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REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 2016-2017 Financial Statements of Government & 2016-2017 Agency Financial Statement of Ministry of Economy PARLIAMENT OF FIJI PARLIAMENTARY PAPER NO.
127 OF 2019 OFFICE OF THE AUDITOR-GENERAL – REPUBLIC OF FIJI Location : Level 8, Ratu Sukuna House 2-10 MacArthur Street Suva, Fiji P. O Box : 2214, Government Buildings Suva, Fiji Telephone : (679) 330 9032 E-mail : info@auditorgeneral.gov.fj Website : www.oag.gov.fj OUR VISION Excellence in Public Sector Auditing OUR MISSION • • To provide world-class, independent and objective value-adding audit services To provide a working environment which allows our people to excel OFFICE OF THE AUDITOR GENERAL Excellence in Public Sector Auditing 6-8TH Floor, Ratu Sukuna House 2-10 McArthur St P. O.
Box 2214, Government Buildings Suva, Fiji Telephone: (679) 330 9032 Fax: (679) 330 3812 E-mail: info@auditorgeneral.gov.fj Website: http://www.oag.gov.fj File: 102 30 August 2019 The Honorable Ratu Epeli Nailatikau Speaker of the Parliament of the Republic of Fiji Government Buildings Constitution Avenue SUVA Dear Sir AUDIT REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT AND 2016- 2017 AGENCY FINANCIAL STATEMENTS OF MINISTRY OF ECONOMY In accordance with section 152(13) of the Constitution of the Republic of Fiji, I am pleased to transmit to you my report on 2016-2017 Financial Statements of Government and 2016-2017 Agency Financial Statements of Ministry of Economy.
A copy of the report has been submitted to the Minister for Economy who as required under section 152(14) of the Constitution shall lay the report before Parliament within 30 days of receipt, or if Parliament is not sitting, on the first day after the end of that period.

Yours sincerely Ajay Nand AUDITOR-GENERAL Encl.
CONTENTS Part A: Part B: Part C: 2016-2017 Financial Statements of Government Report on the Financial Statements of Government 2016-2017 Statement of Ministry of Economy Agency Financial Part A: 2016-2017 Financial Statements of Government Part B: Report Statements of Government the on Financial REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The Office of the Auditor-General – Republic of Fiji The Office of the Auditor-General is established as an Independent Office by the Constitution of the Republic of Fiji.
Its roles and responsibilities include audit of the accounts of the Consolidated Fund and Financial Statements of Government and Annual Appropriation Statement required to be included in the Whole of Government annual report for a financial year under the Financial Management Act 2004.

The audit extends to audit of the accounts of all money received or held by a State entity, whether or not for purposes of Government.

These audits are carried out by the Auditor-General on behalf of Parliament.
At least once every year, the Auditor General must report to Parliament on the audits conducted and on other significant matters the Auditor-General wishes to bring to the attention of Parliament.

This report satisfies these requirements.

As a result of its mandate, the Office of the Auditor-General has a distinctive view of the entire public sector of matters affecting financial and non-financial performance.
We use this perspective to achieve our vision of excellence in public sector auditing by providing comprehensive analysis and value-adding recommendations.

The Office of the Auditor-General notes the impact of its reports to Parliament on the ordinary citizens and strives for accuracy and high quality reporting including recommendations which are not only value-adding to the entity subject to audit but its customers, the general public as well.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI TABLE OF CONTENTS Introduction ........................................................................................................................................... 5 Budget sectors ................................................................................................................................... 5 Unallocable expenditures.................................................................................................................. 5 2016-2017 Budget ............................................................................................................................... 5 Changes in format for reporting to Parliament ............................................................................... 6 Results of our audits .......................................................................................................................... 6 Financial performance, position and sustainability ......................................................................... 7 Statement of Revenue and Expenses ............................................................................................... 8 Understanding financial position (Statement of Assets and Liabilities)................................... 12 Understanding sustainability....................................................................................................... 13 Financial Flexibility ....................................................................................................................... 13 Financial Vulnerability .................................................................................................................. 14 Understanding internal controls .................................................................................................
15 Reference to comments .................................................................................................................. 16 Report structure .............................................................................................................................. 16 1.0 Context ..................................................................................................................................... 17 Legislative framework .................................................................................................................... 17 Annual Financial statements of State-Agencies (Ministries & Departments) ............................ 18 Consolidation process ..................................................................................................................... 18 Role of the Auditor-General ........................................................................................................... 19 Reporting to Parliament ................................................................................................................. 20 2.0 Types of audit opinions issued ..................................................................................................... 21 Results of our audits ........................................................................................................................... 22 Chapter Summary ............................................................................................................................ 22 Key findings ...................................................................................................................................... 22 Audit conclusions ............................................................................................................................. 22 Introduction ..................................................................................................................................... 23 Conclusion
23 Conclusion ........................................................................................................................................ 23 3.0 Audit Opinion results .............................................................................................................. 24 Modified opinions ........................................................................................................................ 24 Reasons for modified audit opinions were as follows: .............................................................. 24 Unmodified opinions ................................................................................................................... 26 Common key findings .................................................................................................................. 26 Quality of draft agency financial statements ..................................................................................... 27 Timeliness of financial reporting ......................................................................................................... 28 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Year-end closing process ..................................................................................................................... 30 Financial Statements of Government ................................................................................................. 31 Consolidated Fund reporting .......................................................................................................... 31 Consolidated Trust Account ............................................................................................................ 31 Appropriation statement
 ................................................................................................................ 31 Quality of financial report ................................................................................................................ 32 Result of our audits .......................................................................................................................... 40 Key Changes in the Financial Statements of Government ............................................................ 40 4.0 Financial position, performance and sustainability .............................................................. 41 Chapter Summary ............................................................................................................................ 41 Introduction ..................................................................................................................................... 41 Sectors of government covered ................................................................................................. 41 Assessing position and performance .......................................................................................... 42 Net operating balance ................................................................................................................. 42 Net operating Result.................................................................................................................... 42 Equity ............................................................................................................................................ 43 Contingent Liabilities ................................................................................................................... 44 Understanding financial performance ........................................................................................ 45 Revenue
45 Revenue ............................................................................................................................................ 46 Expenditure ...................................................................................................................................... 48 Payroll expenditures ........................................................................................................................ 50 Investments ...................................................................................................................................... 51 Term loan Receivable ...................................................................................................................... 53 Arrears of revenue ........................................................................................................................... 53 Accounts payable ............................................................................................................................. 54 Results from operation of Trading & Manufacturing Accounts .................................................... 54 Trust Fund Accounts ........................................................................................................................ 55 Term loans payable .......................................................................................................................... 56 Public debt sustainability ............................................................................................................. 56 5.0 Assessment of Internal Controls ............................................................................................ 59 Chapter summary ............................................................................................................................. 59 Introduction ..................................................................................................................................... 59 Internal control framework.
............................................................................................................ 59 Internal controls ............................................................................................................................... 60 6.0 Significant Audit Matters ........................................................................................................ 65 Key findings ...................................................................................................................................... 65 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix A: Assessment of Financial Governance ........................................................................... 66 Internal controls .............................................................................................................................. 66 Preparation of Draft 2016-2017 Agency Financial Statements ..................................................... 66 Quality of Draft Financial Statements by Entities ......................................................................... 66 Timeliness of Draft Financial Statements for Entities .................................................................. 67 Timeliness of Management Comments ......................................................................................... 67 Timeliness of Signed Accounts Received ...................................................................................... 67 Result summary ............................................................................................................................... 68 Appendix B: Audit Opinion Results .................................................................................................... 70 Appendix C:
70 Appendix C: Glossary........................................................................................................................... 72 Appendix D: OAG Analysis Based on the 2016-2017 Financial Statements of Government ........... 74 CASH AND CASH EQUIVALENTS ..................................................................................................... 74 BORROWING FUND ACCOUNT ....................................................................................................... 75 Borrowings over the 15 Year Period ............................................................................................. 75 Trends in Government Borrowing by Category ............................................................................ 76 Loan Repayments .......................................................................................................................... 77 Domestic Bonds ............................................................................................................................ 79 Borrowings & Interest Payments .................................................................................................. 80 Overseas Borrowings .................................................................................................................... 81 Yearly Overseas Borrowings ......................................................................................................... 81 Overseas Borrowings Outstanding & Interest Paid ...................................................................... 83 Revaluation of Overseas Borrowings ............................................................................................ 84 Treasury Bills ................................................................................................................................. 84 Treasury Bills Over a 15-year Period ............................................................................................. 86 Treasury Bills Management
 ......................................................................................................... 87 Ways and Means ........................................................................................................................... 88 Financial Flexibility ........................................................................................................................ 88 Financial Vulnerability ................................................................................................................... 89 INVESTMENTS .................................................................................................................................. 95 Return on Investments .................................................................................................................. 95 Analysis of Dividends and Investments ......................................................................................... 96 Dividends Remitted per Entity ....................................................................................................... 96 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Introduction All ministries and departments prepare annual agency financial statements.
Permanent Secretaries and management of these agencies are responsible for the preparation and fair presentation of the financial statements in accordance with requirements of Financial Management Act 2004 and other applicable laws and regulations.
This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error, selecting appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

