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EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Statutory Authorities – June 2012 EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Statutory Authorities - June 2012 File: 102 31 July 2012 Commodore Josaia V. Bainimarama Prime Minister and Minister for Finance Office of the Prime Minister Government Buildings SUVA Dear Sir REPORT OF THE AUDITOR GENERAL AUDIT OF STATUTORY AUTHORITIES - JUNE 2012 In accordance with section 7(7) of the State Services Decree 2009, I am pleased to transmit to you my report on the audits of accounts of the above mentioned entities that were completed during the 1st half of 2012.
The report should be presented to Cabinet within 30 days of receipt as required under section 7 (8) of the State Services Decree 2009.

Tevita Bolanavanua Auditor - General Statutory Authorities 1.

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Fiji Commerce Commission Consumer Council of Fiji Ra Rural Local Authority Fiji Independent Commission Against Corruption Fiji Institute of Technology Fiji Revenue & Customs Authority National Fire Authority Western Division Drainage Board Korovou Rural Local Authority Tourism Fiji Investment Fiji Land Transport Authority OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI _________________________________________________________________________ SECTION 1: FIJI COMMERCE COMMISSION The objective of the Fiji Commerce Commission is to promote effective competition in the interests of consumers, facilitate an approximate balance between efficiency and environmental and social considerations, and to ensure non-discriminatory access to monopoly and near monopoly infrastructure or services.
The Commission has the following functions in relation to regulated industries:      the provision of advice to the Minister about proposed access agreements; the maintenance of a register of access agreements; the facilitation of negotiations about access to infrastructure facilities or service under access regimes; the arbitration of disputes about access to infrastructure facilities or services under access regimes; if, under a law relating to a regulated industry, the referring authority delegates to the Commission the power to impose, modify or revoke conditions in respect of licenses granted under that law-the imposition modification and revocation of those conditions in accordance with the relevant delegation.
The Commission has the following functions in relation to the Fair Trading Decree:   to administer those provisions of the Decree in respect of which functions are conferred on it on or under the Decree; to facilitate the operation of the Decree Table of Contents SECTION 1: FIJI COMMERCE COMMISSION ......................................................................................................................... 1 FINANCIAL INFORMATION ............................................................................................................................... 1 PART A: Audit Opinion .......................................................................................................................................................... 1 1.1 Statement of Financial Performance ...................................................................................................................... 1 1.2 Statement of Financial Position .............................................................................................................................. 2 1.3 PART A: FINANCIAL INFORMATION 1.1 Audit Opinion The audit of the financial statements of the Fiji Commerce Commission for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
1.2 Statement of Financial Performance Year ended 31 December 2011 31 December ($) 6 Months 31 Dec 2010 ($) Income Government Grant Amortization of Deferred Income Professional Fees Report of Statutory Authorities – July 2012 1,491,699 36,759 79.266 619,849 12,857 31,133 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________ 2011 Year ended 31 December 31 December ($) 6 Months 31 Dec 2010 ($) Miscellaneous income Total Income Expenditure Personnel Expense Rent Advertising Other Expense Total Expenditure Net (Deficit) 50,048 1,657,772 1,107,544 101,172 14,241 341,858 1,564,815 92,957 7,993 671,832 515,814 54,324 21,792 166,834 758,764 (86,932) The Commission recorded a net surplus of $92,957 in 2011 compared to a deficit of $86,932 in 2010 due to increase in government grant as the result of the merger of Prices and Income Board and the Department of Fair Trading with Fiji Commerce Commission.
1.3 Statement of Financial Position As at 31 December Current Assets Cash at bank and on hand Deposits Other receivables Total Current Assets Non Current Assets Property, Plant & Equipment Total Assets Current Liabilities Accounts Payable Other current liabilities Total Current Liabilities Non Current Liabilities Deferred Income Total Liabilities Net Assets Accumulated Fund 2011 31 December $ 6 Months 31 Dec 2010 $ 133,760 5,478 28,835 168,073 133,773 301,846 11,899 77,038 88,937 48,703 137,640 164,206 164,206 66,176 4,724 9,643 80,543 141,323 221,866 32,904 52,387 85,291 65,326 150,617 71,249 71,249 Total assets of the Commission increase by $92,957 or 130% in 2011 compared to 2010 was largely attributed by increase in Cash at bank.
The increase in Cash at bank was a result of increase in government grant following the merger of Fiji Commerce Commission with Prices and Income Board and Department of Fair Trading.
Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS SECTION 2: CONSUMER COUNCIL OF FIJI The principal purpose of the Council is to provide the protection and promotion of consumer interests, informing consumers of their rights and responsibilities and mobilising consumers to achieve fairness and safety in the marketplace.
Table of Contents SECTION 2: CONSUMER COUNCIL OF FIJI ......................................................................................................................... 1 PART A – FINANCIAL POSITION ............................................................................................................................................. 1 Audit Opinion ............................................................................................................................................................. 1 2.1 Abridged Statement of Financial Performance ......................................................................................................... 1 2.2 Abridged Statement of Financial Position ................................................................................................................. 2 2.3 PART A – FINANCIAL POSITION 2.1 Audit Opinion The audit of the financial statements of the Consumer Council of Fiji for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
2.2 Abridged Statement of Financial Performance As at 31 December Income Government Grant Other Income Total Income Expenditure Depreciation Rent and rates Salaries, wages and related payments Telephone and postage charges Travelling expenses Sundry expenses Total Expenditure Net Surplus/(Deficit) for the year 2011 ($) 2010 ($) 531,281 147,144 678,425 22,244 50,061 341,233 14,879 21,134 142,837 592,388 86,037 517,578 41,196 558,744 29,632 49,800 342,934 12,130 19,353 136,856 590,705 (31,961) The Council recorded a surplus of $86,037 in 2011 compared to a deficit of $31,961 in 2010.
This was due to the increase in total income by $119,681 or 21%.

Expenditure was also adequately controlled over the period reviewed.
Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS 2.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash on hand and at bank Other current assets Total Current Assets Non – Current Assets Property, plant and equipment Total Non – Current Assets Total Assets Current Liabilities Accounts payables and accruals Grants Payable Other current liabilities Total Current Liabilities Total Liabilities Net Assets Accumulated Funds and Reserves 2011 ($) 2010 ($) 273,211 11,873 285,084 40,891 40,891 325,975 47,281 266,751 125,567 439,599 439,599 (113,624) (113,624) 198,103 9,073 207,176 60,715 54,008 267,891 43,590 180,266 243,696 467,552 467,552 (199,661) (199,661) Cash on hand and at bank increased by $75,108 or 38% in 2011 compared to 2010.
This contributed towards the decline in deficit balance from $199,661 in 2010 to a deficit balance of $113,624 in 2011.

Report of Statutory Authorities – July 2012 2 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 3: RA RURAL LOCAL AUTHORITY The Ra Rural Local Authority and all other local authorities were established under section 10 of the Public Health Act (1985).
The Authority is responsible for the provision of sanitary services such as garbage collection, the operation of market, community centre and public health projects.

The Authority charges garbage fees, market fees and other charges to meet the cost of these services.
Table of Contents SECTION 3: RA RURAL LOCAL AUTHORITY ......................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion - 2008 ................................................................................................................................................. 1 3.1 Abridged Statement of Financial Performance ......................................................................................................... 1 3.2 3.3 Abridged Statement of Financial Position ................................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................... 2 Presentation of Financial Statements ....................................................................................................................... 2 3.4 Accounting Manual .................................................................................................................................................... 3 3.5 3.6 Non Payment of Provisional Tax ............................................................................................................................... 4 PART A – FINANCIAL INFORMATION 3.1 Audit Opinion - 2008 The audit of the financial statements of the Ra Rural Local Authority (RRLA) for the year ended 31 December 2008 resulted in the issue of a qualified audit report.
The qualifications were as follows: 1.

The Statement of Revenue and Expenditure has been prepared using the cash basis of accounting and did not take into account revenue not received and expenditure not paid at balance date.

Similarly, the Statement of Financial Position did not incorporate debtors, prepayments, creditors and accruals and was therefore a limited statement of financial position contrary to section 7(4) of the Public Health (Sanitary Services) Regulations.

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Certain revenue receipts were missing from the receipt books, and which were not accounted for in the cashbook; therefore I am unable to satisfy myself on the completeness and accuracy of the total revenue amounting to $113,837.
3.2 Abridged Statement of Financial Performance Items Revenue Garbage fees 2008 ($) 2007 ($) 15,685 16,611 Report of Statutory Authorities – July 2012 1 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Items Government Grant Market fees Rent/Hire of Hall Taxi and Carrier Fees Other Revenue Total Revenue Expenditure Garbage Contractor Materials & Tools Salaries, Wages and Related Payments Capital Other Expenses Total Expenditure Net surplus/(deficit) balance for the year 2008 ($) 40,000 40,084 8,282 5,940 3,846 113,837 10,000 7,345 53,909 15,032 14,110 100,396 13,441 2007 ($) 15,000 39,747 6,019 3,848 4,754 85,979 10,000 1,166 55,294 129 27,483 94,072 (8,093) RRLA recorded a net surplus of $13,441 in 2008 compared to a deficit of $8,093 in 2007.
This was attributed to the increase in revenue collected by $27,858 or 32% in 2008.

3.3 Abridged Statement of Financial Position As at 31 December Assets Cash at bank – Operating Cash at bank – Capital Total Assets Liabilities VAT payable Total Liabilities Net Assets Accumulated Funds 2008 ($) 2007 ($) 239 19,896 20,135 394 394 19,741 19,741 6,694 --- 6,694 394 394 6,300 6,300 The company’s net asset position increased by $13,441 or 213% in 2008 compared to 2007 as a result of the increase in cash at bank.
PART B – CONTROL ISSUES 3.4 Presentation of Financial Statements A complete set of financial statements includes the following components:1 a) b) c) Balance sheet; Income statement; Statement showing either: 1 Fiji Accounting Standard – Presentation of Financial Statements, paragraph 7 Report of Statutory Authorities – July 2012 2 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI i. ii.
All Changes in equity; or Changes in equity other than those arising from capital transactions with owners and distribution to owners.

Cash flow statements; and d) e) Accounting policies and explanatory notes Section 7 (4) of the Public Health Act states that the Authority shall deliver to the Auditor-General a statement of account showing all monies received and expended together with a balance sheet.

The Authority adopted cash basis of accounting for financial reporting.
With the cash basis of accounting, the Authority did not disclose in its financial statements property, plant and equipment, debtors, creditors, prepayments and other accruals.

The balance sheet was also not prepared and presented for audit.

In addition, the Statement of Receipts and Expenditure did not take into account revenue not received, expenditure not paid and prepayments at balance date.
The financial statement for the year ended 31 December 2008 does not reflect the true financial position of the Authority; hence it is limited statement of financial information.

Recommendations  The Authority should adopt accrual basis of accounting in order to fairly reflect the financial operations during the financial period.

 The Authority should comply with the requirements of the Fiji Accounting Standards and the Public Health Act while preparing the financial statements.
 Training with respect to basic accrual accounting should be provided to the finance staff of the Authority to ensure that the accrual basis for preparation of accounts is complied with.

Authority’s Comments  The only money received in the office is the government grant.

All public health activity payments are made from this grant.

 A balanced Financial Statement will need to be in place prior to the next audit.
 Training on Basic Accrual Accounting has been proposed for the Western Division with Divisional Hea1th Inspector Western organizing it.
3.5 Accounting Manual Each Agency must have in place a cost effective system of internal controls which:2 (a) (b) (c) safeguards money and property against loss; avoids or detects accounting errors; and avoids unfavorable audit reports Prudence requires that entities should maintain an accounting manual, whether in the private or public sector to enhance its accounting functions, internal controls and eliminate risk of mismanagement.
An 2 Finance Instruction 2010 – Section 59 Report of Statutory Authorities – July 2012 3 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI accounting manual provides a useful means of attaining standard and uniform procedures.

It also is of assistance in initiating staff to correctly and effectively perform accounting functions within the entity.
The Authority does not have an accounting manual to govern accounting and administration functions and to provide guidance to staffs to ensure tasks are carried out efficiently and effectively.

Failure to establish a Finance Manual detailing financial policies and procedures increases the risk of incorrect accounting, incorrect financial reporting and mismanagement of funds.
Recommendations   The Central Board of Health (CBH) should take the initiative to prepare an accounting manual incorporating all the relevant accounting policies and guidelines to be used by all the rural local authorities.

In the absence of a Financial Manual, the Authority should comply with the Finance Instructions of Government.
Authority’s Comments The formulation of basic accounting manual or standard operating procedure to be utilized to all rural local authorities has been proposed to Divisional Health Inspector, Western.
3.6 Non Payment of Provisional Tax Unless a Certificate of Exemption (except as mentioned in the Legal Notice 70) is produced by the contractor or satisfactory evidence is produced by the contractor that he holds such certificate, provisional tax of the rate of 15% must be deducted from the gross amount at the time of actual payment of the contracted sum.3 The Local Authority paid $10,000 to Company X for the removal and disposal of all garbage from the Ra Sanitary Services proclaimed area to the garbage dump at Naria.
However, the Authority failed to deduct $1,500 (15%) as provisional tax since no Certificate of Exemption was produced by the company.

The above reflects the laxity on the part of the supervising officer in ensuring that provisional tax is deducted on the above payment.

Recommendation The Authority should ensure that recovery of provisional tax is made from the company.

Authority’s Comments The recommendation is noted and to be complied with.
3 Income Tax (Collection of Provisional Tax) Regulations, 1976.

Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SECTION 4: FIJI INDEPENDENT COMMISSION AGAINST CORRUPTION (FICAC) The Fiji Independent Commission Against Corruption (FICAC) was established on the 4th of April 2007 to investigate acts of corruption by Public Officers, employees of government and government – related organisations.
The Fiji Independent Commission Against Corruption is governed by the FICAC Promulgation 2007 and to maintain its independence, it reports directly to His Excellency the President.
Table of Contents SECTION 4: FIJI INDEPENDENT COMMISSION AGAINST CORRUPTION (FICAC) ............................................................ 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ............................................................................................................................................................. 1 4.1 Abridged Statement of Financial Performance ......................................................................................................... 1 4.2 4.3 Abridged Statement of Financial Position ................................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................... 2 Salary Overpayment ................................................................................................................................................. 2 4.4 Case Management System ....................................................................................................................................... 3 4.5 PART A – FINANCIAL INFORMATION 4.1 Audit Opinion The audit of the financial statements of the Fiji Independent Commission Against Corruption for the year ended 31 December 2010 resulted in the issue of a unqualified audit report.
4.2 Abridged Statement of Financial Performance Year Ended 31 December Income Government Grants Other Deposits Total Revenue Expenditure Salaries and Wages Legal Fees – Local and Overseas Fixed Assets Traveling Local and Expatriate Other operating expense Total Expenditure Net Surplus/(Deficit) for the year 2010 ($) 2009 ($) 7,288,889 --- 7,288,889 4,800,000 28,454 4,828,454 2,961,671 2,250 1,943,833 288,667 1,757,631 6,954,052 334,837 2,161,161 185,899 437,998 329,248 1,079,560 4,193,866 634,588 Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS FICAC’s operation was fully funded by the government with salaries and wages making up the major component of the expenditure.
The government grant to FICAC was increased by $2,488,889 or 52% in 2009.

Operating expenses also increased by $2,760,186 or 66%..... Government grant increased due to high case loads and expansion in operation.

The Suva and Lautoka Offices were strengthen.

New recruitments made locally and from overseas increased the salaries and wages expenditure.

A new server was also purchase and software upgrading was undertaken.
4.3 Abridged Statement of Financial Position As at 31 December Assets Cash at bank Receivables Total Assets Liabilities Creditors and other accruals VAT Payable Total Liabilities Net Assets Net Accumulated Fund 2010 ($) 2009 ($) 696,701 115,040 811,741 126,968 --- 126,968 684,773 684,773 1,219,741 2,784 1,222,525 72,704 616,848 689,552 532,973 532,973 The Commission’s net assets increased by $151,800 or 28% in 2010 compared to 2009.
This was mainly due to the increase in VAT receivables by $112,256 and decrease in total liabilities by $562,584 or 82%.

PART B – CONTROL ISSUES 4.4 Salary Overpayment Salaries and Wages constitute a major portion of the Commission’s budget.
Proper controls over engaging new employees, salary payments and resignations reduce the risk of fraudulent or unauthorized payments, inaccurate payroll reports and invalid pay rates.1 The audit noted that a former employee whilst employed at Fiji Military Forces was overpaid leave compensation of $5,732.81.

The Ministry of Finance through its memorandum (03/09/09) advised the Commission to deduct $44.10 per fortnight from the officer’s salary.

The former employee joined the Commission on 10/10/07.
The Commission started the recovery of $44.10 from the officer’s pay 18/2009.

However, audit noted that the officer resigned from the Commission with effect from 03/04/10.

As of his resignation date, only $661.50 was recovered from the officer.

The officer still owes $5,071.31 Furthermore, the Commission revealed that the whereabouts of the Officer is unknown; hence no recovery could be made.
1 FICAC Finance Manual – Part 3 - Payroll Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Lack of controls over resignation increases the risk of non recovery of debt owed by public officers Recommendations   The Commission should make a concerted effort to find the officer and recover the overpayment of $5,071.31.
The Commission should ensure that salary overpayments are recovered or arrangement made before an officer is released upon resignation or retirement.

Commission’s Comments The officer’s salary overpayment occurred in RFMF, however we ensued deductions until his resignation from FICAC.

The officer was paid $572.00 at the time of his resignation which was beyond the management’s jurisdiction to recover the same.
We have obtained confirmation from Airports Fiji Limited, that the officer is a current employer that the recovery deduction was instigated when the officer commenced work at AFL.

The Financial Accountant of AFL confirmed that after 6 fortnightly deductions, the recovery was ceased by the officer due to RFMF not providing the correct account that is to be credited.
This matter has been addressed to the officer and he has confirmed that he would verify this with RFMF Accounts Section in order to have the recovery reactivated.

The auditors can confirm and obtain an update from AFL on the current status of the overpayment recovery.

Ministry of Finance has given a 5 year period from September 2009 to recover the total overpayment.
4.5 Case Management System In the exercise of his duties, the Auditor-General may call upon any officer for any explanation and information he may require or may authorise any officer on his behalf to conduct any enquiry, examination or audit.2 Upon the completion of evaluations, the Chair of the Commission Tender Board or Evaluation Committee shall prepare a report including: a) A list of all tenders received; b) The evaluation of each tender against each evaluation criteria; c) The ranking of tenders based on evaluation criteria – whether on an individual or consensus basis; d) The approved or recommended tender.3 Furthermore, for goods, services or works subject to a written contract or agreement, the receiving officer shall verify that claims for progress payments are in order and delivered in accordance with the contract or agreement.4 The Commission is in the process of implementing a case management system to handle the entire case history starting from the case registration to the case closure.
In addition, the Commission is 2 Audit Act – Section 7 (a) & (b) 3 FICAC Finance Manual – Section 2.4.13 4 FICAC Finance Manual – Section 2.5.12 Report of Statutory Authorities – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS introducing a bio metric access control to monitor their attendance system and at the same time ensuring and strengthening its security structure.

The Commission called for tenders on 04/12/09 for the implementation of the above system.
The tender was awarded to Bidder 1 on 11/02/10 to implement the above system within 12 months.

The Project commenced as plan on 15 February 2010 and was expected to be completed in February 2011.

The audit noted the following anomalies in regards to the selection and implementation of this system:    The Commission did not produce the details of the tender evaluation and ranking of each tender received.

As such, the audit was unable to verify the basis on which Bidder 1 were selected.
The Commission did not produce a signed tender document or contract for the above work.

Hence audit could not determine the cost of tendered work estimated to be done by the company.

A total of $1,929,733.06 was incurred as at 31/12/10 for the above work.

The work was estimated to be completed in December 20105 as per tender submission by Bidder 1; however the project is still ongoing as at the date of audit.6 Hence the works have past the expected date of completion by 7 months.
The Commission will continue to incur high cost if proper plan and budget are not prepared to monitor the implementation of the above capital project.

The above anomalies indicate the laxity of the Commission in ensuring that the above capital work is properly monitored so that it can be completed on time as stipulated in the tender submission by Bidder 1.
Recommendations   The Commission should carry out proper planning and supervision of capital works to ensure that the work is completed within the stipulated timeframe and proper value is obtained for the money spent.

The Commission should ensure that all requested documents are made available to auditors during the audit.
Commission’s Comments In response to the audit findings and recommendations, we wish to clarify the following:  21 November 2009  4 December 2009  7 December 2009 - Tender was called/advertised in the local papers.

- Tender closed - Tender was opened.

Nine (9) companies had submitted their tender and were called to attend the opening of the tender.
Out of the nine (9) companies only two (2) were present for the opening of tender (Bidder 2 and Bidder 1)  21 December 2009 - Analysis of tender carried out based on the matrix system from Government ITC and FICAC’s requirements  11 February 2010 - Tender awarded to Bidder 1 5 Work Estimated to be completed in 10 months 6 03/08/2011 Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS  22 February 2010 - Feasibility study on FICAC current IT setup carried out by Bidder 1 and their parent company  30 March 2010 - Non disclosure agreement signed with Bidder 1 and feasibility assessment report submitted to FICAC  April – May 2010 - Framework and flowchart of the case management system requirements was discussed with all Department Heads  June – September 2010 - Testing and rectification of errors and changes to the case management system  October – December 2010  January 2011  March 2011 - Training of officers on the use of the case management system and further changes to the Assessment and Prosecution modules of the case management system - Programming of the security and individual access into the system - Roll out of the case management system Concurrent to the above activities, Bidder 1 attended to the following:      Supply, installation and programming of a new server; Relocation, installation and programming of the backup server; Supply, installation and interfacing of the attendance machines for FICAC offices (Suva, Lautoka and Labasa); Supply, installation and programming of the audio/video recording system, suspect fingerprinting system, barcode machine and photographing system; and, Linking IT systems at all FICAC locations (Suva, Lautoka and Labasa).
Please note, the case management system is operational with over 10,000 complaints registered on the system.

