Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697794561627.pdf (Fiji)
EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Volume 1 Audit Report on Whole of Government Financial Statements and Annual Appropriation Statement 2015 PARLIAMENT OF FIJI PARLIAMENTARY PAPER NO.

58 OF 2017 EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Volume 1 Audit Report on Whole of Government Financial Statements and Annual Appropriation Statement 2015 PARLIAMENTARY PAPER NO.
58 OF 2017 PARLIAMENT OF FIJI Foreword The 2015 accounts of Whole of Government of Republic of Fiji together with 37 Ministries and Departments were audited during 2015, with their audit reports and relevant findings on them reported in accordance with section 152 of 2013 Constitution of Republic of Fiji.

The audit of Whole of Government concludes with an unqualified audit report.
The accounts have been faithfully and properly kept in accordance with section 152(2) of the Constitution, section 6 of the Audit Act and sections 46 and 47 of the Financial Management Act 2004.

However, emphasis has been made on the need to include accounts of controlled entities with those of government ministries and departments.
In addition, variances between bank reconciliation statements and their respective general ledger accounts for Trust Fund, Trading and Manufacturing Activities, Overseas Missions bank accounts and Drawings accounts, need to be rectified.

The financial statements of the Republic of Fiji have been presented in accordance with the Financial Management Act 2004 with direct reference to the budget estimates of Government.
Presentation and certain disclosures have also been made in accordance with cash-basis International Public Sector Accounting Standards (IPSAS).
The audit reports comprise off four volumes which have been presented in accordance with the budget sectors as follows: Volume 1 Audit Report on the Accounts and Finance of Government 2 3 4 Audit Report on the General Administration Sector Audit Report on the Social Services Sector Audit Report on the Economic Services and Infrastructure Sector Volume 1 of the report should be read in conjunction with the Whole of Government financial statements, the appropriation statement of the Republic of Fiji and my opinion expressed on them for the year ended 31 December 2015.
Audit Opinion on respective Ministry/Department (Agency) Financial Statements A total of 37 Agency Financial Statements were prepared in accordance with the Financial Management Act 2004 and Finance Instructions 2010.
Of these, unqualified audit reports were issued on 20 financial statements while audit reports on 17 financial statements were qualified on the following grounds:  Variances were noted between reconciliations prepared by Ministries and Departments and FMIS Ledger maintained by Ministry of Finance;  Board of Survey was not carried out;  Financial transactions were not recorded in the FMIS Ledger;  Amounts reflected in Trust and Trading Manufacturing Accounts were not fully supported;  Funds in approved budget estimates for 2015 were used for trust account expenditures; and  Independent stock take was not done.
Page 1 of 2 Expenditure planning Ministries and Departments concentrated spending of their budgets towards the end of 2015 (December) hence indicating lack of proper financial planning during the year.

This contributed to significant unpresented cheque balance at the end of the year placing undue strain on government cash flows at the beginning of 2016.

Public debt At the end of 2015, the percentage of national debt relative to GDP was 46%, a decrease of 2% when compared to 48% 2014.
In addition, percentage growth in Government debt was less than the percentage growth in the economy indicating a slight decrease in debt burden of individuals in 2015.

The Government needs to sustain its existing resources to fund its current programs, commence new projects as well as meet existing creditor obligations in order to maintain the level of borrowings at a sustainable level.
Root Cause Analysis Root cause analysis is defined as the identification of why an issue (error, problem, missed opportunity or instance of non-compliance) occurred which is reported as audit findings in audit reports.
Analysis of audit findings reported in Volumes 1 – 4 of the 2015 Audit Reports indicate the following as key causes to the issues highlighted:  People Inability to prepare reconciliations, investigate and rectify variances o o Supervision of work of subordinates o Inability to manage capital projects o Procurement processes not followed o Payment procedures not followed o Diversion of funds o Conflict of interest not managed o Records not updated  Processes o Delay in approval of capital projects o Procedures for debt recovery not effective o Policies need to be formulated in some areas  Systems o Automated inventory management systems not used Page 2 of 2 CONTENTS Volume 1: Audit Report on the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: Part 2: Volume 2: 1.
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Whole of Government Financial Statements and Annual Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2015 Report of the Whole of Government Financial Statements and Annual Appropriation Statement Office of the President Office of the Prime Minister Office of the Attorney General Ministry of Finance Ministry of i-Taukei Affairs Ministry of Immigration, National Security and Defence Ministry of Employment, Productivity and Industrial Relations Ministry of Foreign Affairs Office of the Auditor General Elections Office Judiciary Parliament Independent Commissions Office of the Director of Public Prosecutions Ministry of Justice Fiji Correction Services Ministry of Communication Department of Information Technology and Computing Services Public Service Commission Ministry of Rural and Maritime Development and National Disaster Management Republic of Fiji Military Forces Fiji Police Force Ministry of Education, Heritage and Arts Ministry of Health and Medical Services Department of Housing Ministry of Women, Children and Poverty Alleviation Ministry of Youth and Sports Higher Education Institutions Ministry of Agriculture Ministry of Fisheries and Forests Ministry of Lands and Mineral Resources Ministry of Industry, Trade and Tourism Ministry of Sugar Ministry of Public Enterprise Ministry of Local Government, Housing and Environment Ministry of Infrastructure and Transport Peacekeeping Missions VOLUME 1 Volume 1: Audit Report on the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: Part 2: Whole of Government Financial Statements and Annual Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2015 Report of the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: and Whole of Government Financial Annual Statements Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2015 13th March 13 13th March h t 3 1 Part 2: on the Whole Report of Government Financial Statements and
 Appropriation Statement Annual REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table of Contents 1.0 FINANCIAL POSITION OF GOVERNMENT .................................................................................................................... 2 1.1 Financial Performance 2015 ............................................................................................................................................. 2 1.2 2015 Appropriation Act ...................................................................................................................................................... 3 1.3 Operating Results .............................................................................................................................................................. 3 1.4 Financing of Operating Expenditure .................................................................................................................................. 3 1.5 Treasury Bills ..................................................................................................................................................................... 4 2.0 CASH AND CASH EQUIVALENTS ................................................................................................................................. 5 2.1 Decrease in Unpresented Cheques .................................................................................................................................. 6 2.2 Drawings Account Variance .............................................................................................................................................. 8 2.3 Anomalies in Cash at Bank Balance ............................................................................................................................... 10 2.4 Overdrawn Bank Balances
 .............................................................................................................................................. 12 Impact of Error and Omission on Cash at Bank Balance ................................................................................................ 12 2.5 3.0 INVESTMENTS ............................................................................................................................................................... 13 3.1 Composition of Government Investments ....................................................................................................................... 14 3.2 Return on Investments .................................................................................................................................................... 15 3.3 Analysis of Dividends and Investments ........................................................................................................................... 16 3.4 Dividends Remitted per Entity ......................................................................................................................................... 16 Investment records not updated ...................................................................................................................................... 18 3.5 4.0 TRUST FUND ACCOUNT .............................................................................................................................................. 19 4.1 Main Trust Fund Account ................................................................................................................................................ 19 4.2 Operating Trust Fund Account ........................................................................................................................................ 21 5.0 REVENUE
21 5.0 REVENUE ....................................................................................................................................................................... 21 5.1 Anomalies in the calculation of receipts in Statement of Cash Flows ............................................................................. 22 5.2 Arrears of Revenue ......................................................................................................................................................... 22 5.2.1 Analysis of Arrears of Revenue for 2015 ......................................................................................................... 23 5.2.2 Significant Balances Owed by Ministries and Departments ............................................................................ 23 6.0 EXPENDITURE ............................................................................................................................................................... 25 6.1 Overview of 2015 Government’s Budgeted and Actual Expenditures ............................................................................. 25 6.2 Overall 2015 Budget Utilisation by Standard Expenditure Groups .................................................................................. 26 6.3 Government Expenditures in the Last 5 years ................................................................................................................ 28 6.4 Budget Savings ............................................................................................................................................................... 29 6.5 Over-Expenditure by expenditure group at Ministry level ................................................................................................ 30 6.6 Misstatement of Expenditure due to non-clearance of Remittance Between Chests (RBC) accounts and Accountable
 ...................................................................................................................................................................... 32 6.7 Budget Loading ............................................................................................................................................................... 32 Advance 7.0 BORROWING FUND ACCOUNT ................................................................................................................................... 33 7.1 Trends in Government Borrowing by Category ............................................................................................................... 34 7.2 Borrowings over the 15 Year Period ............................................................................................................................... 36 7.3 Loan Repayments ........................................................................................................................................................... 37 7.4 Domestic Bonds .............................................................................................................................................................. 38 7.5 Borrowings & Interest Payments ..................................................................................................................................... 39 7.6 Overseas Borrowings ...................................................................................................................................................... 40 7.6.1 Yearly Overseas Borrowings ........................................................................................................................... 40 7.6.2 Overseas Borrowings Outstanding & Interest Paid ......................................................................................... 41 7.6.3 Revaluation of Overseas Borrowings
 .............................................................................................................. 42 7.7 Treasury Bills ................................................................................................................................................................... 43 7.7.1 Treasury Bills Over a 15-year Period .............................................................................................................. 44 7.7.2 Treasury Bills Management ............................................................................................................................. 45 7.8 Ways and Means ............................................................................................................................................................. 46 Whole of Government Financial Statements and Annual Appropriation Statement 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 7.9 Financial Flexibility .......................................................................................................................................................... 47 7.10 Financial Vulnerability ..................................................................................................................................................... 48 7.11 Financial Sustainability .................................................................................................................................................... 54 8.0 LENDING FUND ACCOUNT .......................................................................................................................................... 55 8.1 Term Loans Receivable .................................................................................................................................................. 55 9.0 REVOLVING FUND ACCOUNT
 ..................................................................................................................................... 56 9.1 Accounts Receivable ....................................................................................................................................................... 56 9.2 Accounts Receivables Write offs for 2016 ....................................................................................................................... 57 9.3 Accounts Payable ............................................................................................................................................................ 58 9.4 Unsubstantiated Accounts ............................................................................................................................................... 59 10.0 CONTINGENT LIABILITIES ........................................................................................................................................... 60 10.1 Contingent Liabilities for Government ............................................................................................................................. 60 11.0 INVENTORY ................................................................................................................................................................... 62 11.1 Non Disclosures of Accounting Policies adopted in Valuing Inventory ........................................................................... 62 11.2 Valuation of Inventories ................................................................................................................................................... 63 11.3 Unsubstantiated Inventory Balance and Ineffective Inventory Management System ..................................................... 63 12.0 PREPARATION OF FINANCIAL STATEMENTS .......................................................................................................... 64 12.1 Consolidation of
 Accounts of Controlled Entities ............................................................................................................. 65 12.2 Timeliness of Reports ...................................................................................................................................................... 65 12.3 General Ledger Accounts Write Offs ............................................................................................................................... 66 APPENDIX 1: Appropriation Statement 2015 ................................................................................................................... 68 APPENDIX 2: Analysis of Arrears of Revenue as at 31/12/2015 ..................................................................................... 70 APPENDIX 3: Anomalies in Government Operating and Capital Expenditures (Summary) ........................................ 71 APPENDIX 4: Accountable Advance Balance by Ministry/Department ......................................................................... 78 1.0 FINANCIAL POSITION OF GOVERNMENT The financial statements for the Government of the Republic of Fiji have been drawn up in accordance with the Cash-basis IPSAS standard and the provisions of the Financial Management Act 2004.
1.1 Financial Performance 2015 The performance of the Fiji Government for the year 2015 is provided in Table 1.1.
Table 1.1: Government Performance in 2015 Item Original Budget 2015 Revised Budget 2015 Actual Results 2015 Variance1 2015 Variance REVENUE Operating Receipts Investing Receipts TOTAL REVENUE ($’000) ($’000) ($’000) ($’000) (%) 2,571,412.3 551,026.1 3,122,438.4 2,571,412.3 551,026.1 3,122,438.4 2,542,813.7 250,701.7 2,793,515.4 (28,598.6) (300,324.4) (271,725.8) (1) (55) (9) 1Variance = Actual Results less Revised Budget Whole of Government Financial Statements and Annual Appropriation Statement 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Item Original Budget 2015 Revised Budget 2015 Actual Results 2015 Variance1 2015 Variance ($’000) ($’000) ($’000) ($’000) (%) EXPENDITURE Operating Capital Value Added Tax TOTAL EXPENDITURE Net (Deficit)/Surplus 1,938,856.2 1,321,877.4 75,558.5 3,336,292.1 (213,853.7) Debt Repayment Gross Surplus/(Deficit) Net (Deficit)/Surplus As A Percent of GDP Nominal/Provisional GDP 149,668.3 (363,522) (2.5%) 8,668,818.0[n] 1,957,387.7 1,320,192.8 74,298.1 3,351,878.6 (229,440.2) 678,025.5 (907,465.7) (2.6%) 8,668,818[n] 1,874,199.9 1,045,503.5 55,636.4 2,975,339.8 (181,824.4) 677,261.7 (859,086.1) (2%) 9,210,800[p] 83,187.8 274,689.3 18,661.7 376,538.8 47,615.8 763.8 48,380 8.8% 541,982 (4) (21) (25) (11) (21) (0.1) (5) Source: Schedule 2 of the Financial Statement of the Government of Fiji Financial Statements Original Budget 2015 is sourced from the 2015 Budget Book.
[n]: Nominal GDP Figure [Source: Republic of Fiji Budget Estimate 2015] [p]: GDP Provisional Figure, Source: FBoS Release No: 87, 2016 The actual gross deficit for the year totalled $859.1 million compared to that budgeted of $907.5 million.

The decreased budget deficit was due to due to savings in capital expenditure totalling $274.7 million.

The loans raised in 2015 to finance the budget deficit (Table 1.3) totalled $731.6 million.
In addition, treasury bills were also raised in 2015 to meet short term financing shortfalls.

These are discussed in Section 1.5 and Table 1.3.

1.2 2015 Appropriation Act There were thirty eight appropriation heads in the 2015 budget.2 The expenditure under the various Ministries/Departments and their variances are detailed in Appendix 1.

Against a revised budget of $4,029,904,149, the government spent $3,652,601,536 resulting in a budget saving of $377,302,613 or 9%.
An appropriation of $73.3 million for 2015 was provided under the Lending Fund Account.

1.3 Operating Results A net deficit totalling $181.8 million was recorded in 2015 as shown in Table 1.1 compared to the forecasted net deficit of $229.4 million; an improvement by $47.6 million (21%).

The net deficit for 2015 as a percentage of GDP was 2%, a reduction of 0.6% from the budgeted net deficit of 2.6%.
1.4 Financing of Operating Expenditure It is generally accepted that capital works should be funded by loans.

The funding of operating expenditure by loan would be a concern if effort was not taken to reduce operating expenditure.

Figure 1.1 and Table 1.2 shows the percentage of loan that was used in meeting government’s operating expenditure over the last 10 years.
2 Schedule 1 of the 2015 Appropriation Act 2014 Whole of Government Financial Statements and Annual Appropriation Statement 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 1.1 Operating Expenditure Financed from Loans 60% 50% 40% 30% e g a t n e c r e P 20% 10% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Table 1.2: Operating Expenditure Financed from Loans Details 2006 ($’000) 2007 ($’000) 2008 ($’000) 2009 ($’000) 2010 (‘000) 2011 (‘000) 2012 ($000) 2013 ($000) 2014 ($000) 2015 (000) & Capital Total Loans (Domestic Overseas) Less Expenditures * Balance Operating Expenditures % Loans Utilized for Operating Expenditures for 417,810 334,937 345,649 405,390 462,965 693,707 329,655 272,745 353,647 801,792 212,642 206,933 212,748 335,014 339,654 503,910 534,842 586,349 930,115 1,045,504 205,168 128,004 132,901 70,376 123,311 189,797 --- 49% 38% 38% 17% 27% 27% --- --- --- --- --- --- --- From 2012 to 2015, loans funds were used solely for capital expenditures.
1.5 Treasury Bills Domestic loans were raised in accordance with the approved budgets while the excess borrowings were in the form of Treasury Bills.

The outstanding Treasury bills at the beginning of the year totalled $128.6 million.

Treasury Bills raised during the year amounted to $336.0 million and $143.3 million was outstanding as at 31/12/15.

Table 1.3 details the loans raised by government to finance its budget deficits over the last 10 years.
Whole of Government Financial Statements and Annual Appropriation Statement 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 1.3: Original Budget Deficit vs. Loans Raised Details Gross Deficit Domestic Loans Overseas Loans Treasury Bills Loans Deficit % Excessive Borrowings % 2006 ($) 2007 ($) 2008 ($) 2009 ($) 2010 ($) 2011 ($) 2012 ($) 2013 ($) 2014 ($) 2015 ($) (196%) (118%) (234%) (37%) (231%) (251%) (88%) (3%) (71%) (213%) The 2015 budget funding programme3 appropriated $363.5 million (equal to the forecasted gross deficit) in loan funds to finance the gross deficit.
However, in 2015 a total of $1,137.8 million was raised in loan funds resulting in borrowing of $230.3 million more than the budgeted amount.

The Gross Deficit in 2015 was revised to $907,465,749 to accommodate the borrowing to pay the global bond that was not included in the original budget.

Furthermore, the budgeted gross deficit was $363.5 million while the actual gross deficit was $859.1 million; an increase by $495.6 million for 2015.
2.0 CASH AND CASH EQUIVALENTS A bank account for public money, other money or trust money must only be established with the approval of the Chief Accountant, who must inform the bank of the agency officers authorised to operate on it.

All agency bank accounts must be kept in the name of the agency or the official title of a unit within the agency.4 The Cash and cash equivalent balance decreased from $224,560,999 in 2014 to $224,036,754 in 2015.
Table 2.1 shows changes including decrease in overseas cash by 18%.

In addition, there was an increase in Trust Fund bank balances and Trading & Manufacturing Account bank balances by 18% and 14%, respectively while net domestic cash increased by 187%.
Table 2.1: Cash at Bank Balance as at 31 December 2015 Account Overseas Agencies Domestic Account Trust Fund Account Trading & Manufacturing Account (TMA) Unpresented Cheques Net Cash 2015 Balances ($) 47,221,824 113,160,579 107,297,355 11,253,488 (54,896,492) 224,036,754 2014 Balances ($) 190,762,569 71,312,510 90,552,945 9,909,833 (137,976,858) 224,560,999 Variance % Change ($) (143,540,745) 41,848,069 16,744,410 1,343,655 83,080,366 524,245 (75) 59 18 14 (60) (0.2) 3 2015 Budget Estimate - Page 8.
4 Finance Instructions 2010 – Part 6: Assets – Division 1 – Cash Management – 32(1) & (4) Whole of Government Financial Statements and Annual Appropriation Statement 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ A graphical presentation of the account balances for the past twelve years is provided in Figure 2.1. )
$ ( t n u o m A 300 250 200 150 100 50 0 -50 -100 Figure 2.1: Cash and cash equivalent balances : 2005 - 2015 Overseas Agencies Domestic Account Trust Fund Account TMA Bank 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Cash balances in Domestic and Trust Fund Accounts make up majority of the government’s cash holdings at year end.
2.1 Decrease in Unpresented Cheques The drawings accounts balances (credits) for Ministries and Departments represent the total value of cheques that were issued but were not presented to banks as at 31/12/15.