The Permanent Secretary for Economy is responsible for consolidating the financial data of all ministries and departments into the Financial Statements of Government.
These financial statements separately disclose expenditure against appropriation heads for sectors which include general administration, social services, economic services and infrastructure services.

Certain expenditures which cannot be allocated to any of these sectors are reflected as unallocable.

The accounts of other public entities have not been consolidated with those of government based on the decision of Ministry of Economy.
Budget sectors The General administration sector includes the Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Economy, Ministry of i-Taukei Affairs, Ministry of Defence, National Security and Immigration, 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 the Director of Public Prosecutions, Ministry of Justice, Fiji Corrections Service, Ministry of Communication, Ministry of Civil Service, Ministry of Rural and Maritime Development and National Disaster Management, Republic of Fiji Military Forces, Fiji Police Force and Peacekeeping Missions .
The Social services sector covers 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 and Higher Education Institutions.
Economic services sector includes 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 and Ministry of Local Government, Housing and Environment.

The Infrastructure sector covers Ministry of Infrastructure and Transport and grants paid to Water Authority of Fiji and Fiji Roads Authority.
These entities prepare separate financial statements which are audited by the Auditor-General.

Unallocable expenditures Unallocable expenditures include miscellaneous services, pensions, gratuities and compassionate allowances and finance charges on public debt.

2016-2017 Budget Severe devastation was caused by TC Winston in February 2016 that resulted in total damage and loss to the economy of an estimated $2.85 billion.
As a result, Government designed the financial year 2016 - 2017 budget to meet the costs relating to rehabilitation of public infrastructure including ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI schools, health facilities and housing.
It was anticipated that the systematic programming of rehabilitation expenditure through the budgetary process will smoothen out in the latter years.

The re-focusing of expenditure was also anticipated to have a positive impact on medium to long term macroeconomic fundamentals of the country.

The increased expenditure will stimulate economic activity across a number of sectors and in turn support employment creation, raise consumption levels and provide further impetus for growth.
1 The financial position and expenditure of Government against the approved budget, has been considered against this context in this report.

Changes in format for reporting to Parliament Prior year’s Auditor-General’s reports on the Financial Statements of Government and Annual Appropriation Statement contained a combination of financial analysis and recommendations for improvements which at times was found to be confusing to the users of the report.
The revised reporting format for this report is consistent with formats used by other national audit offices, separates the analysis from the audit findings.

The significant audit findings and recommendations are discussed under the heading “Significant audit matters” section of this report in Chapter 6.

However, the format for reporting of results of audit of ministries and departments for various sectors has been retained pending review.
Changes which have been introduced in these reports include status of controls, timeliness and quality of financial statements by sector.

This report summarizes our analysis of the financial position, performance, sustainability and timeliness and quality of financial reporting by ministries and departments.

The report also includes the results of internal control reviews in respective agencies.
It is important to note that the deficiencies detailed in this report were identified during our audit and may have been subsequently resolved by the entity.

These have been included in this report as they impacted on the overall system of control of the ministries and departments as at 31 July 2017.

Results of our audits We have issued audit opinions on agency financial statements of 33 Ministries and Departments.
Quality and timeliness of Financial Statements  The draft financial statements of 18 or 55% of Ministries/Departments were timely and 29 or 88% of Ministries/Departments were of good quality.

 Management comments on draft management letters for 16 or 48% of Ministries/Departments were received on time and audited accounts for 18 or 55% of Ministries/Departments were signed and returned on time.

 We issued unmodified opinions on 21 or 64% of the agency financial statements for 2016-2017.
1 2016-2017 Budget Supplement – 22 June 2016 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI For the 2017 financial year, we issued 21 or 64% unmodified opinions on 33 of the agency financial statements compared to 21 unmodified opinions on 34 of the agency financial statements for the 2016 financial year.
This reflects a slight increase in percentage of unmodified opinions issued for 2017 financial year when compared to 2016.

In accordance with International Standards on Auditing (ISA), we express an unmodified opinion (unqualified) when the financial statements are prepared in accordance with the provisions of the Financial Management Act 2004 and with relevant legislative requirements.
This type of opinion indicates that material misstatements, individually or in the aggregate, were not noted in our audit, which would affect the financial statements of an entity.
We issue a modified opinion (qualified) when having obtained sufficient appropriate audit evidence, we conclude that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or we are unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.
Refer to Table 1.1 below for details.

Table 1.1: Independent Audit Reports issued for 2016 - 2017 financial year Sector Unmodified Opinions Modified Opinions Total Number of Audits Percentage of Total 21 64% 12 36% 33 100% While majority of the ministries and departments submitted the draft financial statements for 2017 before the deadline of 16 October 2017 set by Ministry of Economy, 15 or 45% of the agencies were significantly late in submitting their financial statements which delayed our audit.
The delay was attributed to the following:  Corrections of errors and omissions in draft financial statements submitted to audit ;  Adjustments and virements passed ;  Delay in submission of management comments for issues raised in draft management letter which affected the draft financial statements ; and  Documents not provided for audit purposes.

The draft financial statements for 2016 - 2017 of 21 or 64% of ministries and departments were not adjusted during our audit.
The remaining financial statements were adjusted through audit adjustments and adjustments passed by respective Ministries/Departments after submission of draft financial statements for our audit.

Financial performance, position and sustainability Each year, the Permanent Secretary for Economy prepares the Financial Statements of Government and Annual Appropriation Statement.
These statements provide a consolidated view of the revenues, expenses, assets and liabilities and cash flows of state-agencies excluding controlled entities.