The system is designed for all FICAC Departments (Complaints, Legal & Investigations) and used at all FICAC locations (Suva, Lautoka and Labasa).

Bidder 1 and its parent company are still providing backup assistance to FICAC with regards to changes required by Legal and Investigations Departments.
Further, the case management system is not an off the shelf software but is a software designed and customised specifically to FICAC’s operational requirements.

Report of Statutory Authorities – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SECTION 5: FIJI INSTITUTE OF TECHNOLGY The Derrick Technical Institute which was established in 1963 was renamed Fiji Institute of Technology in 1978, under the control of the Ministry of Education.
The institute has played a major role in the development of manpower for the nation and also to some Pacific island nations.

From 1 January 1996, FIT became fully autonomous.

Under government’s Decree number 18 of 1992, a FIT Council was set up to control the resources and operations of the Institute.
The objectives of the Institute include provision of a broad spectrum of post-secondary programmes particularly in technical and vocational education, in accordance with the educational and economic developmental policies of the government and the needs of the government, major industries and commerce, placing emphasis on pursuits of excellence and equity.
Table of Contents SECTION 5: FIJI INSTITUTE OF TECHNOLGY ........................................................................................................................ 1 PART A – FINANCIAL INFORMATION ........................................................................................................................................ 1 Audit Opinion ................................................................................................................................................................ 1 5.1 Abridged Statement of Financial Performance ............................................................................................................ 2 5.2 5.3 Abridged Statement of Financial Position .................................................................................................................... 2 PART B – CONTROL ISSUES ...................................................................................................................................................... 3 Strengthening of the Financial and Internal Controls ................................................................................................... 3 5.4 Anomalies in Property, Plant and Equipment ............................................................................................................... 4 5.5 5.6 Controls over student debtors to be strengthened ....................................................................................................... 5 PART A – FINANCIAL INFORMATION 2009 ............................................................................................................................... 5 Audit Opinion ................................................................................................................................................................ 5 5.7 Abridged Statement of Financial Performance ............................................................................................................ 6 5.8 5.9 Abridged Statement of Financial Position .................................................................................................................... 6 PART B – CONTROL ISSUES ...................................................................................................................................................... 7 Anomalies in Property, Plant and Equipment ............................................................................................................... 7 5.10 Control over student debtors to be strengthened ......................................................................................................... 8 5.11 Controls over Inventory Management to be strengthened ........................................................................................... 9 5.12 Anomalies in Trade Creditors and Accruals.
.............................................................................................................. 10 5.13 PART A – FINANCIAL INFORMATION 5.1 Audit Opinion The audit of the financial statements of the Fiji Institute of Technology for the year ended 31 December 2008 resulted in the issue of a qualified audit report.
The qualifications are as follows:  A detailed property, plant and equipment register is not maintained by the Institute, therefore I was unable to satisfy myself on the completeness and existence of physical assets totalling $37,479,896 and the valuation of the cost of depreciation expenses totalling $1,193,807 and the net carrying amount.
 The depreciation charge for the year in respect of the assets donated by the government of Fiji is offset against the deferred revenue of $285,993 released to the statement of income and Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS expenditure.

A detailed deferred income register is not maintained by the Institute, therefore the completeness, existence and accuracy of the deferred revenue could not be ascertained.
5.2 Abridged Statement of Financial Performance Year Ended 31 December Income Government Grant Benefits Realized – Government Grant Tuition Fees Other Income Total Income Expenditure Course Related Expenses Personal Expenses Depreciation and Amortization Loss on Sale of Plant and Equipment Other Operating Expenses Total Expenditure Net Surplus/(Deficit) for the Year 2008 ($) 2007 ($) 8,000,000 285,993 10,289,771 2,696,730 21,272,494 9,026,228 497,813 9,848,386 2,055,308 21,427,735 1,274,239 12,456,582 1,193,807 --- 6,830,138 21,754,766 (482,272) 1,685,655 13,997,500 1,363,603 575 3,596,549 20,643,882 783,853 The Institute recorded an operating deficit of $482,272 in 2008 compared to a surplus of $783,853 in 2007.
This was largely due to decrease in Government Grant by $1,026,228 or 11% and the significant increase in other operating expenses by $3,233,589 or 90% in 2008 compared to 2007.
5.3 Abridged Statement of Financial Position As at 31 December Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Operating Grant Due Property, Plant & Equipment Total Assets Liabilities Bank Overdraft Trade and Other Creditors Provisions Project Funds Deferred Revenue Total Liabilities Net Assets Reserves and Accumulated Losses Capital Reserve Revenue Reserve 2008 ($) 2007 ($) 3,844,628 791,392 91,588 27,922 --- 37,479,896 42,235,426 170,265 3,320,036 487,693 292,325 16,548,055 20,818,374 21,417,052 836,491 3,737,065 107,022 28,888 1,026,228 37,245,820 42,981,514 1,853,217 5,851,010 615,969 281,937 12,480,057 21,082,190 21,899,324 11,430,604 3,851,611 11,430,604 4,333,883 Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS As at 31 December Asset Revaluation Reserve Total Accumulated Funds 2008 ($) 6,134,837 21,417,052 2007 ($) 6,134,837 21,899,324 Net assets decreased by $482,272 or 2% in 2008 compared to 2007.
This was due to a decrease in operating grant by $1,026,228 or 11% and trade and other receivables by $2,945,673 or 79% and an increase in deferred revenue by $4,067,998 or 33%.

PART B – CONTROL ISSUES 5.4 Strengthening of the Financial and Internal Controls The audit noted a number of issues in relation to the preparation and review process of general ledger reconciliation which suggest that the accounting system, internal control processes and procedures at the Institute requires strengthening.
The following irregularities were noted.

 A number of general ledger reconciliations were not available for verification during the audit.

For example, the detailed property plant and equipment register and detailed revenue reconciliations.

 The reconciliations provided did not have any evidence of review by an independent person other than the preparer.

 A number of anomalies were noted in relation to the quality, completeness and accuracy of the reconciliations provided.
The reconciliations provided contained a number of mathematical errors and incorrect data.

The above anomalies and weaknesses in internal controls over the general ledger reconciliations resulted in incorrect accounting data and accounting information reported to management for the purpose of decision making.

In addition the lack of diligence in preparation and independent review of general ledger reconciliations also increases the risk of errors and anomalies not being detected.
Poor accounting systems, processes and procedures could lead to material misstatements, irregularities and even fraud.

Recommendation The management should strengthen the reconciliation and review function of the Institute.

This includes formalizing policies and procedures over the general ledger reconciliation process and establishing and implementing effective internal controls together with adequate segregation of duties over key tasks.
Institute’s Comment All Finance policies and procedures are now in place for general ledger reconciliation.

Report of Statutory Authorities – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 5.5 Anomalies in Property, Plant and Equipment Fiji Institute of Technology had over $37 million in written down value of property, plant and equipment as at 31/12/08.

This was the largest component of the Institute’s total assets.

The following anomalies were noted.


 A detailed property, plant and equipment register was not maintained by the Institute.

For each class of property, plant and equipment, only movements such as the totals of the cost of assets, additions made during the year, depreciation charge for the year and accumulated depreciation were provided;  A separate detailed register is not maintained for fixed assets donated by the Fiji Government.
Also a detailed reconciliation of the amortization of Government grant was not provided for review;  The fixed asset capitalisation policy is $1,000 and above, however, items below $1,000 were capitalized.

Refer to Table 5.1 below for examples.


Table 5.1: Examples of fixes assets capitalised with cost below $1,000 Fixed Asset Category – description Library books Plant and equipment – alloy jet spray nozzle Plant and equipment – fire fighting gloves Cost ($) 130 – 420 75 630  Lease agreements for the following leased lands were not made available for verification.

o Crown lease – DP 2657 Lots 1, 2 & 3 and ND 4758 CAAF Compound lease no.

267384 o Crown lease – No.


13563 Lot 5 ND 4444 pt of now on Lot 1 ND4761 o Native lease – Tauvegavega Lot 1 on BA 2232 and Lots 1 & % on SO 3069 –No.

27737  Rental agreement for quarters 213 CAAF Compound was not renewed which expired in 2007.

As no detailed property, plant and equipment register was provided for verification the audit could not perform audit procedures to verify the property, plant and equipment balance as at 31 December 2008.
Accordingly, the completeness, existence and accuracy of property, plant and equipment and related accounts such as depreciation and deferred revenue could not be ascertained.

Recommendations  Management should maintain a detailed property, plant and equipment register for all  assets of the Institute including those funded by the Government of Fiji.
It should adhere to fixed asset capitalization policy at all times and should properly maintain the land lease agreements and ensure it is renewed on a timely basis.

Institute’s Comment A detailed fixed asset register is now being maintained by the university after doing a board of survey and valuation exercise.

An asset capitalization policy is now being developed and adhered to.

All the property is now being transferred to FNU under FNU decree.
Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 5.6 Controls over student debtors to be strengthened Our review of the internal controls and processes over trade receivables revealed the following.

 The trade receivables balances were made up of accumulated balances dating back to 1999.
The trade receivables balance was understated in the prior years due to the students subsidiary system not able to generate reports;  There were no credit policies and procedures in place which govern the functions of the receivables and collections department;  There was no follow up on outstanding debt from prior years.
This resulted in the accumulation of outstanding debt;  Follow up performed by the collections department in years subsequent to 2010 revealed that some of the debtors have left the country and/or there is no available contact.

Debts which are no longer recoverable should be written off; and  Trade receivables control ledger and reconciliations were not reviewed by management on a regular basis.

The reconciliations provided did not have any evidence of review by senior management personnel.
The above anomalies resulted in the creation of $4.2 million of provision for doubtful debts against the trade receivables balance at balance date.

This represents 85% of total debts.

Recommendations  Management should strengthen the controls regarding the timely update and review of the  debtors listing.

It should follow up student debtors as soon as they become overdue and must ensure that students or their sponsors clear all current dues before they are allowed to enrol for further courses.
 Management should ensure that student arrears are regularly monitored and followed up to minimize the bad and doubtful debts.

Institute’s Comment These are all now covered by the debt and fees policy of the university.

PART A – FINANCIAL INFORMATION 2009 5.7 Audit Opinion The audit of the financial statements of the Fiji Institute of Technology for the year ended 31 December 2009 resulted in the issue of a qualified audit report.
The qualifications are as follows:  The carrying amount of property, plant and equipment as at 31 December 2009 was $44,426,663 and the depreciation expense for the year was $1,372,650.

The carrying amount and depreciation expense were extracted from the property, plant and equipment register (PPER) as at 31 December 2009.
The PPER was not properly maintained and I could not satisfy myself on the existence or completeness of physical assets recorded in the PPER nor the valuation of cost, depreciation and net carrying amounts recorded.
Report of Statutory Authorities – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Accordingly, I was unable to verify the reasonableness of the assets depreciation expenses for the year ended 31 December 2009 and the carrying values of property, plant and equipment disclosed in the financial statements as at 31 December 2009 and determine the impact, if any, of any adjustments which may be necessary had a complete and accurate PPER been made available for verification.
 The depreciation charge for the year in respect of the assets donated by the government of Fiji is offset against the deferred revenue of $285,993 released to the statement of income and expenditure.

A detailed deferred income register is not maintained by the Institute, therefore the completeness, existence and accuracy of the deferred revenue could not be ascertained.
5.8 Abridged Statement of Financial Performance Year Ended 31 December Income Government Grant Benefits Realized – Government Grant Tuition Fees Other Income Total Income Expenditure Course Related Expenses Personal Expenses Depreciation and Amortization Other Operating Expenses Total Expenditure Net Surplus/(Deficit) for the Year 2009 ($) 2008 ($) 9,000,000 285,993 13,428,430 5,291,445 28,005,868 8,000,000 285,993 10,289,771 2,696,730 21,272,494 1,900,921 13,576,327 1,372,650 6,244,034 23,093,932 4,911,936 1,274,239 12,456,582 1,193,807 6,830,138 21,754,766 (482,272) The Institute recorded an operating surplus of $4,911,936 in 2009 compared to a deficit of $482,272 in 2008.
This was largely due to increase in government grant by $1,000,000 (13%), tuition fees by $3,138,659 (31%) and other income by $2,594,715 (96%) compared to 2008 5.9 Abridged Statement of Financial Position As at 31 December Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, Plant & Equipment Total Assets Liabilities Bank Overdraft Trade and Other Creditors Provisions Project Funds 2009 ($) 2008 ($) 5,617,150 514,180 144,402 99,177 44,426,663 50,801,572 3,844,628 791,392 91,588 27,922 37,479,896 42,235,426 --- 5,089,497 200,816 --- 170,265 3,320,036 487,693 292,325 Report of Statutory Authorities – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS As at 31 December Deferred Revenue Total Liabilities Net Assets Reserves and Accumulated Losses Capital Reserve Revenue Reserve Asset Revaluation Reserve Total Accumulated Funds 2009 ($) 22,262,062 27,552,375 23,249,197 2008 ($) 16,548,055 20,818,374 21,417,052 15,851,346 1,263,014 6,134,837 23,249,197 11,430,604 3,851,611 6,134,837 21,417,052 Net assets increased by $1,832,145 or 9% in 2009 compared to 2008.
This was due to increases in cash and cash equivalents by $1,772,522 or 46%, inventories by $52,814 or 58%, prepayments by $71,255 or 255% and property, plant and equipment by $6,946,767 or 19%.

Provisions also declined by $286,877 or 59% and project fund and bank overdraft also reduced to nil from $292,325 and $170,265 respectively.
PART B – CONTROL ISSUES 5.10 Anomalies in Property, Plant and Equipment Our audit noted that Fiji Institute of Technology had over $44 million in written down value of property, plant and equipment as at 31/12/09.

This makes it the largest component of the Institute’s total assets.

The following anomalies were noted:  A detailed property, plant and equipment register was not maintained by the Institute.
For each class of property, plant and equipment, only movement such as the totals of the cost of assets, addition made during the year, depreciation charge for the year and accumulated depreciation were provided.

 A separate detailed register was not maintained for fixed assets donated by the Fiji Government.

 Included in the work in progress balance of $21,872,645 were items which should not be capitalised as per IAS 16 to the value of $37,000 for the year ended 31/12/2009.
Refer to table 5.2 for examples: Table 5.2: Items Capitalised Description Item 1 Charges for site meetings and attendances Item 2 Date Capitalised 03/09/2009 09/06/2009 13/11/2009 Value ($) 150 13,500 29  Lease agreements for leased land were not made available for verification.

The following instances were noted: o Crown lease – DP 2657 Lots 1, 2, 3 and D 4758 CAAF Compound lease no 267384 o Crown lease – No.
13563 Lot 5 ND 4444 pt of now on Lot 1 ND 4761 o Native Lease – Tauvegavega Lot 1 on Ba 2232 and Lot 1 & % on SO 3069 – No 27737 Report of Statutory Authorities – July 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS  Land lease agreement for Quarters 213 CAAF compound was not renewed.

The operating lease agreement expired in 2007.


The absence of a detailed property, plant and equipment register created difficulties in performing audit procedures to verify the property, plant and equipment balance as at 31 December 2009.

Accordingly, the completeness, existence and accuracy of property, plant and equipment and related accounts such as depreciation and deferred income could not be ascertained.
Recommendations  The management should maintain a detailed property, plant and equipment register for all assets of the Institute including those funded by the Government of Fiji.

 The management should adhere to fixed asset capitalization policy at all times.

 The Management should properly maintain the land lease agreements and ensure it is renewed on a timely basis.
Management’s Comments: A detailed fixed asset register is now being maintained by the university after doing a board of survey and valuation exercise.

An asset capitalization policy is now being developed and adhered to.

All the property is now being transferred to FNU under FNU decree.

All lease agreements are now being renewed on timely basis since details are known by FNU.
5.11 Control over student debtors to be strengthened Our review of the internal control and processes over trade receivables revealed the following:  The trade receivable balances were made up of accumulated balance dating as far back as 1999.

The trade receivable balance was understated in prior years due to the students’ subsidiary system not able to generate reports.
 There was no credit policies and procedures in place which govern the functions of the receivables and collection departments;  There was no follow up on outstanding debt for prior years, resulting in the accumulation of outstanding debt.

The above resulted in the creation of $6.4 million of provision for doubtful debts against the trade receivables balance at balance date.

This represented 93% of total debts.


Recommendations  The management should strengthen the controls regarding the timely update and review of the debtors listing by the Accountant and Director Finance.

 The management should follow up student debtors as soon as they become due.

 The management should implement strategies for students and their sponsors to ensure all current dues are cleared before they are allowed to enrol for further courses.
Report of Statutory Authorities – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Management’s Comments These are all now covered by the debt and fees policy of the university 5.12 Controls over Inventory Management to be strengthened Audit identified a number of issues with respect to control and processes over the management and recording of inventory.

The following anomalies were noted.

 Inventory count process was not effectively carried out.
For instance, physical counts were not compared with the inventory listing maintained in the general ledger system and no investigation of the variances between the two records was performed.

 There was no evidence of review of the inventory listing maintained in the general ledger system.

 The books held in the Bookshop were not stated at net realisable value.

The selling prices of books were lower than the cost price however the books were stated at cost price.
Refer to table 5.3 for examples of books not stated at net realizable value.
Table 5.3: Books not stated at Net Realisable Value Book Name Qty A & P Technician General Textbook Accounting Applied Mechanical Design Wiring Rules Cost Accounting (A Management Emphasis) Hydraulics in Civil and Environmental Engineering Public Finance Strategic Management 3 7 5 40 9 5 1 23 Cost Price ($) 207 96 96 297 95 116 102 108 Selling Price as 31/12/2011 ($) 134 95 82 195 56 50 34 105  Completed boat was valued at selling price rather than cost price as there are no costing methods to determine the cost of the boats.
Refer to table 5.4 for boats valued at selling price.

Table 5.4: Boats valued at Selling Price Description Qty 23’ standard boat 23’ wide boat 2 3 Selling Price ($) 7,000 8,500 Value ($) 14,000 25,000 The above anomalies increase the risk of errors and irregularities with respect to the management of inventory.

This may also result in misstatement of inventory balances recorded in the general ledger.
Recommendations   The Institute should ensure effective inventory management procedures and policies are implemented to address the issues noted above and reduce the risk of errors or irregularities in the inventory balance.

A proper costing method should be used for finished boats.

Report of Statutory Authorities – July 2012 9 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Management’s Comments All inventories are now managed by the inventory module of our Navision System.
5.13 Anomalies in Trade Creditors and Accruals.

Audit identified the following anomalies in trade creditors and accruals account.

 Trading accounts was maintained as creditors and accruals accounts.

Refer table 4 for details.

Table 4: Trading Accounts maintained as Creditors & Accrual accounts Account Description Boat Building Trading Account Insurance Refunds Balance ($) 63,853 45,387  The Institute made a provision for medical expenditure on the number of employees.
When staff claims for expenses the claim is offset against this account however the provision accumulated to a substantial balance of $486,417 as at 31/12/2009.

Review of the account against claims revealed that was overprovided at balance date.

The above anomalies may increase the risk of errors and irregularities with respect to income and creditors.

This may also result in the income balance understated and the accrual balance overstated.
Recommendations   The Institution should ensure trading accounts are maintained for each operating activity and the profit or loss from the activity is recognised in the profit and loss account in the respective year.

Provision for medical expenses should be reviewed at the end of each financial year and the remaining income should be reversed to income accordingly.
Management’s Comments  Trading accounts are now being maintained by our Navision system, it works together with the inventory module of the Navision system.

 Medical expenses are kept in a staff insurance scheme, where all the staff medical expenses are catered for.

This fund accumulates over the years and gets topped up every year depending on the number of full time staff employed as recommended by the Human Resources committee of the University.
Report of Statutory Authorities – July 2012 10 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SECTION 6: FIJI ISLANDS REVENUE & CUSTOMS AUTHORITY The Fiji Revenue and Customs Authority (FIRCA) was established as a statutory Authority under the FIRCA Act 1998 and encompasses the operations of the former Fiji Islands Inland Revenue and the Fiji Islands Customs Services.

FIRCA commenced operations on January 01, 1999.


The FIRCA Act specifies the following functions of the Authority:  To act as agent of the State and to provide services in administering and enforcing the laws specified in the First Schedule of the Act.

 Generally to exercise all functions and perform duties carried out by the Inland Revenue Department and the Fiji Islands Customs Service.
To advise the state on matters relating to taxation and customs and excise and to liaise with appropriate Ministries and statutory bodies on such matters.

To represent the State internationally in respect of maters relating to taxations or customs and excise and To perform such other functions as the Minister may assign the Authority.

   Revenue Collection Division The Taxation Division has two major units namely, the Revenue Collection Section and the Risk and Compliance Section.
The Revenue Collection Section is the operational arm, which deals with, return lodgements, assessments and collection of revenue.

Also, the Revenue Collection Section is responsible for processing Income Tax and VAT returns lodged by all taxpayers.

Their function includes:       Customer enquiry services; Lodgement of returns; Tax assessments on returns lodged; Issue tax assessment statements; Collect tax revenue; and Provide tax advice and education.
The Risk and Compliance Section is responsible for recovery and compliance issues.

It also ensures that taxpayers, traders and other stakeholders comply with various legislations administered by FIRCA.

The division also identifies, analyse and manages risk areas.

The Division is structured with four broad sections namely Large International Compliance, Small/Medium Compliance, Strategic Intelligence & Risk Profile and Debt Management & Lodgement Enforcement and Investigation.
Customs Services Division The Customs Division is responsible for:    collection of Revenue for FIRCA in the customs area; acts as a principal agency for Border control; and Cargo clearance and a trade facilitator in allowing movement of goods, people and services from one foreign port to another.
The Division provides information on security measures to all its stakeholders; it provides business support to corporate bodies, the private sector and works in partnership with business entities to protect copyright, trade mark, counterfeiting, etc.

