Belize Electricity Limited Project (ERCAP) In Belize Project

PKFAccountants &business advisers

Belize Electricity Limited

Energy Resilience for Climate AdaptationProject (ERCAP) In Belize Project

GEF Grant Numbers TF0A2887 and TF0A2888

Financial Statements

for the year ended 31 December 2019

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Contents Pages

SECTION I FINANCIAL STATEMENTS 1 -20

Statement of the Management 2 - 3

Independent auditor's report 4-6

Statement of financial position 7

Statement of sources and uses of funds 8

Statement of designated account 9

Statement of use of funds by disbursement category 10

Statement of use of funds by project component 11

Notes to the financial statements 12 - 18

SECTION II INDEPENDENT ASSURANCE REPORT ON THEEFFECTIVENESS OF INTERNAL CONTROL 19 -21

SECTION III INDEPENDENT ASSURANCE REPORT ON 22-24COMPLIANCE

APPENDIX I MANAGEMENT LETTER 1 -9

PKF BelizeGlobal expertise with local knowledge

Accountants &business advisers

Chief Executive OfficerBelize Electricity Limited2 YV MIes Philip Goldson HighwayBelize City, Belize

Attention: Mr. Jose Moreno

14 July 2020

Dear Sir:

We have completed our audit of the Energy Resilience for Climate Adaptation Project(ERCAP) In Belize Project for the year ended 31 December 2019. Our audit included:

1. An audit of the financial statements for the ERCAP In Belize project2. An audit of internal control structure of Belize Electricity Limited (BEL)3. An audit on BEL's compliance with the terms of the loan and grant agreements

and applicable laws, guidelines, and regulations related to BEL's financial activities

Enclosed you will find the following audit reports required by the ERCAP In Belize Projectterms of reference:

1. Independent auditor's report on the financial report2. Independent assurance report on the effectiveness of internal controls3. Independent assurance report on compliance4. Management letter, including management's comments

If you have any questions about this submission or if additional information is necessary,feel free to contact us.

Regards,

Jc 4e 6rtez"KF 'elize,hartered accountants and business advisers

PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * BelizeTel: (501) 227-7428 * (501) 227-7222 * Email: [email protected] * Webste: pkfcaribbean.com/belizePartners: J.A. Bautista * J. Ortez

PKF Beitze iSa member firm of the PKF Inernational Limited family of legally indepenoent firms and does not accept any responsibility or liabilfty for the actions or inactionsofanyindividual memberorcorrespondentfirmorfirms.

SECTION I

FINANCIAL STATEMENTS

Page 1

BELIZE ELECTRICITYLIMITED2 1/ Miles Philip Coldson Highway R P0 Box 327Belize City, Belize C.A.Telephone: 501.2270954 Fax: 501.223.0891

STATEMENT OF THE MANAGEMENT

The Management of Belize Electricity Limited ("BEL") presents this report together withthe financial statements of Energy Resilience for Climate Adaptation Project (ERCAP)In Belize Project, GEF Grant Numbers TFOA2887 and TF0A2888, implemented by theBEL ("the Project") as at 31 December 2019 and for the year then ended.

The Project Steering Committee

The members of the Project Steering Committee during the year and at the date of thisreport are as follows:

Entity Main Representative AlternateRepresentative

Belize Electricity Mr. Jeffrey Locke - Chief Mr. Derek Davis - SeniorLimited Executive Officer Manager, Systems

Planning andEngineering

Ministry of Transport and Ms. Catherine Mr. Derrick Rudon -National Emergency Cumberbatch Deputy ChiefManagement - Chief Meteorologist Meteorologist

Ministry of Public Service Dr. Peter Allen - Mr. Ryan Cobb -Chief Executive Energy Director,Officer Energy Unit

Ministry of Finance Mrs. Yvette Alvarez Ms. Maria Cooper -- Senior Advisor Economist

Ministry of Forestry, Dr. Percival Cho - Dr. Lennox Gladden -Fisheries, the Chief Executive Chief Climate ChangeEnvironment and Officer OfficerSustainableDevelopmentMinistry of Economic Mrs. Yvonne Hyde - Mr. Carlos Pol - Director,Development Chief Executive Officer Policy and Planning Unit

Ministry of Works Mr. Simeon Herrera- Mr. Trevor Garcia -Executive Engineer Executive Engineer

Mr. Jeffrey Locke tenure as CEO of BEL came to an end in March 2019. Mr. John Mencias wasappointed as the new CEO of BEL immediately thereafter.

