public disclosure authorizeddocuments.worldbank.org/curated/en/158641501728855885/pdf/p14… ·...

11 JUL 2017

RECEIVED

Power Grid Improvement Project(Funded by International Development Association underSpecific Investment Lending Instrument Grant No. 56750-LA)

Financial Statements

31 December 2016

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Power Grid Improvement Project(Funded by International Development Association under Specific Investment Lending InstrumentGrant No. 56750-LA)

CONTENTS

Pages

Report of the Project's Management 1

Independent auditors' report 2-3

Statement of receipts and disbursements 4

Statement of fund balance 5

Notes to the financial statements 6-12

Power Grid Improvement Project(Funded by International Development Association under Specific Investment Lending InstrumentGrant No.56750-LA)

REPORT OF THE PROJECT'S MANAGEMENT

MANAGEMENT'S RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Project's Management is responsible for the preparation of the Project's financial statementswhich comprise the statement of fund balance as at 31 December 2016 and the statement of receiptsand disbursements for the year then ended, together with the explanatory notes thereto.

In preparing the financial statements, Management is required to:

> adopt accounting policies as described in Note 3 to the financial statements and apply themconsistently in accordance with the requirements of International Development Association ("IDA")for Government-executed projects' financial statements;

> 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 maintainproper control over those properties.

Management is responsible for ensuring that proper accounting records are kept which disclose, withreasonable accuracy at any time, the funds requested, authorized for, received and disbursed by theProject and to ensure that the accounting records comply with the accounting policies described inNote 3 to the financial statements. Management is also responsible for safeguarding the assets of theProject, and for taking reasonable steps for the prevention and detection of fraud and otherirregularities.

Management confirms that it has complied with the above requirements in preparing the financialstatements.

APPROVAL OF THE FINANCIAL STATEMENTS

We hereby approve the accompanying financial statements as at and for the year ended 31 December2016, which are prepared in accordance with the accounting policies as described in Note 3 to thefinancial statements and comply with the related grant agreements.

The financial statements are prepared to assist the Project's Management in meeting the reportingrequirements of the IDA. As a result, the financial statements may not be suitable for any otherpurpose.

F Management:

Noanagiilg Director I?1nfhaneth XAYS0M H(- N-tq

Mr Kanthaneth XaysomphengManaging Director Deputy Manager of Project-LoanElectricite Du Laos Accounting Office

Electricite Du Laos

Vientiane, Lao PDR

30 June 2017

1

Ernst & Young Lao Company Limited. Tel : +856 21 455 0776th Floor, Capital Tower Fax: +856 21 455 07823 Singha Road, Nongbone Village ey.com

Building a better Saysettha District, Vientiane Capital, Lao PDR

working world

Reference: 61324242/19102628

INDEPENDENT AUDITORS' REPORT

To: The Project's Management of Power Grid Improvement Project

Opinion

We have audited the accompanying financial statements of Power Grid Improvement Project ("theProject") as set out on pages 4 to 12, which comprise the statement of fund balance as at 31 December2016 and statement of receipts and disbursements for the year then ended, and the notes thereto ("the Rfinancial statements").

In our opinion, the accompanying financial statements are prepared, in all material respects, inaccordance with the accounting policies as described in Note 3 to the financial statements.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Ourresponsibilities under those standards are further described in the Auditor's responsibilities for the auditof the financial statements section of our report. We are independent of the Project in accordance withthe International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants(IESBA Code) and the ethical requirements that are relevant to our audit of the statement ofexpenditures in Lao P.D.R, and we have fulfilled our ethical responsibilities in accordance with theserequirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Emphasis of matter - basis of accounting and restriction on distribution and use

We draw attention to Note 3 to the financial statements which describes the accounting policies adoptedby the Project. These accounting policies are not intended to present the financial position, the results ofoperations and cash flows of the Project in accordance with international generally accepted accountingprinciples. As also disclosed in Note 2 to the financial statements, the financial statements are preparedto assist the Project's management in meeting the reporting requirements of its Donors. As a result, thefinancial statements may not be suitable for another purpose. Our report is intended solely for theinformation and use of the Project's management and its Donors, and should not be distributed to orused by other parties. Our opinion is not modified in respect of these matters.

