KIRIBATI AUDIT OFFICE. Independent Auditor's Report

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1 Public Disclosure Authorized KIRIBATI AUDIT OFFICE Tell: (686) P.0 BOX 63 Tel2: (686) Bairiki, Tarawa K,,/ Kiribati Audit for an impact for the public Independent Auditor's Report Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized To the readers of Kiribati Grid Connected Solar Photovoltaic Project Financial statements for the year ended 31 December 2017 We have audited the Financial Statements of Kiribati Grid Connected Solar Photovoltaic Project (KGCSPP) funded by GEF Grant TF and PRI F Grant TF which comprised of the Statement of Cash Receipts and Payments for the year ended December 31, 2017, and a summary of significant accounting policies and other explanatory information. Management's Responsibility Management (Executing Agency) is responsible for the preparation and fair presentation of these financial statements in accordance with Cash Basis IPSAS "Financial Reporting under the Cash Basis of Accounting" described on Page 6, and for such internal control as management determines necessary to enable the preparation of the Financial Statements free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the accompanying statements based on our audit. We conducted our audit in accordance with international Standards on Auditing. Those standards require that we comply with ethical requirements, plan and perform the audit to obtain reasonable assurance that the Financial Statements are free from material misstatement. Our audit includes testing of controls, examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. Our audit also includes the evaluation of the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Projects Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The Project Management's policy is to prepare the accompanying statements in the format agreed between the Donor's and the Government of Kiribati as noted in the Financial Management Manual for the Loan/ Grant, on a Cash Basis Accounting which recognizes cash when received and expenses when paid, rather than when incurred. Unqualified Opinion In my opinion, the KGCSPP Financial Statements and appended notes, present fairly in all material respects, the Cash Receipts and Disbursements of the Project for the year ended December 31, 2017 in accordance with the Cash Basis of Accounting described on Page 6; and that Expenditures have been applied to the purposes intended for in the Grant agreements and within the project's budget. In addition; With respect to Statements of Expenditure, adequate supporting documents have been maintained to support claimsto the Donor for reimbursements of expenditures incurred which are eligible for financing under GEF Grant TF and PRIF Grant TF h June, 2018 Mrs. Matereta B Raiman Auditor GeneraL

2 KIRIBATI GRID CONNECTED SOLAR PHOTOVOLTAIC PROECT Funded by: Global Environment Facility (GEF) Grant TF and Pacific Region Infrastructure Facility (PRIF) Grant TF FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2017

3 KIRIBATI GRID CONNECTED SOLAR PHOTOVOLTAIC PROJECT Contents Introduction 2 Statement of Cash Receipts and Payments 3 Statement of Comparison of Budget and Actual 5 Statement of Accounting Policies and Notes 6 1

4 O Gcvernrnent on 1(,iati KIRIBATI GRID CONNECTED SOLAR PHOTOVOLTAIC PROJECT The Financial Reports for the project for its fourth year of implementation ending 31 December 2017 are being presented for auditing. In compliance with the project agreements the audit report is required to be submitted to the World Bank by 30 June 2017, and we would request your kind offices if the auditing could be completed by the due date. All financial records for the project are held within the Kiribati Fiduciary Services Unit at the Ministry of Finance & Economic Planning. Wayn Brea y Tiaon Aukitiono CEO, Public Utilities Board Project Manager, GCSPV Date: 18 May

5 STATEMENT OF CASH RECEIPTS AND PAYMENTS BY DONOR AND COMPONENT (AU$) (1) FOR THE YEAR ENDED 31 DECEMBER 2017 Account Desci Notes Cumulative CASH RECEIPTS 1. TF (GEF) Designated Account 2 30,112 52, ,321 Direct Payments 2 106, ,401 Total 136, , , TF (PRIF) Designated Account 2 65, , ,334 Direct Payments 2 348,657 1,979,817 Total 414,580 2,137, ,334 TOTAL CASH RECEIPTS Designated Account 1, 2 96, , ,656 Direct Payments 1, 2 455,515 2,624,218 Grand Total 551,550 2,833, ,656 CASH PAYMENTS BY CATEGORY AND COMPONENT As per attached schedule 3 555,281 2,839, ,316 CASH RECEIPTS LESS CASH PAYMENTS (3,731) (5,629) 52,339 IMPRESTS 8 NET CHANGE IN CASH (3,731) (5,629) 52,339 PAYABLES 11 (2,318) (2,032) ADD OPENING CASH BALANCE AS AT 1 JANUARY 44,679 50,307 CLOSING CASH BALANCE AS AT 31 DECI 4 38,630 44,679 50,307 3

