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. ;. ~· ' f3 ~ Contents

'$' it yijJ ;t- % ...... 1 I .Auditor's Opinion ...... 3 -=-' Ji1i- ~fft~&Jili- ~4lt~ 15lti1 ...... 5 II .Financial Statements and Notes to the Financial Statements ...... 5 ( - ) 1!-1it-+~r* ...... s i. Balance Sheet...... 5 ( -=- ) ~~#:kt~~ t:hA-T '~t {JL* ...... 6 ii. Statement of Implementation of Grant Agreement ...... 6 ( ::::... ) t~ ~~ ,P f~* ...... 7 iii. Designated Account Statement ...... 7 (rm) Plt~:J~*l31tit ...... 8 iv. Notes to the Financial Statements ...... 12 =' '$'it~l~if-J]PJ~ltlti.-X...... 16 III.Auditor Findings and Recommendations ...... 18

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2 I. Auditor's Opinion Auditor's Opinion

TO GEF Energy Conservation PMO

We have audited the special purpose financial statements (from page 5 to page 15) of GEF Provincial Energy Efficiency Scale-Up Project( Jiangxi), which comprise the Balance Sheet as at 31 December 2014, the Statement of Implementation of Grant Agreement and the Designated Account Statement for the year then ended, and Notes to the Financial Statements.

Project Entity and Jiangxi Provincial Finance Department's Responsibility for the Financial Statements

The preparation of the Balance Sheet, the Statement of Implementation of Grant Agreement of the financial statements is the responsibility of your entity, while the preparation of the Designated Account Statement is the responsibility of Jiangxi provincial Finance Department, which includes: (I )preparing and fair presenting the accompanying financial statements in accordance with Chinese accounting standards and system, and the requirements of the project loan agreement;(2)designing, implementing and maintaining internal control to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or enor."

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 the Government Auditing Standards of the People's Republic of China and International Standards on Auditing. 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 misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or enor. In making those risk assessments, the auditor consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are

3 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 includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements identified in the first paragraph present fairly, in all material respects, financial position of GEF Provincial Energy Efficiency Scale-Up Project(Jiangxi) as at 31 December 2014, its financial receipts and disbursements, the project implementation and the receipts and disbursements of the designated account for the year then ended in accordance with Chinese accounting standards and system, and the requirements of the project grant agreement.

Other Matters

We also examined the withdrawal application from No.5 to No.6 and the attached documents submitted to the World Bank during the period. In our opinion, those documents comply with the project grant agreement and can serve as basis for grant withdrawal.

The audit report consists of the Auditor's Opinion and two more parts hereinafter: Financial Statements and Notes to the Financial Statements, Audit Findings and Recommendations.

Jiangxi Provincial Audit Office of the People's Republic of China Mar 10, 2015

Address: No.209 Dieshan Road, City, Jiangxi Province, P.R. China Postcode: 330006 Tel.: 86-0791-86817626 Fax: 86-0791-86823311

The English translation is for the convenience of report users; Please take the Chinese audit report as the only official version.

4 _, m-jj--~lt-~.~JZ.m-jj--~-*iJt aA II. Financial Statements and Notes to the Financial Statements (-)*~f~-*: i. Balance Sheet

~ 1x-f ~ * BALANCE SHEET 2014 .1f 12 fl 31 s (As at 31 December, 2014) ~§~#: ~~~~£*••ilw~~1~•*r~§

