Public Disclosure Authorized Public Disclosure Authorized Ministry of Environment, Republic of Lebanon PCB Management in the Power Sector - Project # P122540 Report and financial information for the year ended 31 December 2016 Public Disclosure Authorized Public Disclosure Authorized
PCB Management in the Power Sector - Project # P122540 Report and financial information for the year ended 31 December 2016 Page Independent auditor's report 1-3 Statement of cash receipts and payments by category 4 Statement of cash payments classifying the uses of funds 5 Statement of movements in the Designated Account 6 Notes to the financial information 7-10 List of signed contracts Appendix A
pwc Independent auditor's report to the Ministry of Environment, Republic of Lebanon Report on the audit of the financial information Our opinion In our opinion, the financial information of PCB Management in the Power Sector ("the Project") for the year ended 31 December 2016 presents, in all material respects, the sources and uses of funds, the expenditures by grant component and the movement in the Designated Account of the Project in accordance with the accounting policies described in note 2 to the fimancial information, as approved by the World Bank, and as required by the terms of the Financial Management Procedures Manual of Project, dated July 2015. What we have audited The Project's financial information comprise: * the statement of cash receipts and payments by category for the year ended 31 December 2016; * the statement of cash payments classifying the uses of funds for the year then ended; * the statement of movements in the Designated Account for the year then ended; and * the notes to the financial information. 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 Information's section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Ministry of Environment in accordance with the International Ethics Standard Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the financial information in Lebanon. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Basis of accounting and restriction on distribution and use We draw attention to note 2 to the financial information, which describes the basis of accounting. The financial information is prepared to enable the Project Management Unit ("PMU") to meet its reporting obligations to the World Bank under the terms of the Grant Agreement No. TF-018030. As a result, the financial information may not be suitable for another purpose. Our report is intended solely for the Ministry of Environment, Republic of Lebanon and the World Bank and should not be distributed to or used by parties other than the Ministry of Environment, Republic of Lebanon and the World Bank. Our report is not modified in respect of this matter. PricewaterhouseCoopers, Saba House Bldg., Block B/C, Said Freiha Str., Hazmieh, Lebanon, MoF # 95693 P.O. Box 11-3155, Beirut, Lebanon, Telephone +g61 (5) 4286oo, Facsimile +961 (5) 951979, wm.lutitonr/nriddeenn
2 Independent auditor's report (continued) to the Ministry of Environment, Republic of Lebanon Responsibilities of management and those charged with governance for the financial information The PMU is responsible for the preparation of the financial information in accordance with the accounting policies described in note 2 to the financial information and for such internal control as management determines is necessary to enable the preparation of the financial information that is free from material misstatement, whether due to fraud or error. In preparing the financial information, the PMU is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's responsibilities for the audit of the financial information Our objectives are to obtain reasonable assurance about whether the financial information 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial information. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism through the audit. We also: * Identify and assess the risks of material misstatement of the financial information, 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, 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 the reasonableness of accounting estimates 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 our auditor's report to the related disclosures in the financial information or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern.
3 Independent auditor's report (continued) to the Ministry of Environment, Republic of Lebanon 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. Z1 I % C Beirut, Lebanon 20 June 2017 7121
PCB Management in the Power Sector - Project # P122540 4 Statement of cash receipts and payments by category for the year ended 31 December 2016 From I January From 30 March to 31 December to 31 December 2016 2015 Sources of funds Note US$ US$ IBRD grant finds 6 173,379 130,400 IBRD direct payments 114,062-287,441 130,400 Uses of funds by project component Capacity building and project management 3 158,505 71,508 Inventory of PCB contaminated transformers 4 88,340-246,845 71,508 Surplus 40,596 58,892 The notes on pages 7 to 10 are an integral part of this financial information.