6 STATEMENT OF CASH RECEIPTS AND PAYMENTS BY DONOR AND COMPONENT (AU$) (2) FOR THE YEAR ENDED 31 DECEMBER 2017 CASH PAYMENTS 3 1. TF (GEF) Notes Cumulative Component 1 107, , ,845 Component 2 18,063 18,063 Component 3 37,834 47, ,305 Total 163, , , TF (PRIF) Component 1 320,436 1,988,277 2,308,714 Component 2 Component , ,661 Total 391,932 2,131,965 2,707,375 TOTAL CASH PAYMENTS 555,281 2,842,959 3,648,588 H788 & TF Component 1 427,888 2,651,671 3,079,559 Component 2 18,063 18,063 Component 3 109, , ,966 Grand Total 555,281 2,842,959 3,648,588 4

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8 (GEF Grant No. TF 1410S and PRIF Grant No. TF 14126) Statement of Accounting Policies and Notes 1. Accounting Policies Basis of Preparation The financial statements of the project have been prepared in accordance with the requirement of the Public Finance (Control & Audit) Act, which includes the requirement to comply with generally accepted accounting practice. The financial statements have been prepared in accordance with Cash Basis IPSAS "Financial Reporting under the Cash Basis of Accounting". In previous years, financial statements were prepared largely in accordance with the cash basis of accounting, but with certain modifications. There have been no other changes in accounting policies during the financial year. Reporting Entity These financial statements are prepared specifically for a project that is managed by the Ministry of Public Works & Utilities (MPWU). MPWU forms part of the Government of Kiribati (Gol<). The project is jointly funded by the Global Environment Fund (GEF) and by the Pacific Regional Infrastructure Facility (PRIF), through two grants, as follows: (i) GEF. Grant of US$ 1.00 million (with originally estimated AU$ equivalent of AU$ 1.00 million); established through a Financing Agreement dated 25 March (ii) PRIF. Grant of US$ 2.92 million (with originally estimated AU$ equivalent of AU$ 2.92 million); established through a Financing Agreement dated 25 March Funding arrangements provide that costs are to be to be split over the three different components of the project, with Components 1 (Investments) and 3 (Project Management) to be split at the ratio of GEF 25% and PRIF 75%. Component 2 (Capacity Building) will be split at the ratio of GEF 32% and PRIF 68%. W13 administers both the GEF and PRIF funding. The objective of the project is to support the Government of Kiribati to contribute in reducing Kiribati's dependence on imported petroleum for power generation in order to improve energy security and to reduce the GHG emissions from diesel fuel used for grid electricity supply in the country. Its specific objective is to serve as a catalyst for the substitution of the diesel based electricity generation for the South Tarawa grid by gridconnected solar PV supply of electricity. Under the Grant Agreements, there is only one Category of expenditure. The allocation of expenditure is managed accordingly through the component/activity structure. The project activities and budget is also managed according to the component/activity structure. 6

9 The grant agreements identified the budget activities according to the following three components to be implemented under the project: (i) Component 1 Investments. (ii) Component 2 Capacity Building. (iii) Component 3 Project Management. The project falls under the overall guidance of MPWU, though the Public Utilities Board (PUB) takes the lead in its actual project implementation, which is being coordinated by a Project Support Team (PST), which consists of a Project Manager and a Technical Assistant. Financial management and procurement support for the project continued to be provided through the Kiribati Fiduciary Services Unit (KFSU), which is established under the Ministry of Finance and Economic Development. The major activity being implemented by the project are the contracts for US$ 2,144,325 with CBS Power Solutions and NZ$668, with the South Pacific Synergies The project officially commenced on 18 June 2013, being the date when the both grants were made available. The closing date has been extended and is currently set as 31 October 2018; a further four months is available for settling expenditures incurred by 31 October Accounting Period IPSAS cash accounting standards require that general purpose financial statements be prepared at least annually (IPSAS cash para 1.4.1). These financial statements cover the fiscal year The balance of undrawn grants as at 31 December 2017 is as follows: GEF PRIF US$ 291, which is approximately AU$ 0.37 million US$ 854, which is approximately AU$ 1.1 million Currency Reporting Currency The reporting currency is Australian Dollars (AU$). Foreign Currency Incountry payments made in foreign currencies and reported in these financial statements have been converted to AU$ by the ANZ Bank at the applicable rate as of the date of transaction. Direct Payments made in foreign currencies and reported in these financial statements have been converted to AU$ based on the exchange rate as per as of the transaction value date. The incountry fund receipts transferred from the World Bank were all in AU$. Withdrawals from the grants are charged against the grants, in the respective grant currency, based on exchange rates applied by the World Bank. 7

10 Cash and Cash Equivalents Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value. Direct Payments made by World Bank GoK also benefits from payments made directly by the World Bank. These payments do not constitute incountry cash receipts and payments of GoK, but do benefit GoK. They are disclosed as Direct Payments in the Statement of Cash Receipts and Payments, and in these Notes. 2. Cash Receipts (AUD) Details of the cash receipts, for each of the GEF and PRIF grants, are given in the table on the following page. The Designated Account (DA) is the locallymanaged, account; funds are transferred from WB periodically, from which payments are made. Direct Payments are made by WB directly to the supplier/consultant, based on the official request of the authorized signatories of the project. GoK receives the funds into the DA (covering both GEF and PRIF funding), which are managed by MPWU/KFSU, with signatories as agreed by GoK. Under this arrangement MPWU carries out the implementation of the project, and KFSU makes payments on their behalf after appropriate authorization and documentation provided by MPWU. 8

