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Our Reference: LC821/248/18

Your Reference:

Date: 19" December, 2018

Mr Paula Ma'u

Chief Executive Officer

MEIDECCNuku'alofa

Dear Mr Ma'u

Final Audit Report: Pacific Resilience Project for financial yeard ended 30 June 2018

Please find enclosed the Final Audit Report of the Pacific Resilience Project for the financial yearended 30 June 2018.

Finally, I would like to take this opportunity to thank the Project Management Unit staff, for theirassistance and cooperation during the audit.

Yours Sincerely

Sisilia Fe'iloaki CA (ANZ)for AUDITOR GENERAL

cc: Mrs Balwyn Fa'otusia, CEO - Ministry of Finance & National Planning

Mr Maliu Takai, Project Manager (PREP)

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PACIFIC RESILIENCE PROGRAM(PREP)

FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2018

PACIFIC RESILIENCE PROGRAMFINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 2017

CONTENTS Page(s)

1. Certification by Management 2

2. Auditor's Report 3

3. Statement of Receipts and Payments 4

4. Statement of Comparison of Budget and Actual Amounts 5

5. Notes to the Financial Statements 6 - P

2

PACIFIC RESILIENCE PROGRAMCERTIFICATION BY PROJECT'S MANAGEMENTFOR THE YEAR ENDED 30 JUNE 2018

We certify that the attached financial statements for the Pacific Resilience Program (PREP)comprising of the Statement of Receipts and Payments, Statement of Comparison of Budget &Actual Amounts and Notes forming part of the financial statements for the year from 01 June 2017to 30 June 2018:

a) gives a true and fair view of the matters to which they relate; and

b) have been properly drawn up in accordance with the accounting policy described in Note 2 tothe financial statements.

We are not aware of any circumstances which would render any particulars included in thefinancial statements to be misleading or inaccurate.

Sigau A ignature

Mr. Maliu Takai Mr. Vatulele TuputupuProject Manager Acting Chief Executive OfficerPacific Resilience Program (PREP) MEIDECCTonga Tonga

17TH December 2018; Nuku'alofa; TONGA

1OAC

INDEPENDENT AUDITOR'S REPORT

To the Chief Executive Officer

Ministry of Meteorology, Energy, Information, Disaster, Management, Environment, Communications and

Climate Change

Pacific Resilience Program

We have audited the accompanying Statement of Cash Receipts and Payments and the accompanying notes to theFinancial Statements for the Pacific Resilience Program (PREP) as set out on pages 4 to 9 for the financial periodended 3 0 h June 2018.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of the Financial Statement on the cash basis accounting as

accordance with the Public Finance Management Act 2002 and fair presentation of the financial statements in

accordance with the International Public Sector Accounting Standards (IPSASs), Financial Reporting under the

Cash Basis of Accounting and for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with International Standards of Supreme Audit Institution (ISSAls). 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 misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor's 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 auditor considers internal control relevant to the entity's preparation and fair presentation 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 entity's internal control. An audit also included

evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my unqualified

audit opinion.

Unqualified Opinion

In my opinion, the Financial Statements on pages 4 to 9, have been presented fairly in all material respects the

receipts and payments of Pacific Resilience Program for the year ended 30111 June 2018 in accordance with the

Public Finance Management Act 2002 and in accordance with International Public Sector Accounting Standards

(IPSASs Fin ncial Reporting under the Cash Basis ofAccounting.

Sefita Tangi FCPA (Aust)

AUDITOR GENERAL

4

PACIFIC RESILIENCE PROGRAMSTATEMENT OF CASH RECEIPTS AND PAYMENTSFOR THE YEAR ENDED 30 JUNE 2018

Direct 2017 - 18 FY 201 - O17LtACTUAL (TOP Payment TOTAL TOTAL TOTAL to

5)__ __ (TOP 5) (TOPs) (TOPS) Date

Sources of FundsIDA 56890 (CREDIT) 1,259,597 1,104,972 2,364,569 2,956,527 5,321,096IDA D0780 (GRANT) 822,058 - 822,058 589,396 1,41 1,454TF A0900 (SCCF) 155,057 - 155,057 878,546 1,033,603TF A1232 (GFDRR) 2,621 2,621 531,526 534.147Counterpart Funds (Tonga Gov't) - - -Others - -

TOTAL 2,239,333 1,104,972 3,344,305 4,955,995 8,300,300

Uses of Funds - By Component1 Strengthening Early Warning Preparedness

1 1 1 Institutional strengthening of legal & 302,443 302,443 158,363 460,806regulatory frameworkObservation Infrastructure, DataManagement Systems, Forecasting and 68,176 68.176 1,197,098 1,265,274