A review of the unpresented cheques balances over the past 10 years provided in Table 2.2 and Figure 2.2 indicate that it accounted for a significant portion of the domestic cash holdings of Government as at 31/12/15.
However, significant decreases were noted in unpresented cheque balances in 2015 compared to 2014.
Table 2.2: Unpresented Cheques Year Unpresented Cheques Cash at Bank ($) ($) % of Unpresented Cheques Against Cash at Bank 92 18 63 28 51 21 39 53 27 76 Domestic Cash Holding ($) 50,071,389* 70,524,396* 56,774,511* 65,865,376 50,840,686 82,425,719 89,553,394 106,660,817* 126,382,089* 71,312,510 % of Unpresented Cheques against Domestic 104 86 130 90 192 59 57 101 60 193 Whole of Government Financial Statements and Annual Appropriation Statement 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Year Unpresented Cheques Cash at Bank ($) ($) 2015 * Includes the cash balance of Trust Fund Account 54,896,492 278,933,246 % of Unpresented Cheques Against Cash at Bank 20 Domestic Cash Holding % of Unpresented Cheques against Domestic ($) 113,160,579 49 Figure 2.2: Percentage of Unpresented Cheques against Cash at Bank and Domestic Cash Holdings 250% 200% 150% 100% 50% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year % of Unpresented… % of Unpresented Cheques against Domestic A decrease of $83,080,366 or 60% was noted in unpresented cheque balance for 2015 compared to 2014.
However, unpresented cheque balance for Ministry of Infrastructure and Transport accounted for 70% of the total unpresented cheque balance as at 31/12/15 which is significant.

Refer to Table 2.3 for details.
Table 2.3 Ministries/Department with significant unpresented cheque balances Ministry/Department Amount % of ($) Total Office of the President 1,059,236 Office of the Prime Minister 860,864 Treasury Rural Maritime Education 4,400,164 1,011,361 4,027,440 Infrastructure and Transport 38,332,588 Others Total 5,204,658 54,896,311 100 2 2 8 2 7 70 9 Even though monthly spending for SEG 5 for all ministries and department in the first eleven months of the year averaged around $6.9 million, the surge to about $14 million in December may imply the rush to utilise unspent budget allocations.
Whole of Government Financial Statements and Annual Appropriation Statement 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 2.4: Monthly Purchases for SEG 5 at Whole of Government level.
Period 01 02 03 04 05 06 07 08 09 10 11 12 Grand Total Amount ($) 5,471,100 6,412,925 7,495,111 6,529,933 7,985,609 7,963,439 6,568,474 5,395,827 7,296,772 7,066,336 7,268,558 13,995,020 89,449,104 The large unpresented cheques balances indicated that spending for some Ministries and Departments is concentrated towards the end of the year which will affect the cash flow for the initial months in the following year.
Recommendations  Ministries/Departments should be encouraged to plan their expenditures well in order to avoid the accumulation of unpresented cheques at year end.

 The Ministry should monitor end of year purchases to ensure that bulk spending at year end is avoided.

Explanations and justification for large spending should be obtained from Accounting Heads.
Ministry’s Comments The MoE always stressed the importance of timely presentation and clearance of cheques through closing of accounts circular that are issued during the last quarter of every year.
2.2 Drawings Account Variance The Accounting Heads are responsible for submitting their monthly drawings reconciliation statements within the stipulated time frame to the Ministry of Finance.5 The Accounting Head must verify balances in the bank reconciliation to the cashbook, bank statements, unpresented cheque list and the previous month’s bank reconciliation before certifying it.6 5 Ministry of Finance, Finance Manual Section 17.3.1 6 Ministry of Finance, Pro-forma Finance Manual 2011 Section 7.4.11 Whole of Government Financial Statements and Annual Appropriation Statement 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The following anomalies were noted:  At the end of 2015, variance exists between departments’ drawings reconciliations and general ledger balance for some ministries and departments.
No proper explanation or any adjustments was provided by ministries/departments for the variance noted.

Table 2.5 highlight ministries and departments that had variances between their Drawings Accounts reconciliation and the Ministry of Finance General Ledger balances as at 31/12/15.
Table 2.5: Variance of Ministries/Department Drawings Account and FMIS General Ledger Ministry / Department Reconciliation Immigration Youths & Sports Fisheries & Forests Sugar Meteorological Services Transport Energy Water & Sewerage Total Balance ($) 13,520 81,151 543,371 582,627 795,256 91,682 1,717,090 553,118 4,377,815 General Ledger Balance ($) 12,912 80,524 327,338 572,236 728,884 90,710 1,714,838 553,079 4,080,521 Difference ($) General Ledger Overstated /Understated 608 Understated 627 216,033 10,391 66,372 972 2,252 39 297,294 Understated In all cases, the General Ledger balance was understated which totalled $297,294 as at 31/12/15.
 Included in the unpresented cheque listings, are the stale cheques and Electronic Fund Transfer (EFT) payments.

Refer to Table 2.6 below for details.

Table 2.6: EFT payments included in the unpresented cheque listings.

Ministry / Department Fisheries & Forestry Unpresented Cheques ($) 543,371 EFT / Stale Cheque Balance ($) 57,322 Percentage (%) 11 Furthermore, Table 2.7 highlights the Ministries and Departments that did not carry out the Board of Survey (BOS) for the unpresented cheques as at 31/12/15.
Table 2.7 Details of Ministries/Department that did not carry out the BOS Ministry/Department Director of Public Prosecution Justice Education Total Reconciliation Balance ($) 62,768 269,090 4,027,440 4,359,298 The findings indicate the lack of supervision and monitoring by senior officers.

As a result, audit could not ascertain the correctness of total Unpresented Cheques amounting to $54,896,492 as at 31/12/15.
Whole of Government Financial Statements and Annual Appropriation Statement 9 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Recommendations The respective Ministries/Department should ensure that:  Ministry of Finance and the individual ministries and departments should investigate and rectify the total variance of $297,294 as at 31/12/15 so that correct balances are reflected at year end.
 Ministry of Finance should closely monitor month end drawings reconciliation and ensure that agencies appropriately address errors and discrepancies in their monthly reconciliations before the next reconciliations are due.

 Board of Survey of the Unpresented Cheques is carried out at the end of the year.

Ministry’s Comments Issue on Drawings Account variance is noted.
Some of the Ministries especially Fisheries and Forest were not able to regularise their charges due to lack of budgetary provisions for 2015, hence the variance in their Drawings account reconciliations.

Comments on non-performance of BoS exercise on the various Agencies are noted.

However, the Ministry of Economy will be reviewing the need to continue with the BoS exercise now that the payment process has been automated via the FMIS.
The BoS exercise was aimed to monitor the issuance of cheques and to ensure that no manual cheques are issued after the closing date.

With the FMIS in place, this is no longer a requirement as the system keeps proper periodic control of transactions that are being processed; payments done after the closing date will be processed accordingly under the new period budget.

2.3 Anomalies in Cash at Bank Balance All bank accounts shall be reconciled monthly.
The bank reconciliation shall list the outstanding cheques and other reconciling items and be signed and dated by the responsible officer.7 The following anomalies were noted from review of the domestic and overseas cash balances:  Variances were noted between the bank reconciliation and FMIS general ledger.

The general ledger has been overstated by a sum of $1,619,790 as at 31/12/15.

Refer to Table 2.8 for details.


Table 2.8: Details of variance between Bank Reconciliation and the FMIS General Ledger Allocation Missions 1-08103-80102-510106 1-08103-80101-510107 1-08103-81001-510202 1-08103-80501-510401 1-08103-80701-510502 1-08103-80201-510504 FIJI CONSULATE GENERAL SYDNEY FIJI HIGH COMM.

CANBERRA FIJI HIGH COMM.
LONDON FIJI EMBASSY TOKYO DOM CASH FIJI HIGH COM WELLINGTON FIJI HIGH COMMISSION Bank Reconciliation Balance ($) 666,924 FMIS Balance Variance GL Overstated/ Understated ($) 758,370 ($) 91,446 Overstated 196,208 203,715 7,507 39,461 769,891 60,371 1,102,869 20,910 332,978 296,097 307,103 11,006 10,192 143,804 133,612 7 Finance Instructions 2010 Section 32.6 Whole of Government Financial Statements and Annual Appropriation Statement 10 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Allocation Missions BEIJING FIJI MISSION BRUSSELS FIJI HIGH COMMISSION UN 1-08103-80301-510601 1-08103-81101-510801 1-08103-81102-510802 WASHINGTON 1-08103-80407-510808 FIJI HIGH COMMISSION GENEVA FIJI EMBASSY ABU DHABI FIJI EMBASY KOREA BANK IN KULAR LUMPUR CLOSING BALANCE FOR PNG FHC NEW DELHI FIJI EMBASY INDONESIA FIJI EMBASY BRAZIL FIJI EMBASY SOUTH AFRICA 1-08103-80405-510900 1-08103-80406-510901 1-08103-80601-510901 1-08103-80801-510902 1-08103-80401-510903 1-08103-80402-510905 1-08103-80403-510905 1-08103-80404-510905 Total Bank Reconciliation Balance ($) FMIS Balance Variance ($) ($) GL Overstated/ Understated 233,312 (173,885) 193,541 309,697 479,682 122,027 374,546 318,919 27375 150,080 540,857 285,458 225,038 (10,804) 198,279 402,883 155,493 170,255 1,804,688 (47,798) 24,094 174,652 505,381 281,779 (8,274) Understated 163,081 Overstated 4,738 93,186 (324,189) Understated 48,228 Overstated 1,430,142 (366,717) Understated (3,281) 24,572 Overstated (35,476) Understated (3,679) 4,840,382 6,460,172 1,619,790 Overstated  A sum of $600,331 in the scholarship recovery bank account was still reflected in the Ministry of iTaukei Affairs general ledger as at 31/12/15 despite the transfer of the administration of scholarships to the TSLB in 2014.
 Variances totalling $1,627,016 were noted between the TMA Bank Reconciliation and FMIS general ledger as at 31/12/15.

Refer to Table 2.9 for details.


Table 2.9: Variance between TMA Bank Reconciliation and the FMIS General Ledger (GL) Ministry Ministry of Agriculture Government Printing Fisheries and Forests Infrastructure and Transport Remarks Variance ($) 263,038 GL understated 99,551 GL understated 20,320 GL Overstated 1,244,107 GL Overstated 1,627,016  Variances totalling $1,351,354 were also noted between the Trust Bank Reconciliation and FMIS general ledger.

Refer to Table 2.10 for details.


Table 2.10: Variance between Trust Bank Reconciliation and the FMIS General Ledger (GL) Ministry Fisheries and Forests Ministry of Agriculture Judiciary Remarks Variance ($) 113,393 GL understated 511,584 GL overstated 726,377 GL understated 1,351,354  Furthermore, two Trust cash accounts with a total balance of $1,027,504 were not recorded in the FMIS general ledger.
Whole of Government Financial Statements and Annual Appropriation Statement 11 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 2.11: Trust Cash not reflected in the general ledger Ministry Ministry of Justice Public Service Commission Variance ($) 836,282 191,222 1,027,504 Recommendations  The responsible Ministries/Departments should strictly comply with section 32(6) of Finance Instructions 2010 which requires that all bank accounts must be reconciled on a monthly basis.
Ministry’s Comments Comments noted.

FMIS is currently working with these Ministries in resolving anomalies in their various cash at bank accounts.

Issue should be resolved for financial year ending Jan-December 2016.
2.4 Overdrawn Bank Balances Officers operating official bank accounts shall not allow such accounts to be overdrawn and may be liable for surcharge in respect of any bank charges arising from the overdrawn accounts.8 Audit noted there were overdrawn general ledger balances totalling $329,311 as at 31/12/15 for which satisfactory explanations were not provided during audit.

Refer to Table 2.12 for details.

Table 2.12 Details of overdrawn balances Cash GL Account No.
Ministry Overseas 1-08103-81101-510801 Foreign Affairs 1-08103-80801-510902 Foreign Affairs 9-22101-22002-520401 Health Trust Total Amount ($) (10,804) (47,798) (270,709) (329,311) Recommendation Overdrawn bank accounts should be investigated and necessary corrective measures are taken.

Ministry’s Comments The Ministry of Economy had twice undertaken write off of MoFA bank account imbalances but we felt that the root cause for recurring errors is the process itself.
There is a need to revamp MoFA accounting processes especially for transactions relating to foreign missions to avoid such issues from happening in future.
2.5 Impact of Error and Omission on Cash at Bank Balance The Cash at Bank balance of $224,036,754 as at 31/12/15 has been misstated in view of the following errors and omissions: 8 Finance Instructions 2010(5) Whole of Government Financial Statements and Annual Appropriation Statement 12 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 2.13 Errors and Omissions in Statement Of Cash At Bank Errors and Omissions Amount ($) 297,295 Variance in Drawings Account Ending Balance 57,322 EFT payments included in unpresented cheque listings.
1,619,790 Variance between Bank Reconciliation and the FMIS General Ledger 1,627,016 Variance between TMA Bank Reconciliation and the FMIS General Ledger 1,351,354 Variance between Trust Bank Reconciliation and the FMIS General Ledger Overdrawn Balances 329,311 Trust Cash maintained by the Ministry of Justice not recorded in FMIS general ledger.
1,027,504 6,309,592 Total Errors and Omissions The impact on Cash at Bank of the errors and omissions totalling $6,309,590 or 2.8% of the total cash at bank balance in the 2015 accounts is substantial and reflects the existence of weak internal controls in cash management.

Recommendations  Ministry of Finance in consultation with Ministries/Departments should ensure that bank balances are reconciled.

 The errors and omissions highlighted above should be investigated and rectified.
Ministry’s Comments The Ministry of Economy had twice undertaken write off of MoFA bank account imbalances but we felt that the root cause for recurring errors is the process itself.

There is a need to revamp MoFA accounting processes especially for transactions relating to foreign missions to avoid such issues from happening in future.
3.0 INVESTMENTS Section 55(1) (b) of the Financial Management Act 2004 empowers the Minister to invest public money (and other money within the meaning of the Act) on deposit with a Bank; in securities issued by a statutory authority; by way of advances authorized by an Act or by resolution of the House of Representatives.

Government shares held in 24 separate entities were valued at $456,439,8929 as at 31/12/15; a decrease of $92,448,913 or 17% compared to 2014.
Government investment for the last five years is shown in Figure 3.1 below.
9 excludes Investments in TMA balance Whole of Government Financial Statements and Annual Appropriation Statement 13 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 3.1 and Figure 3.1: Total Government Investments: 2011 – 2015 Year 2011 2012 2013 2014 2015 Total Investments ($) 438,907,122 426,197,586 495,975,041 548,888,805 456,439,892 ) $ ( s n o i l l i M 600 500 400 300 200 100 0 Figure 3.1: Total Investments 2011-2015 Total Investments ($) 2011 2012 2013 Years 2014 2015 The decrease in government investments is due to the sale of government shares in Fiji Ports Corporation Limited and Amalgamated Telecom Holdings (ATH).
3.1 Composition of Government Investments The composition of Government Investments for 2015 is shown in the Figure 3.2 below: Semi Commercial (Agro based) 3% Figure 3.2: Composition By Investment Type Dormant Companies (in Liquidation) 1% Fully Commercial Company (Non- Profitable) 21% Fully Commercial Company (Profitable) 75% The major component of Government investments as at 31/12/15 consists of profitable fully commercial companies totalling $338,706,395 or 75% of total investments.
Fully commercial companies that were not profitable accounted for $97,436,954 or 21% with semi-commercial (agro-based) accounted for $15,814,933 or 3% whist the remaining 1% or $4,481,610 made up of government investments in companies in liquidation.

Government Investments in the Infrastructure sector entities comprises 47% of the total investments totalling $213,501,328.
Investments in the Economic Services sector entities make up 52% or $235,582,907 whilst the remaining 1% or $7,355,657 comprises of governments investments in the Social Services sector entities.

Refer to Figure 3.3 below.


Whole of Government Financial Statements and Annual Appropriation Statement 14 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 3.3: Composition of Investment by Sector Infrastructure Service Entities 47% Social Service Entities 1% Economic Service Entities 52% 3.2 Return on Investments Return on investment (ROI) is a performance measure used to evaluate the efficiency of investment.
It is a ratio that calculates the profits of an investment as a percentage of the original cost.

An initial measure that corporatized entities are operating as successful businesses is 10% after tax return on shareholders’ funds.
Once the expectations of annual returns are established, the 10% baseline should be revised based on corporate plan targets.10 Our analysis of governments return on investments indicates that the overall average rate of return on investment increased to 5% in 2014 and again to 7% in 2015.

Over the five-year period, an overall average rate of return on investments of 3.6% has been recorded with the highest overall average of 7% attained in 2015.
Collectively, the 10% baseline as required by the 2003 Corporate Governance Policy Framework has not been achieved.