Page 2

vvwvv.bel.com.bz [email protected] 0.800.235.2273

STATEMENT OF THE MANAGEMENT (continued)

The Management's responsibility in respect of the financial statements

The Management is responsible for preparing the financial statements of the Project,which comprise the statement of financial positions as at 31 December 2019, thestatement of sources and uses of funds, the statement of designated account and thestatement of use of funds by category, and the statement of use of funds by projectcomponent for the year then ended, and the notes to the financial statements, which givea true and fair view of the financial position of the Project as at 31 December 2019 andits receipts, disbursements, and expenditures for the year then ended, in accordance withthe accounting policies set out in Note 3 to the financial statements and the ProjectOperational Manual. In preparing these financial statements, the Management is requiredto:

* select suitable accounting policies and then apply them consistently;* make judgements and estimates that are reasonable and prudent;* state whether applicable accounting principles have been followed, subject to any

material departures disclosed and explained in the financial statements; and* design and maintain effective internal control over compliance with requirements

that could have a direct and material financial effect on the financial statements aswell as over financial reporting for the purpose of properly preparing andpresenting the financial statements so as to minimize errors and frauds; and takeresponsibility for its assertion as to the effectiveness of such internalcontrol.

* ensuring that proper accounting records are kept, which disclose, with reasonableaccuracy at any time, the financial position of the Project and that the financialstatements comply with the accounting policies set out in Note 3 to the financialstatements;

* using the Project's funds as intended for the Project and for complying with theProject Operational Manual as well as laws and regulations applicable to theProject; and

* safeguarding the assets of the Project and hence for taking reasonable steps forthe prevention and detection of frauds and other irregularities.

The Management confirms that they have complied with the above requirements inprep 1hese financial statements.

For a o e alf of the Management:

John e iasChief xecutive Officer15 J y 2020

Page 3



INDEPENDENT AUDITOR'S REPORT

TO THE MANAGEMENT OFBELIZE ELECTRICITY LIMITED

Opinion

We have audited the accompanying financial statements of the Energy Resilience forClimate Adaptation Project (ERCAP) In Belize Project, GEF Grant Numbers TF0A2887and TF0A2888 ("the Project"), as set out on page 7 to page 18, which comprises thestatement of financial position as at 31 December 2019, the statement of sources anduses of funds, the statement of designated account, the statement of use of funds bydisbursement category and the statement of use of funds by project component for theyear then ended and the notes thereto. The financial statements have been prepared bythe management of Belize Electricity Limited ("the Company") in accordance with theaccounting policies as described in Note 3 to the financial statements and the Project'sOperational Manual.

In our opinion, the financial statements of the Project as at 31 December 2019 and for theyear then ended, give a true and fair view, in accordance with the accounting policies asdescribed in Note 3 to the financial statements and the Project's Operational Manual.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs).Our responsibilities under those standards are further described in the Auditor'sResponsibilities for the Audit of the financial statement section of our report. We areindependent of the Company in accordance with the International Ethics Standards Boardfor Accountants' Code of Ethics for Professional Accountants (IESBA Code), togetherwith the ethical requirements that are relevant to our audit of the financial statements inBelize, and we have fulfilled our ethical responsibilities in accordance with the IESBACode. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion.

Emphasis of matter - Accounting Policies

We draw attention to Note 3 to the financial statements which describe the accountingpolicies. Our opinion is not modified in respect of this matter.

PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * BelizeTel: (501) 227-7428 * (501) 227-7222 * Email: [email protected] * Website: pkfcaribbean.com/belizePartners: J,A. Bautista * J. Ortez Page 4

PKF Belize is a member firm of the PKF International Limited farmiy of legally ridependent firms and does not accept ay responsibility or jabily for the actions or inactionsof any individual member or correspondentfirm or firms.


INDEPENDENT AUDITOR'S REPORT (continued)

Responsibilities of Management for the Financial Statement

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 theProject's Operational Manual, and for such internal control as the managementdetermines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditor's Responsibilities for the Audit of the Financial Statement

Our objectives are to obtain reasonable assurance about whether the financial statementas a whole is free from material misstatement, whether due to fraud or error, and to issuean auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with ISAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material if,individually or in aggregate, they could reasonably be expected to influence the economicdecisions of users taken based on this financial statement.

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

* Identify and assess the risks of material misstatement of the financial statement,whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to providea basis for our opinion. The risk of not detecting a material misstatement resultingfrom fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

* Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances and for the purpose ofexpressing an opinion on the effectiveness of the Company's internal control, onwhich we have reported in a separate section of our report.

* Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

Page 5


INDEPENDENT AUDITOR'S REPORT (continued)

Auditor's Responsibilities for the Audit of the Financial Statement (continued)

* Evaluate the overall presentation, structure and content of the financialstatements, including the corresponding notes and supplementary information,and whether the financial statement represents the underlying transactions andevents in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including anysignificant deficiencies in internal control that we identify during our audit.

PKF BelizeChartered AccountantsBelize City

15 July 2020

Page 6

Belize Electricity LimitedEnergy Resilience for Climate Adaption Project TF - A2887/2888

STATEMENT OF FINANCIAL POSITIONas at 31 December 2019(in US dollars)

ASSETS NotesCURRENT ASSETS

Cash and cash equivalents:Deposits held with the bank 4 2,265,891

Prepayments 6 61,7742,327,665

NON-CURRENT ASSETSCumulative project expenditures:

Component 1 41,197Component 2 9,012Component 3 24,309

74,518

TOTAL ASSETS 2,402,183

FUNDSFinancing received from the World Bank:

TF 2887 965,800TF 2888 1,402,160

Other receipts 5 34,223

TOTAL FINANCING 2,402,183

The special-purpose project financial statements for the year ended 31 December 2019were ap roved and authorized for issue on 15 July 2020 by the management of the

0 ' alf he Management:

SExecutive Officer

Project Manager

T notes on pages 12 - 18 form an integral part of these financial statements.

Page 7


STATEMENT OF SOURCES AND USES OF FUNDSfor the year ended 31 December 2019(in US dollars)

NotesRECEIPTS FROM WORLD BANKAdvances:

TF 2887 965,800TF 2888 1,402,160

Receipts from BEL 5 34,223TOTAL RECEIPTS $2,402,183

PROJECT AND OTHER EXPENDITURESComponent 1: 41,197Component 2: 9,012Component 3: 24,309Prepayments 6 61,774TOTAL EXPENDITURES $ 136,292

EXCESS OF RECEIPTS OVER DISBURSEMENTS $2,265,891OPENING BALANCECLOSING BALANCE @ DECEMBER 31,2019 4 $2,265,891

The notes on pages 12 - 18 form an integral part of these financial statements.

Page 8


STATEMENT DESIGNATED ACCOUNTfor the year ended 31 December 2019(in US dollars)

NotesDesignated Account, opening balance $ -WB Grant Funds advanced during period:

TF 2887 965,800TF 2888 1,402,160

Outsanding amount advanced todesignated account $ 2,367,960Eligible expenditures paid:Component 1: 41,197Component 2: 9,012Component 3: 24,309Prepayments 6 61,774Receipts from BEL 5 (34,223)Total funds disbursed 102,069

Account balance, end of period 4 $2,265,891

The notes on pages 12 - 18 form an integral part of these financial statements.Page 9

Belize Electricity LimitedEnergy Resilience for Climate Adaption Project TF - A288712888

