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 2016 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 6 Statement of Balances 7 21 TUVALU ENERGY SECTOR DEVELOPMENT PROJECT FOR THE FINANCIAL YEAR ENDED 31' DECEMBER 2016 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 9 for the year ended 31" December 2016 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 the 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 otolua Mr Avafoa Irata Project Ma' ager Chief Executive Public Utilities & Infrastructures Dated i. .. / .. . 31 Tuvalu Energy Sector Development Project For the year ended 31 December 2016 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. 4| Tuvalu Energy sector Development Project For the year ended 31 December 2016 The TEC is responsible for mplementing 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 urder 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. * AUD$33,883.07 paid by TvAIP but not repaid by TESDP until 30 June 2017. This will be included in the 2017 financial statements. The reporting currency is Australian Dollars (AU$). 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). This is the first year of operation for TESDP and the Financial Statements therefore do not include figures for Prior Years. 5 Tuvalu Energy Sector Development Project Year Ended 31 December 2016 Total All Sources IDA SIDs Project Funding $ $ $ Fundingto TvAlP Bank Accounts 640,000 480,000 160,000 Direct Payments by World Bank - 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 29 14 16 Country Project Operation Costs Financial Costs 29 14 16 Total Project Expenditure 29 14 16 Closing Balances 639,971 479,987 159,985 Tuvalu Energy Sector Development Project Year Ended 31 December 2016 Total All IDA SIDS Sources $$ $ Project Funding Funding to TESDP Bank Accounts 640,000 480,000 160,000 Direct Payments by World Bank 640,000 480,000 160,000 Project Expenditure: By Category 1. Goods, works, training, non-consul ti rig services and cons ulta nts services and Training, 2. Incremental Costs 29 14 16 Total Project Expenditure 29 14 16 Closing Balances 639,971 479,987 159,985 61 Tuvalu Energy Sector Development Project Year Ended 31 December 2016 Total All IDA SIDS Sources $ $ Cash at Bank Funding to TESDP Bank Accounts 639,971 479,987 159,985 Total Balance per Statement of Funds Received & Expenditure 639,971 479,987 159,985 71 GOVERNMENT OF TUVALU Office of the Auditor-General Private Mail Bag, Vaiaku, Funafuti, TUVALU Email: tuvaltugditof f @go ty, Phone No: + (688)20131, 20132: Fax No: + (688) 20133 30 August 20 18 Ihe Project ManaLer Tovalu Energ Sector DeVelopmCnt Project FIlna flti. a) Audit opinion of the TE)ISDP Financial Statements We have audited the accompanying Financial Statements comprising Statement of Funds Received and Expenditures and Statement of Balances of the Tuvalu Energy Sector Development Project for the \ ear ended I December 2016. These statements are the responsibilit\ of the uxalu IEnergy Sector Development Project and management is responsible for such internal control as management determines is necessar\ to enable the preparation of financial statements that are tree from material misstatement. whether due to fraud or error. Our responsibilit\ is to express an opinion thereon based on our audit. We conducted our audit in accordance w\ith the International Standards of Supreme Audit Institutions. [hese standards require that wx e plan and perflorm the audit to obtain reasonable assurance about w\ hether the financial statements are free of material misstatement. An audit includes examining. on a test basis, C ideuce supporting the amounts and disclosures in the financial statements An audit also includes assessing the aCcounting principles LIsed and significant estimates made by management as kell as evaluating the oeraill statement presentation. We belicVC our audit provides a reasonable basis tOr outr opinion. The luxalu Fnergy Sector Development Project management's polic is to prepare the accompanying statements on the cash receipts and pa\ments basis in conformit\ w\ith the modified cash basis of accountin1. On this basis. cash receipts are recognized when reccived and cash expenditures are recognized when paid rather than xxhen incurred except lor advances and payables. In our opinion, the financial statements present fairl the cash receipts and payments of the project during the year ended 3 1 December 2016 in accordance with the modified cash basis. b) Audit opinion on the accurac and propriety of Elxpenditures We have audited the accompanying Statement of Funds Received and Expenditures for the \ ear ended 3 1 December 20 16. We conducted our aUdit in accordance \\ith the International Standards of Supreme Audit Insttittin that accordingl 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 aCCOuntii- principles used and significant estimates made by imianagcement as \well as evaluating2 the overall statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opini1ion. the Statement of uinds Received and Expendlitures is fai-r presented. c) Audit Opinion on the Operation of the Designated Accounts We have audited the operation of the designated accoLnts with its balance shown in the accompanying Statement of Balances for the year ended 31 December- 2016. WAe conducted our audit in accordance \\ ith International Standards of Supreme Audit Institutions that accordingly includedC examifnation. on a test basis, of evidence supporting the amounts and disclosures in the Statement of' Balances. Our testing also includes ensuring that funds in the designated accounts were used on project related purposes in an effective and efficient manner. In our opinion, the designated account is presented fairly and is operating w itlh appropriate internal controls. d) Key internal control weaknesses and non-compliance with the Financing agreement terms. No ke\ internal control \\eaknesses \ere noted during the audit. No instances of non-compliance w,kith the [inancin ii areement terms were noted dUring the audlit li ILopati Auditor General of Tuvali Vaiaku. 'unafuti. Tuv alu.