5 C.=. ) ~ ~ JJJl !§ ~1At 1tt ?JL »A ~ * ii. Statement of Implementation of Grant Agreement ~ ~ tdJ. ~ ~ ti° 1tt ~ U}j ~ * STATEMENT OF IMPLEMENTATION OF GRANT AGREEMENT :il~ 2014 ~ 12 f.] 3 1 E (For the period ended December 31, 2014) :ryt§;g{;t-: 1;-JJtJ:f:!Jt£1fi:-)!111~1IW4J':!p~~~~4i ):rffi § ( 7IW) ~~ #J:. %: TF098703 Project Name: GEF Provincial Energy Efficiency Scale-Up Project (Jiangxi ) Grant No.: TF098703 ~#l.!f!.1i : YI W GEF :ip ~~ :rffi 13 ~ :f!.j}--0- '.t if!.1i: ~ 5tl AR-. i'P 5t __ ...,. ..'""' ___ ------Preoared______bv: Jianirxi__ _ GEF Enenzv Conservation------. ------PMO- - - Currencv------Unit:- . US- - O--/RMB-- - -- Jv uan- - - ~)Ef,1Ji :;fi:JIJ].'.&~'l& (f,lj!) *~t.R~'l& (l\lj! )

~ ~lj Grant Amount Amount of Current Withdrawals Accumulated Amount of Withdrawals l:IH>l:&i: ITT AJ:\l;ffi 'IVF~:&i:ffi AE\l;ffi l!JJo~:bJ: ffi At:V;ifl Category Grant Currency Grant Currency Grant Currency CUSD) RMB (USO) RMB CUSD ) RMB

~ifiJJJOC95- Consultant service 2,008,000.00 12,286,952.00 264,616.91 1,619,190.87 523,053.12 3,200,562.04

;;!'; ~ i!Jf· ~ }f4 ::J ,,.1, i•.t ' iJJ! ' 944,121.00 5, 777,076.40 33,845.29 207,099.33 86,307.36 528,114.74 Workshop, Training, tour

:&'!!WI Goods 1,300,000.00 7,954,700.00 588,128.54 3,598,758.54

incremental .i',g ill ;lg fr Ji~ * 210,000.00 1,284,990.00 36,030.92 220,473.20 91,197.30 558,036.28 Costs

-'!¥- ffJ W~.P Special Account 420,000.00 2,569,980.00

fr ~i- total 4,462, 121.00 27,303,718.40 334,493.1 2 2,046, 763.40 1,708,686.32 I 0,455,451.59

~5t~ A~ rp Jt11t¢.7iJ: t .!k5t=6.l 1905tA R-. rp (Exchange Rate: US$1 = RMB 6.ll90yuan)

6 (-=-) ~ Jtli*? 1&.X* iii. Designated Account Statement ~Jt*?i&x* DESIGNATED ACCOUNT STATEMENT

-*.M ~ ~ 2014 ~ 12 JJ 31 El (For the period ended December 3 I, 2014) ~§~#: ±~~~&*•anw~~~~·~~~0 (tt~> *?•tt~#: ~~ • tt •l~ft Project Name: GEF Provincial Energy Efficiency Scale-Up Project ( Jiangxi) Depository Bank: Nanchang Branch of China Citic Bank • i):_ %: TF098703 Ji*.%: 7281 111 483 100000111 Grant No.: TF098703 Account No. : 72811 11 483100000 I 11 ~ :Jll lf!.{ft: ~I I§ 4J !J1t lfjc]f ~ rp ~~ : ~ j(; Prepared by: Jiangxi Provincial Finance Department Currenc-y : USD :im EI (!}:~! Hern Amount

l.IVHJJ~{fJii Beginning Balance 351,670.67

JJll: 2 .;;t>: JIJJlfll1 H~ Plus: Amount Deposited this Period by World Bank 334,493 .1 2 3.;ftl.\l!.tjX)\. Interest Earned th is Period 157.56

4.i!'B-.m x w~.:iili.(il. ;Wi Total Amount Refunded this Period to Cover Ineligible Expenditure

~:ii:: s.,;i;:JUJx N~~i Minus: Amount Withdrawn this Period 41 5,699.35 6.11HY· ¥ t.t t'l Bank Service Charges this Period 30.00