STATEMENT OF USE OF FUNDS BY DISBURSEMENT CATEGORYfor the year ended 31 December 2019(in US dollars)

Year to DateCATEGORY Jan - Jun Jul - Sep Oct - Dec Jan- Dec

2019 2019 2019 2019

Trust Fund - 2887

1. Consultancy Service - 3,841 5,171 9,012

2. Goods - - .

3. Works 3,763 115 12,013 15,891

TOTAL $ 3,763 $ 3,956 $ 17,184 $ 24,903

Trust Fund - 2888

1. Consultancy Service - - 5,989 5,989

2. Goods - - 35,208 35,208

3. Works 3,050 3,210 2,158 8,418

TOTAL $ 3,050 $ 3,210 $ 43,355 $ 49,615


Page 10


USE OF FUNDS BY PROJECT COMPONENTfor the year ended 31 December 2019(in US dollars)

PROJECT Year to Date

COMPONENT Jan - Jun Jul - Sep Oct - Dec Jan- Dec2019 2019 2019 2019

Trust Fund - 2887

Component 1 - .

Component 2 - 9,012 9,012

Component 3 - 15,891 15,891

TOTAL $ - $ - $ 24,903 $ 24,903

Trust Fund - 2888

Component 1 - - 41,197 41,197

Component 2 - - - .

Component 3 - - 8,418 8,418

T O TA L $ - $ - $ 49,615 $ 49,615


Page 11


NOTES TO THE FINANCIAL REPORTS31 December 2019

1. GENERAL INFORMATION

Under the Energy Resilience form Climate Adaptation Project (ERCAP), theGovernment of Belize (GoB) has received a USD 8 million Grant from The GlobalEnvironment Facility (GEF) through their Special Climate Change Fund (SCCF).ERCAP is comprised of two separate Grant Agreements as shown below:

1. The first agreement is between the GoB and the International Bank forReconstruction and Development (World Bank) acting as implementingagency on behalf of the GEF. The total grant amount under this agreementis USD 2.38 million.

2. The second agreement is between the Belize Electricity Limited (BEL) andthe World Bank. The total grant under this agreement is USD 5.62 million.

In addition to the GEF grant contribution, there is a USD 3.375 million in-cashcounterpart contribution from BEL towards the execution of a few projects andinitiatives under ERCAP, plus a USD 600 thousand in-kind contribution from theGoB. The Grant agreement was signed on 27 September 2016 and the Projectclosing date is 31 July 2020.

The ERCAP is designed to demonstrate measures that enhance the resilience ofthe energy system to adverse weather and climate change impacts in Belize. Itcovers a comprehensive set of areas for enhancing resiliency in the energy sector,particularly as it pertains to electricity supply. The project is divided into threecomponents:

1. Component 1: Long Term Energy Planning and Capacity Building forClimate Change Adaptation: The long-term success of climate adaptationin Belize rests on well-informed, evidence-based planning that mainstreamsmeasures that enhance energy resilience. To achieve this end, it will requirestrategic planning, data collection, as well as strengthening the adaptivecapacity of the energy sector in Belize.

2. Component 2: Demonstrate measures to enhance resilience of energysector: This component will include a comprehensive set of no-regretsstrategic and investment activities that are focused around the power sectortransmission and distribution systems and infrastructure.

Page 12

Belize Electricity Limited

Energy Resilience for Climate Adaption Project TF - A2887/2888


1. GENERAL INFORMATION (continue)

3. Component 3: Project Implementation Support and InformationDissemination for Knowledge Sharing: This component includes aknowledge-sharing activity to maximize the impacts of lessons learned fromthe proposed project, and to provide incremental support to the respectiveagencies for implementing ERCAP.

As a part of the ERCAP financial management and risk mitigation measure, BELis responsible for the fiduciary functions that covers all ERCAP activities for boththe GoB and BEL respective activities. This includes coordination of the annualexternal audits of the project financial statements and a compilation andsubmission of all quarterly unaudited interim financial report (IFR).

