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Financial and Systems Audit of the Caribbean Regional Communication Infrastructure Programme (CARCIP)

MOORE STEPHENS

FINANCIAL AND SYSTEMS AUDIT OF THE CARIBBEANREGIONAL COMMUNICATION INFRASTRUCTURE

PROGRAMME (CARCIP)

FINAL

JANUARY 2016

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TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT - FINANCIAL AUDIT..........................................3

INDEPENDENT AUDITORS' REPORT - SYSTEMS AUDIT ..................... 5

SUMMARY OF FINDINGS ......................................................7

1. ENGAGEMENT CONTEXT .............. 9.......... ............. 9

2. AUDIT FINDINGS ............................................. 12

3. SPECIFIC MATTERS ........................................... 14

ANNEXES ........................................................ 15

2


INDEPENDENT AUDITORS' REPORT - FINANCIAL AUDIT

The Government of St. Vincent and the GrenadinesMinistry of Finance and Economic PlanningCentral Planning DivisionBay StreetKingstownSt. Vincent and the Grenadines

We have audited the Financial Report for the Caribbean Regional Communication InfrastructureProgramme for the period from I January to 31 December 2014 which is set out in Annex I of thisreport. This report is made to the Government of St. Vincent and the Grenadines in accordance withour Terms of Reference.

Respective Responsibilities of the Entity's management and auditors

The preparation of the Financial Report is the responsibility of the Entity's management. Ourresponsibility is to express an opinion on the Financial Report based on our audit, which is a financialaudit performed in the context of compliance with the applicable Agreement Terms and Conditions forthe Project.

We conducted our audit in accordance with the International Standards on Auditing insofar as thesestandards can be usefully applied to this financial audit in its specific compliance context. Thesestandards require that we comply with ethical requirements and that we plan and perform the audit toobtain reasonable assurance about whether the Financial Report is free from material misstatement.An audit includes examining evidence supporting the amounts and disclosures in the abovementioned financial report. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall presentation of theFinancial Report.

The specific objective of this financial audit, in accordance with our Terms of Reference, was to enableus to express an opinion on whether the Financial Report of the Project, including all relevantDesignated Account (DA) reconciliations and supplementary financial information present fairly, in allmaterial respects, the financial position of the project, the funds received and the disbursements madeduring the period audited. Details of sources and use of funds are detailed in Annex II of this report.

We believe that our audit provides a reasonable basis for our opinion.

Scope of the audit

The scope of our audit is set out in the Terms of Reference as noted in Section 1 of our report. Wehave reported all our findings regardless of the amount involved.

Emphasis of Matter

Without qualifying our opinion we draw your attention to the financial findings totalling XCD 182 as setout in Section 2.1 (Financial Audit Findings) of our report. These findings represent 0.02% of the totalexpenditure amount reported for the project and are therefore not considered material in the context ofour audit. Nevertheless, we report them to you in accordance with our Terms of Reference.

Unqualified Opinion

In our opinion the Financial Report of the Project, including all relevant Designated Account (DA)reconciliations and supplementary financial information, present a true and fair view of the financialposition and of the activities of the project for the period from 1 January to 31 December 2014 inaccordance with the rules and conditions governing the use of funds as expressed or referred to in theFinancing Agreement between the International Development Association and the Government of St.Vincent and the Grenadines.

Finwval and Systems Audit of the Caribbean Reg ana Communication Infrastructure Programme (CARCIP)

This report is intended solely for the information and use of the Government of St. Vincent and theGrenadines.

Tim Woodward 150 Aldersgate StreetPartner LondonMoore Stephens LLP EC1A 4AB

14 January 2016

4


INDEPENDENT AUDITORS' REPORT - SYSTEMS AUDIT

The Government of St. Vincent and the GrenadinesMinistry of Finance and Economic PlanningCentral Planning DivisionBay StreetKingstownSt. Vincent and the Grenadines

We have audited the Internal Control System set up and operated by the Entity for the CaribbeanRegional Communication Infrastructure Programme and for the purpose of managing risks to theachievement of the objectives of the Project. These risks include risks to the Project funding providedby the International Development Association not being used in conformity with the applicableFinancing Agreement.

This systems audit covers the design and operating effectiveness of the Internal Control System in theperiod from 1 January to 31 December 2014.

Our findings are set out in the relevant sections of our report, which is made solely to the Governmentof St. Vincent and the Grenadines in order to gain assurance that risks to the achievement of theobjectives of the Project are properly managed and controlled.

Respective Responsibilities of the Entity's management and auditors

The Entity's management are responsible for the design, implementation and effective operation of theInternal Control System, including the management and control of risks to the achievement of theobjectives to the Project.

