TUVALU ENERGY SECTOR DEVELOPMENT PROJECT Funded by: World Bank (International Development Association - (IDA Grant D029-TV) Small Island Development Fund (SIDS) DOCK Support Program Multi Donor Trust Fund - (TF018949) Government of Tuvalu (GoT) FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2017 TUVALU ENERGY SECTOR DEVELOPMENT PROJECT Contents - Statements by Tuvalu Energy Sector Development Project 3 Notes to the Financial Statement 4-5 Statement of Funds Received and Expenditures - By Component by Source 6 Statement of Funds Received and Expenditures - By Category by Source 7 Statement of Balances 7 Audit Opinion 8-9 2| TUVALU ENERGY SECTOR DEVELOPMENT PROJECT FOR THE FINANCIAL YEAR ENDED 313 DECEMBER 2017 On behalf of the Tuvalu Energy Sector Investment Project, we state that in our opinion the accompanying financial statement of the project set out in pages 4 to 7 for the year ended 31s' December 2017 are drawn up so as to (1) give a true and fair view of state of affairs of the project and the result of its operation and statement of balances, (2) in accordance with the accounting policies described in Notes to the financial statement. We are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate. Mr. afalu Ltolua M-Avafya Irata Project Manager . Chief Executive Public Utilities & Infrastructures Dated V J2 31 Tuvalu Energy Sector Development Project For the year ended 31 December 2017 The Tuvalu Energy Sector Development Project (TESDP) officially commenced on 25 February 2015 being the effective date of the IDA Grant D029-TV. The closing date is currently set as 31 March 2019. TESDP is funded jointly by the World Bank (WB; through its International Development Association - IDA), the Small Island Development States (SIDS) DOCK Support Program Multi Donor Trust Fund - TF018949 and the Government of Tuvalu (GoT), as follows: * IDA - Grant of Special Drawing Rights (SDR) 4.8 million (with estimated AUD$ equivalent of AU$ 8.12 million); established through a Financing Agreement dated 25 February 2015. * SIDS MDTF - US$ 2.1 million (with estimated AU$ equivalent of AU$ 2.63 million); established through a Financing Agreement dated 25 February 2016. The objective of TESDP is to enhance the Recipient's energy security by reducing its dependence on imported fuel for power generation, and by improving the efficiency and sustainability of its electricity system. The Project consists of the following components: Component 1 - Renewable Energy Investments: Part 1. Supply and installation of power generation and grid management equipment such equipment to include, solar photovoltaic, wind-power generation, batteries, battery inverters and an integrated power-control systems and a satellite based communications system. Component 2 - Energy Efficient Investments. Carrying out of program of activities designed to enhance efficient use of energy, such to include: (a) Supply and installation of prepayment meters for TEC consumers and smart meters for the largest electricity consumers. (b) Supply and installation of selected energy efficient investment, such as enhanced insulation in buildings to be selected by TEC in accordance with criteria agreed with Association; and replacement of inefficient lighting and appliances in said buildings. (c) Developing policy, standards and labelling for energy efficient. (d) Activities aimed at raising the consumer awareness on energy efficient, and related capacity building activities and training. Component 3 - Technical Assistance and Project Management Support (a) Carrying out of program of activities designed to enhance the capacity of the Recipient and TEC for implementation of the project, including, coordination, administration, technical operation, procurement, financial management, environmental and social management, monitoring, evaluation and reporting of the project. (b) Provision of technical assistance to support the Recipient in mainstreaming gender dimensions inti the Project. 41 Tuvalu Energy sector Development Project For the year ended 31 December 2017 The TEC is responsible for implementing the project including financial management and procurement for this project and be responsible for realizing the governmental accounting, payments, withdrawal applications and auditing as well as managing risks during project implementation, such as operational, developmental, social, environmental, governance, reputational, and capacity/implementation, as appropriate, to the Project's development effectiveness, as well as responsible for project budgeting, accounting, reporting and support in Procurement, Disbursements and Audited financial statements. TEC remains responsible as the implementing agency for contractual obligations and legal covenants. TvAIP-PST is responsible for the oversight of all financial and accounting operations of the project. WB administers both the IDA and SIDS MDTF funding. One bank account ("Designated Accounts") has been established in Tuvalu. In addition, larger payments under WB-administered funding may be made directly by WB and charged directly to the respective grant, rather than channelling through the Designated Accounts, in accordance with agreed WB procedures. The Financial Statements are prepared by TvAIP under the historical cost convention and in accordance with the modified cash basis of accounting; expenditures are charged when paid except: * Advances (which are given for approved official purposes only) are charged against a Receivables Account initially, and are charged to expenditure based on advance acquittals with supporting documents; and * Payables are taken up for income tax and provident fund liabilities at the time of payment of salaries and are cleared through the settlement of the liabilities to the respective authorities, on a monthly basis. The reporting currency is Australian Dollars (AU$). Transactions in currencies other than AU$ are translated into AU$ using the actual exchange rate applied by the bank (where the transaction are paid from the Designated Accounts) or at the applicable rate (where the transactions are paid directly by WB). Although there were