This Financial Statement covers the period from 1 January 2019 to 31 December2019. Details of the financial statements along with associated notes can beviewed on the subsequent pages.

2. BASIS OF PREPARATION

ERCAP accounting function will be guided by the existing financial procedure ofBEL, which uses the accrual basis of accounting to ensure that project funds andactivities are correctly recorded, safeguarded and reported to the World Bank.BEL currently uses Microsoft Great Plains (MGP) accounting software to assistwith its financial management. All ERCAP expenditures are captured in the MGPaccounting software. Budget allocation and accounting codes are customized toseparate ERCAP finances by categories and components, so as to separatelymonitor the accounts of and reports for the ERCAP. Various project numbers havebeen assigned specifically for the different ERCAP activities and are used to recordproject expenditures within MGP (See note 3).

Page 13



3. SUMMARY OF ACCOUNTING POLICIES

3.1.Reporting Currency

All information is presented in United States Dollars (USD) currency; except,where otherwise indicated. Project Expenditures made in Belize dollar currency(BZD) are converted at the exchange rate of one USD to two BZD (USD 1 to BZD2). Exchange losses are reported on the statement of sources and uses of funds.

3.2. Contribution from IBRD and World Bank

Contribution from IBRD and the World Bank is recognized when IBRD fund isdeposited to the Project's designated account which is managed by BEL.

3.3. Contribution from Counterpart Fund

Receipts of Counterpart funds are recognized when disbursements are madethrough the bank accounts of BEL and its project management steeringcommittee on behalf of the Project.

3.4. Disbursements

Disbursements are recognized when advances or payments are made by theProject to contractors, suppliers or beneficiaries for the Project's activities.

3.5. Project Implementing Expenditure

Project implementing expenditure is recognized for amounts paid and to be paidin the future for goods and services received, whether or not billed to the Project,and interest expenses during implementation.

3.6. Cash

Cash includes cash at the designated account.

Page 14



3. SUMMARY OF ACCOUNTING POLICIES (continued)

3.7.Advance to Suppliers and other Prepayments

Advances to suppliers are carried at the disbursed amount and recognized in thebalance sheet until subsequent liquidation or realization is made and approved.

3.8. Payables

Payables to suppliers represent the amounts to be paid to suppliers for goods andservices received but remain unpaid by the Project as at the period end.

3.9. Sources of Funds

Grant Funds are provided by the IBRD through advances to the pooled designatedUSD Accounts established by BEL at the Belize Bank Limited to finance eligibleproject expenditures for both trust funds (TF2887 and TF 2888). These advances aremade based on periodic forecasts of project cash flow needs through the UnauditedInterim Financial Reports (IFR's). In addition to the USD account, BEL has opened aseparate pooled local currency account at the Belize Bank Limited for eligible localexpenditures under ERCAP. Balances in the designated accounts are trackedmanually by the use of a cash flow spreadsheet in BEL's Finance department. TheIBRD may also make payments, at BEL's request, directly to third parties for eligibleproject expenditures.

3.10. Method of Withdrawal of Funds

BEL has established two designated pooled accounts at the Belize Bank Limited tobe used exclusively for ERCAP related transactions in accordance with the GrantAgreement. Withdrawal from the Designated Account are done by authorizedpersonnel from BEL's Finance department via direct online bank transfer to theassociated vendors, contractors and employees upon a request initiated by theERCAP Project Management Unit via BEL's internal accounting system for Goods,Works or Services rendered under the project and in accordance with the GrantAgreement.

Page 15



4. CASH AND CASH EQUIVALENTS 2019

Deposits in the designated accountProject Account BBL - 133333010120000 199,094Project/Designated Account BBL - 133333020120000 2,066,797

- 24265.891

5. AMOUNT DUE TO BEL (OTHER RECEIPTS)

An amount of USD 34,223 is currently outstanding to be paid to Belize ElectricityLimited (BEL). This amount was paid by BEL on behalf of World Bank for thoseactivities eligible for payment under the financing institution grant funds during 2019.These funds will be reimbursed to BEL in 2020 as a means of financial reconciliationfrom the relevant funds in the designated account. The total sum includes:

* USD 170 bank charges which will be reconciled at the end of the project* USD 34,053 for payments towards procurement consultant remuneration,

project management, and other eligible expenses.