The Division also acts on behalf of other public agencies in carrying out their responsibilities and functions at the border, and administers all Customs Laws and Regulations.
It represents the organization and the Government internationally to bodies such as World Customs Organization (WCO), World Trade Organization (WTO), Oceania Customs Organization (OCO) and the Regional Intelligence Liaison Office (RILO) and provides advice to the Private and Public sector.
Its main functions are revenue collection, trade facilitation, warehousing, international trade, industry support providing information on tariff and trade, valuation, making recommendation under section 10 and 11 to the Minister for Finance, amending National Legislation to facilitate in implementing revised or new changes and resource allocation.

Units that fall under Border Management are: Wharf Area, Outstations, Customs Examination Branch, Customs Marine Unit and Primary Line.
Corporate Services Division The Corporate Services Division offers support functions to the Customs and Taxation Divisions of the Authority.

The Corporate Services Division comprises of eight sections namely; Information Technology, Finance, Legal, Policy, economic analysis and research, Human Resources, Training & Development, Records Management and Internal Assurance.
Report of Statutory Authorities – June 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Table of Contents SECTION 6: FIJI ISLANDS REVENUE & CUSTOMS AUTHORITY ....................................................................................... 1 PART A – FINANCIAL INFORMATION ................................................................................................................................... 2 6.1 2 Audit Opinion - 2011 Abridged Statement of Financial Performance ........................................................................................................ 2 6.2 6.3 Abridged Statement of Financial Position ................................................................................................................ 3 PART B - CONTROL ISSUES ................................................................................................................................................. 3 Business Advances Not Retired ............................................................................................................................... 3 6.4 Increasing Salary Advance Balance ........................................................................................................................ 4 6.5 Housing Allowance Entitlement ................................................................................................................................ 5 6.6 6.7 Outstanding SPA’s – Longroom
 ............................................................................................................................... 6 6.8 Variances between ASYCUDA to Physical Stock reconciliation .............................................................................. 7 Outstanding Short Payment Advice’s – Post Audit .................................................................................................. 8 6.9 Certificate of Exports versus ASYCUDA Direct Export (EX1) Reconciliation ........................................................ 10 6.10 6.11 Export Income Deduction ....................................................................................................................................... 11 Uncollected debts .................................................................................................................................................. 14 6.12 APPENDIX 1: OUTSTANDING BUSINESS ADVANCES ..................................................................................................... 16 APPENDIX 2: OUSTANDING SPAs – POST AUDIT SECTION ........................................................................................... 20 APPENDIX 3: RE-EXPORTED ITEMS INCLUDED IN EXPORT INCOME ........................................................................... 25 PART A – FINANCIAL INFORMATION 6.1 Audit Opinion - 2011 The audit of the financial statements of the Authority for the year ended 31 December 2011 resulted in the
 issue of an unqualified audit report.
6.2 Abridged Statement of Financial Performance Year Ended 31 December State Revenue State Revenue Less: Payment to Government Agency Revenue Grants from Government Fees and Charges Other Income Total Agency Revenue Employee Costs Recurrent Expenditure Total Expenditure Net Surplus/(Deficit) for the Year 2011 ($) 2010 ($) 1,585,972,519 (1,585,972,519) 1,303,456,633 (1,303,456,633) 29,587,830 5,776,596 2,312,882 37,677,308 22,473,992 11,031,049 33,505,041 4,172,267 25,230,841 4,329,608 1,176,081 30,736,530 21,638,580 10,168,999 31,807,579 (1,071,049) The Authority recorded a net surplus of $4,172,267 in 2011 compared to a net deficit of $1,071,049 in 2010 which was attributed to the increase in government grant by 17%, fees and charges by 33% and other income by 97%.
Report of Statutory Authorities – June 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 6.3 Abridged Statement of Financial Position As at 31 December Assets Cash at bank Investments Other current assets Property, plant & equipment Total Assets Current Liabilities Grant received in advance Deferred grant income Total Liabilities Net Assets Equity Restated Opening balance Net Surplus Add: Asset Revaluation Reserve Total Equity 2011 ($) 2010 ($) 15,942,076 25,064,432 1,569,207 14,271,778 56,847,493 5,256,674 18,060,023 1,748,413 25,065,110 31,782,383 22,501,762 4,172,267 26,674,029 5,108,354 31,782,383 23,749,955 11,024,908 2,547,460 14,315,911 51,638,234 5,045,617 16,737,213 1,918,794 23,701,624 27,936,610 23,576,340 (1,071,049) 22,505,291 5,431,319 27,936,610 The increase in net assets by $3,845,773 or 14% in 2011 compared to 2010 was due to an increase in investment by $14,039,524 or 127%.
PART B - CONTROL ISSUES 6.4 Business Advances Not Retired Authorised claims are made in advance up to 100 % of the projected cost being issued.

Advances must be accounted for, cleared and unused advance must be repaid within five working days of the completion of the official business otherwise deductions will be made for the full 100% from the next pay.

1 Our audit noted that some business advances issued in 2010 have remained outstanding as at 31/12/11.
Refer to Table 6.1 below for details: Table 6.1: Details of 2010 outstanding business advances Month 2010/005 2010/004 2010/008 2010/012 Total Nature of Advance Allowance Civil Service Awareness @ Suva on 20/05/10 – 21/05/10 Cash advance Interviews – TRCO on 27/04/10 and CO’s (Vac 03/10) Advance - interview of Staff regarding Tax Fraud case Advance - interview of Customs Officers from 21/12/10 – 23/12/10 Amount ($) 100.00 100.00 200.00 50.00 450.00 1FRCA Finance and Accounting Directions –Section 5.22.3 Report of Statutory Authorities – June 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Total outstanding business advances balance as at 31/12/11 had increased significantly by $35,745.42 or 340% compared to the outstanding balance as at 31/12/10.
It was also noted that majority of the advance issued in 2011 have exceeded the 5 working days retirement period.

Refer to Appendix 1 for details.

The above implies the lack of supervisory checks and inadequate monitoring of the advance balances and there is no compliance to the 5 working days retirement period.

Recommendation The Authority should immediately instigate salary deductions against all those officers whose advances have not been cleared within the 5 days period time frame.
The Authority should identify those responsible officers who have yet to clear advances for the year 2010 and institute salary deduction to recover these amounts in arrears.

Authority’s Comments Steps have been taken to clear long outstanding advances and they are closely monitored.

Where possible we have been recovering outstanding dues via salary deductions including the amounts reflected in the above table.
6.5 Increasing Salary Advance Balance The Board approved a revolving fund of $100,000 for the purpose of salary advances and at no time the total outstanding amount exceed $100,000.2 At any time the total deduction should not exceed 50% of gross, as provided for in the employee act.3 Our audit noted that the Authority allows salary advances to staffs who needs urgent assistance in education, family emergencies and funeral expenses for dependent relatives.
In 2011, the outstanding balance for salary advance increased by $15,912 or 23%.

The breakdown of Salary Advance is provided in the table below: Table 6.2: Business Advance 2011 Advance Rent Arrears Vodafone Others Uniforms Salary Advance TOTAL Amount ($) 1,242 3,838 32,701 21,891 23,109 82,781 Audit noted that two officers still have a large sum outstanding with regards to the double payment of the per diem paid in 2004 as tabulated below.
2 1.1 FAD001 Policy Guidelines and Procedures for Salary Advances of 20/03/2002 3 1.5 FAD001 Policy Guidelines and Procedures for Salary Advances of 20/03/2002 Report of Statutory Authorities – June 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Table 6.3: Double Payment of Per-Diem Edp 47806 61159 D.O.B 21/04/62 10/08/73 Annual Salary 60,942 50,684 Amount Outstanding As At 31/12/11 $13,060 $16,669 The recovery rate for both officers is $80 per fortnight which would take for a period of 6 to 8 years to make a recovery.
In the absence of the guidelines for repayments, there are risks of amounts may be irrecoverable should the officers leave the service.

Recommendations The Authority should review the policy guideline for issuing staff advances and put in provisions to ensure that the outstanding amounts are recovered with reasonable recovery time period.

Authority’s Comments: Comments are noted.

Eligibility criteria for salary advances are adhered to including recovery timelines.
With regard to the per diem overpayment, this was not a common occurrence and as such other factors including risk elements were considered prior to determining the recovery amount.

6.6 Housing Allowance Entitlement Staffs eligible to receive housing include all salaried staff working outside Suva who were originally appointed in Suva and transferred to outer stations.
Persons entitled to housing may include legally married and single employees, but where two Employees are entitled and they are spouses to each other only one shall be considered.

Staff occupying quarters belonging to them or their spouses shall not be eligible for housing.4 The audit noted that the following Fiji Revenue and Customs Authority (FRCA) officers have been renting their own property to the FRCA and have been paid housing allowances accordingly.
Moreover, it was noted that properties rented have been written under their spouses’ name as landlords.
Refer to Table 6.4 below for details: Table 6.4: Officers renting in their own property Tenant Tenant 1 Tenant 2 Tenant 3 Tenant 4 Tenant 5 Landlord Landlord 1 Landlord 2 Landlord 3 Landlord 4 Landlord 5 Monthly rent $600 $450 $600 $450 $450 Discussions with the officer responsible revealed that the Authority had sought clarification from the Public Service Commission in 2001 which had clarified that if the posting of the individual officer coincides with the fact the officer has a property at the station, and then it is unforeseen.
4FRCA HRM Directions –Chapter 4d Report of Statutory Authorities – June 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS However, the audit noted that the Human Resource Management (HRM) Directions which was approved in May 2003 had clearly clarified that staffs occupying quarters belonging to them or their spouses shall not be eligible for housing.
The anomaly noted above is an apparent breach of standing FRCA regulations which denotes the laxity of the officer responsible at the Human Resources (HR) section to ensure that the above regulation is adhered to.

The possibility of collusion between the HR officer responsible and the FRCA officer being the tenant cannot be also ruled out.

Recommendation:  The Authority should immediately cease the payment of housing allowances to the above officers and recover the rent amount already paid.
 The Authority should ensure that there is compliance with the FRCA Regulations in particular with the Human Resources Directions.

Authority’s comment: Comments are noted.

In light of the Human Resources Direction (2003) (outlined in paragraph 1 above) taking precedence of the PSC advice (2001).

It should also be noted that good houses in Nadi within staff eligibilities were limited which was evidenced by the frequency of staff requesting a change in quarters during the term of a tenancy/lease.
This issue has been raised with Management and noted by FRCA Board Audit Committee.

In 2012, FRCA has moved away from its involvement with tenancy and landlord leasing agreements by providing respective staff with Housing Allowances to manage their own Housing arrangements.
6.7 Outstanding SPA’s – Longroom The correct amount of any duty, charge or fee due and payable: a) may be demanded by the Comptroller at any time within one year from the date when such duty, charge or fee should have been paid; b) shall constitute a debt payable to the Government; c) d) is recoverable in a court of competent jurisdiction in the name of the Comptroller.
is payable by the importer or exporter, as the case may be; and The owner, director, partners and shareholders shall be held personally responsible for payment of the correct amount of any duty, charge or fee due and payable.5 A total of $42,310 has been outstanding from 3 most common agents representing importers that owe duties to the Authority as at 30th September, 2011.
Details are noted in the following table: Table 6.6: Outstanding SPA’s from June 2010-September 2011 Agent SPA’s outstanding Customs Agent 1 2010 5,940 2011 2,926 Total 8,866 5 Customs Act – Revised to 29th January 2010: Sections 95(1) & (3) Report of Statutory Authorities – June 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Agent SPA’s outstanding Total Customs Agent 2 Customs Agent 3 Total 2010 18,879 7,412 2011 4,735 2,418 23,614 9,830 42,310 Despite the duties being outstanding since 2010, the Authority continues to give clearance to these agents on various goods and items consigned to them.
The Authority advised that they cannot penalise the agents for the outstanding duties with their respective importers/clients.

The onus is on the owners of the cleared goods to settle the duties outstanding with the Authority.

Goods concerned are either sold or used once cleared from the agents therefore most importers are not bothered by the additional duties issued under their goods through these SPA’s.
Reminders are being sent to the agents and the cases are referred to the Legal Section should the importers refuse to clear their duties owing.

Duties owed to Government will continue to escalate and may become irrecoverable if owners do not settle their duties with the Authority on time.

Recommendations  The Authority needs to implement stringent measures in order to recover duties that have been outstanding for some time.
 The FITS system and ASYCUDA should be linked so that VAT refunds of defaulters can be placed ‘on-hold’ and can only be released once their duties owed through Customs has been cleared.

Authority’s comment Comments are noted.

List of owners of outstanding SPA’s will be drawn up and given to VAT Unit for the withholding of their respective VAT refunds until SPA’s are paid.
6.8 Variances between ASYCUDA to Physical Stock reconciliation Section 42(3) of the Customs Act6 states that all goods to be warehoused should immediately be taken to the warehouse, recorded and kept in its original packaging.

A number of input errors over collective SADs were raised by a Beverage and Distillery Company resulting in warehouse stocks being under or overstated.
Since more than one user has access to ASYCUDA, errors have been detected once reconciliation between physical stock and system balances are made.

Examples of these are noted in the following table: Table 6.7: Differences in ASYCUDA and physical stock balances Date 04.01.11 04.01.11 Entry No.
6 6 Product Code CV03 RG02 ASYCUDA Balance 63 639 Physical Balance --- 180 Variance (units) 63 459 6 Customs Act – Revised to 29th January 2010: Sections 42(3) Report of Statutory Authorities – June 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Date 19.01.11 27.01.11 27.01.11 27.01.11 27.01.11 27.01.11 06.04.11 Total Entry No.
2675 3759 3759 3759 3759 3759 15034 Product Code RG02 BW02 CV03 BR03 BR01 BR02 DW03 ASYCUDA Balance 18 558 540 1,252.80 1,566 2.265.48 540 Physical Balance --- --- --- --- --- --- --- Variance (units) 18 558 540 1,252.80 1,566 2,265.48 540 7,262.28 The above variance of 7,262.28 units as highlighted by the beverage and distillery company was due to double entry errors during branch transfers and input errors in the system.
An approval was sought by the company for Customs to adjust the said balances in the system as some of the stock had been removed from the warehouse.

Customs explained that these errors have been resolved and amended accordingly in the system.

This issue has been ongoing since ASYCUDA was first introduced.

Unrecorded movement and variances in stock balances as such may create room for more errors and increases the risk of potential revenue loss for the Authority.
Recommendations  ASYCUDA access given to clients should be restricted to one user only to avoid input errors in the system.

 Monthly reconciliations of the system balances and the physical stock of warehoused items to be carried out regularly by the Authority as reconciling records between the two can highlight any discrepancies and input errors.

Authority’s comment Comments are noted.

Clerks are approved upon application for ASYCUDA access after the necessary vetting is done.
A user name and a confidential password is given to each respective approved clerk for his/her own use only.

A list of post entry modifications is being drawn up for all warehouse related SAD’s to highlight the errors done by each authorized clerk.

The clerks will then be approached individually to emphasize the importance of capturing the correct data.
Any continuous errors made in the system will not be taken lightly and dealt with accordingly (may result in the removal of access level for some clerks).

Monthly reconciliations of system balances and the physical stock of warehoused items are being carried out but we have just started to do the reconciliation continuously with the appointment of additional warehouse officers.
6.9 Outstanding Short Payment Advice’s – Post Audit The correct amount of any duty, charge or fee due and payable: a) may be demanded by the Comptroller at any time within one year from the date when such duty, charge or fee should have been paid; shall constitute a debt payable to the Government; is payable by the importer or exporter, as the case may be; and b) c) Report of Statutory Authorities – June 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS d) is recoverable in a court of competent jurisdiction in the name of the Comptroller.
The owner, director, partners and shareholders shall be held personally responsible for payment of correct amount of any duty, charge or fee due and payable.7 Verifications of the SPA collections maintained at Post Audit section revealed that a number of claims remain outstanding during the year and this amounts to $131,542.08.

Refer to Appendix 2.

The arrears of revenue report highlight duties outstanding for 2-5 years amounting to $1,609,994 as at 31st March, 2011.
The officer in charge explained that importers who owe duties to the Authority are profiled in the ASYCUDA system and all their entries are sent to Post Audit where they are re-routed to red lane for the enforcement of Section 95 which is to be enforced by the Border Control Section.

For duties outstanding for more than a year includes tariff disputes and incorrect entries made during the initial inspection of the imported goods.
Reports are sent to management to inform them of the duties outstanding with the section.

The arrears of revenue of $1,609,994 indicated laxity by the section in vigorously pursuing recovery from Taxpayers.

With the continuing trend in increasing outstanding SPAs, the authority may find difficulty in collecting these outstanding duties and increases the risk of writ off as bad debts.
Recommendations  Management should implement strict collective measures to ensure that duties owed to the Authority are recovered.

Staff resources at the Post Audit Section are reviewed to ensure the revenue which should be collected by the Authority are collected on a timely basis.

Section 95 of the Customs Act must be strictly enforced by the Authority to avoid arrears that may become irrecoverable.

Section leaders’ performance to be monitored against collection of arrears.
   Authority’s comments Comments are noted.

The Compliance Team is currently embarking on a debt recovery project.

This is in line with the imposition of the New Customs garnishee provisions section 95B.The Teams intention is to ensure the timely collection of debt and proper accounting for SPA issued.

Our initial response will be to draw up a list of owners of outstanding SPA’s which will be given to VAT Unit for the withholding of their respective VAT refunds until SPA’s are paid.
Withdrawals will also be addressed in the exercises whereby any SPA withdrawn needs to adhere to strict protocols for transparency and accountability purposes.

An SOP will be developed to incorporate all required processes pertaining to the SPA withdrawal.

Staffs are also being rotated for the purpose of capacity building and expanding their knowledge base on Customs.
7 Customs Act – Revised to 29th January 2010: Sections 95(1) & (3) Report of Statutory Authorities – June 2012 9 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 6.10 Certificate of Exports versus ASYCUDA Direct Export (EX1) Reconciliation In determining total income, a deduction for export income shall be allowed.

For the purposes of section 21B, “export income” means profits derived by a taxpayer from the business of exporting goods or services [but excludes re-exports] 8.
All goods processed in Fiji and country of origin (COO) is Fiji is to be declared through the EX1 model of declarations in the Automated System for Customs Data (ASYCUDA) system.

The various models of declaration are outlined in the Table 6.8 below as provided by the ASYCUDA team.
Table 6.8: Model of declaration Model declaration EX 1 EX 2 EX 2 EX 3 EX 3 EX 3 EX 3 EX 3 EX 3 EX 3 EX 3 ET 9 of Extended Procedure Description 1000 2100 2300 3040 3071 3052 3053 3300 3340 3400 3440 9194 Direct permanent export Temp Export for processing or repair Temp Export for return unaltered state Re-export Re-export after customs warehousing Re-export after Temp Import for inward processing Re-export after Temp Imports for return unaltered state Re-export for which Industrial Drawback is claimed Re-export Industrial Drawback (import component) Re-export for which Normal Drawback is claimed Normal Drawback (imported component) Export Transshipments To verify the correctness of the export income figures in the Certificate of Exports issued by the Tariff and Trade section to the Inland Revenue section, the audit carried out reconciliation between the export income figures in the Certificate of Export (COE) against the value of all the exported goods declared through the EX1 model of declaration in ASYCUDA system.
Refer to Table 6.9 below for examples: Table 6.9: Variance details TIN 50-11528-0-0 50-04744-0-6 50-00352-0-5 50-16568-0-9 50-05466-0-6 50-02505-0-7 50-02667-0-2 50-15768-0-4 Financial Year Ending 31/12/10 31/07/11 30/06/11 31/12/10 31/12/10 30/06/11 30/06/11 30/06/11 COE figures EX1 report figures Variance 117,892,721.64 863,311.40 2,213,308.25 6,683,542.43 11,364,413.14 4,070,495.08 12,959,070.80 1,601,293.77 118,296,593.33 969,968.00 2,101,038.48 8,147,468.47 1,441,538.40 2,794,444.51 13,366,550.75 1,623,348.76 403,871.69 106,656.60 112,269.77 1,463,926.04 9,922,874.74 1,276,050.57 407,479.95 22,054.99 Moreover, it was noted that the Tariff and Trade section does not have an export report generated from ASYCUDA to rely on to verify the correctness of the schedule of export income figures certified in the Certificate of Export.
8Income Tax Act – Section 21B Report of Statutory Authorities – June 2012 10 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS The above findings denotes that goods being temporarily re-exported (EX2), re-exported (EX3) and for transhipment (ET9) have been included in the schedule of exports by the taxpayer without being detected by the Tariff and Trade section.

The above if not addressed will result in the Authority continuing to lose out on potential government revenue.
Recommendation  The Authority should provide explanations for the above variances.

 The Authority should consider strengthening its ASYCUDA system input controls and ensure that only those goods declared through the EX1 model of declaration are taken into account when deriving the export income.

Authority’s comments Changes have been made with regards to claiming of Export Income Deduction for tax purposes.
The current process is that exporters are no longer required to submit Export Certificates when lodging their returns of income.

All exporters are now required to submit the following documents when claiming for this particular deduction: 1.

Export income summary for the fiscal year.

2.

Calculation of 50% export income deduction claim.

Internal verification will then be made with Customs to ensure that only EX1 export entries are included in the export income summary before any deductions are allowed.
Tariff and Trade verifies the details of each entry in the system for those entries that are given to Tariff & Trade section by the exporter for export certification.

The certificate of export figures may not tie up with the EX1 report figure because the exporter may not have submitted all the export entries or some of the entries may have been rejected as those products may not have qualified.
In regards to EX2, EX3 AND ET9 we are now re-verifying the records with the schedules provided and the ASYCUDA print-out and so far we have not come across any of the SADs (EX2, EX3, ET9) has been included in the certificate of export.

Your comments have been noted and once after re-verification we will revert to you on the results.