Other matter

The financial statements of the Project for the period from 17 August 2015 to 31 December 2015 wereaudited by another audit firm whose auditor's report dated 15 August 2016 expressed an unmodifiedopinion on those financial statements.

Project management's responsibility for the financial statements

The Project's management is responsible for the preparation of the financial statements in accordancewith the accounting policies as described in Note 3 to the financial statements and for such internalcontrol as the management determines is necessary to enable the preparation of the financialstatements that are free from material misstatement, whether due to fraud or error.

A member firm of Ernst & Young Global Limited

EYBuilding a betterworking world

Auditor's Responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit 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 theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

i Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Project's internal control.

i Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures nagement.

Vientiane, Lao PDR ERNST & YOUNGLA0 Co.,LTD

30 June 2017

A member firm of Ermst & Young Global Limited

Power Grid Improvement Project(Funded by International Development Association under Specific Investment Lending InstrumentGrant No.56750-LA)

STATEMENT OF RECEIPTS AND DISBURSEMENTSfor the year ended 31 December 2016

For the periodAccumulated as For the year from 17 Augustat 31 December ended 31 2015 to 31

2016 December 2016 December 2015Notes USD USD USD

ReceiptsAdvances received from ElectriciteDu Laos 376,855 - 376,855Counterpart funds 4 144,313 126,590 17,723International Development UAssociation funds 5 2,066,870 2,066,870 - H

Total receipts 2,588,038 2,193,460 394,578

Disbursements by component 0Consultant services fees 6 741,022 447,497 293,525Administrative and other expenses 7 1,104,365 1,003,312 101,053Reimbursement to Electricite DuLaos's advance in prior year 5 259,521 259,521 -

Total disbursements 2,104,908 1,710,330 394,578

483,130 483,130 -

Komonchahll P1KT-ASAE DL Mputy manasggDrco

anthaneth XAYSOMPHENG

Mr Kanthaneth XaysomphengManaging Director Deputy Manager of Project-LoanElectricite Du Laos Accounting Office

Electricite Du Laos

Vientiane, Lao PDR

30 June 2017

4


STATEMENT OF FUND BALANCEAs at 31 December 2016

For the periodFor the year from 17 August

ended31 2015to31December 2016 December 2015

Notes USD USD

Opening fund balanceNet receipts 483,130

Closing fund balance 483,130 -

Represented by: 0Cash at banks 8 483,130

483,130 -

~~Xr Konionchanh~ PHEIf-ASAF DqmDeputy Managing Director Kanthanoth XAYSOMPHENG

Mr Kanthaneth Xaysomphengector Deputy Manager of Project-Loan

Electricite Du Laos Accounting OfficeElectricite Du Laos

Vientiane, Lao PDR

30 June 2017

5


NOTES TO THE FINANCIAL STATEMENTSas at and for the year ended 31 December 2016

1. PROJECT BACKGROUND

The Power Grid Improvement Project ("PGI" or "the Project") is funded by InternationalDevelopment Association ("IDA") under Specific Investment Lending Instrument Grant

No.56750-LA dated 17 August 2015. The Project is implemented by Electricite Du Laos

("EDL").

IDA and EDL have entered into a Development Financing Agreement, the purpose of which

is to finance the eligible expenditures necessary in carrying out the objectives of the Project.IDA has agreed to provide 87% of the said financing assistance in an aggregate principleamount of SDR 21,400,000 (equivalent to USD 30,000,000) and the Government of Lao PDR

("GOL") to provide 13% amounting to SDR 3,210,000 (equivalent to USD 4,500,000). 32

Repayment of the proceeds of the loan is over a period of twenty (20) years, inclusive of a

grace period of the three (3) years.

Payment of interest on the principle amount of the loan withdrawn and outstanding from time 3

to time is at the rate of 2% per annum or any other rate which may be agreed between the

GOL and EDL and which is satisctory to IDA, and payment of service charge of one percent

(1%) per annum on each withdrawn of an amount of the subsidiary loan.

Remaining cash balance for over payments and cash balance with no movements at projectclosure date are required to be refunded. A refund is recognized once the project transfers

the related balance to the Project designated amount to the World Bank.

