THE WORLD BANK FINANCIAL STATEMENT FOR THE GLOBAL PARTNERSHIP ON OUTPUT- BASED AID PROJECT TF 16279 IN VANUATU For the Year Ended 31 December 2016 Prepared Under IPSAS: Financial Reporting Under the Cash Basis Accounting TABLE OF CONTENTS PRO JECT BAC KG RO UND............................................................................................. 3 AUDITOR'S REPORT............. ........... .......................5 STATEMENT OF CASH RECEIPTS AND PAYMENTS..........................6 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL ........................7 STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS ...... ....8 . Accounting Policies......................................................8 2. Government counterpart funding ............................................. 0 3. Donor grant assistance ...................................................11 4. Operating Expenditure .............11................................ . 5. Capital Expenditure......... ...........2................................12 6. Closing cash balance................................................ .... 12 7. Revenue variance between budget and actual .............................. .....12 8. Expenditure variance between budget and actual ................................ 12 9. Imprest Account ....................................................... 12 10. Payments to Third Parties................................................12 11. Related Parties.......................................................12 2 IGlobal Partnership on Output-Based Aid Project - Financial Statements, 2016 PROJECT BACKGROUND Global Partnership on Output - Based Aid Project (GPOBA) provides Grant Funding of US$4.85 million to the Department of Energy (DoE) to support households to the grid network within the concession areas (Port Vila in Efate, Luganville, Espiritu Santo, Lenakel, Tanna and Lakatoro, Malekula) by 2018 when the project is expected to be concluded. The project under the oversight of the Department of Energy (TF 16279) - is planned to connect 4,375 households to the grid network within the concession area by 2018. The objective of the project is to increase sustainable access to formal grid-based electricity services within the Recipient's electricity concession service areas for low-income customers through targeted subsidies. The project consists of the following parts: Part 1: New Service connections for Low-Income Households Provision of OBA Subsidies to assist in covering the costs of connecting Eligible Households to grid- based electricity services. Part 2: Household wiring for Low-Income Households Provision of OBA Subsidies to assist in covering the costs of household wiring and energy saving light bulbs for Eligible Households gaining electricity connections under Part 1. Part 3: Project Management, Monitoring and Evaluation, Communications and Outreach, and Training Carry out activities to support implementation of the project, including among other things: a) Raising Beneficiaries' awareness of the OBA Subsidies under Part I and Part 2 and training on safe electrical practices; b) Development and adoption of technical standards and a licensing scheme for household wiring, including delivering training programs for electricians and monitoring compliance with standards; c) Monitoring and evaluation, financial management, supervision, and audit of the Project; and d) Technical training, support, and incremental operating costs for the Department of Energy. 3 1 Global Partnersip on Outp ut-Based Aid Project - Financial Statements, 2016 Part 4; Independent Verification Carrying out independent monitoring and verification connections through an independent agent. This report provides the financial statement for the Global Partnership on Output-Based Aid Project (GPOBA) TF 16279 for the 12 months ended 31 December 2016. The GPOBA project commenced in June 2014 and will end on 30 June 2018. Mr Jesse Benjamin Director General Ministry of Climate Change Adaptation, Meteorology, Geo-Hazards, Environment & Energy Port Vila, 23 June 2017 4 [ Global Partnership n Outpu-Based Aid Project - Financial Statements, 2016 parLners CHARTERED ACCOUNTANTS AND BUSINESS ADVISERS Independent Auditors' Report Global Partnership on Output-Based Aid The Auditor-General is the auditor of Global Partnership on Output-Based Aid (GPOBA). The Auditor-General has appointed Law Partners to undertake the audit of GPOBA pursuant to Section 24(1) of the Expenditure Review and Audit Act [CAP 241]. Scope We have audited the financial statements of Global Partnership on Output-Based Aid Project for the financial year ended 31 December 2016 consisting of the statement of cash receipts and payments, statement of comparison of budget and actual amount and accompanying notes set out on pages 6 to 12. Members' responsibility for the financial statements The Director of Ministry of Climate Change Adaption, Meteorology, Geo-Hazards, Environment and Energy is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards: Financial Reporting under the Cash Basis of Accounting. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditors' responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance 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 our 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, we consider internal control relevant to the entity's preparation and fair presentation of the 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 entity's internal controls. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Opinion In our opinion, the financial statements present fairly in all material respects the cash receipt and payments and cash flows of the Project for thel2 months ended 31 December 2016, in accordance with International Public Sector Accounting Standards: Financial Reporting under the Cash Basis of Accounting and the project administration complies with relevant Vanuatu legislation and regulations. LAW PARTNERS Chartered Accountants (Qualified auditors under Section 130 ofthe Companies Port Vila Act No. 25 of 2012 of the Republic of Vanuatu) 23 June 2016 TEL+678 22 091 FAX.678 23665 maitLawpartnersvanuatu.com PRINCOPALS LAW PARTNERS HOUSE JONATHAN LAW PO sOX 212 www.Iaw partnersvanuatu.com VICKI JOE PORTVILA I VANUATU FINANCIAL STATEMENTS GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 2016 2015 Receiptl(Paym Receiptl(Paym Consolidated Notes ent) ent) Project Total (VUV) (VUV) (VUV) 12 Months 19 Months 31 Months CASH RECEIPTS World Bank 3 6,030,183 15,560,631 21,590,814 Receipts Paid Directly to Third Party 10 27,577,860 10,550,040 38,127,900 World Bank - Funds Transfer directly to Development Fund 3 -860,001 860,001 - TOTAL CASH RECEIPTS 32,748,042 26,970,672 59,718,714 CASH PAYMENTS Consultants Services Under Part 4 of the Project 3,735,950 4,026,370 7,762,320 Consultants - SmartStream 275,000 - 275,000 OBA Subsidies Under Part 1 and Part 2 of the Project 27,577,860 10,550,040 38,127,900 Goods - 2,620,691 2,620,691 Workshops 335,125 - 335,125 Trainings Incrementing operating Costs 428,311 404,411 832,722 Unallocated funds TOTAL CASH PAYMENTS 4 32,352,246 17,601,512 49,953,758 CASH RECEIPTS LESS CASH PAYMENTS 395,796 9,369,160 9,764,956 INCREASE/{DECREASE) IN CASH 395,796 9,369,160 9,764,956 Cash at 1 January 9,369,160 Cash at 31 December 6 9,764,966 9,369,160 9,764,956 Mr Jesse Benjamin Director General Ministry of Climate Change Adaptation, Meteorology Geo-Hazards, Environment & Energy Port Vila, 23 June 2017 6 Global Partnership oi Output-Based Aid Project - Financial Statemenls. 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF COMPARISON OF BUDGET AND ACTUAL FOR THE YEAR ENDED 31 DECEMBER 2016 (Expressed in Vanuatu Vatu) 2016 2015 CONSOUDATED PROJECT TOTAL ACTUAL BUDGET Difference ACTUAL BUDGET Difference TOTAL ACTUAL FINAL BUDGEr VARIAICE Actual Vers us ActuaiVersus 12month 19month VW VUv Eudget vW VIN Budget OW vuv VUV 12 Months 12 Months 19 Months 19 Monts 31 Months 49 Monts CASH INFLOWS Worl Bank - Funds Transfer directly to DoE 32,748,042 110.367,640 (77,619,498) 26,970672 106,719.570 (79,748,898) 59,718,714 436,500,000 376,781,286) Total Receipts 32,748042 110,367640 (77,819,496) 26,970,672 106,719,570 (79,748,098) 9,718,714 436,00,000 (376,751,26) CASH OUrFLOWS Category 1: Consultants 275,000 4,788,000 (4.513,000) - 275,000 13,838,760 .13,563760 C 0 2,620,691 2,362,00 257,B31 2,6206,1 2,362,860 257,831 Worishops 335125 1,029,060 (693,935) - . - 335,125 2,158,200 -1,823,075 Training Increnental Operating Costs 428,311 905.400 1477,089) 404,411 707,400 (302,989) 832,722 3.185,100 -2,352,378 OBA Subsilies Uhder Part 1 and Part 2 of Category 2: the Proect 27577,860 96.750,00 (69,172,1401 10,550,040 93750.29 (E,199,90) 38,127,900 387,000,000 -348,87Z100 Consutants Services Under Part 4 of the Category 3: Paject 3,735,950 4,497,120 (1761170) 4.020,370 4,51,284 (474,914) 7,752,320 18,363,240 -10,60,920 UnalocEte Funds - 2,397,960 (2.397 0) - 2,398,G25 (2,398,026) - 