6.11 Export Income Deduction In determining total income, a deduction for export income shall be allowed.
For the purposes of section 21B, “export income” means profits derived by a taxpayer from the business of exporting goods or services [but excludes re-exports]9.
The audit noted that the Authority’s verification process of the schedule of exports in order to determine the export income for taxation purposes is not comprehensive and in most cases the custom entries listed in the schedule of exports are only verified to the ASYCUDA system instead of the source documents supporting the single administrative document (SAD) entries to validate the origin of the items being exported.
9Income Tax Act – Section 21B Report of Statutory Authorities – June 2012 11 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Moreover, taxpayers do not submit relevant source documents together with the custom entries for customs verification purposes to ensure that only those goods that are made in Fiji are included in the export income calculation.
As a result, goods valuing $334,290 that were being re-exported by taxpayer 50-04744-0-6 were treated as direct exports hence escalating the taxpayers export income deduction for the financial year ending 31 July 2011.

Refer to Appendix 3 for details of re-exported goods.

Furthermore, taxpayer 50-05466-0-6 was declaring goods processed in Fiji through the EX3 (re- export) model of declaration in ASYCUDA.

Refer to Table 6.10 below for details.


Table 6.10: Details of custom entries declared through the EX3 (re-export) model of declaration Export Date Custom Entry No.
08/10/10 08/10/10 15/01/10 23/12/10 23/12/10 23/12/10 02/09/10 02/09/10 22/06/10 09/06/10 07/06/10 04/06/10 05/05/10 05/05/10 28/05/10 28/05/10 25/05/10 25/05/10 23/04/10 23/04/10 23/04/10 29/04/10 29/04/10 29/04/10 26/04/10 27/04/10 15/04/10 15/04/10 15/04/10 15/04/10 08/04/10 06/04/10 31/03/10 31/03/10 31/03/10 31/03/10 Procedure Code Description of Goods Country of Origin Corned beef Corned mutton Corned beef Corned mutton Corned meat Corned meat savoury Corned beef Corned mutton Corned beef Corned meat Corned meat Corned meat Corned mutton(sheep or lamb) Corned mutton Corned meat Corned meat Corned mutton Corned beef Corned beef Chicken luncheon Drippings Curry chicken Corned beef Drippings Corned meat Corned meat Corned beef Corned beef Drippings Beef sausage Corned meat Corned beef Corned beef Corned beef Beef tongues Beef trims 65CL Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Statistical Value ($) 118,524 38,365 160,917 10,000 191,158 7,358 133,679 22,770 166,148 162,078 186,923
Report of Statutory Authorities – June 2012 12 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Export Date Custom Entry No.
11253 11253 9666 8399 8399 8399 8773 8773 8773 2951 2951 2951 2081 3378 3378 3378 17/03/10 17/03/10 04/03/10 25/02/10 25/02/10 25/02/10 02/03/10 02/03/10 02/03/10 22/01/10 22/01/10 22/01/10 18/01/10 26/01/10 26/01/10 26/01/10 Total Procedure Code Description of Goods Country of Origin 3400 3400 3400 3400 3400 3400 3400 3400 3340 3400 3400 3400 3400 3400 3400 3400 Corned beef Corned mutton Corned meat Ready to eat chicken Lamb Rogan josh Dhal soup Corned mutton Corned meat Sheep hearts Ready to eat chicken Ready to eat lamb Dhal soup Corned meat Corned beef Drippings Chicken luncheon Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Fiji Statistical Value ($) 124,396 29,867 157,909 64,074 22,426 17,480 9,485 146,807 22,282 53,387 19,773 26,938 175,751 73,698 4,610 5,807 4,047,359 The above anomalies denote the laxity or the lack in number of officer responsible at the Tariff and Trade section to ensure that custom entries in the schedule of exports are verified against relevant source documents.
It also indicates that customs agents are not fully aware of the different types of model of declarations in the ASYCUDA system resulting in incorrect entries being made.

Failure to verify accurately export entries may result in revenue leakage.

Recommendations  The Authority should ensure that all the customs entries as per schedule of exports are verified to the relevant source documents before the issuance of Certificate of Exports.
 The Authority should consider conducting more ASYCUDA awareness training programmes to customs agents to enable them to understand the importance of using the correct model of declaration when making customs entries.

 The work of the Tariff and Trade section should be boosted with additional staff to monitor exports and minimise possible revenue leakages.
Authority’s comment Goods manufactured in Fiji for which imported raw materials are used, upon export of the finished product the exporter can claim industrial drawback on imported inputs.

In this case for corned beef and corned mutton, industrial drawback was claimed on the imported raw materials ( Beef heart, beef tongue, beef, trims, beef MDM for corned beef and Lamb trims and mutton trims for corned mutton).
The finished product passes through manufacturing process where the imported raw materials are substantially transformed to corned beef and corned mutton.

Hence the value for the finished product qualifies for export incentive.

In reference to Table 7.10 for some of the entries under EX3 Model, Procedure Code 3400 was used which is now being amended to read Procedure Code 3300 after verification that the products declared on the entries were manufactured in Fiji on which Industrial Drawback was claimed.
Report of Statutory Authorities – June 2012 13 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 6.12 Uncollected debts The taxes and all interest, penalties and costs assessed shall be recoverable as a debt due to [the State] from the person on whom it is assessed or imposed.
Notwithstanding anything contained in the [State] Proceedings Act, any tax, interest, costs or penalty that may be assessed, recovered or imposed under this Act may be sued for and recovered as a debt due to [the State] in any court of competent jurisdiction by the Commissioner suing in his official name.10 The audit noted that the total debt reported by the Debt Management Unit of the Authority as at 31 December 2011, totalled $146,044,908 as tabulated below: Table 6.11: Age of Debtors as at 31/12/11 Age of Debtors 1 – 30 days 31 – 60 days 61 – 90 days 91 days – 2 years 2 – 5 years More than 5 years Total Amount ($) 9,975,873 10,914,405 3,791,626 60,410,266 29,830,695 31,122,043 146,044,908 Percentage 6.8% 7.5% 2.6% 41.4% 20.4% 21.3% 100% Age of Debtors Amount ($) % of T Of this total debt of $146,044,908, income tax has the major component of 47.7%, Value Added Tax 40.8%, PAYE 5.7% and other arrears of revenue being 5.8%.
Refer to Table 6.12 for examples: Table 6.12: Arrears of Revenue by Revenue Type as at 31/12/11e Revenue Type Real Tax ($) Penalties ($) 44,531,970 5,441,147 1,266,995 3,127,252 491,023 422,476 Income Tax PAYE Provisional Tax Withholding Tax Land Sales Tax Gambling Turnover Tax Resident Withholding Tax 1,756 Value Added Tax Hotel Turnover Tax TOTALS 33,247,341 784,786 89,314,746 20,408,762 2,316,815 358,588 176,509 161,223 123,313 439 22,227,628 981,011 46,754,288 Total ($) 64,940,732 7,757,962 1,625,583 3,303,761 652,246 545,789 2,195 55,474,969 1,765,797 136,069,034 % of Total Arrears 47.7% 5.7% 1.2% 2.4% 0.5% 0.4 --- 40.8% 1.3% 100% The recovery mechanism being employed by the Authority should be strengthened and if there is laxity there are risks of cases being statue barred or taxpayers absconding and default payment.
Long outstanding debts run the risk of the debt being uncollectible and could mean loss of revenue for government.

Also, the non-collection of debt in a timely manner results in unwarranted pressure on the government’s day-to-day cash flow.
10 Income Tax Act 2007, Section 76 (1) (2) Report of Statutory Authorities – June 2012 14 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Recommendation The Authority should ensure that its recovery mechanism are strengthened and ensure that favoritism is not being practiced.

Authority’s comments: The comments from OAG are noted.

Firstly the Debt Management Case Manager Performance indicators have been revisited as of January 2012.
A more rigorous follow up of debtors is being pursued with Case Managers required to attend to 100% with follow up actions on their individual caseloads.

This addresses the issue of non-attendance to cases for long periods and thus increasing the risk of un-collectability of the same.

Monthly monitoring of current debt turning arrears has been tagged as KPI of Team Leaders.

Debt Management also requires stronger partnership with other agencies like LTA, Immigration.
To facilitate garnishee of 1/5th pension income towards settlement of tax and information sharing on current employers and addresses of taxpayers with arrears, a MOU with FNPF in 2011 has been signed and agreed upon.

Practice Statements and SPOS are under review and being fined tuned to remove subjectivity in the application of due processes.
Report of Statutory Authorities – June 2012 15 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS APPENDIX 1: OUTSTANDING BUSINESS ADVANCES Month Nature of Advance 2011/001 Allowance Civil Service Awareness @ Suva on 20-21/5 2011/002 Cash Adv Interviews-TRCO on 27/4 & COs (Vac.03/10) 2011/002 Advance Interview of staff re:Tax Fraud Case 2011/002 Advance Interview of Customs Officers, 21.12-23.12 2011/002 Advance Customs Division WrkShp, 07.01.11 2011/002 Advance Quality Customer Care Trng, Lab,24-25.02 2011/002 Advance Panel members- Customs Mngt intervw,24-25.02 2011/003 Cash Advance RPPD, Analyst & Legal Officer-21-22/2/11 2011/003 Advance Board meeting morning tea,21.02.11 2011/003 Advance Work Plan for the Review of Nadi Airprt-02'11 Cash Advance Board Refreshments/Dinner _Board Meeting Levuka 2011/003 2011/003 Morning tea for Busines Plan Meeting 2011/003 Advance Analyst Programmer positn intrvw,17.03 2011/003 Advance Boat travel exp for Isireli.N, attend training 2011/003 Refreshment for Passenger Profiling Trng on 31/3 2011/004 B/D,Visa Fees,Arieta.D,attnd WCO Regional WrkShp 2011/004 B/D,Visa Fees,Arthur.K,attnd WCO Regional WrkShp 2011/004 Advance Quality Customer Care,Nadi Port,07-08.03 2011/004 Advance Disciplinary Tribunal Hearing-P.Tuiviwa,29-30.03 2011/004 Advance cost of final Medical Report-Iliesa.M 2011/004 Advance morning tea-Steering Committee Meeting,13.04 2011/004 TRS Workshop site visit to Suva wharf on 07/04/11 2011/005 Cash Adv for TIN Registration Tour Trip LUISA C 2011/005
 Advance Primary Line Training, Nadi,20-21.04 2011/005 Advance TIN Registration, Bua Distric,05.04-15.04 2011/005 Advance Industrial Relations Training,Suva,07.08.04 2011/005 2011/005 2011/005 2011/005 2011/005 FIRCA Salary Expense 2011/005 2011/005 Processing fees J.Lesi & M.Riaz Chinese embassy 2011/005 Cash advance for Data Entry Interview,12/5/11 2011/005 Cash advance for fuel,Ai Matai & sevusevu,WCO Comp 2011/005 Boat transfer costs,Musket Cove,Nad Audit MUNI 2011/005 Advance for contribution to MSG Cocktail on 28/5/11 2011/005 Cash advance for Code of Conduct Trng on 13/5/11 2011/005 Reimbursement for excess baggage & cash advance 2011/005 Morning tea for 70 tax agents Ltk on 02/06/11MILIA 2011/005 2011/006 Customs Recruitment Trng,09-20/5/11 SAMSU DIN 2011/006 Customs Recruitment trng,23/5-3/6/11 Report of Statutory Authorities – June 2012 16 c/advnc -MSG Customs/Quarantine s meeting.
c/advnc -morning tea for TRS w/shop c/advnc Analyst programmer interview c/advnc -w/plan for review of Nadi Airport Lunch expenses for Board meeting _16/5/11 FRANCES Incidental expense Int.
Audit,Nadi,09-20/05/11 Sereima Amount ($) 50.00 120.00 150.00 150.00 200.00 235.00 500.00 27.50 42.00 50.00 65.00 171.30 171.30 190.00 200.00 57.50 72.50 90.00 100.00 120.00 250.00 340.00 -522.50 -0.13 -12.90 -3.00 44.00 57.00 60.00 70.00 100.00 120.00 150.00 150.00 172.00 175.00 200.00 500.00 500.00 990.00 4,185.00 -92.40 50.00 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Month Nature of Advance Amount ($) Interview for Clerical officer Legal on 29/7/11 c/advnc for recharge card & travel expense Labasa 2011/006 MSG Customs & Quarantine S/Committee Mtg,25-27/5/11 2011/006 A/T,Shujie Zhang,Booking ref#5HFTWS 2011/006 basic recruitment trng - Customs Officers 2011/006 Cash Adv for Dbase Admin & Analyst Programer,14/6 2011/006 2011/006 Cash advance R/Card & taxi fare 2011/006 Tea exp participants attending field trip Ltk on 22/6 2011/007 Cash advance for TRIM training from 9-10/6/11 2011/007 Cash Advance Primary line Trng,22-23/6/11 2011/007 Cash advance boat fare & vehicle freight,29/6/11 2011/007 Exp for launching of automation cargo maifests,16/6/11 c/advnc Industrial Relations training 2011/007 c/advnc: TRIM training 2011/007 c/advnc: ERP training – refreshments 2011/007 2011/007 c/advnc: Industrial Relations training 2011/007 Trainee programmer interview held on 29/7/11 2011/007 2011/007 Catering, refreshment QVS, field trip to FRCA_22.7 2011/007 WCO IPR Action Plan Wkshop,18-22/7/11 2011/007 Permit fee, Paul Gallaghe, transfer pricing specialist 2011/008 TIN Registration in Cicia, Lau group from
 02/08/11 2011/008 2011/008 Fuel for travelling expense, Moce, Oneata & Lakeba 2011/008 Funeral arrangement for S.Selala c/advnc: hosting lunch for IRR consultants 2011/008 c/advnc: interview for Legal CO on 29.7.12 2011/008 2011/008 c/advnc: w/shop-Free Trade Agreement 2011/008 Refreshments - ASYCUDA Training - 04-05/08/11 2011/008 Refreshments for OHS committee on 17/8/11 2011/008 TIN Registration team's morning & afternoon tea,23-27/8/11 2011/008 Refreshments for Border control training on 12/08/11
 2011/008 Cost of medical report for Israel Thamson Thalari 2011/008 Pasage,3 officers, Presentation toLevuka,31/8-2/9/11 2011/008 Purchase salusalu for 50 delegates at $3 each 2011/008 Permit issue fees for R.Vuppala 2011/008 Cash Adv Wshop Free Trade Agrmt - 4-8/08/11NACANI 2011/008 Mining wkshop,25/8/11&Income rewrite on 25-26/8/11 2011/009 Purchase cocktail savouries for PITAA Conf,21/8/11 2011/009 Advance official trip to India,trnst HngKng,27.8-1.9 2011/009 Advance for funeral arrangements for A.Kumar 2011/009 Purchasing items for PITAA Conference from 22-24/8 2011/009 44 gallons @ 15 per gallon of fuel c/advnc: PCA Dinner Customs Recruitment training ( note Jnl 226 $3 to be given by Lai) 2011/009 2011/009 Verekawa c/advnc: medical report for Thalari 2011/009 V Naqaravatu- Cash advance: I/Tax Rewrite - in Lbs 2011/009 M.Naulaukai c/advnc: exec .recruitment interview Report of Statutory Authorities – June 2012 17 50.00 50.00 125.00 150.00 210.00 343.00 727.00 -149.50 -35.45 -26.00 -0.85 50.00 70.00 315.00 340.00 477.00 500.00 660.00 660.00 2,500.00 -100.00 -21.15 -4.90 50.00 57.50 75.00 80.00 115.00 165.00 180.00 190.00 210.00 355.00 600.00 889.52 2,500.00 5,680.00 -185.90 -147.00 -115.00 -4.25 -3.80 32.50 37.50 50.00 55.00 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Month Nature of Advance Amount ($) Incidental expenses for border control operation refund of allowance- Laisiana for Cap/bldg w/shop boat t/port- Denarau to C/Coast for J Vuto c/advance:
 I/tax decree w/shop c/advance: accountants post interview c/advance: VAT/TAX self-assessment w/shop 2011/009 Conduct presentation, Redesign Valdatn,Nad&Ltk,29-30/9 2011/009 Conduct presentation, Redesign Valdatn,Nad&Ltk,29-30/9 2011/009 Purchase recharge cards for Operation Senibiau 2011/009 Afternoon tea for Redesign validation on 27/9/11 2011/009 Taxi fare to & from Nausori airport, Budget training 2011/009 Purchase 5 lali's for PCA Registration training participts,19-23/9 2011/009 Cash advance for 4x$20
 recharge cards 2011/009 Drinks with dinner for delegates,wkshp,22/9/11 2011/009 Refreshments for Income tax rewrite with Labasa agent 2011/009 Staff refreshments for income tax rewrite,15/9/11 2011/009 Allowance SEAA site visit for FRCA,04-06.09 2011/009 Executive recruitment interviews from 26-27/9/11 2011/009 Cash advance UNN Ext Cap Bldg wkhop,7-8/10/11 2011/009 FIRCA Salary Expense 2011/010 2011/010 Boat transportation from Port Denarau to Coral Coast 2011/010 Attend urgent border operation at Taveuni,7-9/9 2011/010 PCA workshop dinner, Bowling club,22/9/11 2011/010 2011/010 2011/010 2011/010 2011/010 2011/010 R Yauvoli - boarder operation in Taveuni 2011/010 Presentation-redesign validation in Ltka/Nadi c/advance :Customs redesigning aft/tea 2011/010 2011/010 c/advance: Customs redesign validation 2011/010 Return ticket on Coral Sun by F.Legget on 22/10/11 2011/010 Advance Afternoon tea for attendees-Redesgn Valdtn 2011/010 Customs Redesign Validation arvo tea 20-21/10/11 2011/010 2011/010 Morning tea for Customs Redesign at Nadi on 7/10/11 2011/010 Refreshments TRCO Intervw_1/11/11 2011/010 Tax self assessment workshop from 16-19/10/11 2011/010 Morning & afternoon tea, Customs Redesign,13-14/10/11 2011/010 Refreshment, Customs Redesign Validatn,20-21/10/11 2011/010 Advance Interview of Finance Positions,12,14.10 2011/010 2011/010 2011/010 2011/010 Refreshment ,Customer Serv trng,Labasa,2-3.11.11 2011/010 Refreshments, TRCO interview,7/10 & 12-13/10/11 2011/010 Cash advance,
 ITAX Decree 2011 on 28.10.11 2011/010 TIN Registration in Nayau&Vanuavatu from 27.10-3.11 2011/010 Refreshment Forensic Actg training Ltk 20-21Oct 11 2011/010 Refreshment Qty Customer Serv training 27-28 & 30.10.11 ITAX Decree 2011 workshop on 13/10/11 Interview, TL Cargo&passenger,Nad,13-14/10/11 Interview for P.Auditor & Prin Assessor,6-7/10/11 Incidental expenses for Levuka audit,26-28.10.11 Report of Statutory Authorities – June 2012 18 70.00 75.00 80.00 80.00 100.00 100.00 156.00 200.00 372.93 500.00
 500.00 520.00 689.00 900.00 -373.00 -217.00 -80.50 -44.12 -8.05 -5.00 -1.20 -1.15 -0.80 22.00 30.00 30.00 50.00 50.00 50.00 75.00 80.00 80.00 100.00 125.00 130.00 150.00 160.00 170.00 200.00 200.00 230.00 300.00 500.00 500.00 500.00 2,500.00 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Month Nature of Advance I.Soqoiwasa-refund extra allwnc for Rotuma trip c/advnc:TRCO interview 2011/010 Advance for Operations Senibiau,Yasawa & Mamanuca 2011/011 Farewell for L.Sakealevu on 15/10/11 2011/011 Sevusevu & trans for TIN Registn to Moala,11-18/11 2011/011 Advance Funeral expenses for Late Ms Susheshni S 2011/011 Advance Funeral expenses for Late Ms Susheshni S 2011/011 c/advnc - funeral exp for Suseshni 2011/011 C/advanc: funeral exp for S Selala 2011/011 2011/011 2011/011 Refreshments ,Dev Standard Operating Procdre,23.11 SASHI 2011/011 Refreshments Risk Mgt trng,Nadi,14.11.11 SASHI 2011/011 Refreshments risk mgt training 24/11/11 Lab/Savu2VIKA N 2011/011 Refreshments Customs attaches interview,2-3/11/11 2011/011 Advance Refreshment interview 22-23/11/11 2011/011 Refreshments panels conducting interview 30/11,1& 5/12/11 2011/012 Taxi fare A.Narayan,Dev of ISO trng,Nadi,23.11.11 2011/012 Stay extended due to bad weather, Rotuma,11-18.11 2011/012 Accommodation & Incidental Exp (4-11/11/11) 2011/012 Per diem N.Dreu WTO Trade facilitatn,04-15/11/11 2011/012 PITAA conference - c/advance 2011/012 morning/afternoon tea - taxation planning workshop 2011/012
 2011/012 2011/012 2011/012 2011/012 2011/012 2011/012 2011/012 2011/012 Refreshment for records management training 8/12/11 2011/012 Purchase 1 can coffee for executive management meeting 2011/012 Morning tea expenses hosted by AGM 3/01/12 - Ltka 2011/012 Refreshment & light snacks for signing new contact 2011/012 Refreshment signing contract for Nadi,Ltk, Lab,Savu2 2011/012 Morning tea for service excellence awards 28/12/11 2011/012 Refreshments for Forensic acctg from 15-16.12.11 2011/012 Refreshment expenses
 for board meeting on 29.12.11 2011/012 Refreshment tax officer & cashier CEC from 14-16.12.11 2011/001 Advance Taxation Division Lockout meeting,15-16.12 2011/002 Refreshment for new auditors trng 7-9 & 14-15/12/11 2011/002 Morning & Afternoon tea-taxation planningwkshp20-23Dec'11 2011/002 C/Advance Customer Service Trng,Nadi-Sashi Total forensic accounting – refreshments c/advnc: new auditors training refreshments c/advnc: board meeting refreshments chief Auditor/Assessor interview refreshments c/advnc: taxation lockout meeting (chq # 72013) incidental exp-transport- Inoke S c/advnc: Sea face-2-face presentation c/advnce: RMU training Amount ($) 5,000.00 -1,515.00 -218.00 -190.00 -104.00 65.00 70.00 77.50 150.00 200.00 200.00 280.00 350.00 413.00 1,183.97 -269.40 -205.10 -160.00 -131.65 -74.60 -71.45 -51.50 -50.00 -4.20 -0.25 45.00 50.00 100.00 100.00 100.00 125.00 160.00 200.00 200.00 250.00 625.00 1,150.00 -88.20 50.00 120.00 150.00 150.00 46,274.62 Report of Statutory Authorities – June 2012 19 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS APPENDIX 2: OUSTANDING SPAs – POST AUDIT SECTION SPA No.
SAD #No.
Date Reason Amount ($) January 22765 22773 22774 22779 22781 22782 22783 Total February 22784 22785 22786 Total March 22789 22790 22792 Total April 22793 22794 22796 28 21550 59827 20987 3270 3341 46578 6971 41178 59827 29903 12275 15892 14502 15209 59923 31.12.10 10.01.11 06.12.10 13.01.11 24.01.11 25.01.11 28.01.11 VFD Incorrect T.I Incorrect T.I Incorrect T.I Incorrect T.I Incorrect T.I Incorrect T.I Incorrect 11.02.11 21.02.11 21.02.11 T.I Incorrect T.I Incorrect T.I Incorrect 21.03.11 21.03.11 13.04.11 T.I Incorrect T.I Incorrect T.I Incorrect 06.04.11 08.04.11 15.04.11 T.I Incorrect T.I Incorrect Code 237 not applicable Code 237 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Report of Statutory Authorities – June OFFICE OF THE AUDITOR GENERAL –
49.00 413.25 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SPA No.
SAD #No.
Date Reason Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Amount ($) 35.10 72.45 173.25 1,162.25 160.50 696.75 365.12 305.37 496.00 1,089.50 150.00 158.40 2,830.35 21,734.66 22860 4665 19.04.11 22861 12766 19.04.11 22862` 20711 20.04.11 22863 20712 20.04.11 22864 27904 20.04.11 22865 28098 20.04.11 22866 34269 20.04.11 22867 37728 20.04.11 22868 39970 20.04.11 22869 40096 20.04.11 22870 22871 22872 Total June 22879 2937 5275 7005 20.04.11 20.04.11 20.04.11 11462 09.06.11 22880 11462 09.06.11 Freight entered Freight entered T.I Incorrect not 1,501.63 not 1,111.87 161.28 20.06.11 24.06.11 T.I Incorrect 9,237.60 24.06.11 T.I Incorrect 253.53 27943 12606 29830 6071 9350 578 2071 27.06.11 T.I Incorrect 27.06.11 T.I Incorrect 28.06.11 T.I Incorrect 28.06.11 T.I Incorrect 29987 28.06.11 T.I Incorrect 3,546.15 4,989.90 2,735.40 1,906.05 3.087.90 25,443.41 22895 25912 25914 25926 25927 25928 25929 25930 Total July 25937 37684 20.07.11 25938 37866 20.07.11 Code 223 not applicable Code 223 not applicable 2,759.12 96.37 Report of Statutory Authorities – June 2012 21 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SPA No.
SAD #No.
Date Reason August 25866 48549 05.08.11 25869 52099 05.08.11 25870 50940 05.08.11 Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable T.I Incorrect Amount ($) 118.37 207.62 180.62 67.75 92.12 152.50 20.62 60.87 46.75 85.25 309.87 29.62 49.87 19.25 26.12 387.93 286.09 340.35 25873 25876 25879 25881 Total September 25886 25887 25888 25890 25891 19491 59062 50800 40561 53836 1844 26822 52737 1355 11.08.11 17.08.11 T.I Incorrect 19.08.11 T.I Incorrect 25.08.11 T.I Incorrect 42,334.25 43,443.86 05.09.11 T.I Incorrect 2,049.55 06.09.11 T.I Incorrect 07.09.11 T.I Incorrect 07.09.11 T.I Incorrect 08.09.11 Code 223 not applicable Code 223 not applicable 275.75 571.50 521.07 578.45 52.05 25893 1356 08.09.11 Report of Statutory Authorities – June 2012 22 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SPA No.
SAD #No.
Date Reason Amount ($) Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable T.I Incorrect Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable Code 223 not applicable T.I Incorrect T.I Incorrect 20.09.11 T.I Incorrect Report of Statutory Authorities – June 2012 23 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SPA No.
SAD #No.
Date Reason 46482 46856 47901 59062 24271 2513 26173 26174 Total October 26175 26176 26177 26178 Total November 26181 26185 19322 55956 26186 64438 14.11.11 55911 56230 26187 26189 Total Total outstanding SPAs Amount ($) 796.17 27.09.11 T.I Incorrect 28.09.11 T.I Incorrect 104.47 10,373.88 04.10.11 T.I Incorrect 4,630.45 07.10.11 T.I Incorrect 25.10.11 T.I Incorrect 25.10.11 T.I Incorrect 286.09 219.35 20.26 5,156.15 07.11.11 T.I Incorrect 1,027.00 14.11.11 14.11.11 Code 223 not applicable Code 223 not applicable T.I Incorrect 85.25 959.42 1,427.74 15.11.11 T.I Incorrect 739.73 4,239.14 131,542.08 Report of Statutory Authorities – June 2012 24 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS APPENDIX 3: RE-EXPORTED ITEMS INCLUDED IN EXPORT INCOME Export date Custom Entry No.
Procedure code Description of goods Country of Origin 29/09/10 29/09/10 29/09/10 29/09/10 27/10/10 27/10/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 07/12/10 15/02/11 15/02/11 15/02/11 15/02/11 15/02/11 15/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/ PVC pipe fittings Foams Hand Basin Taps Cement boards PVC 80mm pipes Paint brush Butt hinges Diamond cutter Dust mask Crome pipe & rods Furniture fittings Welding rods Steel drill bits Builder straps Steel brush PVC trimmer line Sanitary ware Electric cable Hose clips Water taps Valves Walla extra straight Cutting wheels Plastic basins Perspex Sheets PVC fittings Flip flops Electrical fittings Wood Putty Mesonite board Louvre frame Resene glues Plain Roofing Cable wire Carpet Toilet seat Paint Pad bolts Galvanised staples Shower grating Energy saver Rope Tape
 measure Laying trowel Sand paper PVC NZ NZ NZ NZ China China China China China China China China China China China China China China China China China China China China China China China China China China Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Report of Statutory Authorities – June 2012 25 Statistical Value ($) OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Export date Custom Entry No.
Procedure code Description of goods Country of Origin Statistical Value ($) 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 17/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 18/02/11 09/03/11 09/03/ Valves Light fitting Nails Hacksaw blade Paint brush Fibre glass mat Bolt and nuts Shovel Hand saw blade Hammer Butt hinges Locks File Tap Adaptor Panel pin Wood putty Brass bib cork Thread seal tape Hose Silicone Gumboot Garnet paper Drill bits Crome pipes Hinges Electrical fittings Nails Washers PVC pipes Waste pipes Paint spray Paint brush Hand tools Measuring tape Gum boots Sinks and basins Garden hose Padlocks Mild steel rods Galvanised Wire Galvanised mesh wire Adhesives Thread seal tape CRC anti
 rust treat Gas regulators Trimmer line Wheel barrows Engine oil Paints, varnish Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati Kiribati China China China China China China China China China China China China China China China China China China China China China China China China China China Wallis & Futuna Wallis & Futuna Report of Statutory Authorities – June OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Export date Custom Entry No.
Procedure code Description of goods Country of Origin 09/03/11 09/03/11 09/03/11 09/03/11 09/03/11 09/03/11 09/03/11 09/03/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 04/04/11 09/05/11 09/05/11 09/05/11 09/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 13/05/11 Total Louvre frames Rakes Broom handle Chop mat Copper nails Clear Perspex Car tubes Lantern PVC lino Masonite board Cutting wheel Chain link PVC guttering Galvanised tubing Set pan cistern & seat Angle iron steel Cement board Clear louver blade Lamp holder Bolts and Nuts Tile glues W/fabric PVC green cables Cement boards 80mm PVC pipes PVC gutters PVC fittings PVC lino Metal cutting wheel Meso board Binding wire Chain link Pan cistern & seat Ceramic tile Clear lover blade Lamp holder Bolts and nuts Tile glues W/fabric Filling cabinet Blue chair Wallis & Futuna Wallis & Futuna Wallis & Futuna Wallis & Futuna Wallis & Futuna Wallis & Futuna Wallis &
 Futuna Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga China China China China Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Tonga Statistical Value ($) Report of Statutory Authorities – June 2012 27 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 7: NATIONAL FIRE AUTHORITY The National Fire Authority (NFA) was established as a corporate body in 1994 under the National Service Act 1994.
The duties of the Authority are:        establish Fire Districts in the areas to which they cover and ensure that the District Fire Officer conforms to the NFA Act and maintains an efficient fire service having regard to the life and property, which he is under an obligation to protect and to the financial capacity of the district; coordinate the units of fire services for the purposes of fire protection, reinforcement at serious fire or other emergencies; encourage, supervise or carry out fire prevention activities and also experiment or research work with respect to fire service methods, equipment, organization or coordination with other services; establish courses of training and generally direct the training of the members the fire services; provide for the inspection of training of brigades, and for such degree of standardization of plan, equipment and training as it considers necessary for combined operations; inspect in relation to fire safety premises whether public or otherwise; arrange for obtaining, by inspection or otherwise, information required for fire fighting purposes with respect top the character of the building and other property in the Fire District and in any area in which the Authority is under an obligation to protect, the available water supplies, means of access thereto, and other material circumstances; provide consultancy services on fire fighting and fire fighting equipment and   Perform such other duties as the Minister may from time to time direct.
Table of Contents SECTION 7: NATIONAL FIRE AUTHORITY ................................................................................................................................. 1 PART A – FINANCIAL INFORMATION ........................................................................................................................................... 2 Audit Opinion ................................................................................................................................................................. 2 7.1 Abridged Statement of Financial Performance ............................................................................................................. 2 7.2 7.3 Abridged Statement of Financial Position ..................................................................................................................... 2 PART B – CONTROL ISSUES ......................................................................................................................................................... 3 Overstated Accounts Receivable Balance .................................................................................................................... 3 7.4 Property, Plant and Equipment ..................................................................................................................................... 4 7.5 Visa Card Acquitals
 ....................................................................................................................................................... 4 7.6 Unauthorised Travel by Board Members to Malaysia and China .................................................................................. 6 7.7 Per – Diem Loading ...................................................................................................................................................... 7 7.8 Purshase of Air Tickets ................................................................................................................................................. 8 7.9 Abuse of Power by Chairperson ................................................................................................................................... 9 7.10 Increase in Acting CEO’s Salary ................................................................................................................................. 10 7.11 Deposits and Advances .............................................................................................................................................. 11 7.12 Accountable Advance by CEO .................................................................................................................................... 11 7.13 Additional FNPF Contribution ...................................................................................................................................... 12 7.14
12 7.14 Encashment of Leave ................................................................................................................................................. 12 7.15 Salary Advance ........................................................................................................................................................... 13 7.16 Non Deduction of PAYE .............................................................................................................................................. 15 7.17 Non Lodgement of Revenue ....................................................................................................................................... 15 7.18 Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI PART A – FINANCIAL INFORMATION 7.1 Audit Opinion The audit of the financial statements of the Authority for the year ended 31 December 2009 resulted in the issue of an unqualified audit report.
7.2 Abridged Statement of Financial Performance Year Ended 31 December Income Fire Levy Government Grant Other Income Total Income Expenditure Personnel Expenses Depreciation & Amortization Others Total Expenditure Net Surplus/(Deficit) for the Year 2009 ($) 2008 ($) 5,047,927 1,422,222 1,218,589 7,688,738 4,932,500 885,758 1,825,600 7,643,858 44,880 4,945,864 1,422,222 944,453 7,312,539 4,431,870 713,478 2,086,637 7,231,985 80,554 The Authority surplus decreased by $35,674 or 44% in 2009 to $44,880 compared to 2008.
This was largely due to increase in personnel expenses by $500,630 or 11% and depreciation and amortisation expense $172,280 or 24% in 2009.
7.3 Abridged Statement of Financial Position As at 31 December Assets Cash & Cash Equivalents Trade & Other Receivables Inventories Financial Assets – Short Term Property, Plant & Equipment Total Assets Liabilities Bank Overdraft Trade & Other Payables Employee Entitlement Deferred Revenue Total Liabilities Net Assets Accumulated Funds Retained Profits 2009 ($) 2008 ($) --- 1,623,428 83,646 --- 6,148,192 7,855,266 344,588 679,579 273,342 206,165 1,503,674 6,351,592 327,379 2,057,671 77,323 --- 5,066,120 7,528,493 --- 611,012 202,650 408,119 1,221,781 6,306,712 6,351,592 6,306,712 Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI As at 31 December Total Accumulated Funds 2009 ($) 6,351,592 2008 ($) 6,306,712 The Authority acquired land and building, fire engines, radio equipment, fire fighting equipment and other fixed assets totalling $1,976,723 in 2009 which was funded from within hence the decrease in cash at bank and the increase in bank overdraft.
PART B – CONTROL ISSUES 7.4 Overstated Accounts Receivable Balance In all cases the gross amounts received by revenue collectors shall be accounted for and paid in as revenue.1 Prudence requires that assets should not be overstated in the financial statements.

