JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT FINANCIAL STATEMENTS 30 NOVEMBER 2017 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT FINANCIAL STATEMENTS 30 NOVEMBER 2017 INDEX Page INDEPENDENT AUDITORS’ REPORTS  On the Rural Economic Development Initiative (REDI)) Project’s Financial Statements 1  On System of Internal Control 1.2  On Compliance with the Financial Clauses of the Loan and Project Agreements and with Legislation and Official Regulations 1.3 FINANCIAL STATEMENTS Statement of Sources and Application of Funds 2 Statement of Cumulative Investments 3 Statement of Project Funding Available 4 Notes to the REDI Project Financial Statements 5-10 SUPPLEMENTARY INFORMATION Auditors’ report on the REDI Project’s Supplement Financial Information 11 Statement of Transactions and Availability of Funds 12 Statement of Designated Account Reconciliation 13 Statement of Sources and Uses of Funds 13.1 Statement of Cumulative Investments - REDI 13.2 Page 4 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 STATEMENT OF PROJECT FUNDING AVAILABLE GOJ Contribution Beneficiary Contribution World Bank Loan Total Loan Total Loan vs Expenditure Proportions Expenditure (Over)Under REDI Expensed Balance REDI Expensed Balance REDI Expensed Balance as at 30/11/17 as at 30/11/17 as at 30/11/17 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 PROJECT MANAGEMENT AND SUPPORT - 516 (516) - - - 2,280 2,258 22 2,280 2,774 (494) JSIF SUB-PROJECTS 500 359 141 2,000 779 1,221 12,683 12,431 252 15,183 13,569 1,614 Financial expenses (Note 5) - - - - - - - 6 (6) - 6 (6) Total 500 875 (375) 2,000 779 1,221 14,963 14,695 268 17,463 16,349 1,114  The amount of contributions by the beneficiaries and sponsors of sub-projects depend on the type of sub-project, the resources available from the sponsoring agency and the income level of the beneficiary community. These contributions would mainly be in the form of donated labour, local materials, project preparation and supervision services.  The IBRD portion of the REDI loan amounting to US$14,963,000, consist of the original loan amount of US$15,000,000, less front-end fees of US$37,000 (note 4). The accompanying notes form an integral part of the financial statements. Page 5 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 1. IDENTIFICATION AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS: Jamaica Social Investment Fund (the company) is incorporated in Jamaica under the Companies Act as a company limited by guarantee. The company is the vehicle used to carry out all the activities of the Jamaica Social Investment Fund (JSIF). The registered office of the company is 1C-1F Pawsey Road, Kingston 5, Jamaica, W.I. The Jamaica Social Investment Fund (the Fund) is a temporary, autonomous Government of Jamaica (GOJ) sponsored project designed to assist the Government in its poverty alleviation programme. In order to achieve this, the Fund mobilizes resources from the GOJ, project donors and international lending agencies. The Company is the entity through which the Fund executes several projects and all expenses incurred by the Company are absorbed by the projects. The Rural Economic Development Initiative (REDI)) Project is one of the several projects executed by the company. Rural Economic Development Initiative (REDI) became effective on 2 November 2009 and closed on 31 July 2017, with a four month disbursement period which ended 30 November 2017. In accordance with the Project Agreement, JSIF is required to ensure that the project’s accounts are independently audited on an annual basis. The Project has been audited up to 31 March 2017, leaving the period 1 April 2017 to 30 November 2017 now audited. 