Refer to Table 3.2 and Figure 3.4 which outlines Governments return on capital over the past five years from its shareholding with Government Commercial Companies and Commercial Statutory Authorities.
Table 3.2 and Figure 3.4: Return on Investments 2011 – 2015 Year 2011 2012 2013 2014 2015 Total Government Shareholding ($) 438,907,122 Dividends On Investment ($) 10,631,806 426,197,586 10,524,101 495,975,041 11,980,221 548,888,805 24,816,121 456,439,892 33,243,215 Return On Investments Figure 3.4: Expected vs Actual Return on Investments (2011- 2015) e t a R 15 10 5 0 (%) 2 2 2 5 7 Return on Investment % Expected Baseline % 2011 2012 2013 2014 2015 Year 10 Corporate Governance Policy Framework – December 2003, Part II, Section 22 Whole of Government Financial Statements and Annual Appropriation Statement 15 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 3.3 Analysis of Dividends and Investments The estimated dividend revenue in 2015 was $41.29 million11 while actual dividend revenue received for 2015 totalled $33.24 million resulting in a shortfall of $8.05 million or 19%.
Refer to Table 3.3 below for details of analysis: Table 3.3: Investments and Dividends Received 2011 – 2015 Year Total Government Shareholding Dividends on Investment % Change In Dividend Dividend Paying Entities 2011 2012 2013 2014 2015 ($) 438,907,122 426,197,586 495,975,041 548,888,805 456,439,892 ($) 10,631,806 10,524,101 11,980,221 24,816,121 33,243,215 (16) (1) 14 107 34 8 6 6 6 5 Number of Entities Holding Government Investments 30 25 26 24 24 % of Dividend Paying Entities 27 24 23 25 21 Refer to the figure 3.5 below for the graphical analysis of dividends collected over the 5 year period: Figure 3.5: Total Dividends Remitted: 2011 – 2015 Figure 3.5: Dividends on Investment (2011 to 2015) 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 Dividends on Investment ($) 2011 2012 2013 2014 2015 Over the past five years, an average number of six (6) entities paid dividends to Government.
3.4 Dividends Remitted per Entity An initial measure that corporatized entities are operating as successful businesses is 10% after tax return on shareholders’ funds.
Once the expectations of annual returns are established, the 10% baseline should be revised based on corporate plan targets.12 All Government Commercial Companies and Commercial Statutory Authorities pay at least 50% of the net earnings to the Government as dividends in consultation with the Minister for Public Enterprises, Minister of Finance, and relevant Minister.13 11 2015 Budget Estimate 12 Corporate Governance Policy Framework – December 2003, Part II, Section 22 13 Corporate Governance Policy Framework – December 2003, Part II, Section 26 Whole of Government Financial Statements and Annual Appropriation Statement 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ A total of $33.2 million was received by government as dividends in 2015 from the following entities; a) Government Commercial Companies 1.
Post Fiji Ltd ($1.2m) 2.

Fiji Ports Corporation Ltd ($3.7m) 3.

Airports Fiji Limited four ($17.6m) b) Majority owned company 1.

Air Terminal Services Ltd ($0.5m) c) Minority owned company 1.

Amalgamated Telecom Holdings Ltd ($10.2m) In addition to dividends received from the above companies, the government also received a sum of $28.5 million as dividend from Reserve Bank of Fiji .

Refer to Table 3.4 below for details of dividends remitted to government in the past five years.
Table 3.4 Analysis for Entities that remitted Dividends: 2011 – 2015 Description Value of Investments as at 31/12/2015 Dividend for 2015 ($) Dividend for 2014 ($) Dividend for 2013 ($) Dividend for 2012 ($) Dividend for 2011 ($) Post Fiji Limited 5,600,000 1,249,574 - - - 434,820 UTOF (Management) Limited Air Terminal Services Yaqara Pastoral Company Ltd Fiji Ports Corporation Limited Airports (Fiji) Limited ATH Limited FINTEL* Fiji Television Limited* Pacific Forum Line(2006)* Dividends from Investments - - - 219,866,328 *government shares in these companies have been sold - - 528,768 765,000 - - 3,719,191 29,993,490 92,300,180 17,528,344 91,207,658 10,217,338 - - - 33,243,215 119,526 401,006 3,300,000 3,698,979 10,000,000 7,296,610 - - - 24,816,121 113,574 235,530 1,226,124 3,654,877 74,276 496,117 - 2,821,102 - 1,020,640 4,377,966 - 1,734,000 6,566,949 - - - 10,524,101 183,167 11,980,221 - 319,651 279,287 2,641,643 1,000,000 4,377,966 1,376,559 201,880 - 10,631,806 A graphical representation of budgeted and actual dividend revenue remitted by Government entities over the five year period is outlined in the Table 3.5 and Figure 3.6.: Table 3.5: Budgeted vs. Actual Dividend Revenue Descriptions 2015 2014 2013 2012 2011 Actual Dividends Budgeted Dividends % of Budgeted Dividends collected 33,243,215 41,290,000 81% 24,816,121 36,121,700 69% 11,980,221 38,281,000 31% 10,524,101 27,356,500 38% 10,631,806 30,149,700 35% Whole of Government Financial Statements and Annual Appropriation Statement 17 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 3.6: Budgeted vs. Actual Dividend Revenue Figure 3.5: Budgeted vs Actual Dividend Revenue ) m $ ( t n u o m A 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Budget Actual 2011 2012 2013 Year 2014 2015 In 2015, forty eight (48) per cent of government’s total investments of $456.4 million returned dividend to government.
Refer to Table 3.6 below for details of Government entities which paid dividend in year 2015.
Table 3.6: Government Entities which paid dividend in 2015 Entity Post Fiji Limited Air Terminal Services Fiji Ports Corporation Limited Amalgamated Telecom Holding Limited Airports Fiji Limited Total *measured at fair value Value of Investments as at 31/12/15 ($) 5,600,000 765,000 29,993,490 *91,207,658 92,300,180 219,866,328 Dividend 2015 ($) 1,249,574 528,768 3,719,191 10,217,338 17,528,344 33,243,215 % of Dividend to total Investments value 22 69 12 11 19 15 All these entities have met the required 10% Return on Investment in accordance with Public Enterprises Corporate Governance Policy Framework.
3.5 Investment records not updated The Accounting Head is responsible for maintaining ledgers and reconciling balances in such ledgers to ensure the accuracy of financial information and the timeliness of management reports.

14 The investment records are maintained and amended by Ministry of Finance when share certificates are received and proper verifications are undertaken to confirm the increase or the reduction in shares numbers and value when sold.
The Ministry of Finance records show a total share capital of $2 with the entity, which is confirmed by its share certificates.

14 Pro-forma Finance Manual 2011, Section 16 Whole of Government Financial Statements and Annual Appropriation Statement 18 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The audit noted a variance of $200,000 between the Ministry’s record15 and the investment confirmation received from the Fiji Broadcasting Corporation Limited.
Variance between the Ministry’s records and the entities in which shares are held has been a recurring issue which denotes lack of follow up action and inadequate record keeping leading to possible misstatement of investments by $200,000.

Recommendation The Ministry of Finance should liaise with the Fiji Broadcasting Corporation Ltd and update the records of government investments accordingly.
Ministry’s Comments The Ministry valuation of $2 is based on the share certificate that is currently with the Ministry.

We are aware of the difference and we had for a number of occasions requested FBC to provide the basis for their valuation but they have not been able to do so.

Until the Ministry of Economy (Finance) received share certificate from FBC to vouch for the $200,000 reflected in their accounts, we will not change the valuation of FBC in our books.
4.0 TRUST FUND ACCOUNT 4.1 Main Trust Fund Account Section 25 of the Financial Management Act (2004) states that trust moneys should be accounted for separately from the public monies and kept in a separate bank account.16 Trust money is to be kept in a separate bank account pending its withdrawal (including withdrawal for use or investment).17 Trust money is to be kept in a separate bank account.18 Each month, the trust account must be balanced and reconciled with the trust bank account.
The names and balances of each account must be listed and the reconciliation shall be signed by the responsible officer.

Un-reconciled items must be investigated and resolved promptly.19 The Main Trust Fund Account balance totalled $107,789,102 as at 31 December 2015 which increased by $20,798,391 or 24% from $86,990,711 as the balance as at 31 December 2014.
The increase in the account was a result of increases in Telecommunication, Suitors, Rural Electrification, Immigration, and Performance Bond Trust Funds.

Audit of several Ministries/ Departments revealed that balances in Trust Fund Accounts general ledgers did not reconcile with balances in the respective Cash Account general ledgers.

Refer Table 4.1 for details.
15 Total Share Capital of $2 as confirmed by the share certificate 16 Financial Management Act 2004 Section 25(1) 17 Financial Management Act 2004 Section 25(2) 18 Finance Instruction 2010 – Section 32(3) 19 Finance Instruction 2010 – Part 9, Section 58(3) Whole of Government Financial Statements and Annual Appropriation Statement 19 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 4.1: Reconciliation of Main Trust Account Head Ministries / Allocation Account Description Department Cash Trust Account SAG 52 ($) Liability Trust Account SLG 89 ($ ) Variance ($) 968,582 952,185 16,397 - 2,530 (2,530) 79,641 78,337 1,304 5,505,604 5,565,571 59,967 30 30 32 33 37 Ministry Agriculture of of and Ministry Fisheries Forests Ministry of Lands and Mineral Resources Ministry of Local Government, Housing Environment and 9-30101-30065- 895012 9-30101-30075- 895013 9-32301-76068- 895005 9-33101-79001- 895051 9-37301-37999- 895009 9-37301-37999- 895010 9-37301-37999- 895011 9-37301-37999- 895050 RETENTION FUNDS LWRM RENTIONS FUNDS ALTA LEASE FISHERIES LANDS TRUST FUND ACCOUNT ODS FINES ENVIRONMENT TF HUD LITTER DECREE 2,949,352 ENVIRONMENT TRUST CITES TRUST 1,880,740 353,882 298,732 361,252 54,746 TOTAL 9,503,179 9,493,229 9,950 As a result of the above, Trust Fund Account general ledger balance has been understated by $9,950.
Furthermore, Ministry of Finance passed journal entries to write-off Trust Liability Accounts without any proper substantiation.

Refer to Table 4.2 below for details of the write-offs of Trust Account.
Table 4.2: Write-Offs of Main Trust Account Ministries Account Account Descriptions Elections Office 9-10000-00000-890000 Consolidated Trust Fund Information 9-16300-00000-890000 Consolidated Trust Fund Rural & Maritime 9-18000-00000-89000 Consolidated Trust Fund Health 9-22000-00000-890000 Consolidated Trust Fund Agriculture 9-30000-00000-890000 Consolidated Trust Fund Industry and Trade 1-34000-00000-890000 Consolidated Trust Fund 9-33000-00000-890000 Consolidated Trust Fund Lands Infrastructure & Transport 9-40000-00000-890000 Consolidated Trust Fund TOTAL Amount ($) 560,356 (7,119,801) (551,293) 98,541 (371,192) 53,834 170,101 889,161 (6,270,293) The above anomaly is an indication of the poor maintenance of Main Trust Funds.
Lack of proper reconciliation, poor control, and lack of input controls in general ledger posting has resulted in misposting and unreconciled variances for which approval of the Ministry for Economy have been obtained for write-off.

There is high risk that fraud and thefts may exist in these accounts.
Whole of Government Financial Statements and Annual Appropriation Statement 20 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 4.2 Operating Trust Fund Account the Ministry/Department’s Operating Trust Fund Accounts facilitate administrative role as an employer.
These transactions are authorised and allowable payroll deductions from employees’ salaries/wages with regards to compulsory deductions and contributions, housing loan repayments, insurance premiums and other payroll deductions for onward payment to the relevant authorities and entities.

Operating trust fund account balances are unpaid liabilities awaiting payments to relevant authorities.
transactions relating to Balance in the Operating Trust Fund Account increased by $10,987,730 or 73% from $15,001,773 in 2014 to $25,989,503 as the 31 December 2015.

It was noted that during 2015, unsubstantiated balances in the Operating Trust Fund Account were written-off by Ministry for Economy.

Refer Table 4.3 below for details.


As result of write-offs, there is a high possibility that genuine deductions from civil servants’ pay may not have been paid to relevant authorities as agreed to by the employees.
Table 4.3: Write-Offs of Operating Trust Account Ministries Account Account Descriptions Prime Minister`s Office 1-02100-00000-860000 Deposit, Deduction & Retention Money Fisheries & Forest 9-32000-00000-860000 Deposit, Deduction & Retention Money TOTAL Amount ($) 841 15,310 16,151 The above anomaly indicates poor maintenance, lack of timely reconciliations and quality reviews of Operating Trust Fund Account.

As such, this account may be susceptible to theft and fraud.
Recommendation: The Ministry for Economy ensure that genuine deductions from civil servants are paid to respective authorities/agencies on a timely basis.

Management comments Write offs were done mostly on balances that are long outstanding in various Ministries trust accounts.

The Ministry usually conducted due assessment prior to any write offs being made both with the Ministries as well as the institutions concerned.
For the past 3 years we had been doing write offs, we have never received any complaints of any deductions made that were not remitted to the institution.

5.0 REVENUE The total forecasted revenue by government in 2015 amounted to $3,122,438,400 which comprised of $2,612,702,300 in operating revenue and $509,736,100 in investing revenue.20 No forecast was provided for revenue generated from government Trading and Manufacturing Activity operations.
However, actual revenue collections by government in 2015 from its normal operations totaled $2,800,234,78621 thus recording a shortfall of $322,203,614 or 10% of the total estimated revenue collections.
The key contributing factor to the shortfall was that the budgeted revenue was based on the 20 National Budget Book 2015 21 Excludes revenue from TMA Operations Whole of Government Financial Statements and Annual Appropriation Statement 21 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ planned disposal of government shares in government owned entities (FEA, AFL, Government Printery and KTFZ) which did not eventuate in 2015.Table 5.1 shows the actual revenue collected over the last five years.
Table 5.1: Revenue by Type over the Last 5 years Year 2011 2012 2013 2014 2015 Investing Revenue – Actual ($) 29,699,034 86,043,083 59,894,427 80,723,993 255,471,929 Operating Revenue – Actual ($) 1,774,878,062 1,854,766,943 2,038,833,496 2,290,281,755 2,544,762,857 Total Actual [a] ($) 1,804,577,096 1,940,810,026 2,098,727,923 2,371,005,748 2,800,234,786 Investing Revenue – Budgeted ($) Operating Revenue – Budgeted ($) 79,675,200 1,667,797,412 35,819,200 1,906,987,800 75,744,230 2,032,634,700 513,955,960 2,207,821,990 551,026,138 2,571,412,262 Total Budgeted [b] ($) 1,747,472,612 1,942,807,000 2,108,378,930 2,721,777,950 3,122,438,400 Variance [a-b] ($) (57,104,484) 1,996,974 9,651,007 350,772,202 322,203,614 In addition, government also recorded $22,745,668 from operation of Trading and Manufacturing Accounts.
5.1 Anomalies in the calculation of receipts in Statement of Cash Flows To determine net cash flow from operating activities, entities eliminate the effects of income statement transaction that do not result in an increase or decrease in cash.

The indirect method for creating a statement of cash flows uses accrual accounting information to present the cash flows from the operations section of the cash flow statement.
The audit noted that the RFMF did not include the Trust Fund Account Statement of Receipt and Payments for RFMF Engineers Project Fund Account with receipts totalling $1,985,410 and payments totalling $2,921,204 in its Special Purpose Financial Statements for the year ended 31/12/15.

The Project Fund Account transactions were also not recorded in the FMIS general ledger.

The above resulted in the misstatement of revenue.


Recommendations • • Ministries/Departments affected should prepare revenue reconciliation on a monthly basis and ensure that balances are corrected in the relevant revenue accounts.

Stringent measures should be enforced on Ministries/ Departments to ensure that accurate revenue amounts are reflected at Whole of Government level.

Ministry’s Comments Comments noted.


The Ministry of Economy had already begun this exercise with the major revenue items such as taxes, water fees and LTA fees and we would soon also perform similar reconciliations for other revenue streams.

5.2 Arrears of Revenue The importance of revenue in the budgetary process is significant since it determines the level of possible spending.
Thus, it is essential that the revenue collection process is monitored, including debt collection and the credit policies applied.

Whole of Government Financial Statements and Annual Appropriation Statement 22 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Outstanding amounts due to government are classified under two categories as either ‘arrears of revenue’ or ‘other unpaid accounts’.
Arrears of revenues generally arise when credit is extended for supply of goods and services.

Other unpaid accounts include all outstanding amounts under the revolving (suspense) accounts and other debt accounts.

Arrears of revenue for the government comprise of unpaid taxes by individuals and businesses, as well as revenue owed to Ministries and Departments in the form of fees, fines licenses and charges.
5.2.1 Analysis of Arrears of Revenue for 2015 Total arrears of revenue increased by $585,679 or 0.4% from $150,840,876 as at 31/12/2014 to $151,426,555 as at 31/12/2015.

The following anomalies were noted: (i) (ii) The audit noted that debt owed to Ministries and Departments for more than five years amounted to 37,584,996 or 25% of the total arrears.

Although some Ministries/ Departments have indicated in the past that that write offs would be pursued, this is yet to occur.
Resource constraints have also been indicated as one of the reasons contributing to delay in recovery of arrears.

The Ministry for Economy-Pension, Judiciary, Agriculture and Infrastructure had more than 50% of their respective total arrears aging more than five years.
Entities having about 25% to 50% of total arrears included the Fiji Police Force (43.8%), Water of Authority (36.9%), Ministry of Infrastructure (35.5%), Ministry of Finance-FRCA Customs (31%) and Ministry of Lands and Mineral Resources (30.4%).

Refer to Appendix 2 for details.

Recommendation  Ministries and Departments should review their debt recovery strategies to ensure that all avenues to recover debts are exhausted and irrecoverable debts are reduced.
 The Ministry for Economy should consider providing provision for doubtful debts into the accounts as it moves to accrual accounting as a matter of prudence in the financial reporting of government funds.

Management Comment DCFMU continues to monitor the Whole of Governments Revenue Arrears and at same time act as Secretariat to the Revenue Taskforce.

It’s important to note that key institutions to reduce the arrears are the agencies themselves.
There has been significant improvement to arrears collection following establishment of taskforce.

Reduction in revenue arrears are noted in Lands, FRCA Customs, and WAFs.

The Minister also endorsed the write off for arrears aging more than 5 years; the agencies include Pension Office, OAG and Ministry of Agriculture.

It is the responsibility of the agencies to notify and provide the necessary paper to Ministry of Economy for write off consideration.
5.2.2 Significant Balances Owed by Ministries and Departments Audit review of the Arrears of Revenue for Ministries and Department revealed continuous increase and significant balances from Ministry of Finance-Pension, Communication, Education, Health Government Printing and Peace Keeping as tabulated below: Whole of Government Financial Statements and Annual Appropriation Statement 23 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 5.2: Significant Arrears of Revenue Over 5 Years by Ministry/Department Year 2011 2012 2013 2014 2015 Min Of Finance – Pensions ($) 2,651 15,589 62,036 159,883 218,095 Min of Communications – TAF ($) 1,299,929 3,994,537 5,831,427 8,837,731 11,429,826 ITC Services Min of Education ($) 1,014 1,862 - 30 1,486 ($) 16,144 8,119 16,330 12,180 13,984 Min.
of Health & MS ($) 427,160 451,365 210,647 208,800 330,756 Govt Printing Peacekeeping Missions ($) 113,192 641,013 368,368 634,344 743,936 ($) 1,573,273 6,133,366 1,623,583 1,587,290 1,855,323 Audit also noted that Income Tax, VAT and Custom arrears for Fiji Revenue & Customs Authority totalling $64,960,501.94 or 43% followed by Public Utilities (Water Authority of Fiji) of $29,023,661 or 19% and Lands of $ 26,980,319 or 18% which had decreased but the arrears of revenue was still substantial.
The non-recovery of much needed revenue by Ministries and Departments deprives government the necessary revenue needed to fund daily government cash flows needs and forces government to short term borrowing to meet its needs.

