The Planning Institute of Jamaica FOUNDATIONS FOR COMPETITIVENESS AND GROWTH PROJECT Loan no. 8408-JM FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2018 (Expressed in United States dollars) The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 84084JM Year ended March 31, 2018 TABLE OF CONTENTS Page Nuniber Independent Auditor's Report 1 -4 Financial Statements Statement of Sources and Uses of Funds 5 Statement of Cumulative Investments 6 Special Account Statement 7 Notes to Financial Statements 8- 12 1 AUDITOR GENERAL'S DEPARTMENT 40 KNUTSFORD BOULEVARD P.O. BOX 455 ANY REPLY OR SUBSEQUENT REFERENCE KINGSTON 10 TO THIS COMMUNICATION SHOULD BE JAMAICA ADDRESSED TO THE AUDITOR GENERAL AND NOT TO ANY OFFICER BY NAME Tel. No.: 926-8309/926-5963/926-5846 AND THE FOLLOWING REFERENCE Fax Number: 968-4690 QUOTE- audeen@auditormenera.eov.im. INDEPENDENT AUDITOR'S REPORT To the Board of Directors Planning Institute of Jamaica LOAN No. 8408-JM Name of Project -FOUNDATIONS FOR COMPETITIVENESS AND GROWTH PROJECT Period ending March 31, 2018 Opinion I have audited the accompanying Financial Statements of the Foundations for Competitiveness and Growth Project, set out on pages 8 to 12, which comprise the Statement of Sources and Uses of Funds, as at March 31, 2018, Statement of Cumulative Investments by Categories and Designated Account Reconciliation Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. In my opinion, the Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Supplementary Financial Information reflects a fair presentation of the transactions of the Project for the period under review and the transactions conformed to the terms of the Grant Agreement and complied with the International Public Sector Accounting Standards (IPSAS) Cash Basis. Basis for Opinion The audit of the Project was conducted in accordance with: * Article Ill Section 3.01 - Project of standard conditions for Agreement between the Government of Jamaica (GOJ) and the International Bank for Reconstruction and Development (IBRD) dated September 3, 2014. * International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under ISSAIs are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of this report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. I believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for my opinion. 2 Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. I have determined that there are no key audit matters to report for the period. Management's Responsibility for the Financial Statements The executing agency, the Planning Institute of Jamaica (PIOJ), is responsible for the preparation and fair presentation of these financial statements, in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis. This responsibility includes: designing, implementing and maintaining internal controls, relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether, due to fraud or error; selecting and applying appropriate accounting policies that are reasonable in the circumstances. The Planning Institute of Jamaica is also required to present audited financial statements to the IBRD. The attached financial statements and supplementary financial information which are described hereunder were submitted to me by the Project Execution Unit (PEU) to reflect the transactions of the Project for the period April 1, 2017 to March 31, 2018. Statement 1 Statement of Sources and Uses of Funds Statement of Cumulative Investments by Statement 2 Ctgre Categories Designated Account Reconciliation Notes to the Financial Statements Auditor's Responsibility for the audit of the Financial Statements My responsibility is to express an opinion on these Financial Statements based on my audit. I conducted my audit in accordance with the auditing standards issued by the International Organization of Supreme Audit Institutions (INTOSAI). Those standards require that I comply with ethical requirements; plan and perform the audit 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 my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 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 ISSAls, we exercise professional judgment and maintain professional scepticism throughout the audit. 