7. PJJ* ~W! Ending Balance 270,592.00

7 1. Jji § '~t% ±•~~~*·~~~~~ ~ ·-~~§ (~W) •• %J.J TF098703, §' tE i!:i±1P< ~ § ~ ~ ~~, J.J 1I !ffi 41' :ip- fJ~ 4yt ~~ 31Jtt00 fJ J~ lfr ~ :ip- ~ ~~~~*'~~*~~,~#~££~:ip-~~~~.~~~~~~:ip­ fJ~ *u l{.&_j~Jitt ~1* 5E, 3t ~ fil~ 5! * 5! 1ff--f} 1)lJ :ip- 131A:itt--F fil~~~F ~ )jl;j-{Jtj~Jitt ~~,•4±~:ir-~~-~~~~~h,~~±~tt•1~~~lt~~~~ ~~~~*~~~~;*~:ip-~-~~~~~~~~-*~;1*~~~± ~~~I~~§~~W~*~~*~•:Jtt#~, ~W~~:ip-~-~~§ ~ . ~~,~·~~~~~~.tt*~~§~~~~~~~,JttW~±OO %-~'. IK :ip-fj~ I 1f 1f: ill 7F fE;. ~ § t~i;X_ -f 2011 5f- 05 JJ 17 S ~iT # &~x, mit 2016 5f- 06 JJ 30 l¥J *I~ . ~ 13 it~1Ji~.ft~ :k 446.21 E ~it, t}f ,g-. A ~ Ffi 2,730.37 7J it.

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3.3 *~ 13 ~it;f~K ~"tx.~£& *U"1f: ,JaiE~J:YlL *Jf11t~1l:t. iE Y*. 5iiEY*., ~A~ ffJ :k iE~-* 1i Ffi.

3.4 WR~~ OOA~4R1f 2014 5f- 12 JJ 31 El 5C$, RP USDI=A~ $ 6.1190 it.

4. iR*f4 § -J,)t UJJ 4.1 rJfi § x ill %it

8 2014 1¥-~ 13 Jt te A~$ 2,587,890.80 JG, ~it Jt te tJf 11--A ~ $ 9,016,987.02 j[;, r!J ,~,ft~it~1J ~ 33.02%.

4.3 ~A~~#x%it 20141¥- 12 JJ 31 a ~A~~#x11--it~tJf~A~ $ 10,455,451.59 Jt. ~ ~ 20141¥- 12 JJ 31 8, ~ it~lfX. GEF ~~#x~% 1,708,686.32 ~j[;, r!J~~ #x,~,$Ji~ 38.29%0 !ti:?: ~i~~~it~#x 523,053.i2 ~Jt, ~it~it~ 1J ~ 26.05%; ~ #1 ~ ~ it~#x 588,128.54 ~Jt, r!1 it~ it~1J ~ 45.24%; -ii)f 1-t, :lf5-1J1l.&~~~~ it~#x 86,307.36 ~Jt, ~1t~it~rJ ~ 9.14%; ~ ;_~ 1-J ~*~lit~~ 91,197.30 ~j[;, ~it~it~1J ~ 43.43%0

4.4 w1t#x11-it 2014 1t- 12 JJ 31 a ~tJ1~ A~$ 120,006.58 it, J=t- if Ji 1t5fV ,~,~A~$ 2,950.07 7t, w1t~ 1H 1CJ~Jf5-iJI] f 56,868.00 it, J& 1tWi ~ii% *4~ #J0~ -it~ 29,100.00 Jt, !t11E.~ ~?KJtft~~ ~~%.