The statements also reflect actual expenditure against approved and revised budget by sectors and appropriation heads and revenue collected by economic type.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Financial Snapshot The key financial statement items namely expenditure, revenue, cash and cash equivalents, term loans receivables, investments, trust fund accounts, terms loans payable and equity are discussed below.
The 2017 financial year was for 12 months from 01/08/16 – 31/07/17 and 2016 financial year was for 7 months from 01/01/16 – 31/07/16.

Thus for comparison of Statement of Revenue and Expenses, the 2017 financial year is compared in this report with 2015 since both financial year were for 12 months.

However for Statement of Assets and Liabilities, the comparison is between 2017 and 2016 financial year since the Statement of Assets and liabilities are as at balance date.
Statement of Revenue and Expenses Table 1.2 provides a snapshot of revenue and expenses for 2017 in comparison to 2015.
Table 1.2: Revenue and Expenses snapshot Description 31/07/17 Indicator 31/12/15 ($) 766,055,195 1,813,120,249 127,840,431 220 44,298,661 30,858,490 ($) 605,113,135 1,754,750,096 105,511,209 382 41,813,616 19,252,509 Increase/ (Decrease) ($) 160,942,060 58,370,153 22,329,222 (162) 2,485,045 11,605,981 Direct Taxes Indirect Taxes Fees, Fines and Charges Operating Revenue Sales Other Receipts Reimbursements and Recoveries Grant Aid 18,771,402 18,321,910 449,492 Total Operating Revenue 2,800,944,648 2,544,762,857 256,181,791 Repayments of Term Loan Receivable Sale of Government Assets Dividends from Investments Interest from Bank Balances Return of Surplus Capital from Investment Recovery of Scholarship Bonds Total Investing Revenue 1,398,587 2,470,837 25,308,640 1,156,531 6,162,446 270,831 1,127,756 188,173,658 (185,702,821) 62,331,570 309,535 (37,022,930) 846,996 4,361,514 1,800,932 --- 24,821 (24,821) 36,497,041 255,471,929 (218,974,888) Total Revenue 2,837,441,689 2,800,234,786 37,206,903 Operating Expenditure Capital Expenditure Total General Administration Services 593,142,733 60,340,461 653,483,194 550,181,444 42,961,289 54,098,918 6,241,543 604,280,362 49,202,832 Operating Expenditure 763,344,255 721,059,208 42,285,047 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Description 31/07/17 Indicator 31/12/15 Capital Expenditure Total Social Services Operating Expenditure Capital Expenditure ($) 55,812,027 819,156,282 108,281,854 110,496,336 ($) 56,448,619 Increase/ (Decrease) ($) (636,592) 777,507,827 41,648,455 94,297,812 89,593,357 13,984,042 20,902,979 Total Economic Services 218,778,190 183,891,169 34,887,021 Operating Expenditure Capital Expenditure Total Infrastructure Services Operating Expenditure Capital Expenditure Total Miscellaneous Services 160,075,309 484,373,220 644,448,529 62,288,177 314,579,750
 376,867,927 130,925,366 722,085,594 29,149,943 (237,712,374) 853,010,960 (208,562,431) 122,789,900 50,458,614 (60,501,723) 264,121,136 173,248,514 203,619,413 Pensions, Gratuities and Compassionate Allowance Value Added Tax Interest Payments on Loans Total Unallocable 34,880,413 38,878,319 (3,997,906) 35,913,968 276,746,090 347,540,471 55,558,866 295,416,310 (19,644,898) (18,670,220) 389,853,495 (42,313,024) Total Expenditure 3,060,274,593 2,981,792,327 78,482,266 Key Financial Ratio Operating Margin2 1.63 1.60 0.03 Increase from previous year Decrease from previous year The operating revenue increased by $256,181,791 or 10% in 2017.
However, investing revenue decreased by $218,974,888 or 86%.

Overall, revenue increased by $37,206,903 or 1%.

The increase in revenue was mostly from direct taxes, indirect taxes and fees, fines and charges.

Expenditure for all sectors increased except for infrastructure services which decreased by $208,562,431 and unallocable by $42,313,024.

Overall the expenditure increased by $78,482,266 or 3%.

The net operating result with and without Capital Expenditures is shown in Figure 1.1 below.
2 Operating margin benchmark is > 1.0 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 9 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.1: Underlying Net Operating Result with and Without Capital Expenses (Five Year Trend) 808 869 1,000 800 600 400 ) s n o m $ ( i l l i 200 - 340 (200) (400) 31/7/17 31/7/16 (218) (250) 31/12/15 (176) With Capital Expenses Without Capital Expenses 549 582 31/12/14 (348) (38) 31/12/13 (600) Years Source: Figures from 2017 and previous years audited Financial Statements of Government were used to compute the figures in the graph above The Government’s Net Operating balance (with capital expense) had remained in deficit for the last five years.
The net operating deficit decreased by 13% from $250 million in 2016 to $218 million in 2017.

The Government had a Net Operating Surplus (without capital expenses) of $808 million for the year ended 31 July 2017.

This has remained positive over the last five years.

Payroll Details The payroll expenditure of the government has established staffs and government wage earners.
The established staff and government wage earners include full-time staff employed on contractual basis and project staff employed for specific projects within Ministries/Departments.

The payroll expenditure includes personal emoluments, contributions to Fiji National Provident Fund, various allowances and overtime.

Payroll costs and number of employees from 2013 to 2017 are shown in Table 1.3 below.
Table 1.3: Payroll details Established Staff Actual Payroll Number of Employees Average Cost per employee Government Wage Earners Actual Payroll Number of Employees Average Cost per employee Overall Total Actual Payroll Number of Employees 2013 2014 2015 ($) ($) ($) 2016 (7 months) ($) 2017 ($) Source: Actual payroll amount for Established staff and Government Wage Earners were extracted from Notes to 2017 financial statements and previous years audited financial statements of government.
Number of Established staff were extracted from payroll reports from FMIS payroll and number of Government Wage Earners were provided by Salaries Section of Ministry of Economy.

___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 10 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The payroll expenditure for established staff has been increasing from 2013 to 2017.
The decline in 2016 was due to financial period of 7 months.

Government Wage Earners had a similar trend except for a slight decrease in 2015.

In 2017, the number of established and government wage earners was the highest amounting to 23,932 and 4,642 respectively.

As a result, the average cost per employee of established staff and government wage earners increased to $33,451 and $11,517, respectively.

The total payroll expenditure in 2017 was $854,008,270 with actual number of 28,574 employees.
The overall average payroll cost per employee was $29,888.

The Figure 1.2 below shows budgeted and actual established staff and government wage earners and employee numbers from 2013 to 2017.