3 I also: * Identify and assess the risks 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 my 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 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 my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. The conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that presents a true and fair view. I have communicated with the Planning Institute of Jamaica regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that was identified during the audit. REPORT ON ADDITIONAL REQUIREMENTS OF THE LOAN AGREEMENT NO. 8408-JM COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND FINANCIAL CLAUSES OF THE LOAN AGREEMENT During the period under review, I examined compliance by the PEU of the Executing Agency with the applicable laws and regulations related to the Project's financial activities and with the accounting/financial/ management clauses of the Loan Agreement No. 8408-JM. There was general compliance with the following articles contained in the Loan Agreement mentioned: Article I - Section 1.01 - 1.02: General Conditions; Definitions Article 11 - Section 2.01- 2.07: Loan Article 111 - Section 3.01- 3.02: Project Article IV - Section 4.01 - 4.02: Remedies of the Bank 4 Article V - Section 5.01- 5.03: Effectiveness, Termination Article VI - Section 6.01 - 6.03: Recipient's Representative; Addresses OPINION - GENERAL In my opinion, the Project Execution Unit maintained an adequate accounting system based on separate and clearly identifiable accounts which enabled the recording, monitoring and reporting of the operations and costs under the project in accordance with satisfactory accounting/financial/management practices and standards as required by the Loan Agreement. AUDIT OF THE DESIGNATED BANK AccouNT I have examined the appended Designated Account Reconciliation Statement, reflecting the movement in the Designated Bank Account for the period ended March 31, 2018. The Designated Bank Account No. 810134 is maintained in United States Dollars in the name of the Ministry of Finance and Planning. My examination was made in accordance with the standards of the International Organisation of Supreme Audit Institutions (I NTOSAI) and accordingly included such tests of the accounting records and other procedures I considered necessary. OPINION - DESIGNATED BANK ACCOUNT In my opinion, the Designated Account Reconciliation Statement reflects the total amount advanced to the Designated Account as at March 31, 2018 and has reconciled to the outstanding (undocumented) amount advanced to the account as at March 31, 2018 in conformity with IPSAS Cash Basis and IBRD guidelines. Auditor General of Jamaica Date 5 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Statement of Cumulative Investments by Categories Year ended March 31, 2018 April 1, 2017 CUMULATIVE to CUMULATIVE Notes to March 31, March 31,2018 to Mach 31, 2018 2017 USS USS USS SOURCES OF FUNDS World Bank Designated Account 5 11,073,327.00 22,230,912,00 11,157,585.00 Direct Payment 5 0.00 279,17I.00 279,171-00 Front End Fees 0.00 125,000,00 125,000.00 Advance 11 188,718.25 188,71825 0.00 Interest Earned 10 1,734-66 4,429 74 2,695.08 Total Receipts (A) 11,263,779.91 22,828,230.99 11,564,451.08 USE OF FUNDS Component 1 - Enhancing Competition in the 464,015.22 809,114-36 345,099 14 Business Environment Component 2 - Facilitating Large Scale Private 1,173,616.86 1,844,962.84 671.345.98 Investments Component 3 - Supporting Small and Medium 6,948,611.93 14,508,99674 7,560,384.81 Enterprises (SMIE) Capabilities and Finance Component 4 - Project implementation and 1,183,121.30 2,226,694.41 1,043,573,11 Monitoring Front End Fees 0 00 125,000 00 125,000.00 Totail Expenditures (B) 7 9,769,365.31 19,514,768.35 9,745,403.04 RECEIPTS LESS EXPENDITURES Net Change in Cash (A - 11) 1,494,414.60 3,313,462.64 1,819,048.04 Foreign Exchange adjustment-gain/(loss) (25,105.39) (31,707.81) (6,602.42) 1,469,309.21 3,281,754.83 1,812.445.62 Opening Cash Balances Designated Account 961,683.56 Project Accounts 850,762.06 Total Opening Balance 8 1,812,445.62 - Closing Cash Balances Designated Account 334.81 334.81 961,68356 Project Accounts 3,28 .'120.02 3,281,420.02 850.762,06 Total Closing Balance 8 3,281,754.83 3,281,754.83 1,812,445.62 Approved for issue on behalf of Project o ...................... and signed on its behalf by: Dr. Wayte Henry Barbara Scott The accompanying notes pages 9 to 12 form an integral part of the statements. 