The Planning Institute of Jamaica FOUNDATIONS FOR COMPETITIVENESS AND GROWTH PROJECT Loan no. 8408-JM FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2019 (Expressed in United States Dollars) The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Year ended March 31, 2019 TABLE OF CONTENTS Page Auditor General's Report 1-4 Financial Statements Statement of Sources and Uses of Funds 5 Statement of Cumulative Investments 6 Designated Account Reconciliation Statement 7 Notes to Financial Statements 8 - 12 Audit of Statements of Expenditure (SOE) Procedures 13 The Planning Institute of Jamaica FOUNDATIONS FOR COMPETITIVENESS AND GROWTH PROJECT Loan no. 8408-JM FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2019 (Expressed in United States Dollars) 1 AUDITOR GENERAL'S DEPARTMENT 40 KNUTSFORD BOULEVARD P.O. BOX 455 ANY REPLY OR SUBSEQUENT REFERENCE KINGSTON 10 TO THIS COMMUNICATION SHOULD BE JAMAICA ADDRESSED TO THE AUDITOR GENERAL AND NOT TO ANY OFFICER BY NAME Tel. No.: 926-8309/926-5963/926-5846 AND THE FOLLOWING REFERENCE Fax Number: 968-4690 QUOTED:- audeen@auditoreeneral.ov.im. AUDITOR GENERAL'S REPORT To the Board of Directors Planning Institute of Jamaica LOAN No. 8408-IM Name of Project -FOUNDATIONS FOR COMPETITIVENESS AND GROWTH PROJECT Period ending March 31, 2019 Opinion I have audited the accompanying Financial Statements of the Foundations for Competitiveness and Growth Project, set out on pages 5 to 12, which comprise the Statement of Sources and Uses of Funds, as at March 31, 2019, Statement of Cumulative Investments by Categories and Designated Account Reconciliation Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. In my opinion, the Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Supplementary Financial Information reflects a fair presentation 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 III Section 3.01- Projectof standard conditions for Agreementbetweenthe Government of Jamaica (GOJ) and the International Bank for Reconstruction and Development (IBRD) dated September 3, 2014. * International Standards of Supreme Audit Institutions (ISSAls). My responsibilities under ISSAls are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of this report. We 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 3 As part of an audit in accordance with ISSAIs, we 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 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 we conclude that a material uncertainty exists, we are required to draw attention in my 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 Planning Institute of Jamaica 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 THE LOAN AGREEMENT NO. 8408-JM COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND FINANCIAL CLAUSES OF THE LOAN AGREEMENT During the period under review, I examined compliance by the PEU of the Executing Agency with the applicable laws and regulations related to the Project's financial activities and with the accounting/financial/ management clauses of the Loan Agreement No. 8408-JM. There was general compliance with the following articles contained in the Loan Agreement mentioned: Article I - Section 1.01 - 1.02: General Conditions; Definitions Article II - Section 2.01- 2.07: Loan Article III - Section 3.01 - 3.02: Project 5 The Planning Institute of Jamaica Foundation for Comketitiveness and Growth Project Loan no. 8408-JM Statement of Sources and Uses of Funds Vear ended March 31, 2019 April 1,2018 CUMULATIVE CUMULATIVE Note to March 31, to March 31, to March 31, 2019 2019 2018 USS US USS SOURCES OF FUNDS World Bank Designated Account 5 7,897,000.00 30,127,912.00 22,230,912.00 Direct Payment 0.00 279,171.15 279,171.15 Front End Fees 0.00 125,000.00 125,000.00 Advance 11 (187,860.13) 858.12 188,718.25 Interest Earned 10 2,083.78 6,513.52 4,429.74 Total Receipts (A) 5 7,711,223.65 30,539,454.79 22,828,231.14 USE OF FUNDS Component I - Enhancing Competition in the Business Environment 700,715.52 1,509,829.88 809,114.36 Component 2 - Facilitating Large Scale Private Investments 893,522.78 2,738,485.62 1,844,962.84 Component 3 - Supporting Small and Mediur Enterprises (SME) Capabilities and Finance 5,626,921.57 20,135,918.31 14,508,996.74 Component 4 - Project Implementation and 1,040,935.24 3,267,629.65 2,226,694.4 1 Monitoring Front End Fees 0.00 125,000.00 125,000.00 Total Expenditures (B) 7 8,262,095.11 27,776,863.46 19,514,768.35 RECEIPTS LESS EXPENDITURES Net Change in Cash (A - B) (550,871.46) 2,762,591.33 3,313,462.79 Foreign Exchange Adjustment - Gain/(Loss) 151,693.95 119,985.99 (31,707.96) (399,177.51) 2,882,577.32 3,281,754.83 Opening Cash Balances Designated Account 334.81 Project Accounts 3,281,420.02 - Total Opening Balance 8 - 3,281,754.83 - Closing Cash Balances Designated Account 278,427.45 278,427.45 334.81 Project Accounts 2,604,149.87 2,604,149.87 3,281,420.02 Total Closing Balance 8 2,882,577.32 2,882,577.32 3,281,754.83 Approved for issue on behalf of Project on September 18, 2019 and signed on its behalf by: Dr. Way e enry Barbara cott The accompanying notes on pages 9 to 12 form an integral part of the statements. 