REPUBLIC OF VANUATU PUBLIC WORKS DEPARTMENT FINANCIAL STATEMENTS FOR THE VANUATU INFRASTRUCTURE RECONSTRUCTION AND IMPROVEMENT PROJECT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 PREPARED UNDER IPSAS: FINANCIAL STATEMENTS REPORTING UNDER THE CASH BASIS OF ACCOUNTING 1 TABLE OF CONTENTS Page Introduction .......................................................................................................................... 3 - 4 Auditors Report .............. ..................................................................................................... - 6 Statem ent of Cash Receipts and Paym ents ........................................................................... 7 Statem ent of Com parison of Budget and Actual ...................................................................8 Statem ent of Accounting Policies and Notes to the Accounts .................................... 9 - 17 2 INTRODUCTION The Vanuatu Infrastructure Reconstruction and Improvement Project (VIRIP) is governed by the Financing Agreement signed on 2nd August 2016 between the Government of the Republic of Vanuatu "the Recipient" and the International Development Association (World Bank) "the Association." The Association agrees to extend to the Recipient, on terms and conditions set forth or referred to in the Agreement, a grant and credit (collectively, "Financing") in the following amounts to assist in financing the project described in Schedule 1 of the Agreement ("Project"); a. An amount equivalent to Seventeen million six hundred fifty thousand Special Drawing Rights (SDR 17,650,000), ("Grant"), and b. An amount equivalent to Seventeen million six hundred fifty thousand Special Drawing Rights (SDR 17,650,000), ("Credit"). Schedule 1 of the Agreement provides the objective of the project that is to reconstruct and/or improve the disaster and climate resilience of selected public sector assets in provinces impacted by Tropical Cyclone Pam, and to provide immediate and effective response to an Eligible Crisis or Emergency. The Project consists of the following parts; o Part 1: Roads Reconstruction and Improvement * Part 2: School Reconstruction and Improvement * Part 3: Public Building Reconstruction and Improvement * Part 4: Project Implementation and Technical Support * Part 5: Contingency Emergency Response Schedule 2 of the Agreement provides for the project execution which includes institutional arrangements (Project Implementation Committee, Ministry of Infrastructure and Public Utilities, Ministry of Education and Training and project Support Team) and the relevant implementation covenants of the project (Project Operations manual, annual work plans, safeguards, procurement, M&E, financial management and audit, withdrawals of the financing, etc.) The Project Code for VIRIP registered in the Government Financial Management System (Smart-Stream) is 17B978. The first and second tranche of the financing was received in February and June 2017 totalled VT.400 million (which consist of a Grant of VT.200 million and a Credit of VT.200 million). In 2018, an additional grant of VT. 82.4 million and a Credit of VT. 205 million was received and deposited in the project number 17B978, held with the Department of Finance and Economic Management. This makes a total grant of VT.287.4 million. 3 It should be noted that the project was signed on 2nd August 2016, however the setting up of the VIRIP Office was established in April 2017 with only the Project Manager/Coordinator. Therefore, the costs incurred starts from April to December 2017. However, because of low capacity during the inception of the Office and absence of the tools and covenants of the project implementation, the main output was getting the covenants in place associated with some design/supervision of two road projects on Tanna and two culverts projects on Malekula that were approved by the World Bank. During the early stage of VIRIP operations, the main cost was attributed by Consultant costs under Part 4 (Project