9,01,40 -9,591,40 Total Payments 32,352,246 110,367,540 (78,01,2941 17,01,512 106,719,570 (89,11,058) 49,93,758 436,00,000 (386,646,242) NET CASH FLOWS 395,796 395,796 9,369,160 9,39,160 9,764,956 - 9,764,955 This statement is to be read in conjunction with the accompanying notes and accounting policies, - - Global Partnership on Output-Based Aid Project - Financial Statements, 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016 1. Accounting Policies a. Reporting Entity The Global Partnership on Output-Based Aid Project (GPOBA) is administered by the Department of Energy (DoE). The Grant is for Global Partnership on Output-Based Aid Project (GPOBA) which the objective of the project is to increase sustainable access to formal grid- based electricity services within the Recipient's electricity concession service areas for low- income customers through targeted subsidies. The project consists of the following parts: (i) New Service Connections for Low-Income Households (ii) Household Wiring for Low-Income Households (iii) Project Management, Monitoring and Evaluation, Communication and Outreach, and Training (iv) Independent Verification b. Authorization Date The financial statements of the Grant TF 16279 was for the year ended 31 December 2016 and was authorized for issue on 23 June 2017 by Mr. Jesse Benjamin for the Department of Energy. No other body has the power to amend these financial statements once they have been issued. c. Basis of Preparation The financial statements of the Grant have been prepared in accordance with requirements of the Public Finance and Economic Management Act [CAP.244] which includes the requirement to comply with generally accepted accounting practice. The financial statements comply with IPSAS "Financial Reporting under the Cash Basis of Accounting" for the year ended 31 December 2016. Global Partners/p on Output-Based Aid Project - Financial Statements, 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016 d. Presentation currency The financial statements are presented in Vanuatu Vatu (VUV). e. Foreign currency The grant funding payments received from the World Bank are in USD and have been converted by the Reserve Bank of Vanuatu at the rate on the day of the transaction. f. Cash and Cash equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Department of Energy receives the grant from the World Bank which is managed through the centralized SmartStream system. Under this arrangement the Department of Energy does not control the grant as their own bank account but rather the central entity will make payments on behalf of the department after appropriate authorization and documentation. These transactions have been disclosed in a separate column in the "Statement of cash receipts and payments". g. Property, Plant & Equipment Purchases of fixed assets have been included in the statement of Cash Receipts and Payments under Goods. Separate disclosure has been disclosed in Note 5 of these accounts. Fixed assets are stated at cost at the date of purchase. There are no fixed assets purchased on hire purchase schemes and no depreciation is being charged. h. Budget The budget is prepared on a cash basis when cash is expected to be received and paid. The classification of the budget is prepared on the common revenue sources and expenditure is classified on the nature of expenditure normally incurred by the project. Goods are treated as part of normal operational expenditure. 9 Global Partnership on Output-Based Aid Project - Financial Statements, 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016 h. Budget (continued) The final budget is the budget that was approved by the World Bank dated 02 June 2014. The approved budget is developed on the same accounting basis, classification basis, as the financial statements. The budget presented has been prepared for the whole project period of 49 months which is different to the 12 months period prepared for these financial statements. The reason for presenting a different period of budget to actual is because the grant agreement was only approved according to the budget given over the project life. The Grant Agreement identified the budget categories according to the following components to be procured under the project. It encompasses the same entities as the financial statement. Category 1: Goods, Consultant services, Incremental Operating Costs, Training and Workshops under Part 3 of the Project. Category 2: Output -Based Aid (OBA) Under Parts 1 and 2 of the Project Category 3: Consultants' services under Part 4 of the Project The budget was originally designed in USD and was converted into VUV at the rate of USD 1= VUV90 as per summary of disbursements, i. Changes in accounting policies There have been no changes in accounting policies during the financial year. j. Comparatives These financial statements are for the year ended 31 December 2016. The comparative figures are for the 19-month period ended 31 December 2015. 