The increasing rate of arrears of revenue also reflects that revenue recovery strategies deployed by government may not be working effectively.
Recommendation  Ministries and Departments should review the debt recovery strategies to ensure that all avenues to recover debts are exhausted and irrecoverable debts are reduced.

 The Ministry should consider providing provision for doubtful debts into the accounts as it moves to accrual accounting as a matter of prudence in the financial reporting of government funds.
Management Comment DCFMU continues to monitor the Whole of Governments’ Revenue Arrears and at same time act as Secretariat to the Revenue Taskforce.

It’s important to note that key institutions to reduce the arrears are the agencies themselves to ensure proper mechanism is in place.

There has been significant improvement to arrears collection following establishment of taskforce.

Reduction in revenue arrears are noted in Lands, FRCA Customs, and WAFs.
The Minister also endorsed the write off for arrears aging more than 5 years; the agencies include Pension Office, OAG and Ministry of Agriculture.

It is the responsibility of the agencies to notify and provide the necessary paper to Ministry of Economy for write off consideration.
Whole of Government Financial Statements and Annual Appropriation Statement 24 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 6.0 EXPENDITURE 6.1 Overview of 2015 Government’s Budgeted and Actual Expenditures The expenditure budget for financial year 2015, as approved by Parliament, totalled $4,029,904,149 increased by $922,690,849 or 30% from $3,107,213,300 budgeted for 2014.
As at 31/12/15, government incurred a total expenditure of $3,970,769,776 thus recording a budget savings of $59,134,373 or 1.5%.

The significant budget saving was mainly due to the savings recorded in capital budgets across ministries and departments.
Table 6.1: Overview of the 2015 Budget and Actual Expenditure 2015 Original Budget Virements 2015 Revised Budget Expenditure ($) 1,615,462,200 1,321,877,400 75,558,500 ($) 2,944,961 (1,684,624) (1,260,320) [a] ($) 1,618,407,161 Operating22 1,320,192,776 Capital23 74,298,180 VAT Payments24 42,343,300 --- 42,343,300 281,050,700 15,586,505 296,637,205 149,668,300 528,357,227 678,025,527 --- --- --- 3,485,960,400 543,943,749 4,029,904,149 Pension Payments25 Interest on Loans26 Principal on Loans27 Redemption of Treasury Bill Total Government Expenditure Actual Expenditure 2015 2015 Budget Saving/ (Overspending) Actual Expenditure 2014 % Increase / (Decrease) Increase / (Decrease) in Actual Expenditure [b] ($) 1,540,173,910 1,045,503,540 55,636,374 [a-b] ($) 78,233,251 274,689,236 18,661,806 ($) 1,434,490,110 930,115,814 57,395,410 ($) 105,683,800 115,387,726 (1,759,036) 38,878,319 3,464,981 36,785,353 2,092,966 295,147,698 1,489,507 264,309,159 30,838,539 677,261,695 763,832 202,166,704 475,094,991 318,168,240 (318,168,240) 280,578,002 37,590,238 3,970,769,776 59,134,373 3,205,840,552 764,929,224 7 12 (3) 6 12 235 13 24 Majority of government spending were on Operating Expenditure which accounted for 39% of the total spending.
Principal and Interest on Loan Repayments accounted for 24% while Capital Expenditure accounted for 26% of total expenditure.

The remaining 11% was for other payments.

Refer Figure 6.1 below for percentage of types of expenditure in year 2015.
22 SEG 1,2,3,4,5,6 & 7 23 SEG 8,9 & 10 24 SEG 13 25 SEG 11 26 SEG 12,14 & 15 27 Reducing balance of SLG 81 & 82 Whole of Government Financial Statements and Annual Appropriation Statement 25 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 6.1: Total Expenditure Incurred in 2015 By Type Principal on Loans Repayments 17% Interest on Loans Repayment 8% Pension Payments 1% VAT Payments 1% Redemption of Treasury Bill 8% Operating Expenditure 39% Capital Expenditure 26% In 2015, total expenditure increased by $764,929,224 or 24% compared to the total expenditure of $3,205,840,552 incurred in 2014 due to increases noted in Principal Loan Repayments ($475,094,991 or 235%), redemption of Treasury Bills ($37,590,238 or 13%), interest payments of loans ($30,838,539 or 12%) and capital expenditure ($115,387,726 or 12%).
In addition to the total expenditure, the Trading & Manufacturing Account (TMA) as the trading arm of Government incurred a total expenditure of $14,911,192.

6.2 Overall 2015 Budget Utilisation by Standard Expenditure Groups Government expenditure in 2015, when categorised into expenditure groups showed that 25 of the funds were spent on repayment of loans & treasury bills, 23% on capital grants and transfers, and 20% on established staff.
Principal repayments of loans relates to repayments of overseas loan, domestic bonds and treasury bills.

Capital Grants and Transfers include any grants and transfers to statutory authorities for capital projects.

Established Staff includes staff personal emoluments.

Refer to Figure 6.2 for percentage utilisation by categories of expenditures groups.
Whole of Government Financial Statements and Annual Appropriation Statement 26 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 6.2: 2015 Government Expenditure by Standard Expenditure Group Value Added Tax 1% Government Wage Earners 1% Capital Purchase 1% Capital Grants and Transfers 23% Capital Construction 2% Established Staff 20% Operating Grants and Transfers 11% Principal on Loans & Treasury Bills 25% Interest on Loans 8% Travel and Communications 1% Maintenance and Operations 2% Purchases of Goods and Services 2% Special Expenditure 2% Pensions 1% Furthermore, summarised in Table 6.2 below is the approved budget allocation and its utilisation for the financial year 2015 by expenditure groups.
Table 6.2: Budget Utilisation For 2015 Revised Forecast [A] Standard Expenditure Group Actual Expenditure [B] Budget Savings/(Overspending) [A-B] Budget 2014 ($) 727,724,809 Budget 2015 ($) 799,642,518 Established Staff 31/12/2015 ($) 773,262,555 31/12/2014 ($) 719,735,059 31/12/2015 ($) 26,379,963 31/12/2014 ($) 7,989,750 46,128,475 43,736,987 30,691,391 32,345,338 95,465,909 101,863,441 91,061,481 103,663,237 407,363,682 443,296,338 87,291,020 93,859,302 1,485,726,767 1,618,407,161 39,747,400 42,343,300 Government Wage Earners Travel and Communications Maintenance and Operations Purchases of Goods and Services Operating Grants and Transfers Special Expenditure Total Departmental Operating Expenditure Pensions, Gratuities and Compassionate Allowance 45,089,205 45,253,662 (1,352,218) 874,813 29,437,580 28,713,649 2,907,758 1,977,742 91,109,340 90,243,818 10,754,101 5,222,091 89,620,229 82,305,459 14,043,008 8,756,022 436,078,259 400,163,862 7,218,079 7,199,820 75,576,742 68,074,600 18,282,560 19,216,420 1,540,173,910 1,434,490,109 78,233,251 51,236,658 38,878,319 36,785,353 3,464,981 2,962,047 Whole of Government Financial Statements and Annual Appropriation Statement 27 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Revised Forecast [A] Standard Expenditure Group Actual Expenditure [B] Budget Savings/(Overspending) [A-B] Budget 2014 ($) 278,960,850 224,556,416 Budget 2015 ($) 296,637,205 Interest on Loans 678,025,527 Principal on Loans 31/12/2015 ($) 295,147,698 677,261,695 31/12/2014 ($) 264,309,159 202,166,704 31/12/2015 ($) 1,489,507 763,832 31/12/2014 ($) 14,651,691 22,389,712 0 0 543,264,666 1,017,006,032 110,715,378 149,316,946 Redemption of Treasury Bill Total Un- allocable Operating Expenditure Capital Construction 318,168,240 280,578,002 (318,168,240) (280,578,002) 1,329,455,952 783,839,218 (312,449,920) (240,574,552) 87,471,076 83,464,462 61,845,870 27,250,916 61,697,041 60,396,056 Capital Purchase 45,824,720 45,199,392 14,571,336 16,497,649 839,173,866
 1,110,479,774 1,011,586,285 1,320,192,776 Capital Grants and Transfers Total Capital Expenditures 912,207,744 801,451,961 198,272,030 37,721,905 1,045,503,540 930,115,815 274,689,236 81,470,470 66,635,793 74,298,180 Value Added Tax 55,636,374 57,395,410 18,661,806 9,240,383 3,107,213,511 4,029,904,149 TOTAL EXPENDITURE 3,970,769,776 3,205,840,552 59,134,373 (98,627,041) A total budget savings of $59.1 million or 1.5% was recorded by government in 2015 due to savings in various standard expenditure group allocations.
6.3 Government Expenditures in the Last 5 years Government’s expenditure for the last five years has been increasing and majority of the spending were on operating expenditures.

Total expenditure in 2015 increased by 24% or $764,929,224 compared to the increase of 30% or $742,627,969 in 2014.

Overall there was a 6% decrease in the percentage between the two financial years.
Table 6.3: Government Expenditure for the Last 5 Years Expenditures Operating28 Capital29 Vat Payments30 Pension Payments31 Interest on Loans32 Principal on Loans33 Redemption of Treasury Bills Total 2011 ($) 1,088,155,668 494,534,923 43,978,964 33,374,303 267,218,638 503,003,259 2012 ($) 1,163,505,072 533,838,990 50,043,665 36,371,123 260,860,919 249,483,884 2013 ($) 1,212,492,362 586,349,201 41,682,412 35,340,641 260,450,670 179,320,244 2014 ($) 1,434,490,110 930,115,814 57,395,410 36,785,353 264,309,159 202,166,704 2015 ($) 1,540,173,910 1,045,503,540 55,636,374 38,878,319 295,147,698 677,261,695 416,019,281 2,846,285,036 265,852,974 2,559,956,627 147,577,053 2,463,212,583 280,578,002 3,205,840,552 318,168,240 3,970,769,776 28 SEG 1,2,3,4,5,6 & 7 29 SEG 8,9 & 10 30 SEG 13 31 SEG 11 32 SEG 12,14 & 15 33 SEG 14,15 & Reducing Balance of SLG 81& 82 Whole of Government Financial Statements and Annual Appropriation Statement 28 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Expenditures Increase/(Decrease) % Change 2011 ($) 2012 ($) 2013 ($) 2014 ($) 2015 ($) (286,328,409) (10%) (96,744,044) (4%) 742,627,969 30% 764,929,224 24% 6.4 Budget Savings The budget estimates and budget statements are to be prepared as far as practicable in accordance with internationally accepted standards.34 Review of budget against actual expenditure shows that all ministries and departments have budget savings in 2015.
This was attributed mainly from savings in their capital expenditure budget.

Refer to Table 6.4 below for details.
Table 6.4: Government Budget Savings for the Year 2015 Expenditure Capital Expenditure35 Operating Expenditure36 Value Added Tax Total Budget Savings ($) 274,689,236 78,233,251 18,661,806 371,584,293 Value Added Tax 5% Operating Expenditure 21% 2015 Budget Savings Capital Expenditure Operating Expenditure Value Aded Tax Capital Expenditure 74% The attributing factors common to Ministries and Departments which resulted in capital budget savings were attributed to non-implementation of capital projects or incomplete capital projects.
These were caused by the following contributing factors.

      Lack of proper preliminary assessment and planning; Procurement processes not followed; Delay in Tender Process; No proper contractual agreement; Lack of monitoring and supervision of projects; and No acquittals.

Refer Appendix 3 for detailed summary for deficiencies noted Ministries and Departments capital expenditures during audit.
Also notable in the monthly trends for spending across Ministries and Departments is the increase in end of the year procurements in period 12 (December) to utilise unspent budgets.

Table 6.5 below shows the surge in December 2015 to utilise SEG 5 - Purchase of Good and Services budget.
34 Financial Management Act 2004 – Section 13 (3) 35 Includes SEG 8,9 & 10 36 Includes SEG 1,2,3,4,5,6 & 7 Whole of Government Financial Statements and Annual Appropriation Statement 29 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 6.5: Periodic Purchases for SEG 5 at Whole of Government level.
Period 01 02 03 04 05 06 07 08 09 10 11 12 Grand Total Amount ($) 5,471,100 6,412,925 7,495,111 6,529,933 7,985,609 7,963,439 6,568,474 5,395,827 7,296,772 7,066,336 7,268,558 13,995,020 89,449,104 Even though monthly average spending for SEG 5 for all Ministries and Departments in the first eleven months of the year averaged around $6.9 million, the surge to about $14 million in December shows the rush to utilise unspent budget allocations before the end of the year.
This indicates that SEG 5 budgets may have been overstated for some Ministries and Departments.

Budgeting of expenses based on previous year’s budget figures may have caused some over budgeting for some Ministries and Departments.

Non- adherence to the procurement plan and lack of capacity for project management has been identified as a major contributing factor to underutilisation of capital budgets.
Recommendations  Capacity development for capital project managements across Ministries and Departments should be supported.

Engagement of appropriate capital project expertise should also be considered.

 Operating budgets across Ministries and Departments should be reviewed for any over- budgeting.

Ministry’s Comments Whilst some of the factors as mentioned in 6.4 above are genuine, attention should also be drawn to the fact that most of these are outside the control of these implementing agencies.
Some of the common ones we had identified are adverse weather conditions or sudden changes in prices etc.

Trainings are usually done by our Fiji Procurement Office to up skill Agencies on the existing procurement regulations as well as the new guidelines.

6.5 Over-Expenditure by expenditure group at Ministry level Each year the Appropriation Act and the Budget Estimates set out details of the appropriations that Parliament approves for spending by each agency.
No officer may incur expenditure, which results in the agency’s appropriation being exceeded without the proper authorization of the Ministry of Finance, pending approval by Parliament.37 37 Finance Instruction 2010 – Part 3, Division 1 (7) Whole of Government Financial Statements and Annual Appropriation Statement 30 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The audit noted that three Ministries overspent their approved budget allocation for certain SEGs in 2015 while one Ministry understated one of its SEG, avoiding the disclosure of over-expenditure.
Refer Table 6.6 and commentaries below for details.
Table 6.6: Ministries Overspending its Approved Budget Allocation for 2015 Head Ministry SEG Description Revised Budget [A] ($) Actual Expenditure [B] ($) Savings / (Overspent) [A-B[ ($) 8 21 of 9 Capital Purchase 528,443 562,340 (33,897) of 1 2 Established Staff Government Wage Earners 259,341,004 2,493,300 267,580,510 4,673,078 (8,239,506) (2,179,778) Ministry Foreign Affairs Ministry Education, National Heritage, Culture Arts and The following were noted from the review of actual expenditures of the three Heads of Appropriation: 1.
2.

3.

Ministry of Foreign Affairs overspent its capital purchase budget, in particular the new diplomatic vehicle vote.

The overspending in this expenditure vote was due to incorrect posting by the Ministry’s Finance Division.

Ministry of Education, National Heritage, Culture, and Arts overspent its payroll expenditure allocations, SEG 1 & 2.
In addition to the above, it was noted that for the Ministry of Employment, Productivity and Industrial Relations, certain payroll expenditure were charged to Trust Fund and VAT allocations thus SEG 1 was understated by $782,167.

In effect the SEG 1 allocation for the ministry was overspent by $763,050 being the difference between the understated amount and the SEG 1 surplus stated in the Ministry’s Agency Financial Statement for 2015.
The above indicate that proper procedures to request for additional funds were not followed.

Moreover, overspending of budgetary allocations lacked approval from Ministry for Economy hence was unauthorised.

Recommendations  Proper approval should be obtained for virement or redeployment of funds to meet shortfall in appropriations.

 Stringent measures to restrict unauthorised utilisation of funds should be placed in the system.
Ministry’s Comments Comments is noted, efforts will be made to ensure that mentioned issues are avoided in future.

Whole of Government Financial Statements and Annual Appropriation Statement 31 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 6.6 Misstatement of Expenditure due to non-clearance of Remittance Between Chests (RBC) accounts and Accountable Advance Remittance Between Chests (RBC) account is used to facilitate remittance to Fiji Overseas Mission.
Ministries and Departments are to reconcile and clear their RBC by making necessary adjustment to its expenditure or revenue allocation.

Upon clearance of the advance, AAO Advance shall update the debtors register, offset the advance account and debit the appropriate expenditure account.38 The Ministry of Foreign Affairs RBC account had a credit balance of $1,394,547.
The Ministry passed a journal entry to write-off this balance to the Equity Account instead of conducting reconciliations and investigating the credit balance prior to making adjustments.

In addition, it was also noted that some Ministries and Departments did not clear their accountable advance accounts (1-00000-00000-570000) resulting in outstanding balance of $3,605,965 as at the end of the financial year.

As a result, expenditures for the year have been understated by the amount of outstanding advance.
Refer Appendix 4 for details.

The above anomalies have resulted in misstatement of expenditure.

Recommendations  Ministry of Foreign Affairs should prepare RBC Account reconciliation on a monthly basis and ensure that balances are correctly cleared to relevant expenditure accounts.

 Stringent measures should be enforced on Ministries and Departments to clear all advance accounts within the 7 days deadline.

Outstanding balances should be recovered from officers concerned.
Ministry’s Comments No written comments received.

6.7 Budget Loading A sum of $3,025,006,500 is to be issued from the Consolidated Fund or other funds of the State, and applied to the ordinary services of the Government for the year ending 31st December, 2015, and such sum is to be appropriated for the purposes specified in Schedules 1 and 2 and also the 2015 Budget Estimates39.
An amount of $152,158,300 was approved by Parliament for Capital Construction under Standard Expenditure Group (SEG) 8 across Ministries and Departments for 2015.

The audit noted that the budget amount loaded into the FMIS general ledger was $151,858,260 resulting in a shortfall of $300,040 in budget for SEG 8 for Capital Construction.