Implementation and Technical Support). The actual expenditure against the budget is low due to its infant stage. This report was put together by the Project Support Team (PST) with the assistance of the Finance Section of the Department of Public Works. Harrison LUEN Director General Ministry of Infrastructure and Public Utilities 20 January 2020 4 parmners Independent Auditors' Report to the members of Vanuatu Infrastructure Reconstruction and Improvement Project The Auditor-General is the auditor of the Vanuatu Infrastructure Reconstruction and Improvement Project (VIRIP). The Auditor-General has appointed Law Partners to undertake the audit of VIRIP pursuant to Section 24(1) of the Expenditure Review and Audit Act [CAP 241]. Audit Opinion We have audited the accompanying financial statements of Vanuatu Infrastructure Reconstruction and Improvement Project for the financial year ended 31 December 2018 consisting of the statement of cash receipts and payments, statement of comparison of budget and actual amount and accompanying notes set out on pages 7 to 17. In our opinion, the financial statements present fairly in all material respects the cash receipt and payments and cash flows of the Project for the year ended 31 December 2018, in accordance with International Public Sector Accounting Standards - Financial Reporting under Cash Basis of Accounting and the project administration complies with relevant Vanuatu legislation and regulations. Basis for Opinion We have conducted our audit in accordance with International Standards on Auditing. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the Financial Report section of our report. We are independent of the company in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial statements in Vanuatu. We have fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Responsibilities of members for the financial statements The members of the project are responsible for: * the preparation and fair presentation of these financial statements and the information they contain, in accordance with International Public Sector Accounting Standards: Financial Reporting under Cash Basis of Accounting; * implementing necessary internal controls to enable the preparation of the financial statements that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and * assessing the project's ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to cease operations or have no realistic alternative but to do so. rL s 22 091 =AX 678 23 665 .A) Ar\P~t~ a'K C.prtnersvet:tcorn C E PORTVLA VANUAU aw-orLners Independent Auditors' Report to the members of Vanuatu Infrastructure Reconstruction and improvement Project (continued) Auditors' responsibilities for the audit of the financial statements Our objective is: * to obtain reasonable assurance about whether the financial statements 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 International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. A further description of our responsibilities for the audit of the financial statements is located at the website https://www.ifac.orgisystem/files/ublications/files/ISA-700-Revised 3.pdf. This description forms part of our auditor's report. 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И �' �К б � т т n м а нII,, � �_ а ° � " о - �.'м^ м � т т н ... н N " "' н .. "�{ � � Ё йq н� � ° - � ? г й _ с а i - а � � w а п о ° � � ¢ А Э 6 { н ,. .. N^ n п о ,9, н I� 4 Е ^ � г ? � � й q Ё - б � 4� З ш д� i б г о � � т �', 1 q г а ¢¢. б� -. т о � й ° � б г � о� н И,� � чо �..� аа � ,� г � � _ z � д - _ - б - й F ё - о - - - - ' - Е а Ё ° �С R� � ' ui �� м .� 'ы ' а .� ']� и ' ч" � - �_ �� - � 1 а р а�� О й� G �] й � � � .. У � _ И � Е U' � � - 'п� - Е � - . а и у � � � n° � n С а .