PCB Management in the Power Sector - Project # P122540 5 Statement of cash payments classifying the uses of funds for the year ended 31 December 2016 From I January From 30 March to 31 December to 31 December 2016 2015 Note USS US$ Capacity building and project management Consultants' 3 108,490 48,000 Equipment 3 15,202 10,560 Operating cost 3 17,515 10,173 Training 3 17,298 2,775 158,505 71,508 Inventory of PCB contaminated transformers Works 4 88,340 - Total expenditures by project component and sub-components 246,845 71,508 The notes on pages 7 to 10 are an integral part of this financial information.
PCB Management in the Power Sector - Project # P122540 6 Statement of movements in the Designated Account for the year ended 31 December 2016 Designated Account balance at the beginning of the year 58,892 Add: IBRD grant funds 173,379 IBRD direct payments 114,062 US 287,441 Less: Uses of funds (132,783) Direct payments (114,062) (246,845) Designated Account balance at 31 December 2016 99,488 The notes on pages 7 to 10 are an integral part of this financial information.
PCB Management in the Power Sector - Project# P122540 7 Notes to the financial information for the year ended 31 December 2016 1 Project background The Government of Lebanon became party to the Stockholm Convention on 3 January 2003. For the planning of appropriate action in the field of controlling POPs substances and releases as well as fulfilling the reporting requirements of the Convention, Lebanon submitted its National Implementation Plan (NIP) on POPs in 2006. According to the NIP, Lebanon's top priorities in POPs management are: (i) awareness raising; (ii) institutional and regulatory strengthening; (iii) PCB management; and (iv) management of emissions of dioxins and firans. The Lebanese Republic has obtained from the International Bank for Reconstruction and Development "IBRD" of the World Bank a grant of US$ 2.5 million to finance the implementation of the PCB Management in the Power Sector Project. The project's effective date was 30 March 2015 and its closing date is 30 June 2020. The objective of this Project is to dispose of high risk PCBs and improve the inventory management of transformers in the power sector in an environmentally sound manner. Given the risk of high content PCB equipment and the priorities set by the Stockholm Convention to eliminate PCB from Lebanon by 2025, this project will take action to: (i) (ii) (iii) conduct a country-wide inventory of the PCB contaminated transformers in the power sector in Lebanon, which will update the findings of a previously conducted survey in 2010; dispose of all the high content PCB equipment and OCB contaminated oil; and provide capacity building to stakeholders for an improved PCB management in the future. The Project Management Unit (PMU) within the Ministry of Environment is responsible for overall coordination and implementation of the Project. 2 Principal accounting policies and basis of preparation The Project Management Unit ("PMU") prepares the financial information of the PCB Management in the Power Sector ("the Project"). The Project's governing documents provide certain guidelines for governing its financial activities. To ensure observance of limitations and restrictions on the use of financial resources, the PMU classifies the Project's uses of funds for accounting and reporting purposes under the following components:
PCB Management in the Power Sector - Project# P122540 8 2 Principal accounting policies and basis of preparation (continued) Component 1 - Inventory of PCB contaminated transformers (USS 0.79 million): This component supports a countrywide inventory of the PCB contaminated transformers in the power sector in Lebanon including: (i) desk review to identify the number of transformers potentially contaminated, (ii) sampling and (iii) on-site and laboratory testing of PCB. Component 2 - Disposal of high-content PCB equipment and contaminated oil (USS 1.1 million): This component supports the disposal of PCB equipment and contaminated oil, including associated capacitors. Component 3 - Capacity building and project management: (US$ 0.65 million): This component supports project management and coordination activities including (i) the establishment and staffing of a Project Management Unit (PMU), (ii) training staff at the Ministry of Environment and other relevant institutions and (iii) building the capacity of technical staff in reviewing, sampling, testing and labelling of PCB contaminated oil. The Project's expenditures are reflected in the unaudited Interim Financial Reports (lfrs) presented to the World Bank office in Beirut on a quarterly basis. During the year ended 31 December 2016, total cash receipts received from the World Bank amounted to US$ 173,379 (2015 - US$ 130,400); disbursements made amounted to US$ 246,845 (2015 - US$ 71,508) and IBRD loan direct payments amounted to US$ 114,062 (2015 - nil). The significant accounting policies adopted by the PMU in the preparation of the financial information are as follows: Basis of preparation The financial information has been prepared in accordance with the cash receipts and disbursements basis of accounting. Sources of Funds Funds received are recognised when cash is received. Use of Funds Uses of funds, expenses and other disbursements are recognised when cash is disbursed. Eligible expenditures under the Grant Agreement are used, accounted for and classified in accordance with the conditions of the Grant Agreement and applicable laws and regulations of the PMU's financial activities.