1.1.2 Warning SystemsEnhancement of the MHEWS Service Delivery 107,568 107,568 398,176 505744

1 1.3 SystemTotal Component 1 478,187 - 478,187 1,753,637 2,231,824

Risk Reduction and Resilient Investment2 Planning and Preparation2.1.1 Investment planning and preparation - - - -

Investments to strengthen climate and21.2 disaster resilience 69,409 69,409 3,810 73,219

Total Component 2 69,409 - 69,409 3,810 73,219

3 Disaster Risk Financing3.1-1 Contingency Emergency Response - - - -3.1.2 Premiums financing - 1,104,972 1,104,972 2,179,134 3,284,106

3.1.3 Capacity building for Disaster Risk Financing 14,975 - 14,975 - 14,975Total Component 3 14,975 1,104,972 1,119,947 2,179,134 3,299,081

4 Project Management4.1.1 Project Manager 101,388 - 101,388 95,550 196,93841,2 Pro;ect Accountant 68,141 - 68,141 66,178 134,3194 1.3 Procurement Specialist 45,277 - 45,277 39,155 84,4324,14 M & E Expert - - - -

4 1 5 Administrative Officer 25,242 - 25,242 18,052 43,2944.1 6

a) Incremental Operaiing Costs 80,194 80,194 90,050 170,244Capital Budget (Computers, Equipment &

b) Furnitures)2,973 2,973 42,174 45,147C) Others (including MTR preparation) - - - -

4.1.7 Driver 2,346 2,346 - 2.346Total Component 4 325,561 - 325,561 351,159 676,720TOTAL PROJECT EXPENDITURE 888,132 1,104,972 1,993,104 4,287,740 6.280,844

Balance of Receipts over Payments 1,351,201 - 1,351,201 668,255 2,019,456

Plus Opening Balance - 01/07/2017 668,796

Less Prior Year Unswept expenses 277,409

Double Paid vouchers 33,757

Add Gain on Foreign Exchange 98,743

Closing Bank Balance 30/06/2018 1,807,574

6

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 June 2018

1. GENERAL INFORMATION

BACKGROUND

Tonga, like its pacific neighbouring countries, is highly vulnerable to all forms of hydro-meteorological and geo-hazards as well as climate change extreme events. These eventsaffects socio-economic development, livelihoods as well as natural and built environments.

PREP is seen as part of initiatives to provide a solution to combat the adverse effects of theseevents, in building the resilience of Tonga & participating countries to hydro-meteorological,geo-hazards and climate change extreme events, through strengthening of early warningsystem and preparedness, risk reduction and resilience investments, and financial protectionof participating countries.

SOURCES OF FUND

TOTAL BUDGET USD$ 16.759M

PREP COMPONENTS

COMPONENT 1 (USD$11.5M - ); STRENGTHENING EARLY WARNING AND

PREPAREDNESS: this involves carrying out activities designed to strengthen institutional and

regulatory framework, modernize observation infrastructure and facilities and improve service

COMPONENT 2(USD$1.7M - §>); RISK REDUCTION AND RESILIENT INVESTMENTS: involvesactivities designed to prepare a multi-sectoral resilience investments and feasibility studies for

such investments and financing refurbishment of facilities-schools, etc.

COMPONENT 3(USD$2.68M - ): DISASTER RISK FINANCING: involves the establishmentof contingency emergency response comp (cerc), financing of premiums and capacity building

in disaster risk financing.

COMPONENT 4(USD$0.9M - iJ; PROGRAM MANAGEMENT: involves strengthening

recipient's capacity in program management, coordination and monitoring.

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2. SUMMARY OF ACCOUNTING POLICIES

2.1 Basis of PreparationThe accounts are prepared on the basis of historical Cash Basis IPSAS Financial Reporting Underthe Cash Basis of Accounting.

The accounting policies have been applied consistently throughout the period.

2.2 Reporting EntityThe financial statements are for the Ministry of Meteorology, Energy, Information, DisasterManagement, Environment, Climate Change, and Communication (MEIDECC).

2.3 Reporting CurrencyThe reporting currencies are both Tongan Pa'anga (TOP) and some in US Dollars (USD). The Designated.are maintained in USD, although all expenses are paid in TOP hence the Financial Statements arepresented in both TOP and some in USD.

Project Income (Funding) in the Statements is converted from USD to TOP at the rate on the day tWmoney is received, and the Direct Payment was converted from USD to TOP using a rate ofI TOP = 0.4525 USD.