6 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Statement of Cumulative Investments by Categories Year ended March 31, 2019 CURRENT CURRENT PRIOR YEAR No. Categories YEAR YEAR CUMULATIVE ACTUAL CUMULATIVE US$ US$ USS Goods, non-consulting services, training and consultants services for Components 1 700,715.52 1,509,829.88 809,114.36 Goods, non-consulting services, training and 2 a) consultants services for Components 2A, 2B (i), 1,725,359.58 3,724,528.76 1,999,169.18 2B (ii) and 2B (iii) and 3 excl. SME sub-loans and matching grants 2 b) SME sub-loans 3,547,723.24 16,768,118.24 13,220,395.00 2 c) SME matching grants 1,472,901.77 1,954,384.77 481,483.00 Goods, non-consulting services, training and 3 consultants services for Components 2B (iv) and 4 and operating costs for all components 815,395.00 3,695,001.81 2,879,606.81 4 Front end fees 0.00 125,000.00 125,000.00 TOTAL 8,262,095.11 27,776,863.46 19,514,768.35 The accompanying notes on pages 9 to 12 form an integral part of the statements. 7 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Designated Account Reconciliation Statement Year ended March 31, 2019 US$ 1 Total Advanced by The World bank 30,127,912.00 2 Less: Eligible expenditure for the current year ended March 31, 2019 documented by World Bank (8,262,095.11) Less: Cumulative eligible expenditure for the prior periods ended March 31, 2018 documented by World (19,110,597.20) Bank 3 PRESENT OUTSTANDING AMOUNT ADVANCED TO THE DESIGNATED ACCOUNT (1 -2) 2,755,219.69 4 Balance of Designated Account per Bank Reconciliation Statement at March 31, 2019 278,427.45 Balance of other project Accounts per Bank Reconciliation Statement at March 31, 2019 2,604,149.87 5 Less: Interest Earned Credited to Account (6,513.52) Advance from Development Bank of lamaica (858.12) 6 Total Advance Accounted for (No. 4 through No. 5) 2,875,205.68 7 Difference (3 - 6) (119,985.99) 8 Explanation of difference shown in Line 7 The difference represents the cumulative foreign exchange adjustments The accompanying notes on pages 9 to 12 form an integral part of the statements. 8 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2019 Expressed in USD 1. IDENTIFICATION General background On September 3, 2014, the Government of Jamaica signed a loan agreement with The World Bank to secure funding of US$50M for the Foundations for Competitiveness and Growth Project (the Project). The closing date of the loan is June 30, 2020. Implementing organisations The Project is being implemented by the Planning Institute of Jamaica (PIOJ) in conjunction with lead coordinating agencies Jamaica Promotions Corporation (JAMPRO) and the Development Bank of Jamaica (DBJ). 2. OVERVIEW The Project Development Objective (PDO) is to strengthen the business environment in Jamaica for private sector investment. The primary project beneficiaries will be private firms operating in Jamaica. Both existing and new firms will benefit from streamlined business regulations that save costs and decrease incentives for rent- seeking. Large foreign and domestic investors will benefit from appropriate preparation for Public- Private Partnerships (PPPs), divestments, and other strategic investments that help bring deals to market. Small and Medium-sized Enterprises (SMEs) benefiting from skills training, supply chain linkages, and financing will be able to increase private investment in knowledge and physical capital, thereby raising productivity, sales, and jobs, including by linking with new large foreign and domestic investors supported by the project. Impacts on these beneficiaries will be closely tracked through project indicators and Monitoring and Evaluation (M&E). The program is structured in four components PROJECT COMPONENTS Funding is allocated to three primary components and an oversight component as follows: 1. Enhancing competition in the business environment - The component will provide technical assistance (TA) and implementation support to address critical business regulatory and procedural issues that constrain firm entry, operation and expansion, competition, and trade and logistics. JAMPRO will be the LCA for this component. 2. Facilitating strategic private investments - This component will finance feasibility and other related studies and TA to enable the government to prepare for and close investment transactions with private sector participation in a way that enables transformational growth impacts. DBJ will be the LCA for this component. 9 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2019 Expressed in USD PROJECT COMPONENTS (Cont'd) 3. Strengthening SMEs' (Small and Medium Enterprises) capabilities and Financing SMEs' investments- This component will fund a combination of supply chain learning, skills upgrading, and finance for SMEs. DBJ will be the lead coordinating agency. This component has two sub-components which are component 3A - co-financing anchored firms' supply chains through a matching grant program and Component 3B- an on-lending facility through the Approved Financial institutions to Small and medium entities in order to support competitiveness and growth within the Private sector. 