Figure 1.2: Trends in Payroll ) s n o i l l i m $ ( 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 - 800 782 728 720 829 838 801 572 582 458 41 40 45 46 45 44 28 48 53 56 31/12/13 31/12/14 31/12/15 31/7/16 31/7/17 29,000 28,000 27,000 26,000 25,000 ) s e e y o p m E l f o .
o N ( 24,000 23,000 Established Staff-Budgeted ($m) Established Staff-Actuals ($m) GWE-Actuals ($m) GWE-Budgeted ($m) No.
of Employees ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 11 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Understanding financial position (Statement of Assets and Liabilities) Table 1.4 provides a snapshot of assets and liabilities for 2017 in comparison to 2016.
Description 31/07/17 Indicator 31/07/16 Cash and Cash Equivalents Accounts Receivable Prepayments Inventory Term-Loans Receivable Equity Investments Total Assets Liabilities Accounts Payable Deferred Income Trust Fund Account Term Loans Payable - Treasury Bills Term Loans Payable - Overseas Loans Term Loans Payable - Domestic Loans Total Liabilities ($) 289,753,141 114,406,946 1,203,897 3,441,302 481,928,586 440,342,400 1,331,076,272 95,014,885 5,115,009 197,199,489 94,884,303 1,367,960,883 3,204,762,346 4,964,936,915 ($) 218,496,898 83,468,643 1,700,879 3,971,882 397,505,809 445,303,322 1,150,447,433 Increase/ (Decrease) ($) 71,256,243 30,938,303 (496,982) (530,580) 84,422,777 (4,960,922) 180,628,839 100,948,253 3,230,049 143,329,585 163,844,780 1,258,728,393 3,079,850,613 4,749.931,673 (5,933,368) 1,884,960 53,869,904 (68,960,477) 109,232,490 124,911,733 215,005,242 Net Liability (3,633,860,643) (3,599,484,240) (34,376,403) Key Financial Ratios Current ratio3 Debt to equity ratio Debt to asset ratio 0.67 (1.37) 3.73 0.55 (1.32) 4.13 0.12 (0.05) (0.40) Increase from previous year Decrease from previous year The total assets increased by $180,628,839 or 16% due to the increase in cash and cash equivalents by $71,256,243 and term loan receivables by $84,422,777 and accounts receivable by $30,938,303.
The liabilities increased by $215,005,242 or 5% due to increase in trust fund accounts by $53,869,904, term loans payable – overseas loans by $109,232,490 and term loans payable – domestic loans by $124,911,733.

The increase in trust fund was due to opening up of new trust fund accounts in 2017.

The increase in term loan payable was due to increase in government borrowing.
Total assets as at 31/07/17 was $1.3 billion against total liabilities of $4.9 billion resulting in a net liability of $3.6 billion as at 31/07/17.

For every $1 of assets there is $3.73 of liabilities indicating an unfavourable financial position of the government as at 31/07/17.

The, overall the net liability of the government declined by $34.4 million or 1% from 31/07/16.
3 Current ratio benchmark is > 1.0 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 12 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Understanding 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 (GDP).

The total Government debt as a percentage of GDP is an indication of debt sustainability relative to the production of goods and services.

Figure 1.3 below is the Debt Sustainability for the Government for the last five years.
Figure 1.3: Movement in Debt Sustainability for the Government debt to GDP Total Debt 4,668m 4,502m 4,221m 4,083m 3,825m GDP 9,865m 9,853m 9,211m 8,436m 7,716m Debt to GDP Ratio Financial Year Ended 47% 46% 46% 48% 50% 31/7/17 31/7/16 (7 months) 31/12/15 31/12/14 31/12/13 % Change 1 0 2 2 2 Source: Total Debt and Gross Domestic Product (GDP) figures were extracted from 2017 and previous years audited Financial Statements of Government.
An increase in debt to GDP ratio indicates there is slightly more burden of debt against the total production of goods and services by the government.

The provisional GDP amount provided by the Reserve Bank of Fiji Macroeconomic Committee for the fiscal year and was reflected in the Financial Statements of Government amounted to $9,865,489,759 (p).
The GDP amount recorded by the Fiji Bureau of Statistics for the calendar year was $8,407,931,155.4 Financial Flexibility in Furthermore, a good debt financial resources or revenue to respond to increasing financial commitments either by expanding the revenue or increasing the debt burden.

is financial flexibility.

This shows the indicator increase This indicator would show the percentage of total debt repayments against the total revenue for the economy.
Figure 1.4 below shows the Debt Financial Flexibility for the Government for the last five years.
4 Written confirmation provided by Fiji Bureau of Statistics on 17 April 2019 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 13 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.4: Movement in Debt Financial Flexibility for the Government Debt Repayment 664m 433m 1,286m 747m 577m Revenue 2,859m 1,515m 2,820m 2,393m 2,120m Debt Repayment to Revenue 23% 29% 46% 31% 27% Financial Ended Year 31/7/17 % Change 6 31/7/16 (7 months) 17 31/12/15 31/12/14 31/12/13 15 4 9 Source: Debt Repayment and Revenue figures were extracted from 2017 and previous years audited Financial Statements of Government.
A lower percentage of debt to be repaid from total revenue is a good indicator for government as this indicates that a larger percentage of revenue is available to be used for other government programs.

Financial Vulnerability Financial Vulnerability measures the total exposure of government to exchange rate and other market risks through its dependence on external borrowings.

The lesser the proportion of total external borrowings in comparison to domestic debt, the better it is for the government.
Figure 1.5 below shows the Financial Vulnerability measure for the Government for the last five years.
Figure 1.5: Movement in Financial Vulnerability Measure for the Government External Debt 1,368m 1,259m 1,241m 1,254m 1,081m Total Debt 4,668m 4,502m 4,221m 4,083m 3,825m External debt to Total debt 29% 28% 29% 31% 28% Financial Ended Year 31/7/17 % Change 1 31/7/16 (7 months) 1 31/12/15 31/12/14 31/12/13 2 3 3 Source: Debt figures were extracted from 2017 and previous years audited Financial Statements of Government.
The government has a debt mix of approximately 30% external borrowings against 70% Domestic borrowings.

However, the lesser the reliance on external borrowings, the better it is for the government.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 14 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Understanding internal controls Good internal controls provide reasonable assurance that ministries or departments are achieving its objectives relating to operations, reporting and compliance.
We assess the financial controls used by the public sector entities using the following five key elements: (i) Control environment – actions, attitudes and values that influence daily operations (ii) Risk assessment – processes for identifying, assessing and managing risk (iii) Monitoring activities – oversight of internal controls for existence and effectiveness (iv) Control activities – policies, procedures, and actions taken to prevent or detect errors (v) Information and communication – systems to inform staff about control responsibilities When we identify that internal controls in any of these elements are missing or are not operating as intended, we refer to them as control deficiencies (audit finding).
If we identify that a control deficiency, either alone or in combination with other deficiencies, may lead to a material misstatement in the entity’s financial statements, we refer to this as a significant audit finding.

If we identify a deficiency (audit finding) with any of these internal controls as part of our audits, we report the finding to the entity’s management.
The internal controls for the Ministries and Departments were assessed and categorized as effective, generally effective and ineffective.

Summary of control assessments across whole of government are shown in Table 1.5 below.
Table 1.5: Summary of control assessments Number of Ministries/Departments Control Environment Risk Assessment Control Activities (CE) (RA) (CA) Information and Communication Control (IC) Monitoring Activities (MA) General Administration Effective Generally Effective Ineffective Total Social Services Effective Generally Effective Ineffective Total Economic Services Effective Generally Effective Ineffective Total Infrastructure Services Effective Generally Effective Ineffective Total Source: OAG 15 2 3 20 1 2 2 5 2 1 4 7 --- 1 --- 1 13 6 1 20 2 2 1 5 2 2 3 7 --- --- 1 1 12 7 1 20 1 3 1 5 3 --- 4 7 --- 1 --- 1 18 1 1 20 3 2 --- 5 3 1 3 7 --- 1 --- 1 16 3 1 20 3 2 --- 5 4 --- 3 7 --- --- 1 1 It is noted that the internal controls for majority of the ministries and departments are collectively effective.
Detailed discussion of internal controls in ministries and departments and deficiencies noted are reported in the respective sector reports.

