29MAR 211 RECEIVED EY Building a better working world Forest Carbon Partnership Facility (FCPF) Funded by the International Development Association under Financing Agreement Grant No. TF 014777 Report of the Project's Management and Audited Financial Statements For the period from 11 August 2014 to 30 September 2015 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 CONTENTS Pages General information 1 Report of the management 2 Independent auditors' report 3-4 Statement of receipts and disbursements 5 Statement of fund balance 6 Notes to the financial statements 7-12 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 GENERAL INFORMATION THE PROJECT Forest Carbon Partnership Facility ("the Project") was funded by International Development Association in accordance with the Financing Agreement Grant No. TF014777 dated on 11 August 2014. The total grant for the Project is three million six hundred thousand dollars (USD 3,6000,000). The objective of Grant is to assist the Reciptient to carry out the Reduced Emissions from Deforestation and Degradation REDD+ Readiness Preparation Activities which consist of the following parts: i) Readiness Process Management and Stakeholder Consultation. a) Establishment of operational Reduced Emissions from Deforestation and Degradation offices at the national levels and in selected provinces and development of protocols for coordination amount these offices; b) Assessment and alignment of REDD+ strategy and activities with the national policy, legal and regulatory framework; c) Establishment of a stakeholder participation working group, updating of the stakeholder participation and consultation plan acceptable to the World Bank, and development of an effective communication and outreach strategy, to ensure and facilitate participation of relevant stakeholder in REDD+ Readiness Preparation Activities. ii) REDD+ Strategy Development a) Carrying out of an assessment of the existing policy and regulatory framework to further develop and finalize the REDD+ strategy; b) Carrying out of analytical studies on land and natural resources tenure, right, access and use, and development of participatory land use plaining and REDD+ strategy options; c) Carrying out of the Strategic Envionmental and Social Assessment ("SESA") and development of the Environmental and Social Management Framework ("ESMF"), both in compliance with World Bank Safeguard Policies. iii) Implementation Arrangements a) Establishment of the necessary institutional, regulatory, and financial arragements for supporting the REDD+ preparatory process; b) Carrying out analytical studies on revenue management and benefit sharing mechanisms, establishment of a benefit sharing working group, and development of benefit sharing arrangements acceptable to the World Bank; c) Conduct of an assessment of existing feedbank and grievance redress mechanisms, and reinforcement and/or development, as appropriate, such mechanisms to address the needs of relevant REDD+ stakeholders; d) Assessment of the needs and development of options to build capacity in information and knowledge management of relevant institutions for the REDD+ preparation process. iv) Reference Emission Level and Monitoring Systems a) Development of reference emission levels aligned with REDD+ strategy; b) Design of a system to monitor, report and verify the forest carbon stock and co-benefits of REDD+; c) Establishment of a carbon registry, which can be used for both carbon and non carbon requirements of REDD+. Implementing agency is Ministry of Agriculture and Forestry, Department of Forestry (DOF). 1 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 REPORT OF MANAGEMENT THE PROJECT MANAGEMENT'S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS The Project's management is responsible for the financial statements which comprise the statement of receipts and disbursements and the statement of fund balance together with the explanatory notes thereto as at and for the period from 11 August 2014 to 30 September 2015. The financial statements are prepared solely to report to the Government of Lao PDR and the International Development Association ("IDA") on the funds received by the Project from the IDA and related disbursements made during the period. In preparing the accompanying financial statements, Project Management is required to: adopt the accounting policies as described in Note 3 to the financial statements and then apply them consistently in accordance with the presentation and disclosure requirements of IDA for the Government-executed Project; w make judgements and estimates that are reasonable and prudent; maintain proper financial operations and controls; maintain adequacy of the management structure and general control environment; ensure that all non-expendable properties are used solely for and by the Project, and maintain proper control over those properties; and comply with the related grant advance. Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the funds requested, authorized for, received and disbursed by the Project, and to ensure that the accounting records comply with the accounting policies as described in Note 3 to the financial statements. Management is also responsible for safeguarding the assets of the Project, and for taking reasonable steps for the prevention and detection of fraud and other irregularities. Management confirms that it has complied with the above requirements in preparing the financial statements. APPROVAL OF THE FINANCIAL STATEMENTS We hereby approve the accompanying financial statements as at and for the period from 11 August 2014 to 30 September 2015 which are prepared in accordance with the accounting policies as described in Note 3 to the financial statements and comply with the related grant agreements. The financial statements are prepared to assist the Project in meeting the reporting requirements of the donor. As a result, it may not be suitable for any other purpose and will not be distributed to or used by other parties. On behalf of Project Management: Khamsene OUNEKHAM Vilayphone SENGSAVANG National Project Director Head of Financial Unit Vientiane, Lao PDR 25 March 2016 2 Ernst & Young Lao Limiled. Tel : +856 21 155 077 