6. ADVANCES TO SUPPLIERS AND OTHER PREPAYMENTS

A total prepayment of $61,774 was made from the designated ERCAP accounts asfollows:

2019

Peco International Inc. (see note a below) 51,023

WKC Enterprise (see note b below) 10,751$61,774

a. The amount was paid to Peco International Inc. in November 2019 for the purchaseof two (2) amphibious equipment in accordance with the procurement planestablished under the grant agreement and the payment terms under theassociated contract.

b. The amount was paid to WKC Enterprise in December 2019 for the purchase of acomputer server and software for the Ministry of Energy, Energy Planning Unit, inaccordance with the procurement plan established under the grant agreement andthe payment terms under the associated contract.

Page 16



7. COMMITMENTS

7.1. Contracts

This project includes agreements with suppliers of goods, services, and works inaccordance with the established budgets and procurement plan. Subsequent toBEL's fulfillment of the conditions precedent listed under the grant amendmentletter from the World Bank, the Project Management Unit commenced with theprocurement process for those approved activities. Consequently, a total ofseven contracts were established under ERCAP during the 2019 period. The tablebelow shows a list of those contract commitments and details of their status as at31 December 2019.

Energy Resilience for Climate Adaption Project TF - A2887/2888CONTRACTS

December 31st 2019a Amount Remaining

No. Contracting ERCAP Activity Date of Contract Amount To NotesParty contract value (US$) Paid Be PaidUSS (US)Trust Fund - 2888

Carolyn Procurement1 Crawford Consultant 29/07/2019 21,500 9,012 12,488 5

Peco Procurement ofInternational Amphibious

2 Electric Inc. Equipment 04/11/2019 101,866 - 101,866 6Total Trust Fund - 2887 123,366 9,012 114,354

Trust Fund - 28881 Deon Kelly Energy Planner 14/10/2019 27,650 5,988 21,662

Belize Diesel Purchase of off-2 and Equipment road vehicle 30/09/2019 35,207 35,207 -

Equipment &Software for Data

3 Elligence Intergration 05/12/2019 87,000 - 87,000Lightning Detection

4 EarthNetworks System 18/12/2019 100,000 - 100,000Computer Server

WKC and Software for5 Enterprise Energy Planning 22/11/2019 21,500 - 21,500 6

Total Trust Fund - 2887 271,357 41,195 230,162Grand total 394,723 50,207 344,516

Page 17



7. COMMITMENTS

7.1. Legal Matters

There were no pending or threatened legal claims related to the Project as at 31December 2019.

8. EVENTS OCCURRING AFTER THE REPORTING PERIOD

8.1. ERCAP closing date

The ERCAP closing date as established in the grant agreement is 31 July 2020.The Project Steering Committee will submit a request for project extension to theWorld Bank to facilitate successful execution and achievement of all the project'sobjectives.

8.2. Effect of Covid-19 pandemic

At the commencement of 2020, the rapid spread of the Covid-1 9 global pandemicbrought with it various challenges that had a direct effect on the management andexecution of ERCAP. The execution of ERCAP continues with the relevant projectand support staff working mostly in a remote mode and is expected to continueuntil global conditions improve. This mode of working has a direct effect onconsultancy services from foreign firms and the purchase of materials andequipment as global production lines have witnessed unprecedented back-logsdue to the extensive closure of factories worldwide.

8.3. Appointment of new Project Manager for ERCAP

As the tenure of the previous Project Manager (Mr. Derek Davis) came to an endin February 2020, the request for appointment of a new Project Manager (Mr. JoseMoreno) was issued to the World Bank immediately thereafter for considerationand approval. In the interim ERCAP was managed by the remaining Project unitstaff under the guidance and governance of the BEL management team andSteering Committee respectively. Appointment of the new Project Managerbecame effective on 6 April 2020.