These include Parliamentary Paper No.

07 of ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 15 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 2019, Parliamentary Paper No.

08 of 2019, Parliamentary Paper No.


09 of 2019 and Parliamentary Paper No.

10 of 2019.

Reference to comments Responses provided by Ministry of Economy have been incorporated in this report where applicable.

Responses from ministries and departments are incorporated in the sector reports.
Report structure Chapter Summary Audit Report on Financial Statements of Government and Appropriation Statement for the year ended 31 July 2017 Chapter 1 Provides context for audit findings and conclusions 2 Discusses the types of audit opinions 3 Evaluates the audit opinion results, timelines and quality of reporting 4 Provides financial analysis 5 Assess the strength of internal controls in ministries & departments 6 Discusses significant audit matters in the 2017 Financial Statements of Appendix Government.
Appendices containing Assessment, Audit Opinions, Glossary and Analysis on Financial Statements of Government ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 1.0 Context Legislative framework The following legislation establishes the financial accountability frameworks and legislative time frames to complete financial statements audits for state-agencies.
Refer to Table 1.6 below.
Table 1.6: Legislative framework Entity Type Legislative Framework Financial Government Statements of Ministries & Departments      Financial Management Act 2004 Sector International Accounting (IPSAS) financial reporting under cash basis of accounting Public Standards Financial Management Act 2004 Finance Instructions 2010 Finance (Amendment) 2016 Instructions Legislative Timeframe 30th April 30th April Financial Management Act 2004 states the following principles of responsible finance management: (a) (b) (c) (d) (e) to manage finance over a medium term on a responsible and transparent basis; to manage revenues and expenditure in such a way as to achieve prudent levels of debt; to ensure value for money in the use of money and resources; to manage contingent liabilities in a prudent manner; and to report transparently in accordance with relevant accounting and statistical standards.
The legislation further states that the Minister is responsible for managing the financial affairs of the Government as a whole in accordance with the requirements of the Constitution of Republic of Fiji and the Act and with due regard to the principles of responsible financial management.
In addition, the responsible authority for a state-entity (Ministry/Department) is responsible for managing the financial affairs of the entity in accordance with the requirements of the Act and with due regards to the principles of responsible financial management.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 17 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Annual Financial statements of State-Agencies (Ministries & Departments) Each state-agency must prepare the following statements as required by Section 71 (1) of the Finance Instructions 2010 as part of annual financial statements: Statement of receipts and expenditure; Profit and loss statement for each trading and manufacturing activity(where applicable);    Appropriation statement;  Statement of assets and liabilities for each trading and manufacturing activity (where applicable);  Notes to the statement of assets and liabilities for each trading and manufacturing activity (where applicable); Statement of losses; Trust account statement of receipts and payments (where applicable).
  On 1 June 2017, Ministry of Economy issued a circular number 04/2017 to all state-agencies to submit the draft 2017 annual financial statements to the Auditor-General by 16 October 2017 for audit.

Except for trading and manufacturing accounts which are accounted for on accrual basis, state- agencies prepare their financial statements using Financial Management Act 2004, Finance Instructions 2010 and Finance (Amendment) Instructions 2016.
Each year State-agencies must prepare and make publicly available, for each financial year, an annual report which must be tabled in Parliament by the responsible Minister.

The annual report must include the audited annual financial statements and audit report issued by the Auditor- General for the financial year.
The audited financial statements are used by a broad range of users such as parliamentarians, non- governmental organizations, donor agencies, employees, suppliers, lenders and the general public.

The Auditor-General’s audit opinion on these financial statements gives reasonable assurance to the users that the financial statements are accurate and can be relied upon.
Consolidation process The accounts of state-agencies are consolidated with those of Ministry of Economy using International Public Sector Accounting Standards (IPSAS): Financial Reporting under Cash Basis of Accounting reporting requirements, Cabinet decision 277 of 2010 and disclosures made as required by Financial Management Act 2004.

Additional statements are prepared in accordance with modified cash.
Consolidated financial statements include state-agencies which are part of the national budget estimates and financials of those agencies outside the budget, such as Trading and Manufacturing Accounts and Trust Accounts, as required by law.

Intra-economic entity transactions, receipts and expenditures are eliminated on consolidation.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 18 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Role of the Auditor-General The Constitution of Republic of Fiji states that at least once every year, the Auditor-General shall inspect, audit and report to Parliament on - (a) (b) (c) the public accounts of the State; the control of public money and public property of the State; and all transactions with or concerning the public money or public property of the State.
In the report, the Auditor-General must state whether, in his or her opinion – (a) transactions with or concerning the public money or public property of the State have been authorized by or pursuant to the Constitution or any written law; and (b) expenditure has been applied for the purpose for it was authorized.
In addition to the above, the Auditor-General is responsible on behalf of Parliament, to audit – (a) the accounts of the Consolidated Fund; (b) the Financial Statements of Government and annual appropriation statement required to be included in the Whole of Government Annual Report for a financial year under the Financial Management Act 2004; and (c) the accounts/financial statements of all state entities required to be included in the annual report for a financial year.
The Auditor-General must satisfy himself or herself that - (a) the accounts have been faithfully and properly kept; (b) expenditure has been properly authorized, properly applied and otherwise properly accounted for: (c) where applicable, all reasonable precautions have been taken to safeguard the collection of public money and trust money and other money and that the laws, directions and/or instructions relating to its collection have been duly observed; (d) where applicable, expenditure of money appropriated by Parliament has been applied to the purposes for which the money was appropriated; and (e) provisions of the Constitution of the Republic of Fiji and of the Financial Management Act 2004, and of any other law relating to money or property subject to his or her audit, have been complied with in all material respects.
The Auditor-General may conduct audits in the manner considered appropriate but must ensure that they are conducted in a competent manner having regard to assessment of effectiveness of any relevant internal control system.

The Auditor-General must carry out the audit in accordance with the relevant provisions of the standards on auditing issued by the Fiji Institute of Accountants or other relevant standards considered appropriate.
Following completion of an audit, the Auditor - General must give an opinion on each set of financial statements audited.

In addition, a management letter should be issued to the responsible authority for each entity audited.

The Auditor-General’s responsibility is to express an opinion on these financial statements based on his or her audit in accordance with the International Standards on Auditing (ISA).
The public sector equivalent standard is International Standards for Supreme Audit Institutions (ISSAI).Those standards require the Auditor-General to comply with ethical requirements and plan and perform ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 19 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the entities preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Reporting to Parliament At least once every year, the Auditor-General must report to Parliament on audits completed under the Audit Act 1969.
In addition, a report of the Auditor-General to Parliament about an audit must be submitted to the Speaker to Parliament within 9 months after the financial year in which the audit relates or within a longer period appointed by resolution of Parliament.

The Act also requires that the Auditor-General must report on other significant matters which the Auditor-General wishes to bring to the attention of Parliament.
Other significant matters highlighted in this report, include control weaknesses which could cause or is causing severe disruption to the process or on the ability of an auditee to achieve process objectives and comply with relevant legislation.