As a result, funding for made available in FMIS general ledger was less than what was appropriated by Parliament for capital expenditures in the 2015 Budget Estimates.
38 Section 10.1.15 2011 Pro Forma Finance Manual 39 2015 Appropriation Act 2014 sec 2 Whole of Government Financial Statements and Annual Appropriation Statement 32 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Recommendations  The Ministry for Economy should ensure that budget loaded into the FMIS are consistent with the Appropriation Act and the Budget Estimates Ministry’s Comments Comments noted.
This is a very rare slip; as a result, FMIS has come up with a reconciliation tool to check that budget loading ties exactly with the Appropriation Act, in terms of allocations and amounts.
7.0 BORROWING FUND ACCOUNT The Minister may, on behalf of the State, borrow money: (a) (b) (c) by raising loans of such amounts as may be necessary for the purpose of funding the budget deficit from time to time and any standing or other appropriations; by raising loans of such amounts and for such purposes as the House of Representatives may authorise by resolution; and by means of overdrafts or advances, but so that the total amount outstanding by way of overdrafts and advances under this paragraph does not at any one time exceed $20 million or such greater amount as the House of Representatives may determine by resolution; on such terms and conditions as the Minister thinks fit and whether within or outside Fiji.40 Public debt in 2015 totalled $4,221,151,867 and comprised of domestic borrowings of $2,836,488,629 or 67% of total debt; overseas borrowings of $1,241,407,386 or 30%; and Treasury Bills $143,255,85241 or 3%.
These are illustrated in Figure 7.1 below.

Figure 7.1: Composition of Public Debt in 2015 Treasury Bills 3% Overseas Loan 30% Domestic Debt 67% In addition to the overseas borrowings, an amount of $69,895,49042 was accrued in expenditure and recorded under accounts payable.

40 Section 59 (1) Financial Management Act, 2004 41 This is the discounted value after discount of $2,344,148 42 Direct disbursement made in 2016.
Whole of Government Financial Statements and Annual Appropriation Statement 33 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The government also receives short term advances from the Reserve Bank of Fiji (RBF) referred to as Ways and Means.

The advances are raised to meet immediate cash needs of government.

During the year, Government had utilised $55,500,000 of this facility through RBF.
7.1 Trends in Government Borrowing by Category The total public debt at the end of each year from 2001 to 2015 and its composition for the last 15 years are summarised in Table 7.1 Table 7.1: Government Debt (2001 – 2015) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Domestic Bond ($) 1,302,595,650 1,501,095,650 1,682,718,650 1,986,515,650 2,121,422,650 2,300,672,650 2,196,208,150 2,346,258,150 2,505,092,150 2,759,292,150 2,627,382,087 2,631,565,650 2,641,564,500 2,698,317,500 2,836,488,629 % of Total Borrowing 77 79 79 87 88 80 80 81 80 82 74 72 69 66 67 Treasury Bills ($) 176,604,613 196,432,453 276,925,838 126,987,822 136,018,387 141,311,687 141,160,433 64,552,990 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 130,600,000 143,255,852 % of Total 10 10 13 6 6 5 5 2 3 2 2 3 3 3 3 Overseas Loan ($) 206,889,315 193,505,879 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,793 935,530,587 1,081,097,414 1,254,277,326 1,241,407,386 % of Total Borrowing 12 10 8 7 7 15 15 16 17 16 24 25 28 31 29 Total ($) 1,686,089,578 1,891,033,982 2,133,770,240 2,282,168,851 2,421,491,961 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,919 3,382,723,748 3,530,451,273 3,678,829,200 3,824,939,970 4,083,194,826 4,221,151,867 The government bonds mature between 3 to 15 years.
In contrast, the term of Treasury Bills which constitute 3% of the borrowings ranges between 14 days to 390 days.

Over the last 15 years, the percentage of overseas borrowings constituted an average 17% of the borrowings.

A graphical representation of the outstanding government borrowings position is provided in Figure 7.2.
Whole of Government Financial Statements and Annual Appropriation Statement 34 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.2: Public Debt Trend 2001 - 2015 Figure 7.2 PUBLIC DEBT (2001 - 2015) Treasury Bills Overseas Loans Domestic Loans Total Borrowings m ) $ ( t n u o m A 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years Public debt has been increasing over the years and in 2015, a further increase of 3% or $137,957,041 was noted when compared to the debt of $4,083,194,826 owed in 2014.
The increase was due to an increase in domestic debt by $165.2 million and Treasury Bills by $12.7 million.

Overseas borrowings decreased by $12.9 million in 2015 compared to 2014.

Figure 7.3 shows the relationship between actual revenues and expenditures over the last 15 years.
Figure 7.3 Revenue vs Expenditure 4,000 3,000 2,000 1,000 t n u o m A ) m $ ( 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue Year Figure 7.4 reveals that government expenditure of $3,652,601,500 exceeded revenue $2,793,515,400 during 2015 resulting in a gross deficit of $859,086,100 for the year 2015.

Total expenditures noted above include debt repayment of $677,261,700 for overseas and domestic borrowings.
Whole of Government Financial Statements and Annual Appropriation Statement 35 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.4: Deficit Financed From Borrowings 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ) m $ ( t n u o m A 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900 -1000 Year 7.2 Borrowings over the 15 Year Period The composition of government debt over the last 15 years is summarised in Table 7.2 Government borrowed a total of $1,067,628,101 in 2015 which increased by $407,100,451 or 62% from a total of $660,527,650 borrowed in 2014.
Of the total amount borrowed in 2015, 44% or $474,271,972 was borrowed from Overseas, 31%, or $336,000,000 from Treasury Bills and 25% or $257,356,129 was borrowed through domestic bonds.

Tabulated below are the total amount borrowed by government from 2001 to 2015.
Table 7.2: Government Borrowing Composition - 2001 – 2015 Year Domestic Bonds Amount $’000 229,000.9 299,000.0 291,000.0 449,218.2 319,967.0 356,778.6 100,536.3 341,266.9 404,239.8 452,734.1 81,470.5 192,102.0 172,822.0 233,405.8 257,356.1 % Change 9 31 (3) 54 (29) 12 (72) 239 18 12 (82) 136 (10) 35 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Overseas Borrowings Amount $’000 10,247.0 26,196.7 28,745.3 9,267.7 8,641.3 283,258.7 19,855.8 20,802.8 25,476.8 61,949.5 569,043.1 136,428.7 99,466.3 120,241.3 474,272.0 % Change (32) 156 10 (68) (7) 3,178 (93) 5 22 143 819 (76) (27) 21 294 Treasury Bills Total Amount $’000 424,654.9 437,465.8 580,634.6 189,256.7 326,951.1 528,715.4 685,889.2 391,725.9 253,821.7 687,313.1 411,970.9 306,664.5 138,122.1 306,883.4 336,000.0 % Change 229 3 33 (67) 73 62 30 (43) (35) 171 (40) (26) (55) 122 9 Amount $’000 663,902.8 762,662.5 900,379.9 647,742.6 655,559.4 1,168,752.7 806,281.3 753,795.6 683,538.3 1,201,996.7 1,062,484.5 635,195.2 410,410.4 660,530.5 1,067,628.1 % Change 87 15 18 (28) 1 78 (31) (7) (9) 76 (12) (40) (35) 61 62 Whole of Government Financial Statements and Annual Appropriation Statement 36 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The increase in government borrowing was noted for both overseas and domestic borrowings.
Overseas borrowing increased by 294% in 2015 from a total of $120,241,251 borrowed in 2014 while domestic borrowings increased by 10% from $233,405,800 in 2014.

Treasury bills raised in 2015 increased by 9% from $306,883,399 raised in 2014.

The increase in overseas borrowing in 2015 was due to the refinancing of global bonds.

7.3 Loan Repayments There is an annual obligation for the Government of Fiji to redeem the borrowings which become due for payment.
The terms and conditions of the borrowings are stipulated in the Loan Agreements between the Government of Fiji and the Lending Agency.

The repayment of the borrowings of the Government of Fiji over the past 15 years is represented in Table 7.3.
Table 7.3: Repayment of Borrowings per Year 2001 – 2015 Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Domestic Bonds Overseas Borrowings Interest Principal Interest Principal ($) ($) ($) ($) Treasury Bills Principal ($) 320,504,093 417,637,927 500,141,175 339,194,733 317,920,558 523,422,114 686,040,488 468,333,380 220,653,349 710,064,626 416,019,281 265,852,974 147,577,053 280,578,002 318,168,240 Interest ($) 2,207,889 2,362,073 2,597,656 4,310,352 2,392,788 5,746,278 10,514,012 566,620 1,971,651 4,295,961 2,081,244 850,851 967,595 921,998 2,831,760 Total Repayment ($) 528,254,835 645,854,008 737,530,379 614,793,350 643,786,808 855,321,754 1,088,897,778 840,754,892 678,939,009 1,159,390,078 1,178,947,358 776,045,330 587,347,969 746,927,616 1,286,113,338 Principal payments for 2015 for government borrowings totalled $995,429,935 whilst interest payments amounted to $290,683,403.
Refer to Table 7.4 below for details.

Table 7.4: Total Principal and Interest Repayments in 2015 Description Domestic Bonds Overseas Borrowings Treasury Bills Total Principal Repayment ($) 119,185,000 558,076,695 318,168,240 995,429,935 Interest Repayment ($) 210,353,664 77,497,979 2,831,760 290,683,403 The interest repayment in 2015 on Domestic Borrowings for 2015 was $210,353,664 compared to $77,497,979 for Overseas Borrowings and $2,831,760 for Treasury bills.
The interest rate on domestic borrowings ranges from 1% to 6% whilst interest rates for overseas borrowings range from 1% to 3%.

Whole of Government Financial Statements and Annual Appropriation Statement 37 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 7.4 Domestic Bonds The total domestic bonds as at 31/12/15 amounted to $2,836,480,500 or 67% of total Government borrowings.

This is inclusive of $8,129 as unamortised premium.
Table 7.5 shows the amounts that are owed by the Government of Fiji to bond holders.
Table 7.5: Composition of Outstanding Government Bonds Bond Holder FNPF Insurance Companies Commercial Banks RBF Trust Fund (excluding UTOF) Unit Trust of Fiji Credit Corporation Merchant Finance & Investment Ltd Others Total Amount ($) 1,952,156,500 542,656,000 139,120,000 82,761,000 30,728,950 21,670,000 1,400,000 9,250,000 56,738,050 2,836,480,500 % of Outstanding Debt 69 19 5 3 1 1 0 0 2 100 Fiji National Provident Fund (FNPF) held 69% of the bonds as at 31/12/15; Insurance Companies 19%; Commercial Banks 5%; RBF 3%; the remaining 4% of the bonds are held by Trust Fund, Unit Trust of Fiji, Merchant Bank of Fiji, Credit Corporation and others.
The composition of outstanding government bonds is shown in Figure 7.5 RBF 3% Commercial Banks 3% Insurance 19% Figure 7.5 Composition of Outstanding Bonds as at 31/12/15 Others 5% Unit Trust of Fiji 1% Credit Corporation 0% Merchant Finance & Investment Ltd 0% Others 2% FNPF 69% Whole of Government Financial Statements and Annual Appropriation Statement 38 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 7.5 Borrowings & Interest Payments Details of outstanding borrowings over the past 15 years with the total interest paid and its budgetary provision is shown in Table 7.6.
Interest payments are made every six months.
Table 7.6: Domestic Borrowings Outstanding, Interest PAID, and Budgetary Provisions Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Domestic Borrowings ($m) 1,302.6 1,501.1 1,682.7 1,986.5 2,121.4 2,300.7 2,196.2 2,346.3 2,505.1 2,759.3 2,627.4 2,631.6 2,641.6 2,698.3 2,836.5 % Increase /(Decrease) 12 15 12 18 7 8 (5) 7 7 10 (5) 0.2 0.4 2 5 Interest Paid ($m) 88.3 95.3 102.0 108.6 120.2 129.5 148.0 147.4 165.3 190.7 213.2 210.5 207.5 209.4 210.3 % Increase/ (Decrease) 8 8 7 6 11 8 14 (0.4) 12 15 12 (1) (1) 1 0.4 Budgetary Provision ($m) % Change 92.7 102.0 110.0 121.5 124.0 127.7 148.2 151.4 156.7 190.6 225.4 211.7 208.3 209.5 210.5 4 10 8 10 2 3 16 2 4 22 18 (6) (2) 1 1 Total domestic borrowings outstanding increased by $138.10 million or 5% in 2015 compared to 2014.
Interest paid on domestic borrowings increased by 1% or by $0.9 million.

The Government had allocated $210.5 million in the 2015 Budget for interest payments of which $210.3 million was paid during the year.

The interest expense and the principal repayments over the past 15 years are shown in Figure 7.6.
Figure 7.6: Interest and Principal Repayments on Domestic Bonds Figure 7.6 Interest and Principal Repayments on Domestic Bonds ) m $ ( t n u o m A 300 250 200 150 100 50 0 1995 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Principal Interest Whole of Government Financial Statements and Annual Appropriation Statement 39 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 7.6 Overseas Borrowings The total outstanding overseas borrowing of Government as at 31 December 2015 was $1,241,407,386 which represents 29% of the total outstanding borrowings.
Majority of the overseas borrowings obtained were to finance capital projects.

7.6.1 Yearly Overseas Borrowings Figure 7.7 shows the trend of the yearly cash overseas borrowings over the past 15 years.
Figure 7.7: Yearly Overseas Borrowings 2001 -2015 Figure 7.7 Overseas Borrowings: 2001 - 2015 ) $ ( 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year There were marked increases in overseas borrowing in years 2006 and 2011.

In 2015, overseas borrowings increased again due to issuance of $US150 million, $US250 million and the $US200 million in global bonds.
The Government borrowed a total of $478,804,784 from overseas.

Of the total amount borrowed, $268,612 was in the form of interest capitalisation and direct disbursement.

Overseas loan repayments totalling $635,574,673 were made in 2015, which comprises of $77,497,979 in interest and $558,076,694 in principal payments as shown in Table 7.7 Refer to Table 7.7 for the details of overseas borrowings raised in year 2015.
Table 7.7: Overseas Loan Disbursements for 2015 Loan Road Upgrading Project Buca/ Moto Roads Sigatoka / Serea Roads Nabouwalu/ Dreketi Flood Recovery Loan Emergency Flood Recovery Loan Housing Project 2014 ADB/ Transport and Infrastructure Project Total Cash ($) --- --- --- --- --- Capitalisation Of Interest ($) Direct Disbursement ($) Total ($) --- --- --- --- 12,429,878 8,039,335 91,864,224 12,429,878 8,039,335 91,864,224 1,773,182 1,773,182 268,612 268,612 114,106,619 268,612 114,375,231 Whole of Government Financial Statements and Annual Appropriation Statement 40 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Further details of outstanding borrowings by Government as at 31/12/15 are outlined as follows: (a) (b) Borrowings in relation to the Road Upgrading Project comprised of 98% or $112.3 million of the total outstanding overseas borrowings.
The funds obtained for this project were to be used for road upgrading, rehabilitation, and the management of road assets and sector resources.

Emergency Flood Recovery loan totalled $1.7 million or 2% of the overseas loan outstanding as at 31/12/15.
The composition of the overseas Borrowings is illustrated in Figure 7.8 Figure 7.8: Composition of Outstanding Overseas Borrowings Figure 7.8 Composition of Outstanding Overseas Borrowings Flood 2% Housing 0% Road Maintenance 98% 7.6.2 Overseas Borrowings Outstanding & Interest Paid Table 7.8 provides details of overseas borrowings outstanding over the past 15 years with the total interest paid each year.
Table 7.8: Overseas Borrowings Outstanding, Interest Paid and Budgetary Provision Year Overseas Borrowings ($m) % Increase/ (Decrease) 0 (6) (10) (3) (3) 154 (5) 20 11 4 52 12 16 16 (1) Interest Paid ($m) 9.8 9.3 7.2 6.1 5.5 5.7 22.2 20.8 24.4 22.9 43.1 46.3 51.9 53.8 77.4 % Increase/ (Decrease) 14 (5) (23) (15) (10) 4 289 (6) 17 (6) 88 7 12 4 44 Budgetary Provision ($m) Variance ($m) 10.6 10.0 9.4 7.0 6.7 6.4 23.4 24.8 29.1 28.2 45.1 51.4 57.6 63.4 91.6 0.8 (6) (6) (26) (4) (4) 266 6 17 (3) 60 14 12 10 44 In 2015, the outstanding overseas borrowings decreased by 1% compared to 2014.
A sum of $91,694,404 was provided in the 2015 Budget Estimates (revised) for interest expense of which $77,497,979 was actual interest payment made in 2015.

Whole of Government Financial Statements and Annual Appropriation Statement 41 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.9 Interest Payments vs.
Principal Repayments Principal Repayments Interest 600.00 500.00 400.00 ) m 300.00 $ ( t n u 200.00 o m A 100.00 0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year The principal and interest payments are illustrated in Figure 7.9 Principal repayment for overseas loans in 2015 amounted to $558.1 million while interest payment totalled $77,497,979.

This is an increase by $5.86 million or 30% compared to 2015.
7.6.3 Revaluation of Overseas Borrowings Overseas borrowings are revalued at year end using the RBF exchange rate as at 31/12/15 which has an effect on public debt balance outstanding at year end.

Revaluation may result in increase or decrease in the public debt balance based on the exchange rate prevailing at the end of the year.

Table 7.9 outlines the amounts attributed to overseas borrowings due to revaluation over a 15 year period.
Table 7.9: Revaluation of Overseas Borrowings & Unrealised Exchange Gains/Loss Year Revaluation Increase/ (Decrease) Overseas Borrowings ($) (9,239,298) (18,905,125) (31,859,534) (3,554,545) (534,342) (17,120,505) (21,844,864) 70,352,312 46,988,862 22,885,617 1,537,285 14,895,650 65,295,314 65,340,835 70,570,698 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($) 206,889,315 193,505,881 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,104 935,530,587 1,081,097,414 1,254,277,326 1,241,407,386 Unrealised Exchange (Gain)/Loss as a % of Overseas Borrowings (4) (10) (18) (2) (0.3) (4) (6) 15 9 4 0.2 2 6 5 6 Whole of Government Financial Statements and Annual Appropriation Statement 42 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ The value of the overseas borrowings increased by $70,570,698 or 6% due to floating exchange rates43 in 2015.
7.7 Treasury Bills The Government through the RBF floats Treasury bills to raise funds in the domestic market to meet its short term needs.

Treasury bills are sold at a discount on face value of which the investor will receive face value upon maturity.