4. Project and Implementation and Monitoring and Evaluation- This component will finance the costs of project implementation arrangements through Component 4A, led by PIOJ as the Implementing Agency. Component 4B will finance technical Assistance for communications and productivity evaluation support, in collaboration with the Statistical Institute of Jamaica (STATIN) and the Jamaica Productivity Centre (JPC). MANAGEMENT REPORT The Annual Report is submitted by management for the Foundations for Competitiveness and Growth Project for the year ended March 31, 2019. AUDITING OF THE PROJECT The Project is currently audited by the Auditor General's Department. The Auditors, Auditor General's Department, 40 Knutsford Boulevard, Kingston 5, Jamaica. 10 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2019 Expressed in USD 3. SIGNIFICANT ACCOUNTING POLICIES 1) Basis of Preparation The Project Accounting Unit (PAU) uses the cash basis of accounting to account for the project's transactions and these financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis. Under this basis, incorne is recognized when funds are received rather than when earned and expenses are recognized when payment is made rather than when obligations are incurred. Since the main objective of these financial statements is to disclose the sources and uses of funds, it is not necessary to present information adjusted for inflation. II) Recording of Transactions Transactions are entered in local currency. However, transactions are converted into the United Statement of America currency for preparation of the financial statements. Receipt and expenditure in local currency are translated into US dollars, by applying the exchange rate at which the funds were transferred from the Designated Account. III) Fluctuation rate and fees All fees and charges for un-disbursed loan funds, as well as losses due to exchange rate fluctuations are not considered eligible project costs and are absorbed by the Government of Jamaica. IV) 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 is also not reflected in these financial statements. V) Exchange Rate for the period Expenses paid from the Jamaican dollar project accounts held with First Caribbean International Bank Limited and National Commercial Bank Jamaica Limited, were converted by applying the exchange rate at which the funds were transferred from the Designated Bank account to the local Administrative bank accounts. 11 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2019 Expressed in USD 5. SOURCE OF FUNDS The amount of US$7.711 million (cumulatively US$30.539) was received from all sources of which USS7.897 million (cumulatively US$30.532 million) was received from the World Bank for the period reviewed. 6. DISBURSEMENT REQUEST Disbursement Request Date Disbursement Number Amount US$ April 25, 2018 FCGP WAI3 7,500,000 March 19, 2019 FCGP WAl5 397,000 Total 7,897,000 This represents the total advance issued by the IBRD for the year ended March 31, 2019. 7. USE OF GRANT FUNDING Total funds invested during the period amounts to approximately USS8.262 million (cumulatively US$27.777 million). 8. CASH AVAILABILITY The cash available as at March 31, 2019, as expressed in US dollars is: Bank Accounts March 31, 2019 March 31, 2018 US$ USS Designated Account #810134 278,427.45 334.81 Project Account PIOJ FCIB#1002-174-602 41,713.24 109,307.89 Project Account DBJ NCB#2111-18059 2,110,493.71 3,102,454.13 Project Account JBF FClB# 1002-207-634 451,942.92 69,658.00 Available cash balance 2,882,577.32 3,281,754.83 The Designated Account is used to hold deposits of amounts drawn from the Loan account for the purpose of making payments for eligible expenses relating to the Project. 12 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2019 Expressed in USD 9. FIXED ASSETS Furniture, Computer Fixtures & Computer Software Equipment Total Cost Balance at 1st April 2018 320,688 142,500 15,557 478,745 Adjustment (225) 321 154 250 Additions 1,352 - 811 2,163 Balance at 31s "March 2019 321,815 142,821 16,522 481,158 10. INTEREST EARNED The interest earned on the funds deposited in the Designated Bank account are paid over to the Consolidated Fund; while the interest earned on the Operations Account is retained in the Account. 11. ADVANCE The advance amount of US$858.12 represents an amount loaned to the Project from the Development Bank of Jamaica. 13 AUDITOR GENERAL'S DEPARTMENT 40 KNUTSFORD BOULEVARD P.O. BOX 455 KINGSTON 10 JAMAICA Tel. No.: 926-8309/926-5963/926-5846 Fax Number: 968-4690 Email: audgen5@cwjamaica.com LOAN AGREEMENT No. 8408-JM Foundations for Competitiveness and Growth Project Period ending March 31, 2019 AUDIT OF STATEMENTS OF EXPENDITURE (SOE) PROCEDURES In the course of the Audit of the Foundations for Competitiveness and Growth Project for the period ended March 31, 2019, I examined the following statements of expenditure submitted to the IBRD during the financial year under review in support of applications for advance of funds from the Loan Account in accordance with the Loan Agreement: Date of Disbursement Disbursement Number Request US$ FCGP WA13 April 25, 2018 7,500,000 FCGP WAl5 March 19, 2019 397,000 Total 7,897,000 The examination was done in accordance with 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 goods and services, filing of supporting 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 advance in conforming to the requirements of the Loan Agreement. Auditor General of Jamaica Date