Our responsibility is to audit the Internal Control System and to report our findings to the Governmentof St. Vincent and the Grenadines in accordance with the Terms of Reference for the auditengagement. These specify that we should carry out our work in accordance with InternationalStandards on Auditing insofar as these standards can be applied in the specific context of a systemsaudit intended to provide assurance that risks to the achievement of the objectives of the Project areproperly managed and controlled. These standards require us to observe applicable ethical standardsin the conduct of our work.

Scope of the audit

The scope of our audit is set out in our Terms of Reference as noted in Section I of our report. Itincludes an assessment of the main risks to the achievement of the objectives of the Project includingrisks to the Project funding provided not being used in conformity with the applicable ContractualConditions and the risk of error, irregularities and fraud with regard to Project funding. The scope ofour audit includes an assessment of whether the design of the Internal Control System sufficientlymitigates those risks and whether it is operating effectively.

Our work is designed to concentrate only on the key internal controls of the Entity and specificallythose relating to the Project which are designed to prevent and detect material errors, irregularities orfraud with regard to the Project funding.

For the purpose of determining what is a material weakness or deficiency in the Internal ControlSystem we have assessed whether the absence or failure of a control or a series of controls results ina significant risk of material error, irregularity or fraud in the use of the Project funds provided by theInternational Development Association.

Accordingly, our findings cannot be relied upon to disclose every weakness in internal control that mayexist at the Entity or Project level. Additionally, although our audit scope includes consideration ofqualitative as well as quantitative factors, it is not a performance audit and therefore concentrates onfinancial internal controls rather than operational controls.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

5


Emphasis of Matter

Without qualifying our opinion we draw your attention to the finding set out in Section 2.2 of our reportdetailing a weakness in the Internal Control System. As this weakness does not pose a significant riskto the achievement of the objectives of the Project, it is not considered to be material in the context ofour audit. Nevertheless, we report it to you in accordance with our Terms of Reference in order that itmay be remedied in order to further strengthen the Internal Control System.

Unqualified Opinion

In our opinion the Internal Control System set up and operated by the Entity for the purpose ofmanaging material risks to the achievement of the objectives of the Project, was suitably designed andoperated effectively in the period from 1 January to 31 December 2014.

This report is intended solely for the information and use of the Government of St. Vincent and theGrenadines.

Tim Woodward 150 Aldersgate StreetPartner LondonMoore Stephens LLP EC1A4AB

14 January 2016

B


ANNEXES

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Financial and Systems Audit of the Caribbean Regional Communication Infrastructure Programme (CAROP)

Notes to the Financial Report

1, Accounting standards

The financial report has been prepared on a Cash Basis and this accounting policy has been appliedconsistently throughout the period. Under the cash basis of accounting, revenues are reported on theincome statement when the cash is received and expenditure reported when cash is disbursed.

2. Basis of measurement

Expenses are recorded in the Financial Report on the basis of Historical Cost.

3. Functional currency

The reporting currency is East Caribbean Dollars (XCD).

4. Estimates andjudgements

All expenditure is accounted for on a Cash Basis and has been classified under budgetary headingsthat aggregate all costs related to that category, the classification of which is a matter ofManagement's professional judgement.

18

Financial and Systems Audit of the Canbbean Regional Communication Infrastructure Programme (CARCIP)

ANNEX II - SOURCES AND USE OF FUNDS

Sources of funding and revenue - amounts in USD

ctual ATotal

Sources of funding and revenue Budget (Aug 2011 2014 - Dec Actual (Aug- Dec 2014 2011-Dec2013) 2014)

World Bank contribution 6,000,000 200,000 336,575 536,575

Total of funding and revenue 6,000,000 200,000 336,575 536,575

Summary by category I main type of expenditure - amounts in USD

Actual (Aug Actual (Jan Tota ProjectExpenditure category Budget 2011 - Dec 2014 - Dec Expenditure

2013) 2014)Component 1: Regional 3,450,000 - 42,526 42,526Connectivity InfrastructureComponent 2: ICT Led 2,000.000 17,810 179,727 197,537InnovationComponent 3: 550,000 105,505 89,976 195,481Implementation Support

Total 6,000,000 123,315 312,229 435,544


ANNEX III - SYSTEMS DESCRIPTION

Cash and bank management

A USD account (# 9027), known as the 'Designated' account, held with the Bank of St Vincent and theGrenadines was used to receive the International Development Association funds. Funds are drawndown periodically into the local XCD account (# 135715), also held with the Bank of St Vincent and theGrenadines, from where payments in local currency can be made.

Designated Account reconciliations are performed monthly which reconcile International DevelopmentAssociation funds received to the funds drawn down into the local account. Monthly bankreconciliations for the XCD account are also performed.

We were provided with bank statements to evidence the receipts of the USD 146,146.09, USD56,067.74 and USD 134,360.83 from the International Development Association on 31 March 2014, 13August 2014 and 18 November 2014 respectively.