NFA had accounts receivable balance of $1,482,189 as at 31/12/09.

Included in the accounts receivables were arrears of fire levy from Suva City Council (SCC) totalling $530,611 as at 31/12/09.
According to SCC they have paid all fire levies and do not owe any amount to NFA as at 31/12/09.

Refer to table 1 below for details.
Table 7.1: Movement in Fire Levy Account – Suva City Council Accumulated Profits Accumulated losses as at 31 December 1994 Net Profit for the year - 1995 Accumulated profits as at 31 December 1995 Paid to National Fire Authority in 1997 Accumulated profits as at 31 December 1997 Paid to National Fire Authority in 1998 Accumulated profit as at 31 December 1998 Total Amount Paid Amount ($) (166,136) 468,849 302,713 115,080 187,633 187,133 0 Amount Paid ($) 115,080 187,133 302,213 As a result the accounts receivable balance as at 31/12/09 was overstated by $530,611.
Recommendations The Authority should consider writing off the outstanding fire levy of $530,610.76.

Authority’s Comment No comments provided.
1 Section 8.6.1 - The Finance and Accounting Directions Report of Statutory Authorities – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 7.5 Property, Plant and Equipment Either on the satisfactory receipt of newly purchased goods or the transfer of existing assets, the relevant cost centre manager must ensure that the relevant asset register has been updated with the required information.2 Prudence requires that assets should not be overstated in the financial statement.
The audit noted variance in asset values for each class of asset between the Fixed Assets Register and the Financial Statement figures as at 31/12/09.

The total variance between the two records was $169,820.

Refer to the table 7.2 below for details.
Table 7.2: Variance in Asset Values between FAR and Financial Statement Figures Assets Land and Buildings Fire Engines Motor Vehicles Radio Equipment Fire Fighting Equipment Office Equipment Furniture and Fittings Computer Equipment Station Requirements Rescue Equipment Other Assets Total Amount as per Fixed Asset Register ($) 2,975,914 2,142,849 111,541 152,394 574,445 10,395 32,476 64,680 52,115 103,001 44,318 6,264,128 Amount as per Financial Statement ($) 3,053,307 2,183,203 130,084 142,993 625,628 8,342 18,900 69,185 59,238 99,950 43,118 6,433,948 Variance ($) (77,393) (40,354) (18,543) 9,401 (51,183) 2,053 13,576 (4,505) (7,123) 3,051 1,200 (169,820) As a result the total assets in the financial statements were overstated by $169,820 as at 31/12/09.
Recommendations  The Authority should ensure that the fixed asset register is updated to correctly reflect asset acquisitions, transfers, sale and disposal.

 The Authority should ensure that amount disclosed in the financial statements match with the amounts recorded in fixed asset register.

 The Authority should identify the variance noted in fixed assets values between FAR and financial statements and take appropriate action.

Authority’s Comment No comments provided.


7.6 Visa Card Acquitals When using visa cards the officer concerned within seven days of return to duty, shall submit a statement of expenses with supporting vouchers.

3 2 Section 9.4.1 – The Finance and Accounting Directions 3 Section 3.11.3 of Finance Instruction NFA Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI NFA maintained three Visa Cards for official purposes during 2009.
Arrangement was made with the bank to automatically replenish the balances on the visa cards on the agreed due date.

This was facilitated by debiting NFA’s operating account and crediting the visa card account with the amount expensed during the preceding period.

Subsequent to the replenishment of the credit card accounts, the Visa Card holders were required to provide the acquittals of the Visa Card usage to facilitate posting of the expenses into respective expense accounts.
As at 31 December 2009, the general ledger had a balance of $24,967.52 under Visa Card allocation.

However total expenses incurred using credit cards totalled $35,896.21 as at 31/12/09.

Refer to table 7.3 for details.


Table 7.3: Credit Card Expenses Visa Card Number Position 4999-6400-0008-5736 4999-6400-0008-5744 4999-6400-0008-4267 Total Director Corporate Services Chief Executive Officer Chief fire officer Amount Used ($) 26,343.91 7,272.57 2,279.73 35,896.21 Out of the total credit card expenses of $35,896.21, the credit card holders did not provide acquittals for expenses incurred totalling $25,213.46.
As a result these expenses were not posted into respective expenditure allocations in Authority’s general ledger.

Refer to table 7.4 below for details of the credit card expenses.
Table 7.4: Details of Visa Card Visa Card Number Position 4999-6400-0008-5736 4999-6400-0008-5744 Total Director Corporate Services Chief Executive Officer Visa Card Limit ($) 10,000 10,000 Amount not Acquitted ($) 18,839.39 6,374.07 25,213.46 The audit further noted that visa card expenses totalling $24,966.52 for which no acquittals were provided was incorrectly included in accounts receivables through a journal entry.
In absence of acquittals for credit card expenses it cannot be determined whether the expenses incurred by the card holders were for business purposes or personal in nature.

In addition the accounts receivable balance as at 31/12/09 was overstated by $24,966.52 due to incorrect posting of credit card expenses.

Recommendations  The Authority should ensure that all acquittals for credit card transactions are obtained from the card holders.

 The Authority should cease the use of credit card.
Report of Statutory Authorities – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Authority’s Comment No comments provided.

7.7 Unauthorised Travel by Board Members to Malaysia and China A letter was written by former chairman, to the Minister of Local Government, Urban Development, Housing and Environment on 16 /03/09 seeking approval for the official overseas travel in April 2009.
On 31/03/09, approval was granted by the Minister for two board members to travel to Malaysia and China with the Chief Executive Officer.

However, audit noted that 3 board members travelled to Malaysia while another 4 board members and the CEO visited China.

This was a direct breach of the approval granted by the Minister.

Table 7.5 below shows members of the Board who went on the overseas trip.
Table 7.5: Board Members Travelled to China and Malaysia Board Member Country Travelled Per diem ($) Air tickets ($) Total Cost ($) Comments Members Approved by the Minister to travel to China and Malaysia Board Member 1 Former Chairman CEO Total 4,047.84 5,670.97 5,263.15 14,981.96 3,059.78 9,029.35 4,891.35 16,980.48 Malaysia Malaysia Malaysia 7,107.62 Air Fare paid by NFA 14,700.32 Air Fare paid by Chinese Embassy 10,154.50 Air Fare paid by NFA 31,962.44 Additional Members who travel to China and Malaysia without Ministers approval Board Member 2 Board Member 3 Fleet Manager Director Corporate Total 9,949.58 Air Fare paid by Chinese Embassy 9,949.58 Air Fare paid by Jieda Fire (China) 6,650.43 Air Fare paid by NFA 7,386.69 Air Fare partly sponsored by SOPAC 33,936.28 4,035.08 4,035.08 2,232.85 2,232.85 12,535.86 5,914.50 5,914.50 4,417.58 5,153.84 21,400.42 China China China China Grand Total 38,380.90 27,517.82 65,898.72 As a result the Authority incurred additional cost of $24,749.69 for two separate teams to visit Malaysia and China.
Refer to table 7.6 for details.
Table 7.6: Additional Expenses Incurred by NFA for China Trip Board Member Board Member 2 Board Member 3 Fleet Manager Director Corporate Total incurred additional Expenses Per diem ($) 5,914.50 5,914.50 4,417.58 5,153.84 21,400.42 Air Fare ($) 0 0 2,232.85 1,116.42 3,349.27 Total Cost ($) Comments 5,914.50 Air Fare paid by Chinese Embassy 5,914.50 Air Fare paid by Jieda Fire (China) Air Fare paid by NFA 6,650.43 Air Fare partly sponsored by SOPAC 6,270.26 24,749.69 The finding shows that the Authority’s funds were not properly used for its best interest.
Report of Statutory Authorities – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Recommendations The Ministry should take appropriate action against the former chairman and former Chief Executive Officer (CEO) and Director Corporate for not adhering to Ministerial approval for overseas travel.

Authority’s Comment No comments provided.


7.8 Per – Diem Loading The Per Diem or Daily Subsistence Allowance payable at UN rates is meant to be sufficient for an Officer’s subsistence in terms of accommodation, meals and incidentals while on overseas duty travel.4 During the trip to China and Malaysia, the board of directors were paid per-diem allowance based on the rates provided by the Public Service Commission.

In addition, the board members got an additional 10% top up on their per-diem.
The audit further noted that there is no provision for topping up of per diem allowance in the Authority’s Finance Instruction.