During the year, the government raised $336,000,000 in Treasury bills of which $332,840,640 constituted net borrowings by the government whilst $3,159,360 represented discount, as summarised in Table 7.10.
Table 7.10: Treasury bill Holders for Bills Issued In 2015 Bank Face Value Commercial Banks FNPF Others Total 294,320,000 33,880,000 7,800,000 336,000,000 % of Total 88 10 2 100 Discount ($) % Total 2,438,782 594,108 126,470 3,159,360 77 19 4 100 Net Receipts ($) 291,881,218 33,285,892 7,673,530 332,840,640 % of Total 88 10 2 100 Of the total Treasury bills issued in 2015, 88% were purchased by commercial banks, 10% by FNPF, and the remaining 2% was purchased by other entities and individuals.
This composition is graphed below.

Figure 7.10: Composition of Treasury Bills Borrowed for 2015 Figure 7.10 Composition of Treasury Bills Borrowing 2014 Others 2% FNPF 10% Commercial Bank 88% The Treasury bills are issued by the Government through the RBF and have maturity periods ranging from 14 to 392 days.

Table 7.11 details the total Treasury bills raised in the year together with their maturity dates and discount.
43 In a floating rate system, the exchange rate is determined directly by market forces, and is liable to fluctuate continually.
Whole of Government Financial Statements and Annual Appropriation Statement 43 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 7.11: Maturity of Treasury bills issued in 2015 Maturity in Days 14 28 56 91 182 245 364 Total Face Value Discount ($) 13,000,000 13,000,000 59,100,000 93,100,000 83,000,000 47,900,000 26,900,000 336,000,000 ($) 4,984 10,539 97,052 255,947 1,098,679 928,660 763,499 3,159,360 Treasury Bill Cost ($) 12,995,016 12,989,461 59,002,948 92,844,053 81,901,321 46,971,340 26,136,502 332,840,640 The discount increases as the maturity date increases.
Refer to Figures 7.11 and 7.12 for these details: 364 Days 8% Fig 7.12: Treasury Bills Issued by Maturity Fig: 7.11 Discount Expense Based on Maturity Dates 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Discount 14 56 182 364 245 Days 14% 182 Days 25% 28 Days 4% 14 Days 4% 56 Days 17% 91 Days 28% 7.7.1 Treasury Bills Over a 15-year Period Treasury bills issued and redeemed over the last 15 years is summarised in Table 7.12.
Table 7.12: Treasury Bills 2000 – 2015 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Balance Brought Forward ($) 117,231,671 72,449,838 176,604,613 196,432,453 276,925,838 126,987,822 136,018,388 141,311,687 141,160,433 64,552,990 Issues Redemption Outstanding ($) 129,129,145 424,654,868 437,465,767 580,634,561 189,256,716 326,951,124 528,715,414 685,889,234 391,725,937 253,821,653 ($) 173,910,978 320,500,093 417,637,927 500,141,176 339,194,733 317,920,558 523,422,114 686,040,488 468,333,380 220,653,349 ($) 72,449,838 176,604,613 196,432,453 276,925,838 126,987,821 136,018,388 141,311,688 141,160,433 64,552,990 97,721,294 Whole of Government Financial Statements and Annual Appropriation Statement 44 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Year 2010 2011 2012 2013 2014 2015 Balance Brought Forward ($) 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 128,583,452 Issues Redemption Outstanding ($) 687,313,133 411,970,874 306,664,544 138,122,146 306,883,399 336,000,000 ($) 710,064,626 416,019,281 265,852,974 147,577,053 280,578,003 321,327,600 ($) 74,969,801 70,921,393 111,732,963 102,278,056 128,583,45244 143,255,852 Treasury bills raised by Government over the last 15 years have fluctuated significantly.
Similarly, the government deficits/surplus has also fluctuated over past 15 years.

The trend for Treasury bills issued, redemptions, bills outstanding at the end of the financial year and the yearly deficit/surplus are shown in Figure 7.13.
Figure 7.13: Graphical Illustration of Treasury Bills 2001 -2015 Figure 7.13 Treasury Bills: 2001- 2015 ) $ ( t n u o m A 800 600 400 200 0 -200 -400 -600 2001 2002 2003 2004 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Issues Redemption Outstanding Budget Deficit In 2015 a budgeted gross deficit of $595.0 million was recorded, with treasury bills outstanding totalling $143.2 million.
7.7.2 Treasury Bills Management Treasury bills are short-term financial instruments used by Ministry for Economy to cover shortfalls during the year.
The analysis of budgeted revenue and expenditure as provided in the Budget and the Treasury bills raised for the year are as follows: 44 Excludes discount of $2,016,548.07 Whole of Government Financial Statements and Annual Appropriation Statement 45 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 7.13: Revenue Variance vs. Treasury Bills Raised Revenue 2006 ($m) 2007 ($m) 2008 ($m) 2009 ($m) 2010 ($m) 2011 ($m) 2012 ($m) 2013 ($m) 2014 ($m) 2015 ($m) Budgeted Revenue Operating Receipts & Investing Loan Receipts Total Actual Revenue Operating Receipts & Investing Loan Receipts Total Revenue Variance Treasury Bills raised Excess/((shortfall) -290.80 685.89 395.09 1,454.9 345.60 1,800.50 18.80 391.73 410.53 1,412.80 405.40 1,818.20 -226.70 253.82 27.12 1,536.50 463.00 1,999.50 5.50 687.31 692.81 1,801.30 693.40 2,494.70 14.50 411.97 426.47 1,937.10 192.20 2,129.30 -151.90 306.66 154.76 2,098.40 173.10 2,271.50 -235.80 138.12 (97.68) 2,371.0 353.60 2,724.60 -382.60 306.88 (75.72) 2,943.5 801.8 3,745.3 -269.0 336.00 67 The operating and investment receipts should pay for operational costs of Government which include standard expenditure groups 1 - 7, 11 & 12 and capital development programs.
Treasury bills are raised to cover operational deficits provided that they are no more than the estimated operating and investing receipts to be collected during the year.

Government revenue and borrowings from domestic and overseas markets were not sufficient to meet the actual expenditure hence a total of $336.0 million was raised through Treasury bills in 2015.
7.8 Ways and Means The Ways and Means is a short term advance facility provided by the RBF for Government where advances are given to Government for a day to meet immediate cash deficits.

The Ways and Means are replenished by Government during the year and are therefore not reflected as part of borrowings.

An analysis of Ways and Means balances for the past 15 years is illustrated in Figure 7.14.
Figure 7.14 Ways and Means Balances 2001 - 2015 ) m $ ( t n u o m A 400 350 300 250 200 150 100 50 0 2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2008 Year Whole of Government Financial Statements and Annual Appropriation Statement 46 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Government utilised this facility and borrowed $55,500,000 in 2015 compared to $98,300,000 utilised in 2014.
7.9 Financial Flexibility Financial Flexibility is an indicator of the degree a Government can increase its financial resources or revenue to respond to increasing financial commitments either by expanding the revenue or increasing its debt burden.

Table 7.14 contains data for total revenue and debt repayments of Government for a period of 15 years.

The revenue derived by the Government includes a significant portion which is derived from borrowings.
The revenue data included in the analysis of flexibility include the loan component.
Table 7.14: Comparison of Revenue and Debt Repayments Year Revenue ($) Repayments ($) Interest Bite % 46 47 53 38 42 42 72 50 38 58 48 36 27 31 46 Debt repayment comprises the principal and interest components of the domestic and overseas borrowings as well as the Treasury Bills redemption.
The Interest Bite represents the percentage of Debt Repayments to Total Revenue.
Whole of Government Financial Statements and Annual Appropriation Statement 47 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.15: Percentage of Debt Repayments to Total Revenue Figure 7.15 Percentage of Debt Repayments to Total Revenue 80% 70% 60% 50% 40% 30% 20% 10% 0% e g a t n e c r e P Interest Bite 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years In 2015, the financial flexibility measure was 46% indicating that the total debt repayment was equivalent to 46% of the revenue received by the Government during the year compared to 31% during 2014.
Hence, 54% of revenues collected were available for government programs compared to 69% during 2014.

7.10 Financial Vulnerability Financial Vulnerability is the measure of the degree of dependence of Government on sources of borrowing outside its control or influence.

A measure of vulnerability is the comparison of overseas Borrowings to the total Government debt.

Table 7.15 compares overseas Borrowings to total Government Debt for a period of 15 years.
Table 7.15: Comparison of Overseas Borrowings and Government Debt Year Outstanding Overseas Borrowings ($) Government Debt % ($) Whole of Government Financial Statements and Annual Appropriation Statement 48 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ In 2015, overseas borrowings made up 29% of outstanding government borrowings which decreased by 2% compared to 2014.
Figure 7.16: Percentage of outstanding overseas loans to Total government debt Figure 7.16 Overseas Loan Percentage to Total Government Debt e g a t n e c r e P 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years The overall trend indicates an increasing reliance by Government on overseas borrowings from 2006 followed by sharp increases in 2006, 2011 and 2014.
Another measure of Financial Vulnerability is the comparison of overseas Borrowings to GDP.

Table 7.16 compares overseas borrowings to GDP for a period of 10 years.
Table 7.16: Comparison of Overseas Borrowings and GDP Year Overseas Borrowings Nominal GDP ($) 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,104 935,530,587 1,081,097,414 1,254,277,326 1,241,407,386 ($) 5,040,000,000 5,325,700,000 5,440,100,000 5,614,900,000 5,614,100,000 6,024,400,000 6,768,500,000 7,109,500,000[r] 7,715,700,000[r] 8,435,900,000[r] 9,210,800,000[p] 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 [r]: GDP Revised Figure [p]: GDP Provisional Figure Source: FBoS Release No: 87, 2016 % of Overseas Borrowings /GDP 3 8 7 8 9 9 12 13 14 15 13 Whole of Government Financial Statements and Annual Appropriation Statement 49 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.17: Overseas Borrowings as a Percentage of GDP Figure 7.17 Overseas Borrowings as a % of GDP e g a t n e c r e P 16% 14% 12% 10% 8% 6% 4% 2% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years Moreover, the comparison of the domestic debt to GDP is another measure of Financial Vulnerability.
Table 7.17 compares Domestic Borrowings to GDP for a period of 10 years.
Table 7.17: Comparison of Domestic Borrowings and GDP Year Domestic Borrowings 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($) 2,300,672,650 2,196,208,150 2,346,258,150 2,505,092,150 2,759,292,150 2,663,382,087 2,631,565,650 2,641,564,500 2,698,317,500 2,836,488,629 [r]: GDP Revised Figure [p]: GDP Provisional Figure Source: FBoS Release No: 87, 2016 Nominal GDP ($) % of Domestic Borrowings/ GDP 5,325,700,000 5,440,100,000 5,614,900,000 5,614,100,000 6,024,400,000 6,768,500,000 7,109,500,000[r] 7,715,700,000[r] 8,435,900,000[r] 9,210,800,00045[p] 43 40 42 45 46 39 37 34 32 31 In 2015, Domestic Borrowings as a percentage of GDP was 31%, a decrease by 1% when compared to 2014.
45 Excludes Treasury Bills outstanding at year end Whole of Government Financial Statements and Annual Appropriation Statement 50 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.18 Domestic Borrowings as a % of GDP e g a t n e c r e P 46% 44% 42% 40% 38% 36% 34% 32% 30% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years Figure 7.18 shows that the Domestic Borrowing as a percentage of the GDP has been decreasing over the years and indicates the nation’s capability to meet its internal debt obligations when due.
Table 7.18 shows the comparison between Tax Revenue and the GDP.
Table 7.18: Comparison of Tax Revenue and GDP Year Tax Revenue ($) 1,065,808,942 1,227,220,772 1,230,363,366 1,243,057,337 1,209,223,648 1,302,130,578 1,512,378,397 1,616,297,515 1,879,243,556 2,117,742,442 2,359,863,232 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 [r]: GDP Revised Figure [p]: GDP Provisional Figure Source: FBoS Release No: 87, 2016 GDP ($) 5,040,000,000 5,325,700,000 5,440,100,000 5,614,900,000 5,614,100,000 6,024,400,000 6,768,500,000 7,109,500,000[r] 7,715,700,000[r] 8,435,900,000[r] 9,210,800,000[p] % of Tax Revenue/GDP 21 23 23 22 22 22 22 23 24 25 26 Table 7.18 shows that the Tax Revenue as a percentage of GDP over the last 10 years has been between 21% - 26%.
Whole of Government Financial Statements and Annual Appropriation Statement 51 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.19 Tax Revenue as a % of GDP e g a t n e c r e P 26 25 24 23 22 21 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years Another measure of Financial Vulnerability is the comparison of tax revenue to debt.

Table 7.19 compares tax revenue to debt for a period of 10 years.
Table 7.19: Comparison of Tax Revenue and Debt Year Tax Revenue ($) 2005 1,065,808,942 2006 1,227,220,772 2007 1,230,363,366 2008 1,243,057,337 2009 1,209,223,648 2010 1,302,130,578 2011 1,512,378,397 2012 1,616,297,515 2013 1,879,243,556 2014 2,117,742,442 2015 2,359,863,232 Debt ($) 2,421,491,962 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,918 3,382,723,748 3,530,451,273 3,678,829,200 3,824,939,969 4,083,194,826 4,221,151,867 % of Tax Revenue/Debt 44 43 45 43 39 38 43 44 49 52 56 The tax revenue as a percentage of debt has increased by 4% compared to 2014.
This indicates that 56% of total government debt can be met from tax revenue.
Whole of Government Financial Statements and Annual Appropriation Statement 52 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.20: Tax Revenue as a Percentage of Debt Figure 7.20 Tax Revenue as a % of Debt 60% 55% 50% 45% 40% 35% 30% 25% 20% e g a t n e c r e P 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years The ability of tax revenue to meet the debt over the 10 year period was on a declining trend since 2007 and gradually increased from 2010 to 2015 due to increase in tax collections during these years.
Table 7.20 shows the comparison of government surplus/ (deficit) to GDP.
Table 7.20: Comparison of Government Deficit (Surplus) and GDP Year Gross Surplus/ (Deficit) GDP 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($) (366,334,029) (346,769,675) (334,935,764) 120,093,824 (93,167,378) 99,398,751 49,027,101 (136,880,612) (37,583,667) (554,256,802) (859,086,199) ($) 5,040,000,000 5,325,700,000 5,440,100,000 5,614,900,000 5,614,100,000 6,024,400,000 6,768,500,000 7,109,500,000[r] 7,715,700,000[r] 8,435,900,000[r] 9,210,800,000[p] % of Gross Surplus (Deficit) /GDP (7.3) (6.5) (6.2) 2.1 (1.7) 1.6 0.7 (1.9) (0.5) (6.6) (9.3) [r]: GDP Revised Figure [p]: GDP Provisional Figure Source: FBoS Release No: 87, 2016 Whole of Government Financial Statements and Annual Appropriation Statement 53 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.21: Gross Deficit as a Percentage of GDP Figure 7.21 Gross Deficit as a % of GDP e g a t n e c r e P 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years In 2015, the gross deficit as a percentage of GDP remained at 6% compared as in 2014.
7.11 Financial Sustainability Financial Sustainability is defined as the ability of Government to maintain existing programs and meet existing creditor requirements without increasing the burden on the economy.

It is measured by the ratio of Government debt to the Gross Domestic Product.

The total Government debt as a percentage of GDP as at 31 December 2015 was 46%, indicating debt sustainability relative to the production of goods and services.
Table 7.21: Total Government Debt to Gross Domestic Product Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Government Debt ($) % of Growth GDP ($) % of Growth 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,918 3,382,723,748 3,530,451,273 3,678,829,200 3,824,939,969 4,083,194,826 4,221,151,867 18 (4) 6 8 8 4 4 4 7 3 5,325,700,000 5,440,100,000 5,614,900,000 5,614,100,000 6,024,400,000 6,768,500,000 7,109,500,000[r] 7,715,700,000[r] 8,435,900,000[r] 9,210,800,000[p] 6 2 3 (0.01) 7 12 5 9 9 9 Public Debt as a % of GDP 54 50 51 56 56 52 52 50 48 46 [r]: GDP Revised Figure [p]: GDP Provisional Figure Source: FBoS Release No: 87, 2016 Table 7.21 shows that percentage growth in Government debt is 3% only while the percentage growth in the economy is 9% indicating a slight decrease in debt burden of individuals in 2015.
In 2015, percentage change in national debt relative to the GDP was 46%, a decrease of 2% when compared to 48% 2014.
Whole of Government Financial Statements and Annual Appropriation Statement 54 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 7.22: Government Borrowings as a Percentage of GDP Figure 7.22 Government Borrowings as a % of GDP 60% 55% e g a t 50% n e c r e P 45% 40% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years The Government needs to sustain adequate resources to fund existing programs, commence new projects as well as meet existing creditor obligations in order to maintain the level of borrowings at a sustainable level.
8.0 LENDING FUND ACCOUNT 8.1 Term Loans Receivable The Minister may, on behalf of the state, make loans of public money from the Consolidated Fund on such terms and conditions as the Minister thinks fit and whether within or outside Fiji.46 As at 31 December 2015, total outstanding loans owed to Government amounted to $267,571,883 which is an increase of $68,656,615 or 35% compared to the amount outstanding at 31 December 2014.
This increase is due to government lending $9 million to PAFCO, $9.72 million to South Pacific Fertilisers and $44.01 million to Housing Authority and Public Rental Board to recover debt related cost and fees associated with the Chinese concessional loan entered into on 28 July 2010.

However, a sum $1.81 million given in PSC loans, which have been included in total outstanding loans, could not be substantiated as supporting documentations were not provided for audit.
Term Loans Receivable balances in the past five years is graphed and tabulated below.
46 Financial Management Act 2004, Section 61 (1) Whole of Government Financial Statements and Annual Appropriation Statement 55 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 8.1: Trend of Term Loan Receivables Balance Year Balance Outstanding ($) 2011 2012 2013 2014 2015 70,377,340 67,813,754 58,396,827 198,915,268 267,571,883 ) $ ( s n o i l l i M 300 250 200 150 100 50 0 Term Loan Receivables 2011-2015 Balance Outstanding ($) 2011 2012 2013 Years 2014 2015 9.0 REVOLVING FUND ACCOUNT 9.1 Accounts Receivable An accounts receivables (or debtor) generally arise after a sale of goods or services where payment is not immediately received by government.
It is important to have in place a stringent credit policy and debt recovery procedures to counter the risk of losses of irrecoverable debts.47 The accounts receivables (debtors) of government as at 31/12/15 amounted to $2,521,296 which decreased by $11,613,157 or 82% compared to $14,134,453 as at 31 December 2014.

The significant decline noted in 2015 is attributed to the write off of dormant accounts totalling $14,673,909 from the general ledger.
The write off was approved by the Minister of Finance.48 It was noted that $1,502,818 or 60% of the accounts receivable reported in the financial statement were not supported by reconciliations and source documents.