�. ; � - �; ° � ., 3� ��а � �, � r г - 4 0. q Й � ¢ � F ���dJJ STATEMENT OF ACCOUNTING POLICIES AND NOTES OF THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2018 ACCOUNTING POLICIES AND NOTES 1. ACCOUNTING POLICIES a. Reporting Entity The Financing Agreement recognise the Recipient's Representative as the Minister of Finance and Economic Management and the Ministry of Infrastructure and Public Utilities (MIPU) as the Executing Agency of VIRIP. The project is funded entirely by the International Development Association through the World Bank and implemented by the Department of Public Works, under MIPU. The total project in SDR is 17,650,000 (Credit) and SDR 17,650,000 (Grant) which is equivalent to VUV5,000,000,000 for the project timeframe of 5 Years. The Project Support Team (PST) in support by MIPU, Ministry of Education and the Project Implementation Committee (PIC) agreed with the World Bank the Selection Criteria under the Project Operational Manual on which a project can be selected. PST and MIPU have worked hard to have a robust system whereby due diligence assessment to accompanied the checks and balances before it expedites funds from the Project Funds under 1713978. The following have been agreed between the Government of Vanuatu and the World Bank; i. The Financing "Revenue" will be deposited in Designated Account with the Reserve Bank of Vanuatu and a Project CODE provided by DSPPAC and fund is managed by the Ministry of Finance and Economic Management through the Department of Treasury and Finance and using the Smart-stream finance system. ii. Procurement Rules, the Council of Ministers agreed in December 2017 that major project would have to utilise the World Bank Procurement Systems, however the PST and the MIPU would have to ensure that the Central Tender Board and the Legal Entities are informed of the rules and understanding prevail between the parties. iii. The Government Legislations and regulations must be observed by the PST and the MIPU in relation to purchases and other issues under VIRIP. iv. Interim unaudited Report will be provided on a Quarterly Basis and followed with a Semester Report in conjunction with the Public Finance and Economic Management (PFEM) Act would be provided to the World Bank. In 2017, Vt. 400 million was receipted for associated parts of the project whilst Vt.287.4 million was receipted in 2018 that makes a total of Vt.687.4 million. 9 b. Authorisation Date The Financial Statements for VIRIP are for the year ended 31 December 2018, and were approved by the Harrison Luen, Director General, Ministry of Infrastructure and Public Utilities on 2 ' o L 2c . No other body has the power to amend these financial statements once they have been issued. c. Basis of Preparation The financial statements of VIRIP Accounts have been prepared in accordance with the requirements of the Public Finance and Economic Management Act (CAP 244) which includes the requirements to comply with the generally accepted accounting principles and practices. The financial statements comply with IPSAS Cash "Financial Reporting under the Cash Basis of Accounting" for the year starting 1st January 2018 to 31st December 2018. d. Presentation Currency The financial statements are presented in local currency VATU. e. Foreign Currency All drawdowns are made in Special Drawing Rights (SDR) and deposited in the Designated Account in US Dollar Account with the Reserve Bank of Vanuatu (RBV). The conversion from the USD to the VATU is made by the RBV. Transactions and payments for service contracts and works contracts are denominated in Foreign currency particularly US Dollar however for the purpose of this report, all are presented in local currency, VATU. The converted FX Rate is determined by the National Bank of Vanuatu where all foreign currency is transacted or transferred. f. Cash and Cash Equivalents The VIRIP Grants/Credit are released on tranches and based on needs of the VIRIP and more importantly the project procurement plan. The process of drawdowns will be done by the PST via the World Bank Client Connection and approval by the Ministry of Finance and Economic Management. Through the process, the World Bank will release the tranche via the RBV, Designated Account. The funds are managed through the Government Centralised smart-stream financial system. The Project Support Team (PST) and Public Works Department (PWD) Finance Section will ensure that suppliers, service contracts and work contracts are paid through the process of purchasing request form by the PST, followed with a local purchase order raised by the PWD Finance Section and signed off by the authorised personnel in the Department of Public Works. These transactions have been disclosed in a separate column in the "Statement of Cash Receipts and Payments." 