Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Report and Financial Statements For the period from 1 January 2018 to 31 December 2018 Talal Abu-Ghazaleh & Co. Member of Talal Abu-Ghazaleh Global Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Pages Independent auditor's report 1 Statement of cash receipts and payments by category 4 Statement of cash payment 5 Statement of movements in the designated account 6 Notes to the financial statements 7 List of fixed assets 10 List of signed contracts 12 TAG-Audit Talal Abu-Ghazaleh & Co. a Global Company for Auditing and Accounting ......j . L-wi Sacete Civile (R.C. 67) .w . a.a .S u . Certified Public Accountants Independent Auditor's Report To the Ministry of Environment, Republic of Lebanon Our opinion In our opinion, the financial statements of PCB Management in the Power Sector ("the Project") comprising of the statement of cash receipts and payments by category for the period from January 1, 2018 to 31 December 2018, and the statement of cash payments classifying the uses of funds, statement of movements in the Designated Account and the notes to the financial statements for the period then ended are prepared, in all material respects, in accordance with the accounting policies described in note 2 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 statements' 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 statements in Lebanon. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Other information The Project Management Unit ("PMU") of the Ministry of Environment is responsible for the other information. The other information comprises the list of signed contracts and list of fixed assets. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Sanayeh-Al Mansour Bldg. J JG - Tel.: +961 1754222 +V%1 I Vol YYY :i*ZLA Fax: +961 1754 222 +ag.COm + I Val Y :Lpsti P.O.Box: 11-7381, Beirut, Lebanon tagco.bierut@tagi.com kail: l s .v r A I :.a Basis of accounting and restriction on distribution and use We draw attention to note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to enable the 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 statements 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. Responsibilities of management and those charged with governance for the financial statements The PMU is responsible for the preparation of the financial statements in accordance with the accounting policies described in note 2 to the financial statements and for such internal control as management determines is necessary to enable the preparation of the financial statements that is free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the project's financial reporting process. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 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 these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism through the audit. We also: * Identify and assess the risk of material misstatement of the financial statements, 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. 2 CI * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 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. Talal Abu-Ghazaleh & Co. Beirut on iarch 14, 2019 3 CD Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Statement of cash receiDts and payments by categor For the year ended 31 December 2018 Note 2018 2017 U~S$ US$ Sources of funds IBRD grant funds 3 140,429 204,291 IBRD direct payments 3 571,822 540,545 Total receipts 712,251 744,836 Uses of funds by project category Goods, work and consultants' services, project audit fees and operating costs (709,455) (690,983) Total payments (709,455) (690,983) Balance refunded to donor - (23,404) Use of funds (709,455) (714,387) Surplus 2,796 30,449 4 Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Statement of cash payments by components For the year ended December 31, 2018 Note 2018 2017 US$ US$ Capacity building and project management 4 137,633 150,438 Inventory of PCB contaminated transformers 571,822 309,190 Disposal of high content PCB equipment and contaminated oil - 231,355 Total expenditures by project component and sub-components 709,455 690,983 5 Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Statement of Movements in the Designated Account For the period from 1 January 2018 to 31 December 2018 2018 US$ Designated Account balance at 1 January 2018 129,937 Add: IBRD grant funds 140,429 IBRD direct payments 571,822 Sources of funds 712,251 Less: Uses of funds (137,633) Direct payments (571,822) Use of funds (709,455) Designated Account balance at 31 December 2018 132,733 El Ministry of Environment Republic of Lebanon PCB Management in the Power Sector Project # P122540 Notes to the Financial Statements 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 Persistent Organic Pollutants ("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 furans. The Lebanese Republic has obtained from the International Bank for Reconstruction and Development "IBRD" of the World Bank a grant of US$ 205 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) 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; (ii) Dispose of all the high content PCB equipment and PCB contaminated oil; and (iii) 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. During 2018, total cash receipts received from the World Bank amounted to US$ 712,251 (2017- US$ 744,836); disbursements made amounted to US$ 709,455 (2017- US$ 690,983). 2- Principal accounting policies and basis of preparation The Project Management Unit ("PMU") prepares the financial statements 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: 7 Component 1- Inventory of PCB contaminated transformers (US$ 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: (USS 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 (IFRs) presented to the World Bank office in Beirut on a quarterly basis. The significant accounting policies adopted by the PMU in the preparation of the financial information are as follows: Basis of preparation The financial statements have been prepared in accordance with the cash basis of accounting as approved by the World Bank, and as required by the terms of the Financial Management Procedures Manual of the Project, dated December 2016. Sources of Funds Funds received are recognized when cash is received. Use of Funds Uses of funds, expenses and other disbursements are recognized when cash is disbursed. Eligible expenditures under the Grant Agreement and applicable laws and regulations of the PMU's financial activities. Designated Account The designated account includes deposits held at call with the bank. The movement in the designated account represents the movement in the Project funds received and disbursed during the year. 3- Sources of fund The below table lists the IBRD grant fund received in the designated account during 2018 Receipt date USD November 7, 2018 140,429 The IBRD direct payments made by the World Bank for the project during the year 2018 were amounted of USD 571,822. 4- Capacity Building and project management This item represents the following: 2018 2017 USD USD Consultants' services 126,854 141,022 Goods 875 - Operating and training costs 9,904 9,416 Total 137,633 150,438 у 4 О О С О О Ф С N N оо оо и и �О �о �д �д м_ м_ V� Б9 О �D О О о о о о О� � � м м �� О И о о О О 'гь u�i �- Ф оо оо vi vi �о �G � � й� о �О Q� N N о N N м N � са N N N N L �� ^ N N N а '> М � и_ и_ _и и_ и_ и и_ и_ и_ и_ и_ и_ _и и_ и_ и_ и_ и_ и и О�• С О О • Q О Ф Ф Ф О Ф О Ф Ф О Ф Ф г��! 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