The Accounts Receivables balances for the past five years is graphed and tabulated below.
Table 9.1: Trend of Accounts Receivables Balance Year 2011 2012 2013 2014 2015 Balance Outstanding ($) 22,331,900 21,252,166 18,712,196 14,134,453 2,521,296 47 Part 9 Finance Manual 2011 48 Financial Management Act 2004, Section 34 Whole of Government Financial Statements and Annual Appropriation Statement 56 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Accounts Receivable Balances 2011 - 2015 ) m $ ( 25 20 15 10 5 0 Balance Outstanding 2011 2012 2013 2014 2015 9.2 Accounts Receivables Write offs for 2016 Subject to this or any other Act, the Minister of Finance may write off losses in respect of public money, state assets and agency assets.49 The Finance Instructions may require each budget sector agency: (a) (b) (c) To undertake appropriate recovery action for losses; To maintain a register of losses containing the details required to be recorded by the Finance Instructions; and To include details about losses and recovery action in the audited financial statements to be included in the agency’s annual report.50 Audit noted that accounts receivable balances totalling $14,673,909 were written off as approved by Ministry of Finance.
The write off include irrecoverable accounts due to debtors inability to pay and accounts without proper documentation as a result of poor control, absence of account reconciliation and lack of timely reviews of general ledger posting and errors by Ministries and Departments.
Table 9.2: Write off Approved by Ministry of Finance Ministry/ Department Public Service Commission Min of iTaukei Affairs Office of the Auditor General Elections Office 00Fiji Corrections Services Min of Rural Maritime Fiji Military Forces Fiji Police Force Min of Education Min of Fisheries Amount ($) (9,951,711) (37,400) (110,555) (49,695) (7,539) (40,175) (17,715) (14,689) (49,941) (66,747) 49 Financial Management Act 2004 – section 34(1)(a) 50 Financial Management Act 2004 – section 35 Whole of Government Financial Statements and Annual Appropriation Statement 57 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Ministry/ Department Min of Lands & Mineral Resources Min of Works Water Authority Govt Printing TMA Min of Health TMA Min of Works TMA Department of Housing Trust Amount ($) (6,834) (1,880,855) (7,038) (212,765) (106,059) (2,114,179) (12) (14,673,909) The write off of accounts receivables is a loss of public funds.
Recommendation Ministries and Departments, especially with those operating TMAs, should develop policies for bad debts and provision for doubtful debt policies for control of amounts applied for write offs.
Management Comments We acknowledged that slow recovery of government receivables is due to the lack of a proper debt collection policy hence to combat issue, the Ministry of Economy with the assistance of PFTAC is developing a policy guide on financial assets that will outline basis for estimation of provisions for doubtful debts as well procedures for writing off of bad debts.
9.3 Accounts Payable A liability is defined as present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.51 A liability shall be classified as current when it satisfies any of the following criteria: (a) (b) (c) (d) (e) It is expected to be settled in the entity’s normal operating cycle; It is held primarily for the purpose of being traded; It is due to be settled within twelve months after the reporting date; or The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
All other liabilities shall be classified as non-current.52 As at 31 December 2015, total accounts payable as reflected in the general ledger totalled $70,710,169.

This balance is made up of Trading Manufacturing Account (TMA) Trade and Sundry Creditors of $26,110, Outstanding Payments to Fiji RA Contractors $69,895,490, withholding tax of $323,809 and litigation claims totalling $464,760.

In the last five years, the accounts payables balance have been fluctuating as depicted in the graph below.
51 Conceptual Framework 4.4(b) 52 IPSAS 1 s.80 Whole of Government Financial Statements and Annual Appropriation Statement 58 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 9.3: Account Payable balance for the last 5 years Year Ending Year Balance ($) 23,515,677 675,870 47,633,541 648,811 70,710,168 2011 2012 2013 2014 2015 ) n o i l l i m $ ( 80 60 40 20 0 5 year Trend - Accounts Payable Balances Accounts Payable 2011 2012 2013 2014 2015 9.4 Unsubstantiated Accounts The Accounting Head is responsible for the safekeeping and proper maintenance of all accounting records or documents.53 It was noted that supporting documentation were lacking to confirm the existence of the general ledger balances as tabulated below.
In addition, Withholding Tax Payable for the Fiji Police Force and the Fiji Military Forces and Accounts Payable for Ministry of Education had debit balances, contrary to the nature of this liability accounts.
Amount ($) (27,143) Table 9.4: Details of Accounts Payable as at 31/12/2015 Ministry/Department Issue Account Description Ministry of Infrastructure and Transport Ministry of Infrastructure and Transport Ministry of Rural and Maritime Development and National Disaster Management Fiji Military Force Fiji Police Force Ministry of Education NET TOTAL Amount is due since 2012 Amount is due since 2014 Amount is due since 2014.
Debit Balance Debit Balance Debit Balance TMA Trade Creditors Withholding Tax Payable (120) Withholding Tax Payable (14,225) Withholding Tax Payable Withholding Tax Payable Accounts Payable Non- Trade 249 11,391 1,505 (28,343) The unsubstantiated account reflect on the various accounting heads of Ministries and Departments for failing in their duties to maintain proper reconciliation and supporting documents for amounts reflected in their respective general ledgers.
Recommendation The Ministry of Finance should take appropriate action to resolve the highlighted issue at the accounting heads forum.
53 Section 19.2.1 Pro Forma Finance Manual 2013 Whole of Government Financial Statements and Annual Appropriation Statement 59 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Ministry’s Comments The above Ministries were not forthcoming with their submission of unsubstantiated balances write off to MoE despite numerous reminders both via email and at the accounting heads forum.

Without their submission, MoE cannot really do anything to assist.
10.0 CONTINGENT LIABILITIES The Government must not guarantee the financial ability of any person or body in respect of a loan or otherwise unless the giving of the guarantee is authorised by Parliament in accordance with conditions prescribed by law.54 A contingent liability is a possible obligation that arises from past events, and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.55 The Debt Management Unit (DMU) of the Ministry of Finance administers the documentation, legal issues, variations, drawdown, and reporting of Government guarantees annually.
A guarantee fee is charged on all guarantees.

The fee percentage range is agreed upon taking into account each entity’s financial performance.56 10.1 Contingent Liabilities for Government Contingent liabilities of government include those guarantees given by government for loans obtained by government entities and also includes other contingent liabilities.
The total contingent liabilities as at 31/12/2015 amounted to $868,317,120 and decreased by $1,678,839,267 or 66% compared to the restated balance of $2,547,156,387 for 2014..

Refer to Table 10.1 and figure 10.1 for a trend analysis of the balances over the past five years.

Table 10.1: Contingent Liabilities for the last 5 years Year 2010 2011 2012 2013 2014 (restated) 2015 Number of Entities on Govt.
Guarantee 16 16 15 14 14 15 Total Liabilities Increase /(Decrease) Change ($) 1,791,461,261 ($) (%) 1,931,795,891 140,334,630 2,155,254,122 223,458,231 2,191,273,681 36,019,559 2,547,156,387 355,882,706 8% 12% 2% 16% 868,317,120 (1,678,839,267) (66)% 54 Section 145 (1) - 2013 Constitution 55 IPSAS 19 Section s.18(a) pg.
567 56 Finance Circular No.8 of 2004 Whole of Government Financial Statements and Annual Appropriation Statement 60 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Figure 10.1: Government Guarantee 2011 - 2015 ) 0 0 0 ( $ 3000 2500 2000 1500 1000 500 0 2011 2012 2013 2014 2015 The decrease is government’s total contingent liability in 2015 is mainly due to the removal of the guaranteed amount of the members’ contribution in the Fiji National Provident Fund as part of contingent liabilities.
However, borrowings of the municipal councils and the provincial councils have also been brought into account in 2015 which were not recognised in previous year’s financial statements.

Table 10.2: Composition of Contingent Liabilities.
Contingent Liabilities Explicit Contingent Liabilities Other Explicit Contingent Liabilities Implicit Contingent Liabilities Total Contingent Liabilities 2015 ($) 824,476,209 7,627,527 36,213,384 868,317,120 2014 (restated) ($) 832,565,387 7,627,527 1,706,963,473 2,547,156,387 Increase/ (Decrease) ($) (8,089,178) --- (1,670,750,089) (1,678,839,267) Government Explicit Contingent Liabilities decreased by $8,089,178 during the year and Implicit Contingent Liabilities decreased by $1,670,750,089.
These Explicit Contingent Liabilities cover both domestic and overseas loans.

Domestic loans accounted for $ 741.7 million or 90% of total liabilities while overseas loans accounted for $ 82.7 million or 10% of total liabilities as at 31/12/2015.

The government entities with overseas borrowings guaranteed by government are Fiji Ports Corporation Limited and Fiji Sugar Corporation.
Included under other explicit contingent liabilities are International Agencies whose membership subscriptions represent callable capital of which the government subscribes for shares as its membership contributions/capital holdings with these institutions.

The agencies would call on this callable capital if Fiji is proven not to be complying with the articles of agreement or if Fiji fails to honour its loan commitments under respective agreements with these institutions.
Whole of Government Financial Statements and Annual Appropriation Statement 61 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ 11.0 INVENTORY The value of Inventory held by Government was $3,585,563 which decreased by $467,468 or 12% from $4,053,031 in 2014.

Inventory is measured at cost.
11.1 Non Disclosures of Accounting Policies adopted in Valuing Inventory The financial statements shall disclose: (a) (b) (c) (d) (e) (f) (g) (h) The accounting policies adopted in measuring inventories, including the cost formula used; The total carrying amount of inventories and the carrying amount in classifications appropriate to the entity; The carrying amount of inventories carried at fair value less costs to sell; The amount of inventories recognized as an expense during the period; The amount of any write-down of inventories recognized as an expense in the period; The amount of any reversal of any write-down that is recognized in the statement of financial performance in the period; The circumstances or events that led to the reversal of a write-down of inventories; and The carrying amount of inventories pledged as security for liabilities.57 The Whole of Government financial statements only showed the ending balances of inventories.
It failed to disclose the accounting policies adopted in measuring inventories including the cost formula used.

The Ministry of Finance is working on developing policy with regards to accounting for inventory.

This issue has been raised in the Auditor General’s Report in previous years.
Recommendations   Ministry of Finance should expedite drafting and adopting clear accounting policies, valuation methods, write off policies, provisions for obsolesce and developing supporting schedules that can provide accurate information on the value of inventory at any given time.

The Ministry should disclose on the financial statement the valuation methods and accounting policies adopted for accountability and transparency purposes and for the benefit of users of the financial statements.
57 IPSAS 12 – Inventories – Disclosure - 47 Whole of Government Financial Statements and Annual Appropriation Statement 62 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Management Comments Comments duly noted.

We will ensure that the above recommendations are implemented to ensure accountability and transparency in the reporting of government inventories.
11.2 Valuation of Inventories Inventories must be valued at the lower of cost and net realizable value.

Costs must be assigned to inventory items on a consistent basis year-to-year using one of the following costing methods: (a) specific identification; (b) first-in, first-out; or (c) weighted average cost.

58 The audit noted that there was no assessment of net realisable value of the inventories held by Government as at 31/12/15 and that inventory are recorded at cost.
The Ministry of Finance indicated that once proper accounting policy for inventory are in place, it should be able to address the valuation methodology accordingly.

This issue has been raised in the Auditor General’s in previous years.

With no assessment of net realizable value or current replacement cost of inventories being carried out, the Ministry is unable to accurately determine the future economic benefits to be realized from their sale, exchange, distribution or use.
Recommendation Ministry of Economy must work towards ensuring that an assessment of net realizable value or current replacement cost is done to certify that the future economic benefits to be realized from the sale, exchange, distribution or use are accurately determined.

Management Comments Comments are duly noted, the Ministry will ensure that the above recommendations are implemented to ensure accountability and transparency in the reporting of government inventories.
11.3 Unsubstantiated Inventory Balance and Ineffective Inventory Management System Inventories which are material in value must be recorded in an inventory system.59 A stock take must be undertaken each year to verify the existence and condition of inventories on hand.60 Two stocktaking officers (other than the stock-keeper) nominated by the TMA Manager shall conduct a stock take on TMA stocks at least once a year.61 The audit noted that $1,496,558 or 41% of the total inventory disclosed in the financial statement cannot be substantiated for its accuracy and completeness.
Refer to Table 11.1 below for details.
58 Part 6 Division 2 (39) 1 of Finance Instruction 2010 59 Part 6 Division 2 (37) of Finance Instruction 2010 60 Part 6 Division 2 (38) of Finance Instruction 2010 61 Pro-forma Finance Manual 2011 – Section 6.3.1 Whole of Government Financial Statements and Annual Appropriation Statement 63 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Table 11.1: Unsubstantiated accounts Ministry/Department Ministry of Agriculture Ministry of Works Ministry of Fisheries & Forests Government Printing & Stationery Department Republic of Fiji Military Force GL account number 4-30351-30999-580301 4-40000-00000-580000 4-32000-00000-580000 4-04451-66999-580211 4-19154-19999-580301 Amount ($) 709,078 542,722 9,922 211,494 23,342 1,496,558 There was no independent stock take verification of inventory held at year end.
Alternative audit procedures could not be performed due to incomplete records.

In addition, government lacks an effective automated inventory management system.

Currently all stores use tally cards to update inventory movements in the year thereby increasing the risk of errors and omissions in recording of stock.

Any obsolesce and damage will only be determined after the stock take at year end after which the general ledger is then updated.
With this current system, inventories are vulnerable to thefts, obsolescence, and losses and are not detected in a timely manner for necessary actions to be taken.

Recommendation: Ministry of Economy should promote the use of automated inventory management systems and guidelines that can be easily adopted across Ministries and Departments.

Ministry’s Comments We will take recommendation on board but it will be down to policy decision of the need to adopt an inventory management system.
12.0 PREPARATION OF FINANCIAL STATEMENTS Cabinet, by Written Opinion; i. ii.
noted progress made towards the adoption of the Cash Basis International Sector Accounting Standards (IPSAS): and agreed to the adoption of the cash basis IPSAS for the Whole of Government financial preparation and reporting.62 Financial statements should not be described as complying with this Standard unless they comply with all the requirements in Part 1 of the Standard.63 The purposes of the Institute (Fiji Institute of Accountant) shall be –   to register accountants and to regulate the practice of the profession of accountancy in Fiji; to exercise control over the training, education and examination by the Institute or any other body of persons, of persons desiring to acquire a basic training in general accounting knowledge and of persons practising or intending to practise the profession of accountancy in Fiji or elsewhere; 62 Cabinet Decision 277 of 2010 – Adoption of Cash Basis IPSAS (International Public Sector Accounting Standards) by Government 63 Handbook of International Public Sector Accounting Pronouncements Volume 2 – 1.1.4 Whole of Government Financial Statements and Annual Appropriation Statement 64 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________  to promote, in any manner which the Institute thinks fit, the interests of the profession of accountancy in Fiji64; The Financial Statements of the Government of the Republic of Fiji has been prepared to comply with the Cabinet decision and thus the requirements of Part 1 of the Cash Basis IPSAS.
The audit report issued was unqualified with an emphasis of matter on the basis of consolidation adopted and variances in reconciliations.

The audit noted that while government is working towards adoption and compliance to the full International Sector Accounting Standards (IPSAS) the Fiji Institute of Accountant is yet to adopt, approve or support the use of the standard in Fiji.
12.1 Consolidation of Accounts of Controlled Entities A controlling entity, other than a controlling entity identified in paragraphs 1.6.7 and 1.6.8, should issue consolidated financial statements which consolidates all controlled entities, foreign and domestic, other than those referred to in paragraph 1.6.6.65 Entities identified in paragraphs 1.6.7 and 1.6.8 include those that are wholly owned controlled entities provided users of such financial statements are unlikely to exist or their information needs are met by the controlling entity’s consolidated financial statements and those that is virtually wholly owned provided the controlling entity obtains the approval of the owners of the minority interest.
Entities under paragraph 1.6.6 are those that operates under severe external long-term restrictions which prevent the controlling entity from benefiting from its activities Audit noted that the whole of government financial statements for 2015 included only the accounts of government Ministries and Departments and did not consolidate the financial statements of other controlled entities.
The controlled entities for government include the State Owned Entities such as Government Commercial Companies, Commercial Statutory Authorities and Statutory Authorities.

12.2 Timeliness of Reports An entity should be in a position to issue its financial statements within six months of the reporting date, although a timeframe of no more than 3 months is strongly encouraged.
On-going factors such as the complexity of an entity’s operations are not sufficient reason for failing to report on a timely basis66.

The Financial Statements for the year ending 31 December 2015 for the Government of the Republic of Fiji was submitted for audit on 27 July 2016 while amended Financial Statements was provided to audit on 16 September 2016.

The Audit report was then issued on 27 September 2016.
Audit noted that some Ministries and Departments preparing Agency Financial Statements did not meet the reporting timelines due to the delay in submission and requests for write off for various accounts balances to the Minister for Economy.

Therefore Audit Reports for some Agency Financial Statements were issued after 30th May 2016.

The submission of accounts for audit and closure of accounts in the general ledger needs to be improved for timeliness.

64 Fiji Institute of Accountant Act sec.


6(b),(c) and (f).
6(b),(c) and (f).

65 Handbook of International public Sector Accounting Pronouncements Volume 2 – 1.6.5 66 Handbook of International public Sector Accounting Pronouncements Volume 2 – 1.4.3 Whole of Government Financial Statements and Annual Appropriation Statement 65 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Recommendations     The ministry should liaise with the Fiji Institute of Accountant on governments plan to adopt IPSAS.
The consolidation of financial statements of controlled entities should be carried out.

The general ledger (FMIS) maintained by the Ministry of Economy should closed for any further entries while the Agency Financial Statements are submitted for audit at the stipulated time.

The performance measurement of heads of Ministries and Departments should also include the timely submission of annual reports inclusive of the audited Agency Financial Statements.
Management Comment    In one of the earlier discussions between MoE and FIA, the FIA had been made aware of government`s plans to adopt cash basis IPSAS as the stepping stone towards accrual accounting.

However, this was when adoption of Cash Basis IPSAS was still in its very preliminary planning stage.
Now that government is actually adopting the Standard; we agree that FIA should again be informed of the progress made given their mandated role as outlined under the FIA Act; The Ministry acknowledged that consolidation of controlled entities should be pursued given that it is one of the key mandatory requirements of Cash Basis IPSAS.

A challenge though is in defining the control parameters; The MoE acknowledged the need for timely submission of AFS as well as tagging of timely AFS submission to PSs KPIs.
12.3 General Ledger Accounts Write Offs The Minister may write off losses in respect of public money, state assets and agency assets.67 The power to write off losses includes the power to abandon or discontinue the recovery of revenue, debts and overpayments.