PCB Management in the Power Sector - Project# P122540 9 3 Capacity building and project management From 1 January From 30 March to 31 December to 31 December 2016 2015 Us$ USS Consulting 108,490 48,000 Goods 15,202 10,560 Operating cost 17,515 10,173 Training 17,298 2,775 158,505 71,508 4 Inventory of PCB contaminated transformers Works From 1 January From 30 March to 31 December to 31 December 2016 2015 USS US$ 88,340-5 IBRD grant funds received The below table lists the IBRD grant fhnds received in the Designated Account during 2016: Receipt date UsS 2 July 2016 173,379 The below table lists the IBRD direct payments made by the World Bank for the project during 2016: Us$ Receipt dates 31 March 2016 12,222 22 April 2016 13,500 28 November 2016 88,340 Total direct payments 114,062
PCB Management in the Power Sector - Project# P122540 10 6 Balance of the Designated Account The table below shows the movement in the Designated Account during 2016: US$ Credit Debit Balance At 1 January 2016 130,400 71,508 58,892 31 January 2016 7,200 51,692 29 February 2016 1,500 50,192 31 March 2016 7,311 42,881 30 April 2016 924 41,957 31 May 2016-41,957 30 June 2016 1,985 39,972 31 July 2016 173,379 39,666 173,685 31 August 2016 26,087 147,598 30 September 2016 13,055 134,543 31 October 2016 6,949 127,594 30 November 2016 9,406 118,188 31 December 2016 18,700 99,488 Designated Account at 31 December 2016 303,779 204,291 99,488
PCB Management in the Power Sector -Project# P122540 Appendix A List of signed contracts Amount Amount Project Component Nature Date o committed paid to date signature no.in n in US$ in USS Capacity building and project management Goods 21-8-15 SHOO2 3,528 3,528 Capacity building and project management Goods 27-07-15 SHOO2 3,600 3,600 Capacity building and project management Goods 27-07-15 SHOO3 1,880 1,880 Capacity building and project management Goods 16-12-15 SHOO4 511 511 Capacity building and project management Goods 09-08-15 SHOO5 1,552 1,552 Capacity building and project management Goods 24-12-15 SHOO6 12,222 12,222 Capacity building and project management Goods 04-02-16 SHOO7 2,215 2,215 Capacity building and project management Goods 04-01-16 OC16 254 254 Capacity building and project management Consulting 31-12-15 FCOOI 17,900 5,370 Capacity building and project management Consulting 01-05-15 IC001 243,000 90,000 Capacity building and project management Consulting 01-05-15 1C002 75,600 30,000 Capacity building and project management Consulting 28-12-15 IC003 17,880 5,364 Capacity building and project management Consulting 28-01-16 IC004 12,096 12,096 Capacity building and project management Consulting 19-08-16 IC005 8,340 8,340 Capacity building and project management Consulting 27-09-16 IC006 19,600 3,920 Capacity building and project management Consulting 19-10-16 IC007 1,400 1,400 Inventory of PCB contaminated Works 24-10-16 PWOO1 883,400 88,340 transformers: Disposal of high-content PCB equipment Works 31-03-16 PWO02 231,355 and contaminated oil