6 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Designated Account Reconciliation Statement Year ended March 31, 2018 CURRENT CURRENT No. Categories YEAR YEAR ACTUAL CUMULATIVE CUMULATIVE USS tiss JSs I Goods, non-consuliing services, training and consultants services for Components 1 464,015.22 809.114.36 345,099.14 Goods, non-consulting services, training and 2 a) consultants services for Components 2A, 21B (i), 1,288,09.27 1,999.169.18 711,077.91 21 (ii) and 2B (iii) and 3 excl. SME sub-loans and matching grains 2 b) SME sub-loans 5,984,152.57 13.220,395.00 7,236,242.43 2 c) SME matching grants 478,664.00 481.483.00 2,819.00 Goods. non-consulting services, training and 3 consultants services for Components 2B (iv) and 4 and operating costs for all components 4 Front end lees 0.00 125,000.00 125,000.0 TOTAL 9,769,365.31 19,514,768.35 9,745,403.04 7 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Loan no. 8408-JM Designated Account Reconciliation Statement Year ended March 31, 2018 1 Total Advanced by The World bank 22,230,912.00 2 Less: Eligible expenditure for (lie current year ended MARCH 31. 2018 documented by world bank (9,769,365.31) Less: Cumulative eligible expendifure for the prior periods ended MARCH 31, 2017 documented by world (9,341,232.04) bank 3 PRESENT OUTSTANDING AMOUNT ADVANCED TO THE DESIGNATED ACCOUNT (1 - 2) 3,120,314,65 4 Balance of Designated Account per Bank Reconciliation Statement at March 31, 2018 334.81 Balance of other project Accounts per Bank Reconciliation Statement at March 31,2018 3,281,420,02 5 LESS: Interest Larned Credited to Account (4,429.74) Advance from Development Bank ol'Jamaica (188,718.25) 6 Total Advance Accounted for (No. 4 through No. 5) 3,088,606.84 7 Difrenrce (3 - 6) 31,707.81 8 Explanation of difference shown in Line 7 The difference represents the cumulat ivo foreign exchange adj 1ustmenIs 8 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2018 Expressed in USD 1. IDENTIFICATION General background On September 3, 2014, the Government of Jamaica signed a loan agreement with The World Bank to secure funding of US$50M for the Foundations for Competitiveness and Growth Project (the Project). The closing date of the loan is June 30, 2020. Implementing organisations The Project is being implemented by the Planning Institute of Jamaica (P101) iin conjunction with lead coordinating agencies Jamaica Promotions Corporation (JAMPRO) and the Development Bank of Jamaica (DBJ). 2. OVERVIEW The Project Development Objective (PDO) is to strengthen the business environment in Jamaica for private sector investment. The primary project beneficiaries wiII be private firms operating in Jamaica. Both existing and new firms will benefit from streamlined business regulations that save costs and decrease incentives forrent-seeking. Large foreign and domestic investors will benefit from appropriate preparation for Public-Private Partnerships (PPPs), divestments, and other strategic investments that help bring deals to market. Small and Medium-sized Enterprises (SMEs) benefiting from skills training, supply chain linkages, and financing will be able to increase private investment in knowledge and physical capital, thereby raising productivity, sales, and jobs, including by linking with new large foreign and domestic investors supported by the project. Impacts on these beneficiaries will be closely tracked through project indicators and Monitoring and Evaluation (M&E). The program is structured in four components PROJECT COMPONENTS Funding is allocated to three primary components and an oversight component as follows: 1. Enhancing competition in the business environment - The component will provide technical assistance (TA) and implementation support to address critical business regulatory and procedural issues that constrain firm entry, operation and expansion, competition, and trade and logistics. JAMPRO will be the LCA for this component. 9 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2018 Expressed in USD PROJECT COMPONENTS (Cont'd) 2. Facilitating strategic private investments - This component will finance feasibility and other related studies and TA to enable the government to prepare for and close investment transactions with private sector participation in a way that enables transformational growth impacts. DBJ will be the LCA for this component. 3. Strengthening SMEs' (Small and Medium Enterprises) capabilities and Financing SMEs' investments- This component will fund a combination of supply chain learning, skills upgrading, and finance for SMEs. DBJ will be the lead coordinating agency. This component has two sub-components which are component 3A - co-financing anchored firms' supply chains through a matching grant program and Component 38- an on-lending facility through the Approved Financial institutions to Small and mediuni entities in order 1O support competitiveness and growth within the Private sector. 