10 g. Property, Plant and Equipment Purchase of fixed assets have been included in the Statement of Cash Receipts and Payments under the Incremental Operating Costs of the Project Implementation and Technical Support. The fixed assets include the photocopy machine and printer, shredder machine, cabinet boxes and safety box. At the moment, the PST hired two vehicles one from World Car Rentals and the other from Europ Car and this is shown under the Project Vehicle. Insurance and depreciation charged are included in the monthly hire fee. The third vehicle is hired from World Car Rentals for the Disaster Framework Technical Adviser (TA) on an intermittently basis. h. Budget The budget is prepared on a cash basis when cash is expected to be received and expedited. The classification of the budget is prepared on the common revenue sources and expenditures are classified on the nature of expenditures normally incurred by VIRIP and PST. Capital Expenditure is treated as part of the normal operational expenditure. The Original Budget is the budget indicated in the Financing Agreement and the Project Appraisal Document (PAD). The Final Budget will be determined by the Exchange Rate and the SDR at any point in time when the drawdown is requested, approved and released to the Designated Account. The fiscal Year Budget is determined by the Tranches or revenue received and deposited in the Designated Account at the Reserve Bank. For example, in 2018 a grant budget of VT. 287.4 million was received and is distributed against the different Parts of VIRIP, Part 1: Roads, Part 2: Schools, Part 3: Public Buildings and Part 4: Project Implementation and Technical Support. In 2017, Part 3 has no budget yet. The Closing balance as at 31st December 2018 fiscal year stood at Vt.203.7 million. The approved budget is developed on the same accounting basis, classification basis, and for the same year as the financial statements. i. Change in Accounting Policies There are no changes in the accounting policies during the financial year. 2. DONOR GRANT ASSISTANCE The main donor of VIRIP is the World Bank. This is shown in the "Recepts and Payments centrally controlled column in the Statement of Cash Receipts and Payments. The value of this payment is determined by the amount paid by the World Bank, SDR and US Dollar and then converted to the local currency VATU at a spot rate determined by the Reserve Bank of Vanuatu on the date of the transaction (as advised by the World Bank). 11 Restated Financial Audited Financial Restated Financial Audited Financial Restated Financial Audited Financial Statements - 2018, Statements-2118 Statements-2018 Statements-2018 Statements-2018 Statements - 2018 Summary Tranche Grant[VT TrancheGrant(VT TrancheCredit(VT TrancheCredit(VT Total Grant/Credit Total GrantCredit million) million) million) million) (Financing VT. Million) (Financing V. Million] BudgetAvailable as at 31st December 2017 323.4 341.4 Grants Received in 2018 82.4 82.4 205.0 93.6 287.40 175 Total Revenue I Budget 2018 61680 517.4 3a, 3c: PROJECT IMPLEMENTATION AND TECHNICAL SUPPORT VIRIP structure has four permanent staff that includes the Project Manager/Coordinator, the Procurement Specialist, Safeguard specialist and the Project Accountant. All staff employed are contracted for VIRIP related activities is made by the Minister, Ministry of Infrastructure and Public Utilities. The permanent staff including the M&E and the Contracts Manager are paid from the Project Implementation or PST budget. There are other staff engaged on