Phone: (-675) 301 2200 lax. (-675) 325 2872 [naI: pnu a a-\kg.pe Website: ww w.aforope

September 30. 20 16

INDEPENDENT AUDIT REPORT ON THE ACCOUNTS OF THE PRODI)LCT1VEPARTNERSHIP IN AGRICULTURE PROJECT FOR THE YEAR ENDE DECEMBER 31.2015

To the Minister for Agriculture and Livestock

l have audited the accompanying consolidated Financial Statements of the "Productive Partnershipin Agriculture Projects (PPAP)" for the year ended December 31, 20 5 consisting of theStatenents of Funding and Expenditure of khich the Project Coordinating Unit that is comprisedof. the Projeet Management Units of the Cocoa Board and the Coffee 1ndustry Corporation Boardw% ho are responsible for the preparation of the Financial Statements on a cash basis as stated in thenotes accompanving the financial statements. My responsibility is to express an opinion on thesefinancial statements based on my audit.

Responsibility for the Financial Staiements

The Departmental Head overseeing the Project Coordination Unit at the Departinent of Agricultureand Livestock is responsible for preparing the financial statements for the projeet which shouldgive a true and fair presentation of the consolidated financial position and performance of theProductive Partnership in Agriculture Projects (PPAP) and to submit to ie for audit in compliancewith Section 63(4 o the Pulic Finance (Mwzagement Act, 1995 (as umenC,ddThe PC1 is also responsibility for the maintenance of adequate accounting records and internalcontrols that are designed to prevent and deteci fraud and error. and for the accounting policies andaccouiting estinates inlerent in the financial statements.

Responsibility of the Auditor-General

[ have conducted an independent audit in accordance with the 41di/ AC, 1989 (as IMended) inorder to express an opinion to y ou. My audit had been planned and performed in accordance withIn1terLtio1(nHal Standard on ditiing as promutigate by thel Accouning Siwndards Buard af PapuaNew Guinea and other -eiant Legislations to obtain reasonable assurance swhether the financialstateienis are free of material misstatemert. '1 he audit procedures included examination. on a testbasis. of evidence supporting the amounts and disclosures in the financial statemenis. My audit alsoincluded assessing the accounting principles applied and significant accounting estimates made b\imanagement as wkell as evaluating the overall statements presentation. 1 belijeve that my auditprovides a reasonable basis for mny opinion.

L[cel 6 T ISA hax' slmenl [ljuI 1 Rx 423Kumul Avenuerce X IGAN( MWaigani. NÉD

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The nature of an audit is inflUenced by factors such as the use of professional judgment, includiniLthe assessment of the risks of material misstatements in the financial statements, whether due tofraud or error. I have considered the risks. based on those assessments. o the internal controlsrelevant to the preparation and fair presentation of the financial statements in designing auditprocedures considered appropriate in the circumstances.

Audit procedure %ere performed to assess w tether, in all material respects. the financial statementspresented fairly. in accordance with the Public Finance thanagememz ct. 1995 rs amendedAccounting Siwtdards. and other mlndatorm financial reporting requiremwts. a view which isconsistent w ith IM understanding of the Project's financial position and the policy on themanagement of the project is to prepare the accompanying project F1nancial statements inaccordance with International Accounting standards (1AS) as adopted by the Accounting StandardsBoard of Papua New Guinea and the requirements of the trust agreement of the ProductivePartnership in Agriculture Project (PPAP). and of its performance as represented by the results ofits operations and cash flow s.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for thisaudit report.

In my opinion,

a) The consolidated financial statement of the Productive Partnership in Agriculture Projects:-* Comply with International Financial Reporting Standards:

* Give a true and fair vie% of the financial performance of the year the ended: and

Proper accounting records have been kept b) the agriculture partners included in the0project, as it had been revealed from our examination of the accounts and records.

PHILIP NA qGAAUDITOR GENERAL

I ce 6 11- Inxc eri IIi Hu t Bo 423Kurnul Aeinue N\ICANl. N 1)Waigani Nt )

2

PRODUCTIVE PARTNERSHIPS IN AGRICULTURE PROJECT

Funded by:

World Bank (International Development Association - IDA)

International Fund for Agriculture Development (IFAD)

Government of the Independent State of Papua New Guinea

FINANCIAL STATEMENTS

YEAR ENDED 31 DECEMBER 2015

PRODUCTIVE PARTNERSHIP IN AGRICULTURE PROJECT

30' August 2016

The PrincipalFrank Benabo & AssociatesP0 Bo0x 103Port MoresbsNational Capital District

Dear Sir.

AUDIT OF THE PRODUCTIVE PARTNERSHIPS IN AGRICULTURE PROJECT -31 DECEMBER 2015

This representation letter is provided in connection with your audit of the consolidatedfinancial statements of PRODUCTIVL PARTNI-RSIHIPS IN AGRICULTURI PROJECT("PPAP*) for the year 31 December 2015 for the purpose of expressing an opinion as towhether the financial statements give a true and 1ir view of (present fairly- in all materialrespects) the financial position of PPAP as of 31 December 2015 and of the results of itsoperations and its cash flows for the year then ended in accordance %Nith InternationalFinancial Reporting Standards (I1FRS).