It is likely that these issues may have an impact on the operations of the entities in future, if necessary action is not taken to address them.
If any time in the opinion of the Auditor-General, serious irregularities have occurred in the receipt, custody or expenditure of public moneys or in the receipt, custody, issue sale, transfer or delivery of any stamps, securities, stores or other Government property or in the accounting for the same, he or she shall bring the matter to the notice of the- (a) (b) Minister responsible for finance ; and Responsible authority and the Minister of the entity subject to audit.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 20 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 2.0 Types of audit opinions issued In accordance with International Standard on Auditing, we express an unmodified opinion (unqualified) when the financial statements are prepared in accordance with the International Public Sector Accounting Standards (IPSAS) under the ‘cash-basis of accounting and with relevant legislative requirements.
This type of opinion indicates that material misstatements, individually or in the aggregate, were not noted in our audit, which would affect the financial statements of an agency.
We issue a modified opinion (qualified) when having obtained sufficient appropriate audit evidence, we conclude that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or we are unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.
An adverse opinion is expressed when we, having obtained sufficient appropriate audit evidence, conclude that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

We issue a Disclaimer of Opinion when we are unable to obtain sufficient appropriate audit evidence on which to base the opinion, and we conclude that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.
We include an Emphasis of Matter paragraph in the audit report to highlight an issue that will help the user better understand the financial statements.

We also include an Other Matter paragraph to highlight a matter that is relevant to users’ understanding of the audit report.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 21 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Results of our audits Chapter Summary We audit the financial statements of Ministries and Departments (State-agencies) to provide reasonable assurance about whether the financial statements are free from material misstatement.
Key findings We issued 33 audit opinions on the 2017 financial statements of State-agencies.

Out of this 21 or 64% were unmodified opinions and 12 or 36% were modified opinion.

This means that in most cases, material misstatements, individually or in aggregate were not noted in our audit, which would affect the financial statements of an agency.
Audit conclusions Out of 33 Ministries/departments financial statements audited, a total of 21 Ministries/Departments financial statements were issued with unmodified opinions while audit opinions on 12 were modified which indicated that amounts shown in these financial statements were materially misstated.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 22 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Introduction Each year, we audit the financial statements of State-agencies to provide assurance to their reliability.
In addition, we also audit the:    accounts of the Consolidated Fund Financial Statements of Government annual appropriation statement Ministry of Economy advised all State-agencies to provide the draft 2017 agency financial statements to the Auditor-General by 16 October 2017.

If agencies comply with the monthly and quarterly reporting requirements set by Finance Instructions 2010 throughout the year, they should be able to a set of high quality financial statements in a timely manner.
We assessed the quality and timeliness of financial statements prepared by 33 agencies for financial year ended 31 July 2017 by considering:   Year - end closing process – whether accounts were closed-off on agreed date.

Timeliness – whether complete draft 2017 financial statements were submitted for our audit by an agreed date.

 Quality – the extent of accounting adjustments made during our audit.
 Management comments – time taken (in days) by Ministries/Departments to submit management comments for findings raised in Draft Management Letter (DML) from the date the DML was issued.

Signing of financial statements – time taken (in days) by Ministries/Departments to submit signed financial statements from the date it was issued.

 Our assessment criteria and the result of our assessment for each ministry/department is included in Appendix A.
Conclusion The summary at whole of government assessment of timeliness and quality is shown in Table 1.7 below.
Table 1.7: Summary of timeliness and quality assessment Number of Ministries/Departments Compliance to Year End Process (YE) 10 18 5 33 Quality of Financial Statements (Q) 19 10 4 33 Timeliness of Financial Statement (T) 10 8 15 33 Timeliness of Management Comments (MC) 11 5 17 33 Timelines of Signing of Financial Statements (SFS) 10 9 14 33 Effective Generally Effective Ineffective Total Source: OAG It is noted that the majority of ministries/departments were either effective or generally effective in compliance to year-end closing process and quality of the financial statements.
Refer below to percentage of ministries/departments which were ineffective in the following:    Timeliness of financial statements – 45%; Timeliness of management comments – 52% Timeliness of signing of financial statements -42% ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 23 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 3.0 Audit Opinion results Table 1.8 summarizes the audit opinions we issued on the 2016-2017 financial statements for State- agencies.
Table 1.8: Audit opinions issued by OAG for 2016 - 2017 financial year Sector General Administration Social Services Economic Services Infrastructure Services Total Source: OAG Unmodified opinions Modified opinions 14 4 3 --- 21 6 1 4 1 12 The sector reports provide summary and detail of the agencies and the opinions issued on their financial statements for each sector.

Modified opinions We issued modified opinions on 12 of the 2017 financial statements completed for various ministries and departments.
Reasons for modified audit opinions were as follows: Twelve (12) or 36% of the Ministers/Departments financial statements had modified opinions.

This means that material misstatements were noted in the financial statement that were audited.

Refer to Table 1.9 for list of Ministries/Departments with modified audit opinion.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 24 Categories of Modified Audit Opinions Revenue Main Trust Record Keeping Inventory Expenditure Value Added Tax and Trading Manufacturing Accounts Categories of Emphasis of Matter Internal Controls Board of Survey and Trading Manufacturing Accounts Main Trust Fund Account REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Table 1.9: Categories of Modified Audit Opinion Ministries/Departments General Administration Security and Employment, Ministry of Defence, National Immigration Ministry Productivity and Industrial Relations Judiciary of Ministry of Justice Fund Account             Social Services Economic Services Disaster National Ministry of Rural and Maritime Development and Management Republic of Fiji Military Forces        Ministry of Health and Medical Services Ministry of Agriculture      Ministry of Lands and Mineral Resources Ministry of Fisheries and Forests  Ministry of Local Government and Environment        Infrastructure Services 1.
Ministry of Transport Infrastructure and 1.

2.

3.

4.

5.

6.

1.

1.

2.

3.

4.
                                                      New modified opinion/emphasis of matter Repeated modified opinion/emphasis of matter _______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 25 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Unmodified opinions We issued unmodified opinions on 21 or 64% of the 2017 financial statements for various ministries and departments.
This means that material misstatements were not noted in majority of the agencies which were audited.

Refer Table 1.10 for list of Ministries/Departments with unmodified audit opinion.
Table 1.10: Ministries/Departments with unmodified audit opinion Number Ministries/Departments General Administration Office of the President Office of the Prime Minister Office of the Attorney General Ministry of Economy Ministry of iTaukei Affairs Ministry of Foreign Affairs Parliament Office of the Director of Public Prosecutions Fiji Corrections Service Department of Information and Communication Department of Information, Technology and Computing Services Ministry of Civil Service Fiji Police Force Peacekeeping Missions Social Services Ministry of Education, Heritage and Arts Department of Housing Ministry of Women, Children and Poverty Alleviation Ministry of Youth and Sports Economic Services Ministry of Industry, Trade and Tourism Ministry of Sugar Ministry of Public Enterprise Source: OAG Common key findings Emphasis of Matter No No No No No No No No No No No No No Yes No No Yes No No No No Common key findings which have been reported in sector audit reports are categorised in Figure 1.6 below.
Figure 1.6: Common audit findings across Ministries/Departments i s g n d n i F t i d u A f o s e i r o g e t a C Others Trading and Manufacturing Account Inventory Financial statements Journals Board of Survey Expenditure Revenue Assets Underline Accounts… Payroll Governance Audit Findings 18 12 9 6 3 4 4 13 16 12 35 52 Number of Audit Findings 0 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 26 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Quality of draft agency financial statements The quality ratings for the draft financial statement for the Ministries and Departments were determined by classifying them into three categories namely effective, generally effective and ineffective.
Refer to figure 1.7 below.
Figure 1.7: Quality Assessment of Ministries and Departments Quality of Financial Statements (Q) EFFECTIVE • Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Defence, National Security and Immigration, Ministry of Employment, Productivity and Industrial Relations, Judiciary, Parliament, Office of the Director of Public Prosecutions, Information and Department of Communication, Information Technology & Computing Services, Ministry of Civil Service, 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, Ministry of Lands and Mineral Resources, Ministry of Industry, Trade and Tourism and Ministry of Public Enterprise 19 10 GENERALLY EFFECTIVE •Ministry of Economy, Ministry of iTaukei Affairs, Ministry of Justice, , Republic of Fiji Military Forces, Fiji Police Force, Peacekeeping Missions Ministry of Agriculture, Ministry of Fisheries and Forests, Ministry of Sugar and Ministry of Infrastructure and Transport.
4 INEEFFECTIVE • Ministry of Foreign Affairs, Fiji Corrections Service, Ministry of Rural and Maritime Development and National Disaster Management and Ministry of Local Government, Housing and Environment.