Page 18

SECTION II

INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNALCONTROL

Page 19

PKF BelizeGlobal expertise with local knowledge P K F


INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNALCONTROL


We have audited the design and operating effectiveness of the internal control of theEnergy Resilience for Climate Adaptation Project (ERCAP) In Belize Project, GEF GrantNumbers TF0A2887 and TF0A2888 ("the Project"), as operated by Belize ElectricityLimited ("the Company") which existed during the year ended 31 December 2019. Theinternal control was set up for the purpose of managing risks to the achievement of theProject's objectives, including the reasonable prevention and detection of errors,irregularities and fraud. The internal control is the responsibility of the management of theCompany.

Auditor's responsibility

Our responsibility is to express an opinion, based on our audit, on the effectiveness of theinternal control that could have a direct and material financial effect on the financialstatements of the Project during the year ended 31 December 2019. We conducted ouraudit in accordance with the principles of International Standard on AssuranceEngagements 3000 - Assurance Engagements other than Audits or Reviews of HistoricalFinancial Information ("ISAE 3000') insofar as this standard could be usefully applied inthis audit and in its specific compliance context. This standard requires that we complywith ethical requirements and that we plan and perform the audit to obtain reasonableassurance about whether the internal control for the Project is adequately designed forthe purpose of the Project and was operating effectively during the period covered by theaudit.

Our audit included obtaining a sufficient understanding of the Project and the internalcontrol for the Project; assessing the risk that a material weakness exists that could havea direct and material financial effect to the financial statements of the Project,- testing andevaluating, on a sample basis, the design and operating effectiveness of internal controlbased on the assessed risk; and performing such other procedures as we considerednecessary in the circumstances.

We considered the following criteria in evaluating the effectiveness of the internal control:

* the requirements for design and implementation of internal controls in the Project'sOperational Manual;

* the appropriateness of internal controls for the Project's activities and objectives;PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Belize City * BelizeTel: (501) 227-7428 * (501) 227-7222 * Email: [email protected] * Website: pkfcaribbean.com/belizePartners: JA. Bautista * J. Ortez Page 20

PKF BIze is a remberfirti of the PKF Inernaion a Lmited family of legalIy independent firms aid does not accept any responsibiI ry or fiability for the actions or nactionsofeany irdjvjduar Irmamber or correspondentfirm or frme.

PKrAccountants &business advisers

INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNALCONTROL (continued)

Auditor's responsibility (continued)

* the implementation of internal controls by the Company to achieve its objective ofprevention and detection of errors, irregularities and fraud that could have a directand material financial effect on the financial statements of the Project;

* the significance on the financial statements where one control or several controlsdid not operate as designed; and

* that a weakness or a deficiency existed where a control or several controls did notreasonably prevent or detect risks that could have an adverse impact on theobjectives of those internal controls which are to provide reasonable assurancethat the financial statements are prepared, in all material respects, in accordancewith the adopted accounting policies and Operational Manual, that the funds areutilized for the purposes defined in the Grant Agreements and that the Projectcomplies with the Grant Agreements, the Operational Manual and other laws andregulations applicable to the Project.

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

Opinion

In our opinion, the Project's internal control which existed during the year ended 31December 2019, in all material respects, was adequately designed for the purpose of theProject and operated in an effective manner, based on the evaluating criteria above.

Other matters

We draw attention to Appendix 1 - Management letter in which we mentioned findingsfrom the internal control system which have no direct and material financial effect on theProject's financial statements but may lead to the risks of the effectiveness of the Project'sinternal control system.

This audit involved a historic evaluation of the effectiveness of internal control at a specificpoint of time. Thus, this audit does not provide assurance for future periods due to therisk that internal control may become inappropriate because of changes in conditions, orthat the degree of compliance with policies or procedures may deteriorate.