2. SIGNIFICANT ACCOUNTING POLICIES: (a) Basis of Accounting These financial statements are prepared under the historical cost convention, using the cash basis of accounting, in accordance with the Cash Basis International Public Sector Accounting Standards (IPSAS): Financial Reporting under the Cash Basis Accounting. Cash basis accounting recognises transactions and acts only when the cash and/or cash equivalent is received or disbursed by the entity, and not when they give rise to, accrue or originate rights or obligations although there was no cash movement. This accounting policy is a comprehensive basis of accounting other than that required under International Financial Reporting Standards (IFRS), under which transactions should be recorded when they occur and not when they are paid. These financial statements of the Rural Economic Development Initiative (REDI) project are prepared on a cash basis modified to include non-cash contributions received and are expressed in United States dollars (US$), unless otherwise stated. Page 6 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d): (b) Foreign Currency Translation The company's accounting records are maintained in Jamaican dollars. In order to calculate the equivalent in Jamaican dollars, the cash received in foreign currency in a specific commercial bank account, is converted at the rate of exchange in effect at the time of receipt of these funds. The exchange rate gain or loss that results from a difference of the exchange rate when the funds are received versus when the funds are converted to a local currency to make payments for eligible expenses are accounted for as an exchange rate differential, which is charged or credited to the local counterpart funds. Expenditure incurred in Jamaican dollars is translated to US dollars at the rates of exchange prevailing at the dates of the transactions. 3. PROJECT OBJECT AND APPROACH: On 3 September 2009, the International Bank for Reconstruction and Development (IBRD) Board gave its approval for a US$15 million loan to fund the Implementation Phase of the Rural Economic Development Initiative (REDI) project. Subsequent to this approval, the Government of Jamaica, the International Bank for Reconstruction and Development (IBRD) and the Jamaica Social Investment Fund signed the Project and Loan Agreements on 2 November 2009 in Washington D.C. The Rural Economic Development Initiative (REDI) project, which began in January 2010, aimed to improve market access for micro and small-scale rural agricultural producers and tourism projects. The overall objective of Rural Economic Development Initiative (REDI) was intended to reduce rural poverty; by increasing the earning potential of rural communities. This was facilitated specifically through the enhancement and development of agricultural supply chain linkages and community based tourism initiatives. The Rural Economic Development Initiative (REDI) project was successfully concluded on 30 July 2017. Rural Economic Development Initiative (REDI) was divided into Preparation and Implementation Phases. The Preparation Phase of the project was funded by a grant of US$500,000 from the Japanese Policy and Human Resource Development (PHRD) Fund. Activities conducted during this phase included:  Assessment of community based tourism projects in pre-selected parishes.  Supply analysis of selected crops in St. Elizabeth, St. Ann and St. James.  Market Analysis to understand the nature, volume and trends of agri-food demand in Jamaica.  Feasibility study of pilot community sub-projects that have the potential to be financed and scaled up under the implementation phase of the second National Community Development Project (NCDP).  Development of a Social and Environmental safeguards manual. Page 7 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 3. PROJECT OBJECT AND APPROACH (CONT’D): The implementation phase was funded by a loan agreement totaling US$17.5 million apportioned as follows:  International Bank for Reconstruction and Development (IBRD) loan No. 7769-JM for the Rural Economic Development Initiative Project (REDI) 15,000  Government of Jamaica 500  Beneficiaries/Sponsors 2,000 17,500 The amount of contributions by the beneficiaries and sponsors of sub-projects depend on the type of sub-project, the resources available from the sponsoring agency and the income level of the beneficiary community. These contributions would mainly be in the form of donated labour, local materials, project preparation and supervision services. Project Components Rural Economic Development Initiative (REDI) provided financial and technical support through grants for eligible projects under two components: Component 1: Agriculture and Rural Tourism Projects Type A: Small-scale revenue generating activities by rural enterprises (maximum grant funding US$50,000.00). Type B: Investments in critical small-scale public infrastructure (maximum grant funding US$200,000.00) Examples of Component 1 Projects are as follows:  Agriculture:  On-farm investments in innovations e.g.; green houses, breeding stock improvement, introduction of new crops and varieties and un-seasonal production methods.  