Effective Generally Effective Ineffective 20 18 16 14 12 10 8 6 4 2 0 The extent of audit adjustments made to draft financial statements indicates the effectiveness of the agency’s internal review processes to identify and correct errors before these are provided for audit.
Nineteen (19) ministries and departments prepared good quality complete draft financial statements that did not require any adjustments.

Adjustments were passed on draft financial statements for twelve (12) ministries and departments.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 27 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Timeliness of financial reporting To be useful to users, financial statements should be completed and made available as soon as possible after close of financial year.
Information in financial statements becomes less relevant to users as the time passes from close of financial year.

The deadline set by Ministry of Economy for submission of draft financial statements was 16 October 2017, as per Ministry of Economy closing of accounts circular number 4 of 2017.
Refer to Table 1.11 below for details: Table 1.11: Agencies which met or missed the agreed timeline for submission of draft financial statements Ministries/Departments Timelines Met Timeliness Missed General Administration 1.

Office of the President 2.

Office of the Prime Minister 3.

Office of the Attorney General 4.

Ministry of Economy 5.

Ministry of iTaukei Affairs 6.

Ministry Defense, National Security and Immigration 7.

Ministry of Employment, Productivity and Industrial Relations 8.
Ministry of Foreign Affairs 9.

Judiciary 10.

Parliament 11.

Office of the Director of Public Prosecutions 12.

Ministry of Justice 13.

Fiji Corrections Service 14.

Department of Information and Communication 15.

Department of Services Information, Technology and Computing 16.

Ministry of Civil Service 17.

Ministry of Rural and Maritime Development and National Disaster Management 18.

Republic of Fiji Military Forces 19.

Fiji Police Force 20.

Peacekeeping Missions Social Services 21.


Ministry of Education, Heritage and Arts 22.

Ministry of Health and Medical Services 23.

Department of Housing 24.

Ministry of Women, Children and Poverty Alleviation 25.

Ministry of Youth and Sports Economic Services 26.

Ministry of Agriculture 27.

Ministry of Fisheries and Forests 28.

Ministry of Lands and Mineral Resources 29.

Ministry of Industry, Trade and Tourism 30.

Ministry of Sugar 31.

Ministry of Public Enterprise 32.


Ministry of Local Government, Housing and Environment Infrastructure Services 33.
Ministry of Infrastructure and Transport Met the agreed timeline for submission of draft financial statements Missed the agreed timeline for submission of draft financial statements                                    ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 28 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Reasons for delays in submission of draft financial statements by various Ministries/departments was as follows:  The Ministry of Infrastructure and Transport was in consultation with Ministry of Economy and other stakeholder in identifying ways to rectify the issue of unsubstantiated balances which arose in audit report from the past years and on the format of presentation which will solve the Cash at Bank balance issue in the TMA Balance Sheet ;  Delay in submission of departmental financial statement for compilation of overall financial statements ;  Reconciliation of amended main trust fund figures to the FMIS general ledger ;  Time taken in appointment of new Accounts Officer to prepare and submit financial statements for audit ;  Unavailability of Head of Department to approve financial statement for submission to audit ; and  Confirmation of financial statement notes.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 29 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Year-end closing process On 1 June 2017, Permanent Secretary for Economy issued Circular No.
04/2017 to Permanent Secretaries, Heads of Departments, High Commissioners and Ambassadors in Fiji Overseas Missions in which procedures for closing of 2017 accounts and times were detailed.

The final day for closing the 2017 accounts was 4 August 2017.
The key focus areas in the circular were:  Closing date for journal adjustments by 11 August 2017;  Clearance of Inter-departmental clearance accounts by 4 August 2017;  Monitoring of unpresented cheques by 31 July 2017;  Clearance of stale cheques by 4 August 2017;  Annual Board of Survey on Drawings Account cheques by 29 September 2017;  Retirement of imprests by 21 July 2017;  Cancellation of unprocessed purchase orders by 14 July 2017;  Processing of payments and virements by 21 July 2017;  Completion of reconciliations by 29 September 2017; and  Submission of arrears of revenue returns by 30 August 2017.
When ministries and departments achieve the key focus areas highlighted by the Permanent Secretary for Economy by the given dates, they are more likely to prepare accurate and timely draft financial statements for audit.

There were 10 key focus areas in the 2017 closing of accounts circular.

The year-end closing process ratings for the Ministries and Departments were determined by classifying them into the 3 categories namely effective, generally effective and ineffective.
Ten (10) ministries and departments completed all process by the due dates.

Eighteen (18) ministries and departments completed 5 of 10 key processes within 2 weeks of due date and were categorized as effective and generally effective respectively.

Five (5) ministries and departments were ineffective as they completed less than 5 of 10 key processes completed within two weeks of due date.

Refer to Figure 1.8 below.
Figure 1.8: Year-end closing process of Ministries and Departments Compliance to Year End Procedures (YE) 18 16 14 12 10 8 6 4 2 0 18 10 5 Effective Generally Effective Ineffective EFFECTIVE GENERALLY EFFECTIVE •Office of Office of the President, the Attorney General, Parliament, Office of the Director of Public Prosecutions, Fiji Corrections and Department Communication, Information Technology & Computing Services, Peacekeeping Missions, Ministry of Industry, Trade and Tourism and Ministry of Sugar.
Information Service, of •Office of the Prime Minister, Ministry of Economy, Ministry of iTaukei Affairs, Ministry Defence, National Security and Immigration, Ministry of Employment, Productivity and Judiciary, Industrial Relations, Ministry of Foreign Affairs, Ministry of Justice, Ministry of Civil Service, Republic of Fiji Military Forces, Fiji Police Force, Ministry of Education, Heritage and Arts, Ministry of Health and Medical Services, Ministry of Youth and Sports, Ministry of Agriculture, Ministry of Lands and Mineral Resources, Ministry of Public Enterprise and Ministry of Infrastructure and Transport.
INEEFFECTIVE •Ministry of Rural and Maritime Development and National Disaster Management, Department of Housing, Ministry of Women, Children and Poverty Alleviation, Ministry of Fisheries and Forests and Ministry of Local Government, Housing and Environment ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 30 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Financial Statements of Government Permanent Secretary for Economy prepares the consolidated financial statements of Government annually.
These financial statements are prepared in accordance with the Cash-basis International Public Sector Accounting Standards reporting requirements and Cabinet decision 277 of 2010.

