects, was adequately designed for the purpose of the Project and operated in an effective manner, based on the evaluating criteria above. Other matters We draw attention to Appendix 1 - Management letter in which we mentioned findings from the internal control system which have no direct and material financial effect on the Project's financial statements but may lead to the risks of the effectiveness of the Project's internal control system. This audit involved a historic evaluation of the effectiveness of internal control at a specific point of time. Thus, this audit does not provide assurance for future periods due to the risk that internal control may become inappropriate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. PKF Belize Chartered Accountants Belize City 15 July 2020 Page 21 SECTION III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE Page 22 PKF Belize Global expertise with local knowledge Accountants & business advisers INDEPENDENT ASSURANCE REPORT ON COMPLIANCE TO THE MANAGEMENT OF BELIZE ELECTRICITY LIMITED We have examined the compliance of the management of Belize Electricity Limited ("the Company") in relation to the implementation of the Energy Resilience for Climate Adaptation Project (ERCAP) In Belize Project - GEF Grant Numbers TF0A2887 and TFOA2888 ("the Project"), with the applicable laws, regulations and other provisions of the Grant Agreement between Belize Electricity Limited and the International Bank for Reconstruction and Development ("IBRD") (GEF Grant Number TF0A2887), and the Grant Agreement between the Government of Belize and the IBRD ("GEF Grant Number TF0A2888"), together "the Grant Agreements", during the year ended 31 December 2019. The management of the Company is responsible for the compliance with the Grant Agreements, the Project's Operational Manual and other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditor's responsibility Our responsibility is to express an opinion, based on our examination, on the compliance of the Company's management with the Project's regulations that could have a direct and material financial effect on the financial statements of the Project during the year ended 31 December 2019. We conducted our examination in accordance with the principles of International Standard on Assurance Engagements 3000 "Assurance Engagements other than Audits or Reviews of Historical Financial Information" ("ISAE 3000") insofar as this standard could be usefully applied in this examination and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the examination to obtain reasonable assurance about whether the Company's management complies with the Project's regulations that could have a direct and material financial effect on the financial statements during the year. Our examination included: obtaining a sufficient understanding of the Project, and the Project's regulations; assessing the risk of non-compliance that could have a direct and material financial effect on the financial statements of the Project; testing and evaluating, on a sample basis, the compliance of the Company's management with the Project's regulations based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Befize City * Belize Tel: (501) 227-7428 e (501) 227-7222 * Email: info@pkfberize.com * Website: pkfcaribbean.comlbelize Partners: J.A. Bautista * J. Ortez Page 23 PKF Belize is a memberfiro of the PKF international Limited arnly of legally ndependent firms and does not accept any rosponsibilty or liability for the actions or inactions of any individual riLmberor correspondentirm or 5rs PKW Accountants & business advisers INDEPENDENT ASSURANCE REPORT ON COMPLIANCE (continued) Auditor's responsibility (continued) We considered the following criteria in evaluating the compliance of the Company's management with the Project's regulations: * the Company's management awareness of the Project's regulations; * the implementation of the Project's regulations by the Company's management; * the significance to the financial statements where the Company's management fails to comply with one requirement or several requirements in the Project's regulations; and * that a weakness or a deficiency existed where the Company's management fails to comply with one or several requirements in the Project's regulations that could have a direct and material financial effect on the financial statements. We believe our examination provides a reasonable basis for our opinion. Opinion In our opinion, the Project complies, in all material respects, with the Project's regulations that could have a direct and material financial effect on the financial statements of the Project during the year 31 December 2019 based on the evaluating criteria above. Other matters We draw attention to Appendix 1 - Management letter in which we discussed certain departures from the Project's regulations which have no direct and material financial effect to the financial statements of the Project but may put the Project's objectives at risk. This examination involved a historic evaluation of the Project's compliance with the Project's regulations at a specific point of time. Thus, this examination does not provide assurance for future periods due to the risk of changes in the Project's regulations, or that the degree of compliance with the Project's regulations, may deteriorate. PKF Belize Chartered Accountants Belize City 15 July 2020 Page 24