1. GENERAL

We acknowledge our responsibility for the lair presentation of the financial statements inaccordance with IFRS. We confirm. to the best of our knowledge and belief. the followinerepresentations:

* There have been no irregularities involving management or employees who have asignificant role in internal control or that could have a material effect on the financialstatements. If there were an. %\e have indicated to you.

* We have made a%ailable to tou all hooks of account and supporting documentationthal w\as used in compiling the set of accounts for the above period. We have alsomade available to \ ou all in mutes of the Project Steering Committee.

* PPAP has complied with all aspects of contractual agreements that could have amaterial eftect on the financial statements in the ex em of noncompliance. There hasbeen no noncompliance witi requirements of regulator\ authorities that could have amaterial ctfect on the financial statements in the event ofnoncompliance.

Project Coordination Unit: 2N Floor Central Government Building, Waigani, NCD, PNG PO Box 792, Waigani, NCD, PNGPhone: +675 3250816 Fax: ... .......... Email: infoppan.gov.pg Webpage www.ppap.gov.pg

PRODUCTIVE PARTNERSHIP IN AGRICULTURE PROJECT

* Accept where mentioned [o \ou on the life of the project. we have no plans orintentions that na materialI alter the carr\ine value or classification of assets andliabilities reflected in the financial statements.

* We have recorded or disclosed, as appropriate. all liabilities both actual andconingent.

* There have been no events subsequent to period end which require adjustment of ordisclosure in the financial statements or Notes thereto.

* [here are no formal or informal compensating balance arrangements with any of ourcash accounts.

2. ASSETS

T[he assets as disclosed in the balance sheet are correct and will realise the value at whichthey are recorded. The project has clear or satisfactory title to the assets and there are noencumbrances attached to the assets.

3. LIABILITIES

The liabilities are stated at correct amounts represent obligations on the parn of the project.

4. INCOME & EXPENSES

All income and expenses as disclosed in the financial statements have being recorded in f"illat the values disclosed in the financial statements.

Yours faithfully,

PPAP PROJEC ATING UNIT (DAL)

..........Jethro ApinasPro ject Coordinator - PPAP

Project Coordination Unit: 2 ,D Floor Central Government Building, Waigani, NCD, PNG PO Box 792, Waigani, NCD, PNG

Phone: +675 3250816 Fax: ............. Email: info@ppap.gov-pE Webpage www.ppap.gov.pg

PRODUCTIVE PARTNERSHIPS IN AGRICULTURE PROJECTFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015NOTES TO THE FINANCIAL STATEMENTS

1 The Productive Partnerships n Agricutture Project ("PPAP I officially commenced in Apni 2011 Tne initial closing datewas set as 30 June 2016, however, this was extended to 30 June 2019 upon approval of additional fundio

2 PPAP is funded jontly by the World Bank (WB) through its International Deveiopment Association - IDA theInternational Funds for Agriculture Development and the Government of the Incependent State of Papua New Guineaas follows

* IDA - Loan of Special Drawing (SDR, 16.40 million Iwith estimated USS equivalent of USS 25.00 million:established through a Financing Agreement dated 9 August 2010.) Additional funding of USS30 milon approved in2016 for PPAP project extension to 30 June 2019

* IFAD - Loan of SDR 9.22 million (with estimated USS 14 00 million) established through a Financing Agreementdates 14 September 2010) Additional funding of US$22 million approved in 2016 for PPAP project extension to 30

* GoPNG - established contribution of US$ & 1 5 mill:on

Private sector counterpart funding is also provided to support the grants activities in part 2 of the PPAP. but does notform part of the core funding of PPAP upon which the financial statements are based

3 The objective of PPAP is to improve the livelihoods of smallholder cocoa and coffee producers through the improvementof the performance and sustainability of the value chains in the cocca - growing areas and the coffee growing areassupported by the project There are three parls to PPAP, as follows

* Part 1 - Institutional Strengthening and Coordination for the cocoa and coffee industnes.* Part 2 - Productive partnership in cocoa and coffee industries, through the provision of grants ano technical

assistance* Part 3 - Market access infrastructure improving the access to the markets for the partnership supporled unoer Part2 of PPAP.

4 PPAP is implemented under tne overall guidance of Project Steering Committee (PSC) and the overall coordination anomonitoring of the GoPNG's Department of Agriculture and Livestock

5 W8 administers both the IDA and ]FAD funding Two banks accounts ("Trust Accounts") have been established throughtrust deeds. at each of the three units - one for WB - administered funding and one for GoPNG Funding. all accountsare held with ANZ Bank

6 Advances and replenishments of tne WB-administered Trust Accounts are made by WB and charges in the WB recordsagainst the JDA and IFAD loans, in the proportion of 64/36

7 The Financial Statement are prepared by PPAP under the historical cost convention and in accordance with the cashbasis of accounting

8 The reporting currency is PNG Kina (PGK)

9 The transactions in currenc es other than PGK are translated nto PGK using the actual exchanging rate appied by ANZBank (where the transactions are paid from the trust Accounts!

10 The Financial Statement incluce figures for Pior Years (relating to 2011 to 2014) and curnulative to 3i December 2015

Mr Francis Daink Mr Jethro ApinasDeputy Secretary - DAL Project CoorainatorFor Secretary - DAL Productive Partnerships In Agricu tl.re Project

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