The main purpose of the Project is to help improve the efficiency and reliability of power

distribution in the selected load areas served by EDL in Xaythany district of Vientiane Capital.

The project consist of th'e following parts:

0- Smart Metering, Distribution Improvement and Distribution losses Redution

> Electric Utility Information System

> Institutional Capacity Building and Project Implementation Support

2. BASIS OF PREPARATION

The Project's financial statements comprise the statements of fund balance, statement of

receipts and disbursements, together with the notes thereto.

The Project maintained its accounting records and presented its financial statements in United

State Dollar ("USD").

The Project's financial statements have been prepared in accordance with the accountingpolicies as described in Note 3. These accounting policies are not intended to present the

statement of fund balance, statement of receipts and disbursements of the Project in

accordance with international generally accepted accounting principles.

The financial statements are prepared to assist the Project in meeting the reporting

requirements of the donors. As a result, they may not be suitable for another purpose.

6


NOTES TO THE FINANCIAL STATEMENTS (continued)as at and for the year ended 31 December 2016

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1. Receipts

International Development Association ("IDA") funds

IDA funds include direct disbursements and designated account replenishment.

IDA funds - direct disbursements related to payments made by IDA, directly to the Projects'

suppliers and consultants. These payments are accounted for as direct receipts and

disbursements when payments are made by and upon receipt of advice from IDA.

IDA funds - designated account replenishments are recognized as receipts when cash isdebited to the Project's designated account replenishment managed by the Ministry ofFinance. The Project records such receipts when notified by the Ministry of Finance based onthe amount received in related bank accounts.

Counterpart funds

Counterpart fund related to payments made by EDL directly to the Project's suppliers and

staffs. These payment are recognized as both receipts (from counterpart funds) anddisbursements upon receipt of advice from EDL.

3.2. Disbursements

Expenditure under each compont is recognized when incurred and documents

substantiating the Project's transactions are submitted and approved by the project's

management and payments are made.

3.3. Advances received from EDL

Advances received from EDL for the payment of consultancy fees is recognized as receiptsand the refunds from IDA to EDL to settle such advance is recognised as disbursements.

3.4. Foreign exchange differences

The Project maintains its accounting records in LAK. For the purpose of preparing these

financial statements, the receipts and disbursements arising in currencies other than USD are

translated into USD by using the average rates of each month that transactions occurred.

Fund balances denoted in foreign currencies are translated into USD at the closing exchangerate at the reporting date (as at 31 December 2016: 8,204 KIP/USD). Foreign exchangedifferences arising from such translation are presented as net foreign exchange gains/(losses)in the statement of receipts and disbursements.

7



4. COUNTERPART FUNDS

Counterpart funds are payments made by EDL directly to the Project's suppliers and staffs,mainly for administrative expenses such salary, perdiem, accommodation, fuel and vehiclemaintenance of EDL's working team at Xaythany station.

5. INTERNATIONAL DEVELOPMENT ASSOCIATION FUNDS

For the year ended31 December 2016

Borrower reference Application type Date of receipt USD

EDL-001 DA-1 11 April 2016 500,000 CEDL-002 Reimbursement (*) 6 June 2016 259,521' UEDL-003 DA-1 25 July 2016 188,032EDL-004 Direct payment 18 July 2016 685,900EDL-005 Direct payment 22 August 2016 224,425

EDL-006 DA-1 19 December 2016 208,992

Total receipt 2,066,870

(*) This is the fund transferred to settle with EDL's advance received in prior year.

8

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Power Grid Improvement Project(Funded by International Development Association under Specific Investment Lending Instrument

Grant No. 56750-LA)


8. CASH AT BANKS

31 December 2016 31 December 2015USD USD

Designated account Replenishment - IDA

Grant No. H56750-LA 483,130 _

483,130 -

In accordance with the financing agreements of the Project, the following Designated Account

is maintained in USD at the Bank of Lao PDR:

* Cash in Designated Accounts - IDA's Grant No. H56750-LAAccount No.: 0000010121310122Depository: Bank of Lao PDRAddress: Yonnet Street, Vientiane, Lao PDRRelated Grant: IDA Grant No. H56750-LACurrency: USD

The purpose of the Designated Account is to receive fund from IDA on Grant No.

H56750-LA for paying to suppliers, consultants and service providers.

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