6th Floor, Capital Tower Fax: +856 21 455 078 23 Singlha Road, Nongbone Village ey.com Building a better Saysettha Districl,Vientiane Capital, Lao PDR working world Reference: 61253240/ 18294923 INDEPENDENT AUDITORS' REPORT To: The Project's Management and the International Development Association We have audited the accompanying financial statements of Forest Carbon Partnership Facility ("the Project") which is funded by International Development Association ("IDA") under the Financing Agreement Grant No. TF014777 as set out on pages 5 to 12, which comprise the statement of fund balance as at 30 September 2015, and the statement of receipts and disbursements for the period from 11 August 2014 to 30 September 2015 together with the notes thereto ("the financial statements"). The financial statements have been prepared by the Project's Management in accordance with the accounting policies as described in the Note 3 to the financial statements. Responsibility of the Project's Management for the financial statements The Project's Management is responsible for the preparation of the financial statements in accordance with the accounting policies as described in Note 3 to the financial statements, and for such internal control as the Project's Management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on the financial 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 and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Project's preparation 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 Project's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Project's management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of the Project as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial statements. A member firm of Emst & Yourig Global Umited EY Building a better working world Accounting policies Without modifying our opinion, we draw. attention to Note 3 to the financial statements, which describes the accounting policies. As also disclosed in Note 2 to the financial statements, the financial statements are prepared to assist the Project's Management in meeting the reporting requirements of the IDA. As a result, the financial statements may not be suitable for another purpose. :n Vientiane, Lao POR 25 March 2016 A member firm of Ernst & Young Global Limited Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 STATEMENT OF RECEIPTS AND DISBURSEMENTS for the period from 11 August 2014 to 30 September 2015 For the period from 11 August 2014 to 30 Notes September 2015 USD Receipts Funds from IDA - Designated account replenishment 4 349,068 Total receipts 349,068 Disbursements by category Goods 5 114,108 Workshops and seminars 6 52,360 Consultancy services 7 12,885 Incremental operating costs 8 21,324 Total disbursements 200,677 Net receipts 148,391 Khamsene OUNEKHAM Vilayphone SENGSAVANG National Project Director Head of Financial Unit Vientiane, Lao PDR 25 March 2016 5 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 STATEMENT OF FUND BALANCE as at 30 September 2015 For the period from 11 August 2014 to 30 Notes September 2015 USD Fund balance Opening balance Net receipts 148,391 Closing balance 148,391 Represented by: Cash on hand and at banks 9 148,391 148,391 Khamsene OUNEKHAM Vilayphone SENGSAVANG National Project Director Head of Financial Unit Vientiane, Lao PDR 25 March 2016 6 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 NOTES TO THE FINANCIAL STATEMENTS as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 1. BACKGROUND INFORMATION Forest Carbon Partnership Facility ("the Project") was funded by International Development Association in accordance with the Financing Agreement Grant No. TF014777 dated on 11 August 2014. The total grant for the Project is three million six hundred thousand dollars (USD 3,6000,000). The objective of Grant is to assist the Reciptient to carry out the Reduced Emissions from Deforestation and Degradation Readiness ("REDD+") and Preparation Activities which consist of the following parts: i) Readiness Process Management and Stakeholder Consultation. a) Establishment of operational Reduced Emissions from Deforestation and Degradation offices at the national levels and in selected provinces and development of protocols for coordination amount these offices; b) Assessment and alignment of REDD+ strategy and activities with the national policy, legal and regulatory framework; c) Establishment of a stakeholder participation working group, updating of the stakeholder participation and consultation plan acceptable to the, World Bank, and development of an effective communication and outreach strategy, to ensure and facilitate participation of relevant stakeholder in REDD+ Readiness Preparation Activities. ii) REDD+ Strategy Development a) Carrying out of an assessment of the existing policy and regulatory framework to further develop and finalize the REDD+ strategy; b) Carrying out of analytical studies on land and natural resources tenure, right, access and use, and development of participatory land use plaining and REDD+ strategy options; c) Carrying out of the Strategic Envionmental and Social Assessment ("SESA") and development of the Environmental and Social Management Framework ("ESMF"), both in compliance with World Bank Safeguard Policies. iii) Implementation Arrangements a) Establishment of the necessary institutional, regulatory, and financial arragements for supporting the REDD+ preparatory process; b) Carrying out analytical studies on revenue management and benefit sharing mechanisms, establishment of a benefit sharing working group, and development of benefit sharing arrangements acceptable to the World Bank; c) Conduct of an assessment of existing feedbank and grievance redress mechanisms, and reinforcement and/or development, as appropriate, such mechanisms to address the needs of relevant REDD+ stakeholders; d) Assessment of the needs and development of options to build capacity in information and knowledge management of relevant institutions for the REDD+ preparation process. iv) Reference Emission Level and Monitoring Systems a) Development of reference emission levels aligned with REDD+ strategy; b) Design of a system to monitor, report and verify the forest carbon stock and co- benefits of REDD+; c) Establishment of a carbon registry, which can be used for both carbon and non carbon requirements of REDD+. Implementing agency is Ministry of Agriculture and Forestry, Department of Forestry (DOF). 