4.5 1CJtAP1 ~11-it 20141¥- 12 JJ 31 s ~~~A~$ 183,944.75 it.

s.t~ JtY*? 1tro tt {JL * ~ § m~ #x t~ >t Jt ? ~ 1± i:p 1§ 1R 1-r Wi ~ 7r 1-r , * % ~ 728111148310000011i, $ ~~ ~ ~Jto t~JtJt? 1Px1f#x 420,000.00 ~Jt. 2014 if.if.iJJi;-$Yi~ 351,670.67 ~it, *1f-ltW-11' 334,493.12 ~Jt, Jfo,~, 1&.A~ 157.56 ~it, *-1f-ltJt1t 415,729.35 ~Jt, 1t-*4;-$J! 270,592.00 ~JGo

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11 iv. Notes to the Financial Statements

Notes to the Financial Statements

1. Description of Project The· objective of GEF Provincial Energy Efficiency Scale-Up Project (Jiangxi) ( TF098703) is that through the implementation of project, to introduce the new energy conservation concept and method from both homeland and overseas and to establish a long-term and sustainable energy conservation mechanism, to strengthen the research in the energy conservation system and policies of the goverrunent at the provincial level, to perfect the financial taxation mechanism for adjusting energy resource price and promoting energy conservation and emission reduction, to enhance the capability of the energy conservation supervision organizations across the province, to set up an energy information scheduling and monitoring and information processing and analyzing system, to drive the energy conservation service market construction and supervision management and research to formulate energy efficiency appraisal and management method as well as the propulsion plan for the newly built industrial projects across the province thus to achieve the energy conservation and emission reduction objective; meanwhile, making measures, technology and projects improving energy efficiency popular among the public thus to demonstrate the energy conservation work of the provinces and districts in the whole country. The project agreement was signed and came into effect on May 17, 2011, and will be completed before June 30, 2016. The total investment plan of the project was USD 4,462,100 (equals to RMB 27,303.70thousand yuan).

2. Consolidation Scope of the Financial Statements Consolidation scope of the financial statements covers the Financial statements of the Jiangxi GEF Energy Conservation PMO and the Designated Account set in the Provincial Finance Department.

3. Significant Accounting Policies 3 .1 The financial statements of this project is prepared in accordance with Measures for the Financial Management of Projects Financed by Grants Managed by International Department of the Ministry ofFinance and Interim Measures for Accounting of Projects Financed by Grants Managed by International Department ofthe Ministry ofFinance.

3 .2 In accounting practice, the Gregorian calendar year is adopted as the fiscal year from January 1 to December 31.

3.3 The bookkeeping of accounting will be on the accrual basis by debit-credit double entry approach and take RMB as the standard currency.

12 3 .4 The exchange rate adopted in the financial statements was the exchange on December 31, 2014 publicated by the People's Bank of China, i.e. USD 1=R1v1B 6.1190 yuan.

4. Explanation of Subjects

4.1 Total Project Expenditure The Project Expenditure in 2014 was RMB 2,587,890.80 yuan and the accumulative total were RMB 9,016,987.02 yuan, which accounted for 33.02% of total investment.

4.2 Cash and Bank On December 31, 2014, the balance was RMB 1,741,000.90 yuan , which includes deposit in the Designated Account of RMB l ,655,752.45yuan.

4.3 Grant Received On December 31, 2014, the balance converted into RMB is 10,455,451.59 yuan and the total withdrawal amount from GEF Grant is USDl,708,686.32, which - j ~ccounts for 38.29% of Grant, including USD 523,053.12 for consultation (accounts for 26.05% of this category), USD 588,128.54for goods (accounts for 45.24% of this category), USD 86,307.36 for workshop, training and tour (accounts for 9.14% of this category), USD 91,197.30 for incremental cost (accounts for 43.43% of this category).

4.4 Payable On December 31, 2014, the balance was RMB 120,006.58 yuan, which including interest payable RMB 2,950.07 yuan, training expense RMB 56,868.00 payable to Huikang and expense from office equipments RMB 29,100.00 payable to Nanchang Fujiate. The rest was outstanding working capital.

4.5 Exchange gain or loss On December 31, 2014, the balance was RMB 183,944.75.

5. Designated Account The Designated Account of the Grant is set in CITIC Nanchang Branch, the account number and currency is 7281111483100000111 and USD respectively. The first deposit for the account is USD 420,000.00. The balance of the account at the early of year 2014 is USD 351,670.67 but refunded USD 334,493.12 in this year. The income from interest is USD 157.56. The annual payment is USD 415,729.35 and the balance at the end of the year is USD 270,592.00.