short term assignments including the Safeguard Officer, Asbestos Specialist and Land Registration Officer attached with the Department of Education and are paid by Part 1 (Roads) and Part 2 (Schools) respectively. Receipts/Payments Receipts/Payments Receipts/Payments Receipts/Payments 2013 Restated Financial 2018 Audited Financial 2017 Restated 2017 Audited Financial Statements Financial Statements Statements (VT million] Statements [VT million) Tmilo)(Tilon Total Project Implementation, Technical Support and Capacity Building (VT million) (VT million) TOTAL CASH PAYMENTS Project Support Team (PST) Personnel expenses Lawrie Carlson 27.5 27.5 20 15.1 lain Haggarty 23.6 23.6 19.3 23 Emile Leau - 3.4 3.5 Ian Gormrlie 25.7 25.7 Ty Morrissey 3.1 3.0 4.3 5.8 Paul Thompsorn 5.3 5.3 John Colwick 5.4 5.9 1.6 L5 Leitangi Morris D.5 0.4 Odfle Siro 1.3 1.2 Phil Hunt - 0.3 Accrued Cost for PST -11.8 0.5 10.7 Project Implementation and Technical Support 80.8 93.1 59.6 50.0 Nigel Fisher 12.4 5.0 Technical Support and Capacity Building 12.4 5.0 0 93.0 98.1 59.6 50.0 12 р n � q � 5-I G `1 4 О р ъ � т n � � -� л GG ь ц q У 6 (С N r `п р � Й и д й�у О л 'Л � О � С � V й � й4 �� N 6 ю й а а У � - � � Э " bII w У .� т � � а т т � у н а ач т .м гч м.+ т ь.. ы ш �i а�� о 4° й $ о й,мi м ш�°а й�. r о ' i: rv об й � и � ' л ы .: vi � Д С � м � � ш й ю т гv ш о й �' р С _ "Ё.S� а ы с t � � п° _ �- и лиоS $о � �о$ ... ° �м �� т д � т ьо "' . г сп ч м и,-« т ое т'� .�ч � ib V ц.. р 'Тг и ы �� °' С $� р а YS О С д sм ый р т и� �п '^ о.' иrv rnv .v'+ и .�. „'� °` у ,д • in • ,, с � с, r ��. • м � ..;,г т п "�' т tO .., "� rn шр w а л а � �., о т н ш � д о м м _ и й �у� � лгд О � _ � ¢ rv с � р � � ? ю н � Ф V 0. т л ь0 ш � С р 4Э п� $ � а а �ii „ rv С z � 6 (С С О - г 'а � _°; ы ® т с = ,. i о `с '3 а а.тrc G " n и Qu' ° �. � w г.� т Q ��.. а, °° о ° ° �. � � т � {fj _ с е� n с с �: о т • �+ и�,. т • , гл � � '« - рΡ F Ф.°R � W д и°✓i Ф м б'� � О � и1 ° W т а _ С1 w тт ш И а, й'е т ш о ��', т м й�. н ы а � Q Е �' ° н U � �а '° п й о � а 9,� ..ш й й � т.й Р т Оar W'ид,� т т й нт, �i,n8, й ��'°^�� ® ё °рΡ� м ю о w � iC � n��. �j � ui rv1 Й тt О гу т °' т^i N г4 о0 .❑ . °.. �� М. � 5� Q. м M1 �о�т � а ��.М еч и � и м�r а.r ,иу��, а й °� � м� Q д т м-, м *+ и � v N � 9 а3' ы �.р iргч �°в ° °.°а п°п � м й а г� г.� а о м о а о й� °т о_v ..° api о с � р � Й гм с� ° т а н о м т о и т т л а г; т � т и и° У. °о °т й® о т а п ° ш.. ш м а п�,п � й й �°и� т � °0 ы ° wнз � CU г°ч ,"�4,. � _ • � � а й с � � _о ы V/ � Ф _ V � L Б � �С в F_ t т � 4 �С С � д I а� .., р С 4 _ ы��. - ы '�.J а �. 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О � р,, = �(3 ее О 7 7 > � ��.. i� Сы ��� c�i J �°е �г ате �� , �� � > �� г . с.+ о д ы д '.i. � О� О а т � 4 � ь� и и и й и и�э и й й. . ta � г z О г` �� и и `�j � t'' �� � р д Q С7 О'� tЬ Ф fl� уШ F�i �� � т т ы т т т т т т т�� ar ar ит � ar ar т т�и и т т ю`� ��w ы ar т w юа т т т т � и 4A,4AA, 4AAA: CAPITAL EXPENDITURE 2019 Restated Financial 2018 Audited Financial 2017 Restated Financial 2U17 Audited Financial Statements JVr million) Statements (VT million) Statements (VT million) Statements (VT million) Capital Expenditure - Roads 268.3 266.9 Physical Works 269.3 266.9 0 1 Capital Expenditure -schools - Physic2l Works - I Capital Expenditure -Public Buildings - 7ft;kal Wodc, - 7otal Caplital Expienditures 268.3 266.9, 4B,4BB,4BBB: DESIGN AND SUPERVISION 2018 Restated Financial Z018 Audited Financial 2017 Restated Financial 2017 Audited Financial Statements (VT mi [lion] Statements (Vr million) Statements (VT million) Statments (VT million) Capital Expenditure - Roads 23-7 ME 02 'Design and Supervision 23.7 1&8 - 0.2 Capital Expenditure -Schools 3.2 2.9 3.8 5.5 Design and Supervision 2.2 2.9 3.8 5.5 Capita I Fxpenditure -Public Buildinps 13-2 13.2 Design and Supervision 13.2 13.2 - - Total Capital Expenditures 40.11 3.8 5-71 5. CLOSING BALANCE Closing Cash Balance Restated 2018 Year Audited 2018 Year to Restated 2017 - Project I Audited 2017 - Project to Date (VT million) Date (VT mfl I ion) to Date (VT million) Ito Date (VT million) Designated Account - RBV 203.7 92.2 329.4 341.4 Designated Account - MFEM Counterpart Account - GoV Closing Cash Balance 203.7 12 , 2 329.4 341.4 N,T,: Thkdo,i,g a, 32,t 0- N-1 ZD18 It is importantto note that the restated 2017 closing balance was Vt.329.4 million relative to the Vt.341.4 million in the audit 2017. The inference is that in 2017, an accrued amount of Vt.11.8 million was not recorded by the auditors, however the general ledger showed that Vt.11.8 was actually paid in 2017. This was reviewed and therefore the restated actual expenditure for the period was Vt.70.6 million not the audited amount of Vt.58.6 million. The increase in actual expenditure in that period attributed to the restated closing balance to Vt.329.4 million. In the same vein, the 2018 audited closing balance was Vt.92.2 million. The Vt. 111.4 million revenue was not reflected in the audited report. It was transferred from the World Bank to the Designated Account, however the Department of Finance and Economic Management did not transfer the equivalent amount to the general ledger when the financial statement was prepared. 14 However, it was advised by the World Bank that the 2018 audited accounts need to be reviewed with the intention to accurately show the revenue of Vt.111.4 million credited in 2018 fiscal year. Now that the revenue of Vt.111.4 was in the general ledger, the restated closing balance for 2018 was Vt.203.7 million relative to the audited report with Vt.92.2 million. 6. BUDGET 22) Desgn and upervisonn_w. 2M. 18. - 0 .7 Grant - MFEM 92.4 19?,S 82A4 Credit - MFEM OetgCt93 0 93s6 WB Funds any.A 2VA. .o. Part 1: Roads Reconstruction and Improvement 135.1 93.3 Z5O 2M_7 2S.7 6157.7 1.1) Road Sector Assets 1as.o 26M3 266.9 - 33.3 1.2) Design and Supervision 23.7 18.8 23.7 1.3) Incremental Operating Cost 0.s - 0.7 Part 2: Schools Reconstruction and Improvement 404. 2.0 40,0 342 12.9 1. 2.1) Schools /a 40.0 - - jo0a 2.2) Design & Supervision -3 2 2.9 _3.2 2.3) Incremental Operating Cost 0.3 1.3 Part 3: Public Buildings Reconstruction and Improvement MO 13.2 so.o 13.2 13.2 16.3 3.2) Design & Supervision j 13.2 13,21- 13 2 3.3) Incremental Operating Cost Part 4: Project Implementation & Technical Support 82.4 82.4 82.4 m03.8 11.6 213 4.1 Project Implementation 82.4 1o3.8 111.6 214 4.1.1) Project Staff / c 72.0 so.6 98.2 - 8 5 4.1.2) Project Vehicles / d Ia 1.1 3 2 1.1 4.1.3) Project Operating Cost / e 9 7.1 71 97 OA 4.1.4) Annual Project Audits 0.5 O6 05- 0.1 4.1.5) Technical Support - 14 - 12.4 Category 5: Contingency Emergency Response Tntml 287.4 191.2 297A a".2 413.4 11261 As shown in the Table above, Column 2 shows the Grant Budget for 2018, and Column 3, shows the Budget for the Grant 2018 Fiscal Year by allocating the budget into Three Parts - Part 1 (Roads), Part 2 (Schools) and Part 4 (Project Implementation and Technical Support). Column 4 shows the Balance for Fiscal Year 2018. a. REVENUE VARIANCE BETWEEN BUDGET AND ACTUAL The VIRIP budget is held at the Designated Account with the Reserve Bank of Vanuatu. In order to expedite funds for the purpose of project implementation, MIPU have to transfer the funds with the Assistance of the Department of Strategic Policy, Planning and Aid Coordination (DSPPAC) and with the provision of Development Code to be established with the Department of Treasury and Finance. 15 The Grant (VT. 82.4 million) and Credit (VT.205 million) in 2018 have been received and deposited at the Designated Account at the RBV and later transferred to the Project Code 17B978 with the Department of Treasury and Finance. The audited report 2018 reported a revenue of Vt.176.0 while the actual received by Finance Department was Vt.287.4 which has a variance of Vt.111.4 million. This has to be corrected as per the World Bank records. When the other tranches are received, similar process will be followed. To date, the total Revenue (grant and credit) received in was VT.687.4 million, that is Vt.400 million