2. Government counterpart funding The project does not receive any funds from the Vanuatu Government as this project is fully funded by the World Bank 10 Global Partnership on Output-Based Aid Project - Financial Statements, 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016 3. Donor grant assistance In 2014, the Department of Energy signed a grant agreement (World Bank Grant No. TF16279) with the World Bank. The purpose of the project is to increase sustainable access to formal grid-based electricity services within the Recipient's electricity concession services areas for low-income customers through the targeted subsidies (Vanuatu Utilities Infrastructure Limited and UNELCO) and the arrangement was for US$ 4,850,000 from 2014 to 2018. The grant agreement specifically sets out the areas for spending of which US$ 350,000 allocated for the Goods, Consultant Services, Incremental Operating Costs, Training and workshops under Part 3 of the Project. OBA Subsidies under Parts I and 2 of the Project are allocated US$ 4,300,000 and US$ 200,000 allocated for Consultants' services under Part 4 of the Project. As at 31 December 2016, US$ 553,790.86 (total grant received as at 31 December 2016 equivalent to VUV 59,718,714) had been drawn down from World Bank with a remaining balance of US$ 4,296,209.14 to be drawn down from 2017 to 2018. 4. Operating Expenditure 2016 2015 12 Months 19 Months Provident Fund 137,020 149,020 Consultants Fees 3,873,930 3,877,350 Subsistence Allowances 105,000 5,000 Vehicle Fuel 60,001 50,000 Telephone / Fax- Communications 38,000 1,000 Vehicle Repairs & Maintenance 0 19,890 Lighting Utilities 27,577,860 10,550,040 Local Travel 142,125 32,200 Advertising -Communications 260,000 273,000 Printing -Communications - 19,000 Stationery- Communications 73,310 4,321 Office - Materials 5,000 - Incidentals 80,000 Total 32,352,246 14,980,821 11 Glbal Partnership on Outp ut-Based Aid Project - Financial Statements , 2016 GLOBAL PARTNERSHIP ON OUTPUT- BASED AID STATEMENT OF ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016 5. Capital Expenditure 2016 2015 Equipment -Additional General - 270,691 Vehicle - Additional Vehicle - 2,350,000 Total - 2,620,691 6. Closing cash balance 2016 2015 Made up as follows: Smartstream Central Account 9,764,956 8,509,159 World Bank- Funds Transfer directlyto Development Fund - 860,001 Total 9,74,956 9,369,160 7. Revenue variance between budget and actual The difference of VUV 77, 619,498 represents the actual amount received being less than the period budget. The variance relates to the funding from the World Bank that was delayed due to the project starting later than anticipated and also the different exchange rate used in the final budget which is US$1 = VUV 90 and the actuals that used the exchange rate on the transaction date. 8. Expenditure variance between budget and actual The project underspent VUV 78,015,294 against the budget of VUV 110,367,540. This is due to the late commencement of the project which required the establishment of new systems, processes and procedures compliant with World Bank requirements. These have now been established and many of the grant activities are progressing well. 9. Imprest Account As at 31st December 2016, there is no outstanding Imprest Account for the Trust Fund. 10. Payments to Third Parties There were six direct payments made to the two subsidies (UNELCO & VUI) in 2016. Direct Payment was made in the World Bank Financial System (Client Connection) for the Subsidy Claim payments. For reporting purposes, the Department of Energy is required to keep a record of every transaction that occurs in Client Connection. Therefore, a general journal has been prepared and processed into SmartStream by debiting the Lighting Utilities account and credit the Global Partnership Output-Based Aid: World Bank Contribution. 11. Related Parties There were no related party transactions during the year. 12 Global Partnership on Output-Based Aid Project - Financial Statements, 2016