Refer to the table 7.7 below for details of payment.
Table 7.7: Per-diem for Directors and NFA Staffs Board Member Per- diem US($) 10% Loading Board Member 1 1,253 125.30 Total Per- diem Paid US($) 1,392.20 Total Per- diem paid FJ($) 3,059.78 Former Chairman 3,626 362.60 4,028.90 9,029.35 CEO 1,989 198.90 2,187.90 4,891.35 Board Member 2 Board Member 3 Director Corporate Fleet Manager 2,422 2,422 2,345 2,010 242.20 242.20 0 2,691.10 2,691.10 2,345 5,914.50 5,914.50 5,153.84 0 2,010 4,417.58 Total 16,067 1,171.20 17,346.20 38,380.90 Route taken (via Seoul)/ Nadi/Kuala Lumpur Nadi Brisbane/Sydney/Kuala Lumpur/Shanghai/Brisbane/Nadi Nadi/Japan (via Seoul)/Kuala Lumpur/Nadi Nadi/Shanghai( via Seoul)/Nadi Nadi/Shanghai( via Seoul)/Nadi Nadi/Sydney/Shanghai/Sydney/Nad i Nadi/Sydney/Shanghai/Sydney/Nad i The Authority incurred additional expenses totalling US$1,171.20 by providing 10% top up on per diem allowance.
4 PSC Circular no.

21/2010 Report of Statutory Authorities – July 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Recommendations The Authority should ensure that payment of per diem allowance is in accordance with Finance Instruction.

Authority’s Comment No comments provided.

7.9 Purshase of Air Tickets The Chief Executive shall obtain at least 3 competitive quotations for the supply of goods and services valued in excess of $1000.
Purchases of goods and services to the value beyond $1001 must be approved by the board.

5 The National Fire Authority board members took official trips to Malaysia and China in April 2009.

Air tickets totalling F$27,517.82 were purchased in Australia by the chairperson.

Refer to the table 7.8 below for details.
Table 7.8: Overseas Travel Details Name Route Taken Air Fare ($) Purpose of trip Board Member 1 Nadi/Kuala Lumpur (via Seoul)/ Nadi Former Chairman Brisbane/Sydney/Kuala Lumpur/Shanghai/Hong Kong/Brisbane CEO Nadi/Japan (via Seoul)/Kuala Lumpur/Nadi Board Member 2 Board Member 3 Director Corporate Nadi/Shanghai( via Seoul)/Nadi Nadi/Shanghai( via Seoul)/Nadi Nadi/Sydney/Shanghai/Sydney Fleet Manager Nadi/Sydney/Shanghai/Sydney 4,047.84 Attend to bilateral talks for secondment of a Structural Fire Engineer and a Technical Assistant to NFA.
Departed Nadi on 19/04/09 and returned on 23/04/09.

5,670.97 Attend to bilateral talks for secondment of a Structural Fire Engineer and a Technical Assistant to NFA and follow up with relationship established with China Fire Services in 2007.

John Low departed Nadi on 18/04/09 and returned on 03/05/09.

5,263.15 Attend to bilateral talks for secondment of a Structural Fire Engineer and a Technical Assistant to NFA.

Departed Nadi on 16/04/09 and returned on 23/04/09.
4,035.08 Follow up with relationship established with China Fire Services in 2007.

Departed Nadi on 23/04/09 and returned on 30/04/09.

4,035.08 Follow up with relationship established with China Fire Services in 2007.

Departed Nadi on 23/04/09 and returned on 30/04/09.

2,232.85 Follow up with relationship established with China Fire Services in 2007.

Departed Nadi on 23/4/09 and returned on 02/05/09.

2,232.85 Follow up with relationship established with China Fire Services in 2007.
Departed Nadi on 23/04/09 and returned on 01/06/09 after spending one month annual leave in Sydney.

Total 27,517.82 5 Section 6.1(f) of Finance Instruction NFA Report of Statutory Authorities – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI The chairperson who was an Australian citizen was in Brisbane when he made the decision to purchase the tickets in Australia on the presumption that it would be cheaper for NFA.
The tickets were purchased on 14/04/09 at a cost of AUD$17,238 and this was later reimbursed to him on 16/04/09 with Fijian dollars amounting to $27,517.82.

The audit noted that the chairperson violated the NFA Finance Instruction which stipulates that the board should approve all purchases over $1,000.

In addition, the Authority did not obtain quotes from other travel agents before purchasing the tickets.
Therefore, the NFA’s claim that they had saved money by buying tickets directly from Australia cannot be substantiated.

Audit further noted that some of the Board members did not fly directly from Fiji to either Malaysia or China and back to Fiji but took indirect routes as following.

 The Fleet Manager for NFA did not return to Fiji immediately after the trip to China but instead went to Sydney on 02/05/09 to spend his one month annual leave before returning to Fiji on 01/06/09.
 The CEO’s trip to China originated from Sydney, Australia and on the return trip again went back to Sydney before coming back to Fiji on 02/05/09.

 The chairperson, travelled from Brisbane to Sydney then to Malaysia and China and on his return trip again went back to Brisbane via Sydney and finally returned to Fiji on 03/05/09.

These indirect routes taken by these Board members may have incurred additional travelling costs.
Recommendations  The Authority should ensure three quotations are obtained for all expenditures more than $1,000 as stipulated in the NFA Finance Instruction.

 The Authority should ensure that all purchases over $1,000 are approved by the Board in accordance with the Finance Instructions.

 The Ministry should investigate this matter further and take appropriate action.

Authority’s Comment No comments provided.


7.10 Abuse of Power by Chairperson The head of an organization should at all times exercise due diligence, practice ethical behaviour and should not take advantage of his position.

Purchases of goods and services to the value beyond $1001 must be approved by the board.

6 Three Board members travelled to Malaysia on 18/04/09 while another 4 board members and the CEO visited China on 23/04/09.
6 Section 6.1(f) of Finance Instruction NFA Report of Statutory Authorities – July 2012 9 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI The air tickets for the board members travel were bought by the former board chairman, on 15/4/2009 for A$17,238 for the China and Malaysia delegation from Flight Centre Unbeatable, a travel agency based in Australia.
Subsequently, on 15/4/2009, the Authority raised cheque number 31798 in Fiji dollars amounting to $23,297.58 payable to the former chairman to reimburse the cost of air tickets purchased in Australia.

However, on 16/04/10, the cheque number 31798 was again cashed, receipted and deposited into the Authority’s bank account.

A replacement cheque number 31809 for $27,517.82 dated 16/4/10 was issued to the chairperson.
The cheque was deposited into his bank account number 1204800 at ANZ Bank in Suva on 16/04/09.

The timing difference between the two cheques was only one day but there was a significant difference of $4,220.24 in the amount paid on the replacement cheque of 16/4/10 due to devaluation of Fiji dollar effective 16/4/10.

Refer to the table 7.9 below for details.


Table 7.9: Reimbursement of Airfare Date Cheque\ Number Amount in Australian Dollars 15/04/09 16/04/09 31798 31809 ($) 17,238 17,238 Variance Fiji Equivalent Australian Exchange rate ($) 0.7407 0.6270 Reimbursement Amount ($) 23,297.38 27,517.82 (4,220.24) The former chairman took advantage of his position and requested for a replacement cheque on 16/4/10 for his personal benefit of $4,220.24 due to devaluation of Fiji dollar.
Recommendations The Authority should report the matter to FICAC for further investigations.

Authority’s Comment No comments provided.

7.11 Increase in Acting CEO’s Salary The base salary for the former CEO, was $60,000 per annum.

He was on contract for three years with effect from 03/09/07.

However, his contract was terminated from June 2009.

Since then Director Corporate was acting as CEO with full acting allowance on the base salary of $60,000 per annum.
However the audit noted that on 04/12/09 the NFA board increased the salary for the CEO position from $60,000 to $76,039 per annum while the post was vacant, the Director Corporate was still acting as CEO.

The CEO’s salary was increased in the board meeting on 04/12/09 and the acting CEO, was paid acting allowance on new salary back dated to 02/10/09 totalling $1,412.45.

The finding shows that the board decision to increase the salary for a vacant position was not in the best interest of the Authority.
Report of Statutory Authorities – July 2012 10 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Recommendations The Board must ensure that decisions made by the Board is justified and is in the best interest of the Authority.

Authority’s Comment No comments provided 7.12 Deposits and Advances The Authority in an effort to support staff during times of bereavement and in encouraging physical fitness of employee will receive written applications from employees for advances on salary.
The Authority may at its discretion consider advances of salary for other important and specific circumstances.

The Authority may require proof that the advance is used for the intended purposes.7 The audit noted that a credit balance of $1,000 in Deposits Reconciliation as at 31/12/09.

This amount was paid to Fairdeal Earthmoving Contractors Ltd as deposit but no corresponding debit was noted in the in reconciliation.

No detail for the payment was provided to audit by the Accountant.
Deposits are paid to secure a service with the service provider.

A negative balance without a corresponding debit entry questions the validity and accuracy of the account balance.

Recommendations The Authority should investigate the variance and take appropriate action.

Authority’s Comment No comments provided.

7.13 Accountable Advance by CEO Where an advance has not been acquitted within 7 working days of travel, recovery must be made from the officer’s salary within 6 fortnights8.
Scrutiny of the payment vouchers revealed that Director Corporate Services approved an advance of $670.69 on 15/04/09 for the former NFA CEO for his travel from Narita to Nagoya while in Japan on official trip from 17/04/09 to 20/04/09.

However, the audit noted that no acquittal was provided by the former CEO after his travel from Narita to Nagoya.

Without the acquittal the audit could not determine whether the advance to the former CEO was utilised for official purposes.
7 NFA/FPSA 2008 Operational Staff Collective Agreement on 24/10/08 – Section 3 8 Finance Instructions (2010) s.44 (5) Report of Statutory Authorities – July 2012 11 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Recommendations The NFA should ensure that acquittals are obtained from officers for advance given to them within 7 days or deducted from their salaries if they fail to clear their advance within 7 days from the date of return.

Authority’s Comment No comments provided.


7.14 Additional FNPF Contribution The Authority shall pay the statutory rates of FNPF contributions and recover the employee contribution from salaries.
The Authority shall also contribute an additional sum equal to 2% of an operational employee’s net weekly salary into the employees FNPF account.9 Contrary to the above, the audit noted that the additional two (2) percent FNPF contributed by NFA for its operational staff’s was calculated on the gross weekly salary rather than net weekly wages.
Discussion with the Payroll Officer, revealed that this has been the practice since the implementation of the Collective Agreement between NFA and Fiji Public Service Association Operational Staff on 24/10/08.

Audit further noted that the payroll software used by NFA cannot calculate 2% on net wages.

The Authority was overpaying the additional 2% FNPF contribution to its operational staff’s.
Recommendations The Authority should rectify this problem and calculate additional 2% FNPF on net weekly wages as stated in the collective agreement.

Authority’s Comment No comments provided.

7.15 Encashment of Leave Employee who have excessive annual leave may convert no more than 25% of their excessive leave to cash.
Any encashment of leave will require the approval of the Authority.10 Contrary to the above requirement of the ‘Collective Agreement’, the audit noted that the Authority had authorised the cashing of annual leave for some staffs that either did not qualify for encashment of their annual leaves or cashed more than 25% of their excess leave days.

Refer to table 7.10 below for details.
9 NFA/FPSA 2008 Operational Staff Collective Agreement dated 24/10/08 – Section 3.11 10 Section 5.1.3 National Fire Authority/Fiji Public Service Association Operational Staff Collective Agreement 2008 Report of Statutory Authorities – July 2012 12 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Table 7.10: Encashment of Annual Leave Employee Initial Excessive leave days Actual Leave days Cashed Entitlement (25% of Excessive leave) Excess Leave paid Value of additional leave Cashed ($) TT BT SM KT AB SN 60.5 nil nil nil 19 13 20 11.5 11 10 7 10 15 nil nil nil 4.75 3 5 days 11.5 days 11 days 10 days 2.25 days 7 days 397.20 680.80 594.00 950.41 120.33 613.20 The audit further noted that an officer cashed 19 days of his long service leave entitlement which was contrary to the National Fire Authority/Fiji Public Service Association Operational Staff Collective Agreement 2008.
The collective agreement only allowed encashment of annual leaves and not the long service leaves.

Refer to the table 7.11 below for details.

Table 7.11: Encashment of Long Service Leave Employee Initial Long Service leave Entitlement (days) Actual Long Service Leave Cashed (days) KT 85 19 Value of long service leave Cashed ($) 1,364.96 The findings show that the Authority did not comply with the collective agreement which resulted in compensating leave to employees who were not eligible.
Recommendation The Authority should strictly comply with section 5.1.3 of National Fire Authority Operational Staff Collective agreement 2008.

Management Comments No comments provided.

7.16 Salary Advance The Authority in an effort to support staff during times of bereavement and in encouraging physical fitness of employee will receive written applications from employees for advances on salary.

The Authority may at its discretion consider advances of salary for other important and specific circumstances.
The Authority may require proof that the advance is used for the intended purposes.11 The audit noted that the Authority issued employees with salary advances for various reasons outlined below.
 Family commitments and gathering; 11 NFA/FPSA 2008 Operational Staff Collective Agreement dated 24/10/08 – Section 3 Report of Statutory Authorities – July 2012 13 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI  Educational assistance;  Renewal of driver’s licence;  Death of family member;  Passport fees;  Payment of bond to landlord;  Purchase of mobile phones; and  Water bill payments.
The audit noted that during the year the Authority issued significant amount of salary advances to its staff totalling $54,817.89.

As at 31 December 2009, staff advances totalling $20,706.35 or 34% of the total advances issued were still outstanding.

Refer to the table 7.12 below for details.
Table 7.12: Details of Staff and Salary Advances in 2009 Balance as at 01/01/09 ($) 6,397.53 Total Amount Advanced for the year ended 31/12/09 ($) 54,817.89 Total Amount Advanced As at 31/12/09 ($) 61,215.42 Total Amount Recovered as at 31/12/09 ($) 40,509.07 Amount Advance Outstanding as at 31/12/09 ($) 20,706.35 The audit also noted that the details such as opening balance, advances issued, amount recovered and balance outstanding for accountable and salary advances issued to staff were maintained on the excel worksheet.
However records maintained on excel worksheet could easily be manipulated without proper authorisation.

It was further noted that in majority of the cases, the officers’ themselves determined the minimal repayment amount that was quite small and prolonged the repayment period.

This resulted in significant amount of advance outstanding at year end.

For instance $6,574 was advanced to NFA staffs in October 2009 to assist them in buying school stationeries for their children.
However as at 31/12/09 only $2,707.30 was recovered while $3,866.70 or 59% was still outstanding.

Issuing of advances without appropriate retirement timelines may have resulted in significant advance owed by the staff.

Recommendations  The Authority should set a minimum repayment amount for all advances to ensure that advances to staff are collected within specified period of time.

 The Authority should take appropriate action to recover the outstanding advances from the staffs.
 The Authority should maintain an Advance Register to record all advances to staff and other details.

 The Authority should also consider ceasing the provision of salary advance to staff.

Management Comments No comments provided.
Report of Statutory Authorities – July 2012 14 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 7.17 Non Deduction of PAYE For the purpose of this Act, “total income” means the aggregate of all sources of income including the annual net profit or gain or gratuity, whether ascertained and capable of computation as being wages, salary or other fixed amount, or unascertained as being fees or emoluments or as being profits from a trade or commercial or financial or other business or calling or otherwise howsoever, directly or indirectly accrued to or derived by a person from any office or employment or from any profession or calling or from any trade, manufacture or business or otherwise howsoever, as the case may be, .12 Subject to the other provisions of this Act there shall be assessed, levied and paid a tax to be known as normal tax for each year of assessment on every dollar of chargeable income of— (a) an individual whose total income, in the case of a resident, exceeds [$8,840] , or any other person, other than a company, in respect of his chargeable income for the year of assessment [but a resident individual shall be exempt from normal tax to the extent that such normal tax, , would reduce the balance of his total income to [$8,840] or less in 1 3 together with [basic tax] : 13 any year] 4 2 The audit noted that normal tax (PAYE) was not deducted from manual payments made to two officer’s.
Refer to the table 7.13 below for details.

Table 7.13: Non Deduction of PAYE Date Cheque Number Payee 02/01/09 30915 VT 07/12/09 33499 JK Particulars Payment of compensation, outstanding leave and gratuity for the officer who retired on medical grounds effective from 01/01/09.

Payment of difference in acting allowance.

Default in tax deductions reduces the tax revenue paid to government.
Recommendation Amount Gross Amount ($) Less FNPF ($) 13,634.06 1,090.72 12,543.34 ($) 1,412.45 112.96 1,299.49 The Authority should take appropriate action against officers responsible for not deducting the tax.

Management Comments No comments provided.

7.18 Non Lodgement of Revenue All cash, cheques and documents of value shall be received by the accounting staff and shall be deposited as soon as possible in a safe with the cash and cheques paid into a bank.
All bank lodgments shall be checked and reconciled with the receipts issued by the Director – Administration & Finance.14 12 Income Tax Act Chapter 201 Laws of Fiji Revised 30 May 2007, Section 11 13 Income Tax Act Chapter 201 Laws of Fiji Revised 30 May 2007, Section 7 14 Section 5.9.1 Financial Instructions Report of Statutory Authorities – July 2012 15 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Whilst tracing the receipts issued during the month of December 2009 to the deposit book and bank statements, audit noted that in some instances the cash receipted by the Authority were not deposited and only cheques were deposited.
Further audit checks of revenue lodgement up to March 2010 noted that cash received in December 2009 totalling $3,099.14 was not banked by the Authority.

Refer to the table 7.14 below for details.
Table 14: Cash Receipts for December 2009 not banked as at 31 March 2010 Date Receipted 11/12/09 11/12/09 22/12/09 23/12/09 24/12/09 24/12/09 24/12/09 24/12/09 29/12/09 29/12/09 29/12/09 30/12/09 30/12/09 30/12/09 30/12/09 31/12/09 31/12/09 31/12/09 31/12/09 31/12/09 Total Revenue Receipt 14595 14597 13230 14198 14596 13227 13232 13231 14271 13233 13144 12323 12322 12320 12319 14955 14954 13235 12325 12334 Station Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Headquarters Audit Comments Amount ($) 933.50 Not banked as at 31 March 2010 871.89 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 112.50 Not banked as at 31 March 2010 112.50 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 168.75 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 112.50 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 56.25 Not banked as at 31 March 2010 3,099.14 There is a high risk of cash being embezzled by the cashier.
The finding shows poor supervision and monitoring of revenue collected and deposited into the bank account.

Recommendations  The Authority should ensure that an officer independent of the revenue collector reconcile the total receipts with the receipt books and deposit the cash into the Authority’s bank account.

 The Authority should ensure that an officer independent of the revenue collection and deposit performs monthly bank reconciliations.
 The Authority should investigate the revenue collected in December 2009 but not deposited and take appropriate action.

Management Comments No comments provided.

Report of Statutory Authorities – July 2012 16 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SECTION 8: WESTERN DIVISION DRAINAGE BOARD The Western Drainage Board was established under the Drainage Act, 1973.
The Board is responsible for the maintenance and improvement of drainage of all land within the Western Division drainage area.

Furthermore, subject to any approval or consent which may be required under the Act, the Board may carry out such works and issue such orders concerning drainage works as it deems necessary for the improvement of drainage within the division.
The Board has powers to make, assess and levy rates required to cover the costs of improving, constructing and maintaining drainage works, the carrying out of any drainage measures and the operating costs of the Board.
Table of Contents SECTION 8: WESTERN DIVISION DRAINAGE BOARD ........................................................................................................ 1 PART A – FINANCIAL INFORMATION 2010 .......................................................................................................................... 1 Audit Opinion - 2010 .............................................................................................................................................. 1 8.1 8.2 Abridged Statement of Financial Performance ....................................................................................................... 1 Abridged Statement of Financial Position ............................................................................................................... 2 8.3 PART B – FINANCIAL INFORMATION 2009 .......................................................................................................................... 2 Audit Opinion - 2009 ............................................................................................................................................... 2 8.4 Abridged Statement of Financial Performance ....................................................................................................... 3 8.5 Abridged Statement of Financial Position ............................................................................................................... 3 8.6 PART C – CONTROL ISSUES ................................................................................................................................................. 4 Acquittal Report – AusAid Grant ............................................................................................................................. 4 8.7 Anomalies in VAT .................................................................................................................................................... 5 8.8 8.8.1 Understatement of VAT on Government Grant ................................................................................. 5 8.8.2 Variance in VAT Receivables – 2009 accounts................................................................................. 5 8.8.3 Variance in VAT Accruals ................................................................................................................ 6 PART A – FINANCIAL INFORMATION 2010 8.1 Audit Opinion - 2010 The audit of the financial statements of Western Division Drainage Board for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
8.2 Abridged Statement of Financial Performance Year Ended 31 December Income Government Grant Other Income Total Operating Income Expenditure Wages and Salaries 2010 ($) 2009 ($) 644,762 13,279 658,041 856,256 204,379 1,060,635 52,702 50,301 Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Year Ended 31 December Vehicle and Maintenance Drainage Maintenance Other Expenditure Total Operating Expenditure Net (Deficit)/ Surplus for the year 2010 ($) 26,329 673,146 54,472 806,649 (148,608) 2009 ($) 22,379 891,357 51,057 1,015,094 45,541 The Board recorded a net deficit of $148,608 in 2010 compared to a surplus of $45,541 in 2009.
The deficit was recorded due to the decline in Government Grant by $211,494 (25%).

In addition AUSAID grant of which $191,911 was received in 2009 was discontinued.
8.3 Abridged Statement of Financial Position Year Ended 31 December Current Assets Cash Financial Assets – Term Deposits Receivables Total Current Assets Non Current Assets Financial Assets – Term Deposits Property, Plant & Equipment Total Non Current Assets Total Assets Current Liabilities Creditors & Other Accruals Employee Benefits Total Current Liabilities Total Liabilities Net Assets Total Accumulated Funds 2010 ($) 2009 ($) 207,600 61,228 28,923 297,751 121,759 28,538 150,297 448,048 169,608 897 170,505 170,505 277,543 277,543 502,956 59,785 16,819 579,560 113,598 42,848 156,446 736,006 303,841 6,014 309,855 309,855 426,151 426,151 Net assets decreased by $148,608 or 35% in 2010 compared to 2009 due to significant decrease in cash balance.
The decrease in cash balance was mainly attributed to decrease in government grant and that no grant was received from AUSAID in 2010.