PKF BelizeChartered AccountantsBelize City15 July 2020

Page 21

SECTION IIIINDEPENDENT ASSURANCE REPORT ON COMPLIANCE

Page 22



INDEPENDENT ASSURANCE REPORT ON COMPLIANCE


We have examined the compliance of the management of Belize Electricity Limited ("theCompany") in relation to the implementation of the Energy Resilience for ClimateAdaptation Project (ERCAP) In Belize Project - GEF Grant Numbers TF0A2887 andTFOA2888 ("the Project"), with the applicable laws, regulations and other provisions ofthe Grant Agreement between Belize Electricity Limited and the International Bank forReconstruction and Development ("IBRD") (GEF Grant Number TF0A2887), and theGrant Agreement between the Government of Belize and the IBRD ("GEF Grant NumberTF0A2888"), together "the Grant Agreements", during the year ended 31 December 2019.The management of the Company is responsible for the compliance with the GrantAgreements, the Project's Operational Manual and other laws and regulations applicableto the Project (collectively referred to as "the Project's regulations").

Auditor's responsibility

Our responsibility is to express an opinion, based on our examination, on the complianceof the Company's management with the Project's regulations that could have a direct andmaterial financial effect on the financial statements of the Project during the year ended31 December 2019. We conducted our examination in accordance with the principles ofInternational Standard on Assurance Engagements 3000 "Assurance Engagements otherthan Audits or Reviews of Historical Financial Information" ("ISAE 3000") insofar as thisstandard could be usefully applied in this examination and in its specific compliancecontext. This standard requires that we comply with ethical requirements and that we planand perform the examination to obtain reasonable assurance about whether theCompany's management complies with the Project's regulations that could have a directand material financial effect on the financial statements during the year.

Our examination included: obtaining a sufficient understanding of the Project, and theProject's regulations; assessing the risk of non-compliance that could have a direct andmaterial financial effect on the financial statements of the Project; testing and evaluating,on a sample basis, the compliance of the Company's management with the Project'sregulations based on the assessed risk; and performing such other procedures as weconsidered necessary in the circumstances.

PKF Belize * Regent House * 35 Regent Street * P.O. Box 280 * Befize City * BelizeTel: (501) 227-7428 e (501) 227-7222 * Email: [email protected] * Website: pkfcaribbean.comlbelizePartners: J.A. Bautista * J. Ortez Page 23PKF Belize is a memberfiro of the PKF international Limited arnly of legally ndependent firms and does not accept any rosponsibilty or liability for the actions or inactionsof any individual riLmberor correspondentirm or 5rs

PKWAccountants &business advisers

INDEPENDENT ASSURANCE REPORT ON COMPLIANCE (continued)

Auditor's responsibility (continued)

We considered the following criteria in evaluating the compliance of the Company'smanagement with the Project's regulations:

* the Company's management awareness of the Project's regulations;

* the implementation of the Project's regulations by the Company's management;

* the significance to the financial statements where the Company's managementfails to comply with one requirement or several requirements in the Project'sregulations; and

* that a weakness or a deficiency existed where the Company's management failsto comply with one or several requirements in the Project's regulations that couldhave a direct and material financial effect on the financial statements.

We believe our examination provides a reasonable basis for our opinion.

Opinion

In our opinion, the Project complies, in all material respects, with the Project's regulationsthat could have a direct and material financial effect on the financial statements of theProject during the year 31 December 2019 based on the evaluating criteria above.

Other matters

We draw attention to Appendix 1 - Management letter in which we discussed certaindepartures from the Project's regulations which have no direct and material financial effectto the financial statements of the Project but may put the Project's objectives at risk.

This examination involved a historic evaluation of the Project's compliance with theProject's regulations at a specific point of time. Thus, this examination does not provideassurance for future periods due to the risk of changes in the Project's regulations, or thatthe degree of compliance with the Project's regulations, may deteriorate.

PKF BelizeChartered AccountantsBelize City

15 July 2020

Page 24

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Belize Electricity Limited Project (ERCAP) In Belize Project