was receipted in 2017 and Vt.287.4 million was receipted in 2018 respectively. It is important to note that there is no variance in the revenue budget because inflows (revenue) is positive relative to the Outflows (expenditures). This is attributed to the fact that in 2018, works program and activity proposal were in the development stages which indicated to only two major road works particularly the Kings Cross road on Tanna Island. b. EXPENDITURE VARIANCE BETWEEN BUDGET AND ACTUAL In 2018, the VIRIP implementation improved from the infant stage to crawling stage where major infrastructure works began to be implemented. This include continued working together with the Public Works Department to improve the Activity Proposal development and scoping of works. Now that the team has completed the management tools for example the Project Operational Manual and other manuals to guide the project implementation and getting staff in place in early 2018, work has progressed. In 2018 fiscal year the expenditures stood at Vt. 413.1 million with a budget balance of VT.203.7 million. The Final Indicative Budget for the planned for the year was Vt.616.8 million. It should be noted that there has been change of the total expenses in page 7 from Vt.425.1 million to Vt.413.3 million under "Receipts/Payments Audited Financial Statements Actual" column. As per the original Audited report, the Statement of Cash Receipts and Payments reflected total expenses of Vt.425.2 million while the Statement of Actual Vs Budget stated total expenses was Vt.413.4 million. The difference was due to the expenditures rolled over from 2017 and therefore paid in 2018. Moreover, it was recognised that in previous audited financial statement in 2018 all capital expenditures were lumped together. This proofed difficult to show the actual expenditures for different category under the financing agreement. However, in this restated financial statement, it was agreed with the office of the Auditor General that reporting should reflect the different parts of the Vanuatu Infrastructure Reconstruction and Improvement Project. That is to reflect the breakdown as per the financing agreement. 16 The underspent in the 2018 budget was attributed to few program activities for the roads, schools and public buildings. This was anticipated because the development of activity proposals has to be scoped and assessed by the Department of Public Works and the PST (Project Support team) and then seeking approval from the World Bank. This also associated to the development of tools that needs to be completed for the monitoring, assessment and quality control measures of works and so forth. Furthermore, this is also due to resources availability to the PST. In 2018 fiscal year, the restated actual expenditure stood at Vt.413.1 million which correlates to the interim financial reports (IFRs) submitted to the World Bank for both semesters. The difference in amount from the audited report 2017 and restated amount 2018 was attributed to the Vt.11.8 million accrued in 2017. 7. RELATED PARTIES There are no related party transactions as at 31 December 2018. The procurement / tender is managed and supervised by the Procurement Specialist / VIRIP Team and the Project Implementing Committee (PIC). Furthermore, the World Bank will have to approve the Project Proposals (AP) with the associated assessment and documents before an activity is tendered openly. 8. IMPREST There is outstanding Imprest as at 31 December 2018 which has been retired in March 2019. 9. CREDITORS AND PAYABLES There are no outstanding payables as at 31 December 2018. 10. STATEMENT OF COMMITMENTS During the year ended 31 December 2018, VIRIP has signed contracts with service contractors and works contractors. These contracts were extended beyond the balance date as outlined below: Contractual Commitments (VT. million) Due not later than 1 year 503.8 Due between 1 and 5 years 216.9 Total 720.7 11. DEBTORS AND RECEIVABLES There are no outstanding debtors as at 31 December 2018. 17