PART B – FINANCIAL INFORMATION 2009 8.4 Audit Opinion - 2009 The audit of the financial statements of Western Division Drainage Board for the year ended 31 December 2009 resulted in the issue of an unqualified audit report.
Report of Statutory Authorities – July 2012 2 8.5 Abridged Statement of Financial Performance OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Year Ended 31 December Income Grant from Government Other Income Total Operating Income Expenditure Wages and Salaries Vehicles and Maintenance Drainage Maintenance Other Expenditure Total Operating Expenditure Net Surplus for the year 2009 ($) 2008 ($) 856,256 204,379 1,060,635 50,301 22,379 891,357 51,057 1,015,094 45,541 772,447 11,012 783,459 46,758 16,051 511,666 49,063 623,538 159,921 The Board recorded a net surplus of $45,541 in 2009 compared to a surplus of $159,921 in 2008.
The decrease in surplus was due to a significant increase in drainage maintenance expenses during the year.

The 2009 flooding in the Western division caused major damage to the Drasa flood gate structure which was rehabilitated by the Board during the year.
8.6 Abridged Statement of Financial Position Year Ended 31 December Current Assets Cash Financial Assets – Term Deposits Receivables Total Current Assets Non Current Assets Financial Assets – Term Deposits Property, Plant & Equipment Total Non Current Assets Total Assets Current Liabilities Creditor and accruals Employee benefits Total Current Liabilities Non Current Liabilities Employee benefits Total Non Current Liabilities Total Liabilities Net Assets Total Accumulated Funds 2009 ($) 2008 ($) 502,956 59,785 16,819 579,560 113,598 42,848 156,446 736,006 303,841 6,014 309,855 --- --- 309,855 426,151 426,151 218,995 58,771 5,060 282,826 109,174 62,285 171,459 454,285 63,418 5,641 69,059 4,616 4,616 73,675 380,610 380,610 Net assets increased by $45,541 or 12% in 2009 compared to 2008.
This was mainly due to significant increase in cash balance.
Report of Statutory Authorities – July 2012 3 PART C – CONTROL ISSUES OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS 8.7 Acquittal Report – AusAid Grant The Board is to provide a final acquittal report consisting of a detailed financial statement, certificate of completion for all building infrastructure activities; and a statement signed by the Chairman of the Western Division Drainage Board that the funds contributed have been applied in accordance with this arrangement once all funds have been expended in accordance with this arrangement.1 Any excess funds from the flood rehabilitation activities including interest on funds waiting use, to be used for activities mutually determined between the MPI and AUSAID.
Any unspent funds will be returned to the GOA.2 Effective monitoring is an essential element of any scheme of financial assistance as it provides the assurance that grant conditions are complied with and assess the effectiveness of individual projects.
In 2009, AusAid provided grant of $215,900 to the Board for on-farm infrastructure rehabilitation work to assist farms affected by the 2009 floods in the following agreed areas:  De-silting of farm drains; Clearing of farm debris; and   Maintenance of farm access roads.
The funds were to be used on the drainage maintenance projects for the following provinces: Table 8.1: Grants to be used for these Provinces Province Ba Province Nadroga/Navosa Ra Province Total Grant Budgeted Amount ($) 26,000 128,400 61,500 215,900 However, the following anomalies were noted for the grant money received:     The audit was unable to substantiate how much was spent for each project as the Board failed to provide breakdown details of the expenditure.
However, as per the Board’s 2009 Annual report, of the $215,900 grant received, only $194,936.44 was spent in 2009.

No acquittal report was prepared and submitted to AusAid as at the date of audit (15/02/12).

The $20,964 unspent as at 31/12/09 was not refunded to AUSAID as required in the agreement.

Audit was unable to ascertain whether the Certificate of Completion for all building infrastructure activities was provided to Ministry of Primary Industries as was required under the grant agreement.
No records were provided during the audit.

Non compliance with the grant agreement can lead to future requests for grants being declined.
1 Arrangement between the government of Australia and the government of Fiji relating to a contribution to assist in the flood rehabilitation program 2 Grant Agreement – Section 4 Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Recommendation The Board should ensure that Grant Agreement conditions are honored and strictly adhered to.
Board’s Comment The Board has taken note of the recommendation and assures that the grant agreement conditions will be honoured and strictly adhered to in future.
8.8 Anomalies in VAT Subject to the provision of the Vat Decree 1991, the tax shall be charged in accordance with the provisions of this Decree at the rate of twelve and a half percent on the supply (but not including an exempt supply) in Fiji of goods and services, by a registered person in the course or furtherance of a taxable activity carried on by that person, by reference to the value of that supply.3 In respect of each taxable period every registered person shall calculate the amount of tax payable by that registered person.
In calculating the amount of tax payable in respect of each taxable period, there shall be deducted from the amount of output tax of a registered person attributable to the taxable period where all the supplies made or to be made by the registered person are or will be taxable supplies, the total amount of input tax.4 Audit noted the following anomalies in the calculation of VAT receivable and VAT Payable by the Board.
8.8.1 Understatement of VAT on Government Grant The Board failed to recognise VAT output on the grant received from AusAid in 2009.

However, an audit adjustment was passed to account for this.

In addition, VAT on government grant was understated for both 2009 and 2010 financial years.

Refer to Table 8.2 below for details.


Table 8.2: VAT on Government Grant Particulars Government Grant Audit Calculation Amount as per GL Variance 2009 ($) 957,000.00 106,333.33 104,744.39 1,588.94 2010 ($) 718,850.00 79,872.22 74,087.56 5,784.66 The VAT amounts recorded in the 2009 and 2010 financial statements are misstated.
8.8.2 Variance in VAT Receivables – 2009 accounts The audit noted that some contractors engaged by the Board to carry out drainage maintenance works had produced Certificate of Exemption (COE) which effectively meant that no provisional tax was to 3 Value Added Tax Decree 1991 4th edition revised to 30/04/04 – Section 15 (1) 4 Value Added Tax Decree 1991, revised 30/04/2004 – Section 39 Report of Statutory Authorities – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS be deducted from their progress payments.
However, client incorrectly treated this as an exemption from VAT.

Therefore, when the invoices were processed for payment, they only entered the VEP amount into the system instead of the full invoiced or VIP amount.

As a result of the above, the system calculated the VAT on the VEP amount, thus the payment made to the contractor as well as the VAT input amount were both understated by the same amount.
In order to correct this error, the Board processed another cheque to the contractor from the VAT Input account.

As a result, the VAT Receivable account was overstated while the Drainage Maintenance account was understated.

Table 8.3 below provides the details of the initial payments process where the VEP amount was processed; however, the system (general ledger) automatically calculated the VAT from this amount and posted it to the VAT Input account.
Table 8.3: Overstatement of VAT Receivable and Understatement of Drainage Maintenance Date Cheque No.
Contractors Amount on Voucher $ Amount in GL $ 23/01/09 312 Contractor 1 VIP ($) per Invoice 8,959.30 VAT 996.30 VEP ($) per Invoice 7,963.00 Drainage Maintenance (VEP) 7,078.95 VAT Input account 884.87 Additional VAT Processed VAT Input account 996.30 23/01/09 311 Contractor 2 13,045.93 1,449.55 11,596.38 10,307.89 1,288.49 1,449.55 17/08/09 528 Contractor 3 32,766.84 3,640.76 29,126.08 24,757.17 3,094.65 3,640.76 After incorrectly establishing that they had not charged VAT on the initial payment, the client had raised another cheque equivalent to the VAT component on Invoice directly from the VAT Receivable account.
The Drainage Maintenance account and the VAT Receivable account in the general ledger as well as in the financial statements for the year ended 31 December 2009 were understated.

8.8.3 Variance in VAT Accruals Agencies must ensure that all commitments and invoices are promptly and accurately recorded in the accounting system to meet management and external reporting needs.5 The accruals record maintained by the Board did not reconcile to the general ledger and the audit figure.
Refer to Table 8.4 below for details.
Table 8.4: Variance in VAT Accruals Item VAT Accruals As per WDDB (Accrual Listing) ($) 19,186.71 As per General Ledger (G. Lal) ($) 13,815.60 Difference (AL vs GL) As per Audit Difference (AG vs GL) 5,371.11 18,262.66 4,447.06 5 Finance Instructions 2010 – Section 53 (1) Report of Statutory Authorities – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS No satisfactory explanation could be provided by the Board on the variances noted above between the three records.
As such the audit was unable to substantiate the accuracy of the VAT accruals figure.

Recommendations  The Board should ensure that a comprehensive reconciliation is carried out for the VAT Receivable and VAT Payable accounts.

These records need to be reconciled to Statement of VAT from FRCA and any variance noted to be adjusted accordingly.

 Accounting for VAT training should be provided to the Accounts Officer to solve the issues on VAT.
Board’s Comment The Board has taken note of the recommendations.

The Board would like to clarify that the former clerical officer who retired in mid 2010 was not familiar with VAT calculation and lodgements.

However the newly appointed clerical officer is a qualified and well versed with the VAT calculation and lodgement procedures.
Report of Statutory Authorities – July 2012 7 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 9: KOROVOU RURAL LOCAL AUTHORITY The Korovou Rural Local Authority is established under section 10 of the Public Health Act.

The Authority is responsible for the provision of sanitary services such as garbage collection, the operation of market, community centre and public health projects.
The authority charges garbage fees, market fees, and other charges to meet the costs of these services.
Table of Content SECTION 9: KOROVOU RURAL LOCAL AUTHORITY ......................................................................................................... 1 PART A – FINANCIAL INFORMATION ................................................................................................................................... 1 Audit Opinion - 2008 .................................................................................................................................................. 1 9.1 Abridged Income Statement 2008 .............................................................................................................................. 2 9.2 Abridged Balance Sheet 2008 ................................................................................................................................... 2 9.3 Audit Opinion – 2009 .................................................................................................................................................. 3 9.4 Abridged Income Statement 2009 .............................................................................................................................. 3 9.5 Abridged Balance Sheet 2009 ................................................................................................................................... 3 9.6 Audit Opinion – 2010 .................................................................................................................................................. 4 9.7 Abridged Income Statement 2010 .............................................................................................................................. 4 9.8 Abridged Balance Sheet 2010 ................................................................................................................................... 4 9.9 PART B – CONTROL ISSUES ................................................................................................................................................. 5 Basis of Accounting and Disclosure of Assets and Liabilities .................................................................................... 5 9.10 Absence of Approvals for Decisions Undertaken ....................................................................................................... 5 9.11 Non- Utilization of Natovi Public Convenience ........................................................................................................... 6 9.12 PART A – FINANCIAL INFORMATION 9.1 Audit Opinion - 2008 The audit of the financial statements of the Korovou Rural Local Authority for the year ended 31 December 2008 resulted in the issue of a qualified audit report.
The following issues were qualified: The Statement of Revenue and Expenditure of the Authority was prepared using the cash basis of accounting and did not take into account revenue not received and expenditure not paid at balance date.

Similarly, the Statement of Financial Position did not incorporate debtors, prepayments, creditors and accruals and is therefore a limited Statement of Financial Position contrary to Section 7 (4) of the Public Health (Sanitary Services) Regulations.
Report of Statutory Authorities – July 2012 1 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 9.2 Abridged Income Statement 2008 Year Ended 31 December Revenue Market Fees CBH Grant Garbage Services Base Fees Other Income Total Revenue Recurrent Expenditure Sanitary Services Market Services Administration and General Total Expenditure Result for the year from Ordinary Activities 2008 ($) 2007 ($) 26,267 25,000 1,812 2,400 7,505 62,984 31,147 15,591 2,696 49,434 13,550 13,653 15,000 2,825 1,848 3,705 37,031 22,718 14,304 2,063 39,085 (2,054) The Authority recorded a surplus of $13,550 in 2008 compared to a deficit of $2,054 in 2007.
This was due to the increases in government grant, market fees and other income.
9.3 Abridged Balance Sheet 2008 As at 31 December Current Assets Cash at Bank Cash on Hand Total Assets Accumulated Funds Opening Balance Net Surplus/(Deficit) Total Accumulated Funds 2008 ($) 2007 ($) 15,918 5,692 21,610 8,060 13,550 21,610 8,060 - 8,060 10,114 (2,054) 8,060 The increase in total assets was due to increase in cash injection into the Authority’s operation through increased government grants, market fees and other income.
Report of Statutory Authorities – July 2012 2 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 9.4 Audit Opinion – 2009 The audit of the financial statements of the Korovou Rural Local Authority for the year ended 31 December 2009 resulted in the issue of qualified audit opinion.
The following issues were qualified: The Statement of Revenue and Expenditure of the Authority was prepared using the cash basis of accounting and did not take into account revenue not received and expenditure not paid at balance date.

Similarly, the Statement of Financial Position did not incorporate debtors, prepayments, creditors and accruals and is therefore a limited Statement of Financial Position contrary to Section 7 (4) of the Public Health (Sanitary Services) Regulations.
9.5 Abridged Income Statement 2009 Year Ended 31 December Revenue Market Fees CBH Grant Garbage Services Base Fees Other Income Total Revenue Recurrent Expenditure Sanitary Services Market Services Administration and General Total Expenditure Result for the year from Ordinary Activities 2009 ($) 2008 ($) 40,491 25,000 1,968 2,136 3,501 73,096 37,413 35,616 4,180 77,209 (4,113) 26,267 25,000 1,812 2,400 7,505 62,984 31,147 15,591 2,696 49,434 13,550 The Authority recorded a deficit of $4,113 in 2009 compared to a surplus of $13,550 in 2008.
This was due to increases in expenditure being market services ($20,025 or 123%) and sanitary services ($6,266 or 20%).
9.6 Abridged Balance Sheet 2009 As at 31 December Current Assets Cash at Bank Total Assets Accumulated Funds Opening Balance Net Surplus/(Deficit) Total Accumulated Funds 2009 ($) 2008 ($) 17,497 17,497 21,610 (4,113) 17,497 21,610 21,610 8,060 13,550 21,610 The decrease in total assets was due to more outflow of operating activities with respect to market and sanitary services resulting in reduced cash at bank balance during in 2009 compared to 2008.
Report of Statutory Authorities – July 2012 3 ______________________________________________________________________________ 9.7 Audit Opinion – 2010 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI The audit of the financial statements of the Korovou Rural Local Authority for the year ended 31 December 2010 resulted in the issue of qualified audit opinion.
The following issues were qualified: The Statement of Revenue and Expenditure of the Authority was prepared using the cash basis of accounting and did not take into account revenue not received and expenditure not paid at balance date.

Similarly, the Statement of Financial Position did not incorporate debtors, prepayments, creditors and accruals and is therefore a limited Statement of Financial Position contrary to Section 7 (4) of the Public Health (Sanitary Services) Regulations.
9.8 Abridged Income Statement 2010 Year Ended 31 December Revenue Market Fees CBH Grant Garbage Services Base Fees Other Income Total Revenue Recurrent Expenditure Sanitary Services Market Services Administration and General Total Expenditure Result for the year from Ordinary Activities 2010 ($) 2009 ($) 40,428 25,000 2,012 1,866 4,072 73,378 17,076 40,046 4,834 61,956 11,422 40,491 25,000 1,968 2,136 3,501 73,096 37,413 35,616 4,180 77,209 (4,113) The Authority recorded a surplus of $11,422 in 2010 compared to a deficit of $4,113 in 2009 due to a significant reduction in recurrent expenditures for sanitary services even though there was no major increase in revenue received during the year.
9.9 Abridged Balance Sheet 2010 As at 31 December Current Assets Cash at Bank Total Assets Accumulated Funds Opening Balance Net Surplus/(Deficit) Total Accumulated Funds 2010 ($) 2009 ($) 28,919 28,919 17,497 11,422 28,919 17,497 17,497 21,610 (4,113) 17,497 The increase in total assets was due to decrease in cash outflows for its sanitary services resulting in the increase in cash at bank during the year.
Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ______________________________________________________________________________ PART B – CONTROL ISSUES 9.10 Basis of Accounting and Disclosure of Assets and Liabilities Before 1st April in each year, the local Authority shall deliver to the Auditor Genera a statement of account, known as the Sanitary Services Account, showing all moneys received and expended in respect of its night soil or garbage removal services for the year ended on the immediately preceding 31 December, together with a balance sheet thereof as at that date.1 The Authority is adopting the cash basis of accounting and does not maintain a balance sheet to show the assets and liabilities as required under regulations 7(4) of the Public Health (Sanitary Services) regulation.
Furthermore, the Statement of Revenue and Expenditure failed to account revenue not yet received, prepayments and expenditure not paid at balance date.

Thus the financial statement for the year ended 31 December 2008 to 31 December 2010 did not truly reflect the true financial position of the Authority.

In addition, this issue has been raised in previous years audit and included in the Audit Reports for the Authority.
Recommendations The Authority should ensure that the Authority maintain a balance sheet and reflect the assets and liabilities of the Authority as required under the Public Health (Sanitary Services) Regulation.

Authority’s Comment The Local Authority would now ensure to comply with section 7(4) of the Public Health (Sanitary) regulation.
9.11 Absence of Approvals for Decisions Undertaken The books of account shall be open to inspection by the Auditor General, and by the Secretary of the Board or any person authorized by it.2 The following anomalies were noted:  Audit was not provided with the Authority’s board minutes despite making several requests.

 The board approval for the dumping of the garbage at the private land dump in Nabilo could not be sighted.
 Authority for the payment of $600 as Christmas Bonus for the year ended 31 December 2010 could not be verified.

 The approval for the increase in the wage rate in 2009 for the Authority’s staff could not be verified.
Refer to table 9.1 below for the payment of wages over the last three years: 1 Public Health (Sanitary Services) Regulations 7(4) 2 Public Health (Sanitary Services) Regulations, Section 52 (7) (3) Report of Statutory Authorities – July 2012 5 ______________________________________________________________________________ Table 9.1: Payment Of Wages OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Year 2008 2009 2010 Total Market Account ($) Sanitary Account ($) Total ($) 10,529 18,071 22,276 50,876 8,228 10,596 4,573 23,397 18,757 28,667 26,849 74,273 In the absence of the minutes of the meeting, the approval for the increase in the wage rate cannot be substantiated.
The absence of approval is contrary to section 52 (7) (3) of the public health (sanitary) regulation.

Recommendations The Authority should ensure that   the minutes of the meetings are made available for audit review; and all records requested for audit are provided for our scrutiny and in the absence of these documents, the basis of these payment could not be established and whether proper procedures were followed.
Authority’s Comments The Authority shall ensure to provide all minutes needed as evidence to decisions made by the Board in regards to utilizations of funds.

9.12 Non- Utilization of Natovi Public Convenience The principles of responsible financial management are to ensure the value for money in the use of money and resources.3 Our audit noted that the Authority built a public convenience facility at Natovi which was completed in 2008.
However, the facility is yet to be used due to the reluctance of shipping companies to fill the public convenience water tanks from a thin pipe which take days to fill.

In addition, the funds for construction of the facilities which totalled $6,606 was provided by Ministry of Health as renovation assistance and there is no value for money since the facility has remained unused for over 4 years.
In addition, audit was not able to determine the following issues which were not provided by the Authority:  Name of contractor for the facility and the approved plan;  Whether consultations were made with shipping companies;  Whether there was any tender called for the building of the facility; and  Whether there was a completion certificate issued for the facility.

3 Financial Management Act 2004, Section 5.


Report of Statutory Authorities – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ______________________________________________________________________________ The above indicates improper planning for the construction of the Natovi public convenience hence wastage of public funds.

Recommendations The Authority should ensure that the public funds are made to good use by ensuring that the facility could be used.
The Authority should ensure that records requested for audit are provided for scrutiny.

Authority’s Comments The Authority would ensure that the facility is to be fully utilized.

The Authority would ensure that records of the outstanding issues are provided to your authority for verification.
Report of Statutory Authorities – July 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS SECTION 10: TOURISM FIJI Tourism Fiji is established under the Fiji Tourism Commission and Visitors Bureau Act, 1985.

Its objective is to encourage and develop the Fiji Tourism industry and the tourist traffic to, within and beyond Fiji, taking into consideration at all times the cultures and customs of the people of Fiji.
In conjunction with representatives from the various sectors of the local tourism industry, the Tourism Fiji undertakes promotion activities overseas promoting Fiji as a holiday destination.

Apart from its head office in Nadi, Tourism Fiji has offices in Australia, New Zealand, US and Japan.
Table of Content SECTION 10: TOURISM FIJI ................................................................................................................................................... 1 PART A – FINANCIAL INFORMATION ................................................................................................................................... 1 Audit Opinion - 2010 ................................................................................................................................................ 1 10.1 Abridged Statement of Financial Performance ........................................................................................................ 1 10.2 10.3 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................. 2 10.4 Inventories ................................................................................................................................................................ 2 PART A – FINANCIAL INFORMATION 10.1 Audit Opinion - 2010 The audit of the financial statements of the Tourism Fiji for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
10.2 Abridged Statement of Financial Performance Year Ended 31 December Income Government Grant Co-operative Promotion & Advertisement Other Income Total Income Expenditure Advertising and Branding Promotions Public Relations Other Selling & Marketing Expenditure Employee Salaries and Benefits Operation & Administration Expenditure Total Expenditure Net (Deficit)/ Surplus for the Year 2010 ($) 2009 ($) 23,555,556 1,493,902 570,688 25,620,146 16,766,833 3,342,548 1,221,054 1,929,489 2,091,186 1,557,262 26,908,372 (1,288,226) 23,111,111 1,366,926 379,806 24,857,843 13,869,507 2,347,285 1,404,596 2,812,496 2,121,949 1,412,136 23,967,969 889,874 Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Tourism Fiji recorded a net deficit of $1,288,226 in 2010 compared to a net surplus of $889,874 in 2009.
This was attributed to the increases in cost of Advertising and Branding by $2,897,326 (21%) and Promotions by $995,263 (42%).
10.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash at bank and on hand Prepaid expenses Tax refundable Other receivables and advances Total Current Assets Non–Current Assets Property, plant and equipment Investments Refundable deposits Total Non–Current Assets Total Assets Current Liabilities Employee entitlements Accrued expenses Income received in advance VAT and Other Payables Total Current Liabilities Total Liabilities Net Assets Net Accumulated Funds 2010 ($) 2009 ($) Net assets decreased by $1,288,226 (23%) in 2010 compared to 2009.
This was due to the decrease in cash at bank by $796,118 (11%).