The Minister for Economy on 31st May 2016 approved for the write off of a sum of $1,874,524.69 from various accounts in the 2015.
Two adjustment exercises had already been carried out in 2013 and 2014 amounting to $96 million and $20 million, respectively.

A summary of the 2015 write off is shown in Table 12.1 below.
Table 12.1: 2015 Write off Account Bank Balance – Local Bank Term Loans for Social Services Drawings and Clearing Account Deposits, Deduction and Retention Money Net amount Adjusted ($) 10,691,700 13,666,299 11,847,445 20,579 Debits Accounts balances Total written off 36,226,023 Bank Balance – Overseas -1,248,352 67 Financial Management Act 2004 Section 34(1) Whole of Government Financial Statements and Annual Appropriation Statement 66 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 ____________________________ Account Bank Balance – TMA Accounts Receivable Term Loan for Economic Services Advances Consolidated Trust Fund Net amount Adjusted ($) -193,239 -14,673,908 -8,761,611 -385,752 -12,837,685 Credit Accounts balances Total written off -38,100,547 Total (Net) write off -1,874,525 The above finding shows that Ministries and Departments failed to properly account for general ledger account balances.
This indicates the lack of proper monitoring and reconciliation of these accounts.

The write off of asset accounts has also resulted in losses to government.

In addition to the above, Ministries and Department did not carry out a complete Board of Survey for the year ended 2015 which also impacted on the accuracy of the Statement of Losses.

Refer to Table 12.2 for details.
Table 12.2: Ministries/Department that did not carry out Board of Survey Ministries/Departments Ministry of Local Government, Housing, Environment Ministry of Sugar Ministry of Foreign Affairs Office of the President Ministry of Rural and Maritime Development and National Disasters Ministry of Education, Heritage and Arts Ministry of Agriculture Recommendations    Ministries and Departments should ensure that monthly reconciliations are properly carried out and reconciled to the FMIS and any variance are investigated and rectified accordingly and; Ministries and Departments should also ensure that internal controls are strengthened to avoid recurrence of discrepancies highlighted above, resulting in write offs.
Ministries/Departments should ensure that the Annual Board of Survey is carried out on a timely basis.

Management Comment Comments are noted, MoE will work towards implementing recommendations put forth by OAG.
Whole of Government Financial Statements and Annual Appropriation Statement 67 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ APPENDIX 1: Appropriation Statement 2015 Ministry/Department Appropriation68 Head No Immigration, National the Director of Public Office of the President Office of the Prime Minister Attorney General and Solicitor General Ministry of Finance Ministry of iTaukei Affairs Ministry of Security and Defence Ministry of Employment, Productivity and Industrial Relations Ministry of Foreign Affairs Office of the Auditor General Fijian Elections Office Judiciary Parliament Independent Commissions Office of Prosecutions Ministry of Justice Ministry of Communications Public Service Commission Ministry of Rural and Maritime Development and National Disaster Management Republic of Fiji Military Forces Fiji Police Force Ministry of Education, Heritage and Arts Ministry of Health and Medical Services Department of Housing Ministry of Women, Children and Poverty Alleviation Ministry of Youth and Sports Higher Education Institutions Ministry of Agriculture Ministry of Fisheries and Forests Ministry Resources Ministry of Industry, Trade and Tourism Ministry of Sugar Ministry of Public Enterprise Ministry of Local Government, Urban Development and Environment Ministry of Infrastructure and Transport and Mineral Lands of 40 41 Water Authority of Fiji Revised Amount ($) 4,202,825 14,305,045 17,181,186 80,803,224 10,283,017 Actual Expenditure 2015 ($) 3,827,804 12,553,159 13,755,679 77,480,472 9,717,730 Savings/(Over- spent) % ($) 375,021 1,751,886 3,425,507 3,322,753 565,287 9 12 20 4 5 ($) 4,202,825 14,305,046 17,181,187 80,803,208 10,283,016 7,152,924 7,152,924 7,128,406 24,518 0.3 15,734,753 15,734,709 15,305,910 428,799 41,779,542 4,082,574 7,089,092 40,382,831 8,888,234 10,249,191 41,779,536 4,082,574 7,089,092 40,382,832 8,888,234 10,249,191 41,255,330 3,329,801 5,119,295
Appropriation Act 2014 – Schedule 1 Whole of Government Financial Statements and Annual Appropriation Statement Page 68 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Ministry/Department Appropriation68 Head No Revised Amount Savings/(Over- spent) % 43 49 50 51 52 Fiji Roads Authority Peacekeeping Missions Miscellaneous Services Pensions, Gratuities and Compassionate Allowances Charges on Account of Public Debt Total ($) 653,788,560 72,626,918 156,850,907 ($) 653,788,560 72,626,918 218,073,007 Actual Expenditure 2015 ($) 559,396,677 68,611,388 176,576,117 ($) 94,391,883 4,015,530 41,496,890 42,343,300 42,343,400 38,878,319 3,465,081 430,719,000 974,662,732 3,424,738,358 4,029,903,414 972,678,004 3,659,054,020 1,984,728 370,849,395 14 6 19 8 0.2 9 Whole of Government Financial Statements and Annual Appropriation Statement
 Page 69 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ APPENDIX 2: Analysis of Arrears of Revenue as at 31/12/2015 Ministries / Department Revenue Types Over 5 years Total arrears % 60% Dependent & Pensions of Finance- Ministry of Finance-FRCA Direct Taxes-PAYE,VAT Ministry Pensions Ministry of Finance-FRCA Customs Ministry Surcharge Indirect Taxes-Customs Finance- for of Judiciary Ministry of Rural and Maritime Development and National Disaster Management Fiji Police Force Ministry of Health and Medical Services Ministry of Agriculture Ministry of Lands and Mineral Resources Ministry of Infrastructure Sector Water Authority of Fiji Communication Education Youth & Sports Fisheries & Forestry Government Printing ITC Industry & Trade Labour Oversees Peacekeeping Mission Solicitor General Surcharge loss of Government stores, misappropriation of revenue, vehicle, accidents, damage costs Court Fees and Court Fines Accommodation Guest, Administration & Sales, Agent Gas Cooking, Agent Yacht, Airline Operator, etc Licence-Arms License Hospital Fees, Health & Fumigation Quarantine Agriculture Produce & Inspection, Sale of Fish & Ice, Agricultural Comm.Sales Land & Survey Fees, Crown Schedule Land Rent Electricity Bills Water Rates Charges Total ($) 8,213,693 131,561 ($) nil nil nil nil nil nil nil nil nil 37,512,843 29,023,661 11,429,826 13,984 5,180 743,936 1,486 3,180 4,722 1,855,323 288 151,235,171 36.9% Nil Nil Nil Nil Nil Nil Nil Nil Nil Whole of Government Financial Statements and Annual Appropriation Statement Page 70 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ APPENDIX 3: Expenditures (Summary) Anomalies in Government Operating and Capital Head Ministry
 Operating Expense Issues Capital Expense Issues 1 Office of the President  2 Office of Minister the Prime Travelling advances totaling $776,850 was not reconciled and journalized to the relevant expenditure allocations during the year.
Consequently total expenditure was understated by $776,850 in the Statement of Receipts and Expenditure.

 No competitive quotes  No delivery dockets  Advance payment and goods still not received as date of audit.
 Anomalies in Small Grant Scheme Projects - Memorandum of Understanding do not state commencement date No progress report Plan not approved by Rural Local Authority No engineering certificate No completion certificate Incomplete work - - - - -  Expenditure charges not transferred to new appropriation Head  Misstatement of VAT in TMA  Missing Payment Vouchers  Overdrawn Funds.

 LPO not issued.

 Lack of monitoring released funds.


FNPF Reconciliation not up to date funds from miscellaneous for   Salary amendment forms not authorised.

 No proper acquittals received for operating grants given by the Ministry.

 No accounts audited utilization of grants.
 Expenditure Mispostings  Expenditure not budgeted for on  Understated Established Staff Expenditure  Variances Listing in Wages Dispute  Representative allowance claims not adequately supported  Overpayment of leave 4 Ministry of Finance 5 6 7 8 Ministry Affairs of iTaukei Ministry of Defense, National Security and Immigration Ministry of Employment, Productivity and Industrial Relations Ministry Affairs of Foreign Whole of Government Financial Statements and Annual Appropriation Statement Page 71 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues compensation  Overpayment of post allowance  Absence of personnel records to verify post allowance  No proper approval on hardship allowances  Overpayment per-diem allowances over- expenditure on travel expenses.
unbudgeted of  Payment of and expenditure  Payment Vouchers without supporting documents  Unretired Accountable Advance  Fine paid for Over-Stayers not recovered from them  Payment of Previous year expenditure 11 Judiciary 12 Parliament  Parliament The allocated $8,888,200 on its 2015 budget under SEG 6.

However, the Parliament Office did not provide any grant to other agencies and the funds were used for the operating of Parliament Office.
expenses 15 Ministry of Justice and Fiji Corrections Service  No proper arrangement for providing 3 meals per day @ $4.00 to single officers.

 Purchase without Tender Board approval.

 Payment from allocation – Payroll incorrect  Payment Anomalies: No competitive quotation, No LPO, from non-approved Purchase supplier & LPO issued after invoice.
16 Ministry Communication of  No Procurement Policy Steering Committee for  No proper supporting documents incidental payment of on expenses  Payment to Yalamanchili not substantiated as work not specified in invoice  Delay in selection of contractor  No valid indemnity cover from contractor  Delay in completion of project as per agreement and no claim of delay damages  Unutilized capital funds  No acquittals on grant  No monitoring of work Whole of Government Financial Statements and Annual Appropriation Statement Page 72 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues 17 Public Commission Service  Salaries and Wages Reconciliation not prepared  No invoices attached to payment substantiate to vouchers payment.
18 Ministry of Rural and Maritime Development and National Disaster Management 19 Republic of Fiji Military Forces  Incorrect payment of allowances   Non Maintenance of Person-to-  files not provided Post Listing  to Leave audit for leave compensation verification Accessories:  Unauthorized Procurement of No Uniform competitive quotes, payments made for last year procurement and no LPO issued  No Tender on purchase of Vaccine  Agreement signed Commission and Contractor  Defects Liability Period not stated not by  in the contract Liquidated damages not stated contract ad associated the in  Scope of Work not specified and documented in the contract  Schedules of payments not stated in the contract  Failure to deduct provisional tax  Poor Implementation of Self Help  Projects to engage approved Failure Whole Government Contractors - Emergency Water Supply Of  No LPO issued  No competitive quotation and no  delivery dockets Full payment of incomplete road works  No Contractual Agreement  Contractual agreement not vetted by SG's Office  Contractual agreements do not contain necessary details of work and timelines.
 Delay in construction and no completion certificate    PSIP - No monitoring and progress reports; no independent building engineer report; delay in completion Inadequate Management of Project Materials - Top Yard Store Items not taken on charge Payments procurements Planned Capital Projects not undertaken  Incomplete Capital Projects  Unjustified Capital Project Costs  No competitive quotation  Consecutive for previous years issues of LPO indicating splitting  No Memorandum of Agreement  No retention of funds  Issue of LPO after invoice just to regularize payments  Poor record keeping on items used on capital projects  Overspending Whole of Government Financial Statements and Annual Appropriation Statement Page 73 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues 20 Fiji Police Force  Lack of proper project preliminary assessment resulting  Estimated cost not realistic to actual cost in over- expenditure and drawing funds from other projects.
 Project not implemented  No Tender Process  Poor Monitoring of projects  No Acquittals on grants  Grants given without proper supporting documents  Unutilized Capital Funds  School Anomalies Incomplete capital projects No competitive quotation No Tender - - - - Missing Payment Vouchers  No approval for Contractor to sub- contract work  Lack of proper monitoring  Delay of installation of equipment  Work not according to agreement  funds & Incorrect retention performance bonds  Poor assessment of work  No contractual agreement  Delay in project completion with no claim on delay penalties  No valid indemnity cover  Unutilized capital funds 21 Ministry of Education, Heritage, National Culture and Arts 22 Ministry of Health and Medical Services  Outstanding Retirement of Accountable Advance  Use of Prepaid Expense for wages and purchase of goods and services  Over-expenditure: Staff Salary  No contractual agreement and no reconciliation on quantity received and invoice for Free Milk Initiative  Variations in quote and invoice for overseas medical price treatment  No competitive quotes against countries for overseas medical treatment  Over-expenditure in payroll  Establishment Post Approved Post exceed  Medicines short supplied by in supply in medicines near supplier and delay resulting expiry date.
 Discrepancy in Pharmaceutical stock records with actual stock on shelves  Expired Stock  Out of Stock Drugs and  Stock Consumables.

below minimum level predetermined  Stock in excess of  predetermined maximum level Incorrect application VAT resulting in VAT receivable of $11,906 instead of VAT payable of $10,030.

23 Department of Housing  Non Provision of Salaries and  Engagement of Contractor without Wages Reconciliation a tender process.
 Unauthorized use of funds by Contractor  Payment not according to agreement  No independent verification and inspection by the department  Delay in Tender Evaluation Process Whole of Government Financial Statements and Annual Appropriation Statement Page 74 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues  Delay in completion as per agreement and no claim of delay damages  No valid indemnity cover from contractor  No 3 competitive quotes  No monitoring and progress reports  Overpayment  Delay in processing applicants of grant recipients 24 Ministry of Women Children and Poverty Alleviation  Appointment of Officers without open, and transparent competitive selection process based on merit  Missing Payroll Records  New appointments paid above the minimum salary scale  Vacant Positions  Creation of project posts without proper approval  for failed funding  Continuous project Lack of supporting documents in Case Files - Poverty Benefit Scheme & Social Pension Scheme  No Standard Procedures Projects/Grants Operating for Women’s' 25 Ministry of Youth and Sports 30 Ministry of Agriculture  No Annual Review of the Schemes  Social Pension Assistance paid to dead recipients  Engagement of a Supplier without a Tender process  Unutilized Budgetary Allocation  No approval proper on   Anomalies reimbursement of tuition fees Lack of Monitoring of Grants in Grant Record Keeping - No file & payment not according to agreement.
  Medical and Police Reports of New Recruits not provided Incorrect PAYE deduction non-residents employees  Non-preparation of Wages and for 32 Ministry of Fisheries and Forests Salaries Reconciliation  Absent of Individual Work Plan (IWP)  No competitive quotes  Medical and Police Reports of New Recruits not provided  Overpayment of Wages  No Individual Work Plan (IWP)  No Contract Agreement  Payments not according to contract agreement  No valid competitive quotes  Splitting of Local Purchase Orders  Absence Tender Board Approval of  Diversion of Funds  Payments not according to  contract agreement Local Purchase Order raised after invoicing Whole of Government Financial Statements and Annual Appropriation Statement Page 75 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues  Absent of Succession Plan  Competitive quotes not obtained  Payment Vouchers not stamped paid  Misallocation of Expenditure  Use of Operating Funds for  No Contract Agreement  VAT Misposting  Diversion of Funds  Settlement of previous years outstanding accounts 33 Ministry of Lands and Mineral Resources 35 Ministry of Sugar Trading Manufacturing Account Incorrect payment of salaries Reconciliation not   Salary prepared on time  Purchase Orders not receipted  Payment Vouchers not stamped   paid Insufficient supporting documents for subsistence/meal claims Failure to update Fixed Assets Register 37 Ministry Local of Government, Housing and Environment  Misallocation of Expenditure 40 Ministry of Infrastructure and Transport  turnover  Payment of expenses from Inter- Department Clearance (IDC) Account.
The TMA for Workshop wages for 2015 was sales above the threshold of $100,000 and was not registered under VAT with FRCA.

However the Ministry charged VAT amounting labour costs to $19,218 on totaling $118,840.

 No competitive quotation  Missing Payment Vouchers  No Grant Agreement  No proper grant acquittals and from grant audited accounts recipients.
 Delay in project commencement  Tender no awarded to lowest and capable bidder  Grants not utilized for its intended purpose  Poor monitoring of projects  Delay in completion as per agreement / work programme  Advance payment without Ministry of Finance approval.
 Goods paid not fully delivered  Extra cost for change in design  No proper preliminary assessment of projects  No Government Tender Board endorsement in using contingency funds Failure to deduct Provisional Tax  No Contractual Agreement   Delay in Tender Process  Contract Agreement: - - - and Not vetted by SG’s Office Commencement completion date no specified Schedule of Work Summary not stated  Diversion of projects  Significant estimates designs cost variation for similar building to other funds of Whole of Government Financial Statements and Annual Appropriation Statement Page 76 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ Head Ministry Operating Expense Issues Capital Expense Issues  Construction not meeting required standard design  Missing Payment Vouchers  Project Records not properly maintained  Surplus materials upon  completion of project Items Not taken on charge at Project site  Building materials issued on loan to other projects  Delay in Supply of Hardware items by approved Contracted Supplier  Highly overstated project cost  estimates Failure approval for project workers  Overstocking of materials - slow overtime obtain to moving - Joinery Stores to  Non-compliance Implementation Schedule Project  Capital Projects not implemented in 2015 Whole of Government Financial Statements and Annual Appropriation Statement Page 77 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – MARCH 2017 _______________ APPENDIX 4: Accountable Advance Balance by Ministry/Department Head of Appropriation 1 2 4 5 6 8 11 15 30 32 33 34 35 36 37 40 Ministry Office of the President Office of the Prime Minister Ministry of Finance Ministry of iTaukei Affairs Ministry of Immigration, National Security and Defense Ministry of Foreign Affairs Judiciary Ministry of Justice and Fiji Corrections Service Ministry of Rural and Maritime Development and National Disaster Management Republic of Fiji Military Forces Fiji Police Force Ministry of
 Education, National Heritage, Culture and Arts Ministry of Health and Medical Services Department of Housing Ministry of Women Children and Poverty Alleviation Ministry of Youth and Sports Ministry of Agriculture Ministry of Fisheries and Forests Ministry of Lands and Mineral Resources Ministry of Industry, Trade and Tourism Ministry of Sugar Ministry of Public Enterprise Ministry of Local Government, Housing and Environment Ministry of Infrastructure and Transport Total Amount ($) 776,850 11,337 23,223 2,475 (5,261) 48,336 2,166 4,249 64,063 36,955 235,774 1,883,521 13,048 163,794 1,279 (8,297) 10,029 180,617 127,349 36,105 (909) 30 (4,754) 1,825 3,605,966 Whole of Government Financial Statements and Annual Appropriation Statement Page 78