expenditure incurred during the financial year, no Withdrawal Application for replenishment was made as there was a need to sort out the new authorised signatories. This is the second year of operation for TESDP and the Financial Statements therefore include figures for Prior Year, 5I Tuvalu Energy Sector Development Project Year Ended 31 December 2017 2017 2016 Total All TotalAll Sources IDA SIDs Sources IDA SIDs Project Funding $ $ $ $ $ $ Funding to TvAIP Bank Accounts 639,971 479,987 159,985 640,000 480,000 160,000 Direct Payrnnts by World Bank 639,971 479,987 159,985 640,000 480,000 160,000 Project Expenditure: Component 1 -Renewable Energy Investments - . Component 2 - Energy Efficiency Investments - - Component 3 - Technical Assistance and Project Management Support Country Project Operation Costs International Travel 16,683 16,683 Perdierns 22,938 22,938 Office Supplies 613 613 Fixed Assets 5,180 5,180 Meeting 2,570 2,570 Other Expenditure 468 468 Finance Costs 223 223 - 29 14 16 Technical Assistance & Project Support 89,823 89,823 - Total Project Expenditure 138,498 138,498 - 29 14 16 Closing Balances 501,473 341,488 159,985 639,971 479,987 159,985 61 Tuvalu Energy Sector Development Project Year Ended 31 December 2017 2017 2016 Total Al Total All IDA SIDS IDA SIDS Sources Sources $$ $ $ $ 5 Project Funding Opening Balance 639,971 479,987 159,985 Funding to TESDP Bank Accounts - 640,000 480,000 160,000 Direct Payments by World Bank - - 639,971 479,987 159,985 640,000 480,000 160,000 Project Expenditure: By Category 1 Goods, works, tra inig, non-consulting services and consultantF services and training, 2. Increnental Costs 48,675 48,675 - 29 14 16 Total Project Expenditure 138,498 138,498 - 29 14 16 Closing Balances 501,473 341,488 159,985 639,971 479,987 159,985 Tuvalu Energy Sector Development Project Year Ended 31 December 2017 2,017 2,016.00 Total All IDA SIDS TtolAll IDA SIDS Sources $ $ Sources $ $ $ $ Cash at Bank Balance per DA Statement /IFR 500,199.49 340,215 159,985 Fundi ng to TESDP Bank Accounts 639,971 479,981 i59,985 Accounts Receivables Mafau lotolua 1.712 1,712 Puvsie Lefai 1,631 1,631 Accounts Payables Provident Fund (1,208) (1,208) PAYE (862) (862) Total Balance per Statement of Funds Received & Expenditure 501,473 341,488 159,985 639,971 479,987 159,985 7! GOVERNMENT OF TUVALU Office of the Auditor-General Private Mail Bag, Vaiaku, Funafuti, TUVALU Emal: doff Phone No: + (688)20131, 20132: Fax No: + (688) 20133 30 Auiust 2018 Thie Project M'lanager Tuvalu E-nergy Sector Developnent ProJect Fuiinafu11t i, a) Audit opinion of the TESIP Financial Statements We hax e audited the accompany'ing lFinancial Statemients Comprising Statement o1 Funds Received and E-xpenditures and Statement o[ Balances oftlIe tuvalu Lnergy Sector DC clopnient Project for the \ear ended 31 December 20 1 7. These statements are the responsibility of the TuX alu nergy Sector Devclopment Project and managelent is responsible för such internal control as managenient determines is necessary to enable the preparation of financial statements that are frec froni material misstatement. wliether duc to fraud or error. Our responsibility is to express an opinion thereon based on our audit. We conducted our audit in accordane wi the International Standards ol Suprene Audit Institutions. These standards require that we plan and pertorn Ilie audit to obtaln reasonable assurance about wx hether the financial statements are firee of material iisslateient. An audit includes exaniing. on a tesi basis. exidence supporting the aniounts and disClosures ini the financial staternents. An audit also incliudes assessing the aCCounting principles used and significant estimates made by iiianaentiei as wkell as ev\al uatin, the overall statement presentation. We bieieve our audit1 provides a reasonable basis for our opinion -lie I ual iE Knergy Sector Dexelopnient roect nianagement's policy is to prepare the accompanyinge statements on the cash recei pts anid paym1 ents biasis ini confority wxxxith ilie miodifhied cash basis of accounting. On this basis. cash reeeipts are recognized w\hen receixed and cash expenditures are recognized w\hen paid rather IIthan wh1lei incurred except for advances and paNahles. In our opinion. the 1inancial statements present fairly the cash receipts anid paynients of the project during the year ended 3 l December 2017 in accordance wxtli the niodified cash basis. b) Audit opinion on the accuracy and propriety of Expenditures \e have audited the accompanyino Statement of Funds Received and Expenditures for the ear ended 31 December 2017. We conducted our audit in accordance w\ith the International Standards of Supreme Audit Institutions that accordinly included examination. on a test basis. of cvidence supporting the amounts and disclosures in the Statement of Funds Received and Expenditure. An audit also includes assessing the accoLntin, principles used and significant estimates made by management as wkelI as cValuatin, the overall statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Funds Received and IExpenditures is fairly presented. c) Audit Opinion on the Operation of the Designated Accounts We have audited the operation of the designated accounts w\ith its balance showxn in the accompany ing Statement of Balances for the year ended 3 1 December 2017. We conducted our audit in accordance with International Standards of Supreme Audit Institutions that accordinuly included examination, on a test basis. of evidence supporting the amounts and disclosures in the Statement of Balances. Our testing also includes ensurin that ftinds in the designated accounts were used on projcct related purposes in an eftective and efficlent manner. In our opinion. the designated account is presented tairly and is operating \\ith appropriate internal controls. d) Key internal control weaknesses and non-compliance with the Financing agreement terms. No kex internal control wxeaknesses wCrC noted durin l the audit. No instances of non-compliance with the Financing agreement terms wkere noted during the audit. Eli ILopati Auditor General of Tuvalu Vaiaku. unafuti. Tuv aiu. 91