Accounting and Reporting

The Central Planning Division were responsible for maintaining the underlying accounting records andprepared all reports. They use the accounting software 'Peachtree' which allows different projects tobe set-up and maintained individually. Project expenditure is allocated against budget headings whichare monitored using 'control cards'. During our fieldwork we noted that some expenses relating toConsultants' PAYE which were not recorded in the month in which they were incurred. Refer to systemaudit finding no.1 for further details.

All computers and software used require password entry. The access / restrictions are set based onrole and authority level. This is to strengthen appropriate segregation of duties.

Expenditure

The majority of expenditure relates to payments to Consultants and a skills assessment which wasundertaken.

Purchases are generally initiated by a Project Officer who completes a purchase requisition. Apurchase order will then be completed by one of the Administrative staff and approved by a moresenior staff member, such as a Procurement Officer. Upon receipt of the invoice, a 3 way match isperformed (checking the invoice against the purchase order and receipt note) in order to verify thepurchase. A payment voucher is then prepared by one of the Accountants, before being reviewed by amore senior Accountant, and sent to the Project Coordinator to approve. A bank order is then signedby two of four bank signatories: Deputy Director of Planning, Accountant General, PermanentSecretary or Senior Projects Officer.

We noted one issue relating to an expense charged to the project which was not for project purposes.Please refer to financial audit finding no.1 for further details.

Procurement

The following thresholds were in place (as per the Project Implementation Manual) in order todetermine which procurement procedures should be followed:

20

F.nancial and Systems Audit of the Caribbean Regional Communication Infrastructure Programme (CARCIP)

Expenditure Category Contract Value (Threshold) Procurement MethodUSD Thousands

1 .Works > 3.0 ICB3.0-250 NCB< 250 Shopping

2. Goods > 250 ICB

50-250 NCB< 50 Shopping

3. Services- firms > 200 QCBS

< 200 QCBS, QBS, FBS, LCS, CQ.SSS

-individuals > 50 Comparison of 3 CVs< 50

We did not note any issues regarding procurement.

21

Financial and Systems Audit of the Caribbean Reg onai Communication Infrastructure Programme (CARCIP)

ANNEX IV - DESIGNATED ACCOUNT RECONCILIATION 2014

DESIGNATED ACCOUNT RECONCILIATION STATEMENT

LOAN/CREDIT/PPFICOFINANCIER NUMBER IDA 5118-VC

US$

1 TOTAL ADVANCED BY WORLD BANK (OR COFINANCIER) 536,574.66LESS: ELIGIBLE EXPENDITURE FOR THE CURRENT YEAR ENDED DECEMBER 31, 2014DOCUMENTED BY WORLD BANK (213,192 05)LESS: CUMULATIVE ELIGIBLE EXPENDITURE FOR THE PRIOR PERIODS ENDEDDECEMBER 31, 2013 DOCUMENTED BY WORLD BANK (117,908 66)

3 PRESENT OUTSTANDING AMOUNT ADVANCED TO THE DESIGNATED ACCOUNT (1 - 2) 205,473.95

BALANCE OF USD DESIGNATED ACCOUNT PER BANK RECONCILIATION STATEMENTAS AT PERIOD END DECEMBER 31 2014 95,620674BALANCE OF PROJECT ACCOUNT PER BANK RECONCILIATION STATEMENT AS ATPERIOD END DECEMBER 31. 2014 7,72420PLUS: ELIGIBLE EXPENDITURE FOR THE CURRENT YEAR DOCUMENTED AFTER THEPERIOD END - (WA #MF CCIP6) 98,968.93

6 PLUS, TOTAL AMOUNT WITHDRAWN AND NOT YET CLAIMED

REASON:.PLUS: AMOUNTS CLAIMED IN PREVIOUS APPLICATIONS NOT YET CREDITED AT DATEOF BANK STATEMENTSAPPLICATION NO.

WA # XXX

WA # XX

SUBTOTAL OF PREVIOUS APPLICATIONS NOT YET CREDITED

8 LESS: INTEREST EARNED -1338 51

9 TOTAL ADVANCE ACCOUNTED FOR (NO.4 THROUGH NO- 9) 200,97529

10 DIFFERENCE (3 - 9) 4,49866

11 EXPLANATION OF ANY DIFFERENCE SHOWN IN LINE 10

Bank charges on funds received from the World Bank and on the transfer of funds from USDbank account to XCD bank account (62.00)

Ineligible expenditure identified in period from 1 January to 31 December 2014 (67.70)

Ineligible expenditure identified in period from 1 August 2011 to 31 December 2013 (5.406.26)

Revenue from sale of bid documents 694.60

Refund from HTERP due to overpayment on loan to CARCIP 342.70

Total (4,498.66)

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