7 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 NOTES TO THE FINANCIAL STATEMENTS (continued) as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 2. BASIS OF PREPARATION The financial statements comprise the statement of receipts and disbursements and the statement of fund balance, which are expressed in United States Dollars ("USD"). These financial statements are prepared by Project Management in accordance with the accounting policies as described in Note 3. The financial statements are prepared solely to report: a. funds received from International Development Association ("IDA"); b. funds disbursed by the Project; and c. the Project's fund balance. The Project maintains its accounting records in USD. The financial statements are prepared to assist Project Management in meeting the reporting requirements of the IDA. Fiscal period The Project's fiscal year applicable for the preparation of these financial statements started on 1 October and ended on 30 September. However, the Project's first fiscal year starts on 11 August 2014 and ends on 30 September 2015. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant policies adopted in the preparation of the financial statements are set out below. Receipts Funds from IDA are recognized as receipts when cash is debited to the Project's designated bank account at the Bank of the Lao PDR, which is managed by the Ministry of Finance, rather than when committed or budgeted. Disbursements Expenditure under each category is recognized when documents substantiating the Project's transactions are submitted and approved and payment are made, The expenditures are sub-divided into four categories as follows: t- Goods; > Workshops ans seminars; > Consultancy services; and P. Incremental operating costs. 8 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TFO 14777 NOTES TO THE FINANCIAL STATEMENTS (continued) as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fixed assets Fixed assets procured are recognized as expenditures in full in the statement of receipts and disbursements when received or when handed-over from the contractors or suppliers upon the respective acceptance and approval by the Project and when payment is made. Accordingly, fixed assets are not recognized in the statement of fund balance at the end of the period. The Project maintains a fixed asset register for control and monitoring purposes. Foreign exchange currency translations Disbursements and withdrawals in foreign currencies other than USD are converted into USD at the actual exchange rate ruling at the dates of transactions. Monetary items denominated in foreign currencies are recognized at the actual exchange rate at the dates of transactions. No foreign exchange differences are recognised in the statement of receipts and disbursements. 4. FUND RECEIPTS For the period 11 August 2014 to 30 Borrower reference Date September 2015 USD Is' Replenishment No. 0001 19 November 2014 300,000 2na Replenishment No. 0002 10 April 2015 5,005 3h Replenishment No. 0003 21 September 2015 44,063 349,068 5. GOODS For the period 11 August 2014 to 30 September 2015 USD Office equipment and tools 114,108 114,108 6. WORKSHOPS AND SEMINARS For the period 11 August 2014 to 30 September 2015 USD Training, workshop and seminar 52,360 52,360 9 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 NOTES TO THE FINANCIAL STATEMENTS (continued) as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 7. CONSULTANCY SERVICES For the period 11 August 2014 to 30 September 2015 USD Consultants 12,885 12,885 8. INCREMENTAL OPERATING COSTS For the period 11 August 2014 to 30 September 2015 USD Publication and announcement 4,882 Telecommunication 3,203 Fuel 5,181 Salary for administrative staffs 3,190 Other expense 4,868 21,324 9. CASHONHANDANDCASHATBANKS 30 September 2015 USD Cash at designated account 139,990 Cash at bank 8,385 Cash on hand 16 148,391 10 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 NOTES TO THE FINANCIAL STATEMENTS (continued) as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 10. STATEMENT OF DESIGNATED ACCOUNT For the period 11 August 2014 to 30 September 2015 USD Opening balance Add: Amount initially received from the IDA 300,000 IDA replenishment (Note 4) 49,068 349,068 Deduct: Total amount withdrawn 209,078 Closing balance (Note 9) 139,990 11. RECONCILIATION OF DESIGNATED ACCOUNT 30 September 2015 USD Amount initially received from the IDA 300,000 Outstanding amount advanced to Designated Account 300,000 Closing balance of Designated Account (Note 9) 139990 Add/(Deduct): Cash at operating account (Note 9) 8,385 Cash on hand (Note 9) 16 Amount withdrawn and not yet claimed (Note 12) 151,609 300,000 116 Amout wthdrwn nd nt yt clime (Noe 1) 15,60 Forest Carbon Partnership Facility Funded By The International Development Association Under Financing Agreement Grant No. TF014777 NOTES TO THE FINANCIAL STATEMENTS (continued) as at 30 September 2015 and for the period from 11 August 2014 to 30 September 2015 12. SUMMARY OF WITHDRAWAL APPLICATIONS 12.1 Summary of withdrawal applications for the period from 11 August 2014 to 30 September 2015 Borrower reference Date Amount (USD) 1st Replenishment No. 0001 19 November 2014 300,000 2nd Replenishment No. 0002 10 April 2015 5,005 3rd Replenishment No. 0003 21 September 2015 44,063 349,068 Summary of withdrawal applications for the period from 11 August 2014 to 30 September 2015: Reconciliation SOE to the statement of receipts and disbursements for the period from 11 August 2011 to 30 September 2015 Total disbursements included in statement of expenditure 49,068 Amount withdrawn and not yet claimed 151.609 Total disbursements included in the statement of receipts and disbursements 200,677 Add: Transferred from Designated Account to and remained in operating account (Note 9) 8,385 Transferred from Designated Account to and remained in cash on hand (Note 9) 16 Total amount withdrawn from the designated account (Note 10) 209,078 12