11 SUMMARY OF CASH RECEIPTS A. GEF GRANTTF KI 1. Designated Account Amount WA WA Amount Date DA No. Details AU$ Disbursed by Value Date Equiv. Grant No.AU$Currency WB (US$) 28Jun ANZ Bank Acct # Replenishment of expenses $ 9, $ 9, Jul17 $ 7, Apr ANZ Bank Acct # Replenishment of expenses $ 7, $ 7, May17 $ 5, Feb ANZ Bank Acct # Replenishment of expenses $ 13, $ 13, Feb17 $ 10, $ 30, $ 30, $ 22, Direct Payments Date Amount WA Amount Equivalent in Equivalent Grant Received Paid to Details Disbursed by Exchange Rate Value Date Euvaent Grant WA (U5D$) WBAU$ Currency (US$) by WB No.WB 30Nov SPS Contract payment $46, $ 46, $ 61, $ Aug17 46, Aug SPS Contract payment $36, $ 36, $ 46, Aug17 36, $107, $ 82, B. PRIF GRANTTF KI 1. Designated Account Amoaunt WA WA Amount Equiv. Grant Date No. DA No. Details AU$ Disbursed by Value Date Currency (US$) WB 28Jun ANZ Bank Acct # Replenishment of expenses S 3, $ 3, Jul17 $ 2, Apr ANZ Bank Acct # Replenishment of expenses $ 21, $ 21, May17 $ 15, Feb ANZ Bank Acct # Replenishment of expenses $ 41, $ 41, Feb17 $ 32, Direct Payments $ 65, , $ 50, Date Date ~WA Amount Amount Amut Equivalent in Equivalent Grant Received Paid to Details Disbursed by Exchange Rate Value Date Euiaent Grant WA (US$) A$Currency (US$) by WB WB No. 22Nov SPS Contract payment 138, , , Dec17 138, Aug SPS Contract payment 109, , , Aug17 109, Jan TRAMA Contract payment 21, , , Jan17 21, $350, $ 269, TOTAL DRAWDOWNS FROM WORLD BANK (2016) AUD $ 553, USD $ 42S, Prior Periods GEF AUD $ 799, USD $ 602, PRIF AUD $2,335, USD $ 1,746, Cumulative GEF AUD $ 936, USD $ 1,851, PRIF AUD $2,751, USD $ 2,065,

12 3. Cash Payments (AUD) The summary of payments is given in the Statement of Cash Receipts and Payments, and is further detailed in the table on the following page. 4. Cash Balance The closing cash balance in these financial statements is reconciled with the balance in the DA as at 31 December The closing cash balance is summarized in the table below. Balance as per Bank Statement 39, Less: Outstanding cheques 1, Balance as per Cash Book AU$ 38, Employee Entitlements No provision is required for employee entitlements. 6. Budget The approved budget is developed on the same accounting basis (cash basis), same classification basis, and for the same period during which withdrawals from the grant accounts are made as for the financial statements. It encompasses the same entities as the financial statements. The lifetime budget in AU$ as per these financial statements is as per the budget agreed by MPWU. The remaining budget available is expected to be utilised over the remaining period of the project, taking account of the closure date. The annual budget for 2017 taking account of the closure date is AU$ 1,697, The lifetime budget is monitored against the likely amount of AU$ to be generated from the SDR/US$ grants, to ensure that the grants are not overcommitted. 10

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14 7. Commitments The outstanding (unpaid) contract commitments, as at 31 December 2017 is AU$ 550,319 as follows: Component 1 494, , Component 2 Component 3 56, , Total 550, , All commitments are due before the end of the Project closing date. Commitments for contracts in currencies other than AUD have been converted to AUD using the exchange rate as at 31 December Imprests As at 31 December 2017, there were no unretired imprests (2016 Nil) had not been retired yet. 9. Property, Plant & Equipment Payments for Property Plant & Equipment (PPE) are charged fully as disbursements under the respective Component, and included in the Statement of Cash Receipts and Payments, at cost; these are recorded in a PPE Register, for the purposes of inventory control. The PPE Register is shown on the following page. There is no PPE purchased in 2017 as well as purchased on hire purchase schemes and no depreciation is being charged. 10. Related Parties There were no related party transactions during the year. The ultimate owner of the project is GoK, as set out in the Grant Agreements. 11. Creditors (i) income tax and provident fund contributions are recorded in the books at the time of payment of salaries. In previous years financial statements, the payable amount at 31 December had been included as expenses, with the payable amount also shown. In these financial statements, the income tax and provident fund payable amounts at 31 December 2017 are not included. The payable amounts at 31 December are as follows: Component , Total ,

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