Improvement of infrastructure e.g.; public markets, abattoirs, storage sheds, fish cleaning and filleting facilities and equipment .  Technological enhancements to improve productivity e.g. drying equipment and drip irrigation.  Provide training in production, marketing, business and financial management, disaster mitigation and recovery, among others. Page 8 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 3. PROJECT OBJECT AND APPROACH (CONT’D): Project Components (Cont’d): Component 1: Agriculture and Rural Tourism Projects (cont’d) Examples of Component 1 Projects are as follows (cont’d):  Tourism:  Investments in promotional strategies intended to improve competitiveness, such as: developing communications materials such as brochures.  Infrastructure development, such as; visitor and information centers, museums, public restroom facilities.  Provision of training in marketing, business and financial management, disaster mitigation and recovery, among others. Component 2: Implementation of Technical Assistance and Capacity Building for national organizations Example of such national organizations are the Rural Agricultural Development Authority (RADA), Tourism Product Development Company Limited (TPDCo.), Jamaica Agricultural Society (JAS), Chambers of Commerce, Parish Council, Non-governmental organizations (NGOs) and other institutions linked to agriculture and rural tourism that would ultimately provide support for projects funded through REDI . Who Can Access REDI  REDI was available to groups of persons who were engaged in existing or new enterprises that were legally registered as a Cooperative, Benevolent or Friendly Society, or groups sponsored by a NGO or community organization. These included:  Rural Tourism, Agricultural Producer and Agro-processing groups comprised of a minimum of 10 persons.  Groups involved in agriculture and /or rural tourism; operating at the small and micro-enterprise level with the most significant potential to deliver economic benefits.  New and existing micro or small business groups in agriculture and /or rural tourism with an asset base (excluding land and buildings) not exceeding the equivalent of US$10,000.00 – US$100,000.00 and an annual turnover of less than the equivalent of US$125,000.00. Page 9 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 4. LOAN STRUCTURE (IBRD): The loan is available for the Rural Economic Development Initiative (REDI) Project. Allocation of % of expenditure Category Loan funds to be financed by loan US$’000 Component 1 - Goods, works, training/ workshops, consultants’ services, and operating costs 11,833 100 Component 2 - Goods, works, training/ workshops, consultants’ services, and operating costs 850 100 Component 3 - Goods, works, training/ workshops, consultants’ services, and operating costs 2,280 100 Front-end fee 37 100 15,000 The closing date of the loan is 31 July 2017. By correspondence dated 6 July 2016 to the IBRD, the GOJ formally requested and was granted an extension of twelve months to complete outstanding activities. During the financial year 2015-2016, an approved reallocation of loan funds was received reducing Component II to USD 850,000 and increasing Component III to USD 1,930,000. A further reallocation was approved in the financial year 2016/2017 to reduce component I by USD350,000 and increase component III. Page 10 JAMAICA SOCIAL INVESTMENT FUND RURAL ECONOMIC DEVELOPMENT INITIATIVE NOTES TO THE PROJECT FINANCIAL STATEMENTS PERIOD ENDED 30 NOVEMBER 2017 5. FINANCIAL EXPENSES: These comprise interest and fees capitalized as part of the loan disbursed by the funding agency. 