13 6. Other Paragraphs of Audit Report In 2014, Jiangxi provided EE counterpart fund for GEF grant is RMB 7.96 million, equals to USD 1300,009 (refers to document G.C.J.Z.[2014] No.188), which accounts for 29 .1 % of total counterpati (USD 4.4 7 million). As of the end of 2014, the accumulated counterpart reached RMB 27.96 million, which accounts for 96.1 % of the total.

In 2014, the counterpart was mainly used for implementation of task 1 "Build capacity for EE Program management and supervision in local public-sector". It is used for strengthening the supervision for key energy-consuming enterprises and developing EE superv1s10n capacity and improving management level, building capacity for Jiangxi Energy Conservation Supervision Agency and EE supervision authorities of municipalities, supporting energy audit, energy utilization supervision for key enterprises caITied out by Jiangxi Energy Conservation Supervision Agency. The details of capital used as follows: Counterpart Fund for GEF Scale-up Project in 2014

Unit: RMB 10,000

S.N Area Implementing Entity Project Name Amount Implementing the task research on energy conservation and emission reduction m industrial field within "the 13th FYP"; Implementing electric machinery energy 1 JXCIIT JXCIIT 116 efficiency upgrading plan; Taking action on air pollution control; implementing Coal-burning boilers renovation roll-out and upgrading plan; Fund needed for energy conservation Jiangxi Energy supervision and law enforcement for 500 key 2 JXCIIT Conservation Supervision 130 enterprises; counterpart for national energy Agency supervision capacity building program. Jiangxi Industrial Review of industrial energy conservation 3 JXCIIT 30 Investment Corporation renovation project and EE effects evaluation

Economic Evening News 4 JXCIIT Industrial energy conservation advertisement 70 Press

Yongxiu Energy Strengthening supervision for key enterprises 5 Yongxiu County Conservation Supervision and developing EE supervision capacity and 40 Agency level Energy Strengthening supervision for key enterprises 6 Xinyu City Conservation Supervision and developing EE supervision capacity and 40 Center level

14 Procurement of devices and equipments for EE supervision capacity building; Xinyu 70 industrial energy consumption on line monitoring program Fuliang Energy Strengthening supervision for key enterprises 7 Conservation Supervision and developing EE supervision capacity and 40 Agency level Energy Strengthening supervision for key enterprises 8 Zhangshu City Conservation Supervision and developing EE supervision capacity and 40 Agency level Fengcheng Energy Strengthening supervision for key enterprises 9 Fengcheng City Conservation Supervision and developing EE supervision capacity and 40 Agency level Wuyuan Energy Strengthening supervision for key enterprises 10 Wuyuan County Conservation Supervision and developing EE supervision capacity and 40 Agency level Shangyu Energy Strengthening supervision for key enterprises Shangyu Conservation Supervision and developing EE supervision capacity and 40 11 County . ;. ·' Agency level

Fuzhou Energy Strengthening supervision for key enterprises 12 Fuzhou City Conservation Supervision and developing EE supervision capacity and 40 Center level

Jishui Energy Strengthening supervision for key enterprises 13 Conservation Supervision and developing EE supervision capacity and 40 Agency level Jiangxi Mechanical Jiangxi Provincial Design Preparation of local standard for unit product 14 Industry and Research Institute of 20 Mechanical Industry energy consumption quota for casting industry Management Office

-€i'-it 796 Remark: regarding the counterpart fund, JXCIIT, Jiangxi Department of Finance and GEF Task Team agreed that the counterpart shall be provided by means of "overall counterpart'' supported by provincial EE special fund. i.e. each year, Jiangxi will distributes specific percentage of provincial EE fund as the counterpart for GEF project (USD 4.47 million or RMB equivalence within five years) for supporting EE works within the lih FYP.

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