Additionally, Tourism Fiji recorded a significant increase in accrued expenses amounting to $1,170,540 (68%) in 2010 contributing to decline in net assets of Tourism Fiji.

PART B – CONTROL ISSUES 10.4 Inventories Inventories are assets in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories are required to be stated at the lower of cost and net realisable value (NRV).1 The audit noted that promotional materials bought for marketing purpose are not held as inventory in the balance sheet.

Instead the promotional materials bought are expensed in the financials in the year of purchase.

Refer to the Table 10.2 below for details of inventories bought for 2010.
1 IAS 2.9 Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ISLANDS Table 10.1: Promotional Materials Purchased During the Year Particulars NZ Fiji me Promo Merchandise Giveaways Luxury Consumer Insert Total Promotional Materials USA Fiji me Display Units Fiji me collaterals Amount ($) Total ($) 13,962.35 13,928.57 6,411.00 34,301.92 9,715.78 9,551.51 68,603.85 Total Promotional Materials 19,267.29 38,534.58 Fiji 2010 Calendar Backpacker Flyers Chinese Collaterals Giveaways Giveaways, Letterheads, etc Mini-SP Travel Guidebook Publication (Explore Fiji) Publications & Merchandise Total 6,841.05 5,224.70 44,000.00 21,817.66 9,742.47 5,633.80 12,338.75 130,599.29 236,197.72 343,336.15 No inventory record was provided during the audit; indicating that an inventory record is not maintained.
Benefits arising from the distribution of promotional materials will not be matched in the year these promotional materials are distributed.

Additionally, lack of inventory record for promotional material increases risk of mismanagement of promotional items.

Recommendations  Management should consider capitalizing promotional materials as inventories when it is purchased and expensed in the period it is distributed.

 A detailed listing of the promotional items should be maintained at all time.
Company’s Comments Noted and will action accordingly.

Report of Statutory Authorities – July 2012 3 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS SECTION 11: INVESTMENT FIJI Investment Fiji is established to promote and facilitate investment and export of Fiji.
Its objectives are to:  promote investment in and development of industries, ventures and enterprise that enhance employment opportunities, increases exports, reduce imports or are otherwise beneficial to the economy of Fiji; assist other persons or bodies in the establishment or expansion of any such activities; undertake product and market development and research either alone or jointly with any other person; act as an agent for the Government on such matters as may be delegated to it; advise on policies that would further the economic development of Fiji; advise the Minister on appropriate administrative machinery to facilitate economic development;       make grants for the purposes related to the discharge of its functions under the Act; and  Generally to do all those things as may be incidental to or consequential upon the exercise of its powers or functions under this Act.
Table of Content SECTION 17: INVESTMENT FIJI .............................................................................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion - 2011 ................................................................................................................................................. 1 11.1 Abridged Income Statement ...................................................................................................................................... 1 11.2 Abridged Statement of Financial Position ................................................................................................................. 2 11.3 PART A – FINANCIAL INFORMATION 11.1 Audit Opinion - 2011 The audit of the financial statements of the Investment Fiji for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
11.2 Abridged Income Statement Year ended 31 December Income Government grant Other income Trade promotion Total income Expenditure Personnel expenses Operating expenses Administrative expenses Depreciation Trade promotion expenses 2011 ($) 2010 ($) 913,043 638,777 244,388 1,796,208 939,455 758,182 210,978 1,908,615 850,323 288,316 205,621 112,217 253,505 985,735 313,218 231,679 125,166 200,947 Report of Statutory Authorities – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS ______________________________________________________________________________ Year ended 31 December Refund of surplus fund Total expenditure Net surplus for the year before prior year adjustments Prior year adjustment Net surplus / (deficit) for the year after prior year adjustments - 1,709,982 86,226 61,967 148,193 2011 ($) 2010 ($) 32,782 1,889,527 19,088 (276,125) (257,037) Investment Fiji recorded a net surplus of $148,193, an increase of $405,230 in 2011, compared to a net deficit of $257,037 in 2010.
The change from net deficit to net surplus in 2011 is mainly attributed to a positive prior year adjustment made in 2011 amounting to $61,967 compared to a negative $276,125 in 2010.

Additionally, the declining personnel expenses resulting from staff resignation and termination amounting to $135,412 also contributed to the net surplus in 2011.
11.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash on hand and at bank Receivables Total Current Assets Non - Current Assets Property, plant and equipment Total Non Current Assets Total Assets Current Liabilities Trade creditors and accruals Other creditors Income received in advance Provision for employee entitlements Deferred Income Total Current Liabilities Non-Current Liabilities Provision for employee entitlement Total Non-Current Liabilities Total Liabilities Net Assets Total Equity 2011 ($) 2010 ($) 606,815 46,038 652,853 326,089 326,089 978,942 99,156 - 11,300 34,234 5,509 150,199 106,091 106,091 256,290 722,652 722,652 556,304 94,653 650,957 379,441 379,441 1,030,398 84,491 134,464 44,556 44,641 15,290 323,442 132,497 132,497 455,939 574,459 574,459 Investment Fiji recorded an increase in net assets by $148,193 or 26% in 2011 compared to 2010.
This is attributed to nil balance of other creditors in 2011 compared to $134,464 in 2010.

Report of Statutory Authorities – July 2012 2 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI SECTION 12: LAND TRANSPORT AUTHORITY LTA is a statutory body established under the Land Transport Act 1998.
The Authority is responsible for administering the provisions of the Act under the administration and policy rule of the Minister responsible for Transport.

The Authority’s specific functions are outlined in section 8 of the Land Transport Act 1998.
The important functions of the Authority as outlined in section 8 of the Act are:     improvement of passenger and goods transport by road, ensuring the standard of road transport passenger services are meeting the requirements of the public; establishing standards for registration and licensing of vehicles and drivers; developing and improving traffic management strategies in conjunction with highway authorities to meet the needs of road users and achieve the objective of road safety; and developing and enforcing policies and strategies to achieve the overall objective of road infrastructure, protection and safety in consultation with Commissioner of Police.
Table of Contents SECTION 12: LAND TRANSPORT AUTHORITY ..................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 12.1 Statement of Comprehensive Income ..................................................................................................................... 2 12.2 12.3 Statement of Financial Position ............................................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Fixed asset register to be properly updated and maintained ................................................................................... 3 12.4 Comprehensive Gain Balance ................................................................................................................................. 4 12.5 Inventory management function to be strengthened ............................................................................................... 4 12.6 Agency Transaction Administrated for the Fiji
 Government .................................................................................... 5 12.7 Post Master Receivables ......................................................................................................................................... 5 12.8 Incorrect VAT Lodgement ........................................................................................................................................ 6 12.9 Review of Journals .................................................................................................................................................. 6 12.10 Annual leave schedule ............................................................................................................................................ 7 12.11 Cashier Shortage Recovery .................................................................................................................................... 7 12.12 Operating Lease Commitments ............................................................................................................................... 8 12.13 Fraud Control strategy ............................................................................................................................................. 8 12.14 Risk Assessments not performed ............................................................................................................................ 9 12.15 Size of the Authority’s Board
 ................................................................................................................................... 9 12.16 Audit Committee .................................................................................................................................................... 10 12.17 PART A – FINANCIAL INFORMATION 12.1 Audit Opinion The audit of the financial statements of the Land Transport Authority for the year ended 31 December 2010 resulted in the issue of a qualified audit report.
The qualification paragraph was:  Included in the financial statements are Property, Plant and Equipment valued at $9,255,146.

The amount of $2,638,660 cannot be substantiated as the Authority was not able to provide a proper reconciliation.

Accordingly, the accuracy and completeness of Property, Plant and Equipment as at 31 December 2010 could not be ascertained.
Report of Statutory Authorities – July 2012 1 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI Without further qualification to the opinion expressed, attention was drawn to the following:  Included in the financial statements was Comprehensive Gain valued at $72,599.

The amount of $72,599 could not be substantiated as the Authority was not able to provide a proper reconciliation.
Accordingly, the accuracy and completeness of the balance for Comprehensive Gain as at 31 December 2010 could not be ascertained.
12.2 Statement of Comprehensive Income Year Ended 31 December 2010 ($) 2009 ($) Revenue Grant Received Total Revenue Expenditure Administration Expenses Operating Expense Other Expenses Total Expenditure Result from Operating Activities Income Tax Expense Loss for the year Other Comprehensive gain/(loss) Total Comprehensive Loss 8,888,889 8,888,889 5,658,476 3,186,645 408,106 9,253,227 (364,338) - (364,338) 72,599 (291,739) 10,666,667 10,666,667 7,268,737 3,701,366 487,743 11,457,846 (791,179) - (791,179) (97,171) (888,350) The Authority recorded a decline in total comprehensive loss of $596,611 or 67% in 2010 compared to 2009.
The decrease in total comprehensive loss was largely due to effective control excised over expenditure.
12.3 Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Receivables Inventories Total Current Assets Non Current Assets Property, plant and equipment Total Non Current Assets Total Assets Current Liabilities Creditors and other accruals Other Provisions Total Current Liabilities 2010 ($) 2009 ($) 1,907,894 946,071 489,088 3,343,053 9,255,146 9,255,146 12,598,199 920,765 361,874 1,282,639 2,636,641 276,280 383,930 3,296,851 10,090,441 10,090,441 13,387,292 1,412,770 367,223 1,779,993 Report of Statutory Authorities – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI _________________________________________________________________________________________________ As at 31 December 2010 ($) 2009 ($) Total Liabilities Net Assets Capital and Reserves Capital Retailed Earning Total Capital and Reserves 1,282,639 11,315,560 1,779,993 11,607,299 1,650,146 9,665,414 11,315,560 1,650,146 9,957,153 11,607,299 Total capital and reserves declined by $291,739 or 2.5% in 2010 compared to 2009 mainly due to decrease in total assets.
PART B – CONTROL ISSUES 12.4 Fixed asset register to be properly updated and maintained The audit noted that the Authority has not conducted a board of survey and updated its fixed assets register.

Further, it was difficult to trace physical assets to the fixed asset register for the following reasons:     The fixed asset register does not include the asset tag numbers even though these are assigned to assets.

The fixed assets register is not updated on the timely manner.
The details for additions to the fixed assets register were not produced for audit verification.

The description of the asset type on the fixed asset register may agree to the physical asset however the serial numbers differed.

The lack of proper update and maintenance of the fixed asset register results in the risk of inaccuracy in the recording of the Authority’s assets.
This also raises the risk that assets may be missing from or incorrectly recorded in the fixed asset register which gives rise to a misstatement in the property, plant and equipment balance as at balance date.

In addition, there is a risk that the depreciation charge on assets may not be accurately recorded in the general ledger as the fixed asset register is not properly maintained.
Recommendations  The Authority should consider setting up a special team to carry out a physical count of fixed assets and ensuring that the relevant details are accurately updated on the fixed asset register.

The asset tags, asset description, serial numbers should be captured accurately on the fixed asset register.

 The fixed asset register should also be reviewed by a senior officer to ensure that any errors or mis postings are identified and rectified in a timely manner.
Report of Statutory Authorities – July 2012 3 _________________________________________________________________________________________________ Management comment OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI Recommendations considered, the management has re-tagged one Finance Officer Position to be responsible of procurement and fixed asset (FA), who will be responsible of all FA management and will spear head the team to carry out the physical count of fixed asset, tagging and updating of FA register.
The finance software will also be upgraded to automatically update the FA register for any procurement of FA.

12.5 Comprehensive Gain Balance The Authority failed to provide substantiated evidence of the amount $72,599 for the comprehensive gain balance included in the Statement of Comprehensive Income.

Such finding increases the risk of retained earnings being misstated at balance date.
Recommendation The Authority should provide proper reconciliation for comprehensive gain balance included into the Statement of Comprehensive Income.

Management comment Recommendation noted, the Authority will ensure that P&L and Balance Sheet are reconciled with TB with proper reconciliations.
12.6 Inventory management function to be strengthened The audit noted a number of issues in respect of the inventory management function which indicates that the process and procedures over inventory management is weak.
Review of the Authority’s inventories revealed the following discrepancies:     The Authority failed to locate the stock sheets of the physical count held for financial year 2010; Review of inventory schedules was not performed on a regular basis; The Authority failed to provide a proper reconciliation on the inventory balance valued at $489,088 as at 31 December 2010; and The procedures over security and safeguarding of inventory items at the store room were not effective leading to risk of pilferages and inventory losses.
In the absences of appropriate process and procedures, there is a risk of theft or misappropriation over the Authority’s inventories.
Recommendations Management should ensure that the following stringent controls are established over the Authority’s inventories:  The inventory listing should be prepared on a monthly basis based on the inventory balance in the inventory register and submitted to a senior office in finance for review; Report of Statutory Authorities – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI _________________________________________________________________________________________________  A count of all inventory items should be undertaken on a monthly basis.
An officer independent of the storeroom should perform the inventory count.

The inventory count records should be reconciled to the inventory listing; and Any variances between the inventory count and the inventory listing should be properly investigated, resolved and reported to management.

 Management comment Recommendation is noted; the Authority will ensure proper procedures are in place for proper controls and recording of inventories on periodical basis.
12.7 Agency Transaction Administrated for the Fiji Government Effective from 2008, the Authority under the Land Transport Authority (Amendment) Promulgation 2007 is responsible for the collection of all licence revenues which are deposited directly into the Government Consolidated Fund.

The Authority is operating a commercial bank account (Account Code 1031) to deposit the revenue received at the Authority’s branch in Taveuni.

As at 31 December 2010, the account had a balance of $212,232.60.
Review of the Authority’s bank reconciliation revealed that as at 31 December 2010, the Authority failed to transfer $212,232.60 into the Government Consolidated Fund.

Such finding indicates that the Authority’s Cash at Bank is overstated at balance date.

Recommendation The Authority should ensure to transfer the money into the Government Consolidated Fund in a timely manner.
Management comment The Authority is now working on the reconciliation of the Account to be transferred to the Government consolidated A/C, however the Authority will ensure that the fund to be transferred on monthly or weekly basis.

12.8 Post Master Receivables Post Fiji Limited acts as an agency of Land Transport Authority whereby the agencies collect revenue on behalf of the Authority where there are no banking services available.
At the end of the month, the Authority issues a debit note to Post Fiji and receipts the revenue into the Government Consolidated Fund Account.

Included in the financial statements is Postmaster receivable totalling ($48,271) and $51,894 for 2010 and 2009 respectively.

The audit noted that the Authority has booked Postmaster as receivables which relates to agency revenue.
Report of Statutory Authorities – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI _________________________________________________________________________________________________ The Authority should have disclosed the receivables into the notes only as the Postmasters are not debtors to the Authority.

Such finding indicates that the Authority’s receivables are under and overstated for 2010 and 2009 respectively.
Recommendation The Authority should make appropriate adjustment to correct the accounts receivable balance and disclose all the receivable relating to agency revenue in the notes to the financial statements.

Management comment The Authority will ensure that appropriate reconciliation and adjustments are properly accounted for and recorded for the Post Masters Receivables, which to be also shown in the notes of FS.
12.9 Incorrect VAT Lodgement The Authority had in its VAT lodgement forms lodged VAT payables on the basis of annual grant being apportioned rather than actual funds received from Government.

Such practice increases the risk of VAT accounts/ lodgements being misstated.

Furthermore, this also increases the risk of legal action against the Authority by Fiji Revenue and Customs Authority.

Recommendation The Authority should prepare a proper reconciliation and make correct VAT lodgements.
Management comment The Authority will ensure that VAT is calculated on actual funds received from Government and proper reconciliation is done to make correct VAT lodgements.

12.10 Review of Journals We were not provided with documentary evidence to attest that the journals prepared in Excel were reviewed by a senior officer.

This increases the risk of data being manipulated as they are spooled from Excel and exported into EPICOR file.

Data not safeguarded appropriately may be easily altered.
Such practise increases the risk of errors and fraud.

Recommendation Report of Statutory Authorities – July 2012 6 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI The Senior Finance Officers should sign off all the journals to ensure accuracy and completeness.

Management Comments The Authority is now prepared journals form to be filled and approved before the posting of data into the GL.
12.11 Annual leave schedule The audit noted that there were differences in the annual leave balances as per annual leave schedule when compared to the individual personnel leave files.

Refer to the table below for details.

Staff Initial RB JS Leave balance as per leave register 88.25 25 Leave balance as per personnel file 81.09 43 Variance 7.16 18 The above finding indicates that valuation for the provision of annual leave could be materially misstated.
In addition, monetary value paid to the employees could be over or understated upon resignation.

Recommendation The Authority should perform substantive overhaul of its annual leave records to ensure that proper records are maintained.
Management Comments The Authority is now conducting a data cleansing and verification exercise in HR department especially on Annual Leave for the HR software , thus will have an up to date and accurate AL data in the HR data base 12.12 Cashier Shortage Recovery Under the Authority’s finance manual, if cashers have shortage in their cash register reconciliations, the cashiers will be required to pay back the amount.
The Authority has recorded $10,242.03 as cashier shortage for financial year 2010 compared to $4,701.18 for 2009.

The audit noted that the Authority has not taken the necessary steps to recover cash shortages from its cashiers.

Such finding indicates that the Authority has not being upholding its finance policies regarding cash shortage.
Report of Statutory Authorities – July 2012 7 _________________________________________________________________________________________________ Recommendation OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI The Authority should put in place effective controls and polices on cash shortages and the recovery of cash shortages.

Management comment The Authority will review its Financial Manual, immediate actions have been taken to recover the shortage from payroll and warning letters have been issued.
12.13 Operating Lease Commitments The Authority has recorded $442,961 as Operating Lease Commitments for financial year 2010 compared to $284,536 for 2009.

The Authority failed to provide details of the Operating Lease Commitments.

Therefore we are unable to substantiate the balance booked into the financial statements.

Such finding increases the risk of commitments being misstated at balance date.
Recommendation The Authority should provide proper reconciliation for Operating Lease Commitments included into the financial statements.

Management comment The Authority will ensure that all the records are up to date and proper reconciliation is done to reflect accurate data is shown in the FS.
12.14 Fraud Control strategy The Authority does not have any risk fraud control strategy in place even though the Authority has signed an agreement with Fiji Independent Commission against Corruption to investigate and control fraud in the organization.

In addition, the Authority does not have an employee awareness program and fraud reporting system in place.

Without a fraud control strategy in place, LTA will fail to address opportunistic fraud scenarios in the organization.
Recommendation The Authority should set up a fraud control strategy.

Report of Statutory Authorities – July 2012 8 _________________________________________________________________________________________________ Management comment OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI The Authority will prepare a fraud risk control strategy together with fraud reporting system and an awareness program covering all functions and operations of the Authority to mitigate risks of fraudulent practises.
12.15 Risk Assessments not performed The Authority has not carried out any risk assessments in its operations.

Without risk assessments, the Authority won’t be able to:  determine internal and external threats; and  determine the vulnerability of the functions of the organization.

Recommendation The Authority should perform risk assessments and formulate a risk register to be used by its internal audit section.
Management Comments No comments provided 12.16 Size of the Authority’s Board The Authority shall consist of 7 members, as follows – 1  a Chairman who is to be a person with knowledge and ability in the fields of management and administration to be appointed by the Minister;  5 other members appointed by the Minister, who in his opinion have experience and expertise in the areas covered by the functions of the Authority or in the engineering, legal, commercial, insurance, business or administration fields; and the Permanent Secretary.
 Audit noted that 3 positions were vacant on the Authority’s boards.

By not having a balanced Board of Directors as required in the above quoted regulation, the Authority’s board will not be able to perform its functions in an effective and efficient manner.

Notable board and management issues currently lacking that also needs to be addressed include Corporate Governance, Internal Audit Charter, Anti-Fraud Strategies and Risk Management.
Recommendation The Authority should consider filling the vacant position of the Board of Director 1 LTA Act 1998 Section 7 (1) Report of Statutory Authorities – July 2012 9 _________________________________________________________________________________________________ Management Comments OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI The Authority will consider filling the vacant positions as recommended.
12.17 Audit Committee The Authority does not have an Audit Committee and an Internal Audit Charter in place.

Benefits of Internal audits as described by the Chartered Institute of Internal Auditors (UK) include:   Internal audit work with Finance on an equal basis to ensure that the business is achieving its objectives, operating in a cost effective way and maximising its return on investments while at the same time managing risks effectively.
If internal audit is proactively looking for ways that business processes can be improved, while at the same time improving the effectiveness of controls, this can have a positive impact on the bottom line.

 All of this work supports the finance director because it is helping to link strategic risks to budgets and to the setting of objectives.

 Assists in achieving their strategic, financial and operational objectives.
 The internal audit inspires confidence in business controls and processes and enhances its influence.

And internal audit’s influence can be instrumental in creating an organisational culture which encourages continuous improvement in the management of risks.

 The nature of those risks is changing more quickly than ever during this challenging economic period.

Internal audit’s role in enabling better risk management strengthens corporate governance.
A well-resourced internal audit function can therefore play a vital role in supporting organisations to achieve their strategic objectives.

Enabling this role requires the right reporting lines, strong internal relationships and the support of a responsive board.2 Recommendation The Authority should consider forming an Audit Committee and establish an Internal Audit Charter.

Management Comments The Authority will consider forming an Audit Committee as recommended.
2 Chartered Institute of Internal Auditors (UK) News Release 18 May 2010 “The advantage of Internal Audit” Report of Statutory Authorities – July 2012 10