4. Project and Implenentation and Monitoring and Evaluation- This component will finance the costs of project implementation arrangements through Component 4A, led by PIOJ as the Implementing Agency. Component 4B will finance technical Assistance for communications and productivity evaluation support, in collaboration with the Statistical Institute of Jamaica (STATIN) and the Jamaica Productivity Centre (JPC). MANAGEMENT REPORT The Annual Report is submitted by management for the Foundations for Competitiveness and Growth Project for the year ended March 31, 2018. AUDITING OF THE PROJECT The Project is currently audited by the Auditor General's Department. The Auditors, Auditor General's Department, 40 Knutsford Boulevard, Kingston 5, Jamaica. 10 The Planning Institute of Jamaica Foundation for Corn petitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2018 Expressed in USD 3. SIGNIFICANT ACCOUNTING POLICIES 1) Basis of Preparation The Project Accounting Unit (PAU) uses the cash basis of accounting to account for the projectfs transactions and these financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis. Under this basis, income is recognized when funds are received rather than when earned and expenses are recognized when payment is made rather than when obligations are incurred. Since the main objective of these financial statements is to disclose the sources and uses of funds, it is not necessary to present information adjusted for inflation. II) Recording of Transactions Transactions are entered in local currency. However, transactions are converted into the United Statement of America currency for preparation of the financial statements. Receipt and expenditure in local currency are translated into US dollars, by applying the exchange rate at which the funds were transferred from the Designated Account. Ill) Fluctuation rate and fees All fees and charges for un-disbursed loan funds, as well as losses due to exchange rate fluctuations are not considered eligible project costs and are absorbed by the Government of Jamaica. I V) Equipment and other fixed assets Equipment and other fixed assets procured with project resources are recorded at their acquisition cost at the date of purchase. Depreciation is not charged on these assets and is also not reflected in these financial statements. V) Lxchange Rate for the period Expenses paid from the Jamaican dollar project accounts held with First Caribbean international Bank Limited and National Commercial Bank Jamaica Limited, were converted by applying the exchange rate at which the funds were transferred from the Designated Bank account to the local Administrative bank accounts. 11 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2018 Expressed in USD 5. DISBURSEMENT REQUEST Disbursement Request Date Disbursement Number Amount Us$ May 25, 2017 FCGP WA9 5,485,844 February 13, 2018 FCGP WAl0 925,000 March 20, 2018 FCGP WA11 3,730,483 March 29, 2018 FCGP WAl2 932,000 Total 11,073,327 This represents the total advance issued by the JBRD for the year ended March 31, 2018. 6. SOURCE OF FUNDS The amount of US$11.073 million (cumulatively US$22.635 million) was received from the World Bank for the period reviewed. 7. USE OF GRANT FUNDING Total funds invested during the period amounts to approximately US$9.769 million (cumulatively USS19.515 million). 8. CASH AVAILABILITY The cash available as at March 31, 2018, as expressed in US dollars is: Bank Accounts March 31, 2018 Maric 31, 2017 US$ US$ Designated Account #810134 334.81 961,683.86 Project Account PIOJ FCIB# 1002-174-602 109,307.89 59,245.86 Project Account DBJ NCB#2111-18059 3,102,454. 13 640,293.77 Project Account JBIP PCIB#1[002-207-634 69,658.00 151,222.43 Available cash balance 3,281,754.83 1,812,445.62 The Designated account is used to hold deposits of amounts drawn from the Loan account for the purpose of making payments for eligible expenses relating to the Project. 12 The Planning Institute of Jamaica Foundation for Competitiveness and Growth Project Notes to the Financial Statements For period ended March 31, 2018 Expressed in USD 9. FIXED ASSETS Furniture, Computer Fixtures & Computer Software Equipment Total Cost Balance at I" April 2017 111,948 - 15,340 127,288 Adjustment - 142,500 - 142,500 Additions 208,740 217 208,957 Balance at 31" March 2017 320,688 142,500 15,557 478,745 10. INTEREST EARNED The interest earned on the funds deposited in the Designated Bank account are paid over to the Consolidated Fund; while the interest earned on the Operations Account is retained in the Account. 11. ADVANCE The advance amount of US$188,718.25 represents an amount loaned to the Project from the Development Bank of Jamaica.