2.4 FINANCIAL PERIODThe financial statements is for the period from 1st July 2017 to 30th June 2018.

8

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2018

3. ReceiptsFunds are received from the World Bank. The amount is based on the Withdrawal Applicationsfrom PREP through the Ministry of Finance and National Planning (MoFNP) for approval and

transfer from the World Bank.

Date Description Source of Ccy ApplicationFunds Amount

28/08/2017 Reimbursement - Withdrawal IDA - Credit TOP 181,040.77Application - PREP 007

05/09/2017 Reimbursement - Withdrawa IDA - Grant TOP 164,316.72Application - PREP 00614/11/2018 Direct Payment - Insurance IDA - Credit TOP 1,104,972.00

19/01/2018 Reimbursement - Withdrawal SCCF TOP 155,057.00Application - SCCF 02

19/01/2018 Reimbursement - Withdrawa[ GFDRR TOP 2,620.82Application - GFDRR 02

10/04/2018 CERC - Fund IDA - Credit TOP 539,025.44

10/04/2018 CERC - Fund IDA - Grant TOP 539,025.44

Reimbursement - Withdrawal23/04/2018 Aication P 009 IDA - Credit TOP 539,530.81

Application - PREP 009

23/04/2018 Reimbursement - Withdrawal IDA - Grant TOP 118,715.39Application - PREP 010

TOTAL 3,344,304.39

4 PaymentsPayments relate to all expenditure payments made to suppliers for goods and services relating toPREP. Payments are approved by the CEO of MEIDECC and are paid in accordance with theProgram Operational Manual (POM).

30JUNE 30 JUNE5 CASH AT BANK 2018 2018

(TOP$) (USD$)Designated Account No. 01 -77-645-2041 1,725,481 767,322Designated Account No. 01-77-645-2042 82,092 36,507

TOTAL 1,807,574 803,828Exchange rate on 29th June 2018: 0.4447 USD = TOP$ I

9

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2018

6 Payments by Third PartiesThird party is the World Bank. There was I payment made in direct payment, by the World Bank.

Source of Application USDDate Description Ccy AmountFund Equivalents

(TOPSI

14/11/2017 Insurance Premium CDi USD 1,104,972 500,000Credit

7 FACILITY AVAILABLE

Funds in historical figures including available balances for the Year.

Signed Disbursed to RemainingAmount Date (TOP) Balance

IDA Notional - Credit TOP 17,741,935 5,321,096 12,420,839IDA- Regional - Grant TOP 4,838,710 1,411,454 3,427,256SCCF - Grant TOP 9,847,312 1,033,603 8,813,709GFDRR - Grant TOP 3,225,806 534,147 2,691,659Counterpart Funds (Tongan Gov't) TOP 387,097 - 387,097

TOTAL 36,040,860 8,300,300 27,740,5608. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment items are stated at cost (TOP $).

Opening Addition/(Dis ClosingDosall

3 x Phillips Desktop 6,085 - 6,0854 x Loptops 6,996 2,973 9,9693 x Seagate External Drive 753 - 7532 x TP Link 182 - 182HP Deskjet Inkjet 181 - 181Multi- Function Printer - FUJl XEROX 9,801 - 9,8012 x Overhang Cupboards 701 - 7013 x Movable Partitions 2,041 - 2,041EPSON Portable Multimedia Projector 1,601 - 1,601D-Link Server 1,251 - 1,2512 x Mazda BT50 151,001 - 151,001Toyota HIACE (16 Seater) - Diesel 73,857 - 73,857Mazda BT50 75,501 - 75,501Scanner 465 - 465Generators (5) 23,000 - 23,000Chainsaws (12) 9,360 - 9,360Two-Stroke Oil (10) 816 - 816Bar & Chain Oil (12) 390 390Maintenance Kit ( 12) 2,016 - 2,016Dust Bins - 100 Ltrs (10) 1,390 - 1,390Buckets - 20 Ltrs (10) 155 - 155Kitchen Utensil Sets (30) 1,425 - 1,425Large Pots - 100 Ltrs (10) 6,950 - 6,950Water Tanks (10) 16,000 - 16,000VHF Radios (100) 60,316 - 60,316Stretchers (12) 7,585 - 7,585Dewatering Pumps (2) 118,848 - 118,848Choirs (10) 1,100 - 1,100AM Transmitter 545,924 - 545,924Portable Toilets (20) 62,046 - 62,046Family Tents (100) 282,996 - 282,996Total 1,470,733 2,973 1,473,706