6. COMMITMENTS: As per the agreement, the loan closed on 31 July 2017 and as such, any unexecuted contractual arrangements as at that date would not be financed by the Project. (a) At 30 November 2017, there were no commitments in respect of contracts approved by the Board but not yet executed in respect of the Project. (b) At 30 November 2017, commitments in respect of contract in execution as at 1 August 2017 amounted to approximately J$ 14.4 million. Page 12 JAMAICA SOCIAL INVESTMENT FUND SUPPLEMENTARY INFORMATION PERIOD ENDED 30 NOVEMBER 2017 STATEMENT OF TRANSACTIONS AND AVAILABILITY OF FUNDS Funded by: International Bank for Reconstruction and Development (IBRD) Depository Bank: National Commercial Bank Jamaica Limited (Private Banking) Address: Cross Roads Related Loan: No.7769-JM Account No: 23-4263315 Project: REDI US$ US$ Opening balance at 1 April 2017 338,818 Add: Advance received 847,366 Add: Net bank charge/interest income - 847,366 Less: Transfer to Project Account (1,186,184) - . Advance received from inception to 30 November 2017 14,962,500 Project Expenditure justified through FMR (14,694,810) Funds to be returned to International Bank for Reconstruction and Development (IBRD) 267,690 Less: Amount in Project Account as at 30 November 2017 ( 273,981) Add: Funds owing to GOJ 6,291 ( 267,690) Balance at 30 November 2017 - Amounts owing to the donor of the Rural Economic Development Initiative (REDI) loan project were returned on 4 December 2017. Page 13 JAMAICA SOCIAL INVESTMENT FUND SUPPLEMENTARY INFORMATION PERIOD ENDED 30 NOVEMBER 2017 STATEMENT OF DESIGNATED ACCOUNT RECONCILIATION Funded by: International Bank for Reconstruction and Development (IBRD) Project: REDI Loan #JM7769 (REDI) US$ 1. Total advance by International Bank for Reconstruction and Development (IBRD) (or Cofinancier) (14,694,855) 2 Less: eligible expenditure for the current period ended 30 November 2017 documented by International Bank for Reconstruction and Development (IBRD) 1,182,889 2(a). Less: Cumulative eligible expenditure for the prior periods ended 31 March 2017 documented by International Bank for Reconstruction and Development (IBRD) 13,511,921 3. Present outstanding amount advance to the designated account (1-2) ( 45) 4. Balance of USD designated account per bank reconciliation statement as at period end - 4(a) Balance of project account per bank reconciliation statement as at period end 273,981 5. Plus: Eligible expenditure for the current year documented after the period end 31 March 2017 - 6. Plus: Total amount withdrawn and not yet Claimed - PLUS: AMOUNTS CLAIMED IN PREVIOUS APPLICATIONS NOT 7. YET CREDITED AT DATE OF BANK STATEMENTS - Application No. WA# - WA# - SUBTOTAL OF PREVIOUS APPLICATIONS NOT YET CREDITED - . 8. GOJ funds in PA ( 6,291) 9. LESS: INTEREST EARNED NET OF CHARGES - . 10. Total advance accounted for 267,690 11. Difference (3-10) 267,645 Item 11 - represents the funds recoverable by the International Bank for Reconstruction and Development (IBRD)as at 30 November 2017. The amount was refunded on 4 December 2017. Page 13.1 JAMAICA SOCIAL INVESTMENT FUND SUPPLEMENTARY INFORMATION PERIOD ENDED 30 NOVEMBER 2017 STATEMENT OF SOURCES AND USES OF FUNDS Funded by: International Bank for Reconstruction and Development (IBRD) - Rural Economic Development Initiative (REDI) LOAN #JM7769 (REDI) Current Current Period Cumulative US$ US$ Actual Actual RECEIPTS IBRD Desígnated account 847,366 14,962,500 Refund ( 267,645) ( 267,645) Total Receipts 579,721 14,694,855 EXPENDITURES Component 1 ( 874,886) (11,742,319) Component 2 ( 20,307) ( 688,150) Component 3 ( 287,696) ( 2,264,341) Total Expenditures (1,182,889) (14,694,810) Excess refund to IBRD ( 45) ( 45) GOJ funds in PA 6,336 6,336 Funds to be returned to IBRD 267,645 267,645 Repayment of prior year receivables and fx adjustment 74,785 - . 348,721 273,936 BANK BALANCES Opening Cash Balances Desígnated account 338,818 - Project account 189,610 - Total Opening Balance 528,428 - Closing Cash Balances Desígnated account - - Project account 273,981 273,981 Total Closing Balance 273,981 273,981 Page 13.2 JAMAICA SOCIAL INVESTMENT FUND SUPPLEMENTARY INFORMATION PERIOD ENDED 30 NOVEMBER 2017 STATEMENT OF CUMULATIVE INVESTMENTS Funded by: International Bank for Reconstruction and Development (IBRD) Project: Rural Economic Development Initiative (REDI) Rural Economic Development Initiative (REDI) - JM7769 TOTAL EXPENDITURES Prior Periods CurrenPeriod ` Cumulative Current Period Cumulative US$ US$ US$ Category 1 10,867,433 874,886 11,742,319 Category 2 667,843 20,307 688,150 Category 3 1,976,645 287,696 2,264,341 Total 13,511,921 1,182,889 14,694,810