Additional disclosures are also made in accordance with the requirements of the Financial Management Act 2004.

Some statements forming part of the financial statements were drawn up using modified-cash figures from the general ledger.
Consolidated Fund reporting Financial Management Act 2004 requires that all public money is to be paid into the Consolidated Fund unless it is required to be; paid to another fund or retained by the authority receiving it by written law.

Trust money is not payable into the Consolidated Fund.

Except for payments made in error or not public money and refunds of unclaimed money, withdrawals can only be made from the Consolidated Fund under an appropriation made by law.
This report covers the following transactions for the financial year:  operating revenue including taxes, revenue from investments including those from operation of trading and manufacturing accounts;  expenditures incurred for unallocable items;  government borrowings and repayments;  government guarantees and other contingent liabilities; and  government assets and liabilities.
Consolidated Trust Account Financial Management Act 2004 states that trust money is to be accounted for separately from public money and other money and is to be kept in a separate bank account pending withdrawal.

Trust monies are to be utilized for purposes related to the objectives of the trust and accounted for, banked, invested, reported and otherwise controlled in accordance with Finance Instructions.

This report covers the trust fund receipts and payments for the financial year.
Appropriation statement Expenditure of money appropriated by an Appropriation Act from the Consolidated Fund or any other fund can be incurred only in accordance with the authorization effected by the Appropriation Act.

Ministries and departments specified in the Appropriation Act concerned or the budget estimate tabled with the Bill are responsible for its administration.
Minister for Economy or permanent secretary for a constitutional body may in writing without further appropriation, authorize the transfer or virement of any unspent amount in an appropriation category within a head of appropriation to another appropriation category within the head of appropriation.
An appropriation made by an Annual Appropriation Act lapses at the end of the financial year to which it relates except where the Minister has authorized the carry over to the following year of all or part of the unused appropriation that relates to known liabilities as at a particular date, for use in the following year, subject to such conditions as the Minister specifies in the authorization.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 31 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The Minister may with the approval of Cabinet, authorize the redeployment of amounts appropriated by the most recent Annual Appropriation Act for administration by the Ministry to the heads of appropriation and appropriation categories to one or more ministries and departments.
As per section 10 (1) of the Finance Instructions 2010, the Permanent Secretaries of the agencies may authorize the transfer of budgeted funds as follows: (a) out from SEG 1 or 2 (Established and Unestablished Staff) but shall not transfer funds into SEG 1 or 2; (b) into and out of one or more of the following operating SEGs (SEGs 3, 4, 5, 6, or 7); (c) from the operating SEGs (SEGs 1, 2, 3, 4, 5, 6, or 7) to the capital SEGs (SEGs 8, 9, or 10) but not from capital to operating or from capital to capital; and (d) virement within SEG 13 to meet the consequential VAT component of the virements in (a), (b) and (c) above.
In addition, the Permanent Secretary for Economy (formerly Finance) may authorise the transfer of the following budgeted funds in respect of all agencies – (a) within each of SEGs 1 or 2 or from SEG 1 into SEG 2 or vice versa; (b) within each of capital expenditure SEGs (SEGs 8, 9, or 10) or from SEG 8 into either SEG 8, 9, or 10 or vice versa, as the case may be; and (c) virement within SEG 13 to meet the consequential VAT component of the virements in (a) and (b) above.
This report covers payments to ministries and departments through appropriation, deployment of funds, virements, expenditures incurred and unspent balances.

Refer to Appropriation statement on Table 1.25.

Quality of financial report The quality of the Financial Statements of Government largely depends on the reliability of the information provided to Ministry of Economy by all ministries and departments.
The audit opinions of Ministries and Departments is shown in Table 1.12 below: ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 32 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Table 1.12: Audit opinions issued for Ministries and Departments Ministries/Departments Modified Audit Opinion Ministry of Defence, National Security and Immigration Ministry of Employment, Productivity and Industrial Relations Judiciary Audit Opinion  A variance of $3,006,088 exists between the Integrated Border Control Management System (IBMS) which records the Department of Immigration’s operating revenue and the FMIS General Ledger.
As a result, audit was unable to substantiate the correctness of the operating revenue balance of $13,490,542 recorded in the financial statements for the period ended 31 July 2017.

 Detailed listings of work permit holders equating to the security bond of $25,215,349 held in trust are not maintained by the Department of Immigration.

As a result, audit was unable to establish the number of work permit holders currently in the country and those that have left the country without claiming a refund.
 The Ministry receives $70,000 annually fees from Ministry of Civil Service under the Shared Services Agreement.

The Ministry deposited the service fees into the OHS Consultancy Trust Fund Account.

Transfer of public funds into a trust account is improper as funds in trust are those funds other than public money.

Consequently, the OHS Trust Fund Account is overstated by $70,000 and Ministry’s operating revenue is understated by the same amount.
 An unreconciled variance of $381,087 exists between the OHS Consultancy Service, Workmen Compensation and Wages Disputes Trust Fund cash at bank balance and General Ledger (FMIS) balance.

As a result audit was not able to ascertain that all receipts and payments had been accurately accounted and disclosed in the Trust Fund cash account.
 The Department’s reconciliations for Suitors, Sundries, and Maintenance Trust Fund were only prepared up to January 2015, January 2000 and December 1994 respectively as at 31 July 2017.

Due to significant lapse in the years of reconciliation balance, audit was unable to ascertain the accuracy of the closing balance of $31,623,770 disclosed in the Judicial Trust Fund account Statement of Receipts and Payments for the year ended 31 July 2017.
 Included in the Suitors Trust Fund Accounts are funds received on behalf of deceased persons who do not have nominees at Fiji National Provident Fund as required under section 57 of the FNPF Act 2011.
The department does not maintain detailed breakdown listing of these funds received from FNPF, funds paid out to beneficiaries, and balance of fund to be refunded to FNPF _______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 33 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries/Departments Audit Opinion Ministry of Justice where no application has been made to claim the funds from High Court.
Hence, audit was unable to establish the quantum of the amount to be refunded to the Fiji National Provident Fund.

The Ministry did not maintain detailed breakdown listings of the companies under provisional liquidations and the individuals under receiverships.
Consequently, audit was not able to substantiate the completeness of the closing balances of $587,437 and $255,603 reflected in the Statement of Receipts and Payments for the Official Receiver Liquidation Trust Fund Account and the Official Receiver Bankruptcy Trust Fund Account, respectively.
Ministry of Rural and Maritime Development and Natural Disaster Management An unreconciled variance of $197,953 exists between the total revenue recorded in the general ledger and subsidiary revenue records maintained by the Ministry.

Consequently, audit could not confirm the accuracy and completeness of the operating revenue of $1,417,065.
Republic of Fiji Military Forces Ministry of Health and Medical Services Ministry of Agriculture The Engineers Trust Fund Account Statement of Receipts and Payments does not provide receipts and payments for each project undertaken by the Force.

The statement only includes closing cash balance for each project.
As a result, audit was unable to determine whether any adjustment might have been necessary in respect of the Engineers Trust Fund Account cash at bank balance at year end and any corresponding adjustments to the elements making up the statement of income and expenditure.

An un-reconciled variance of $114,950 exists between the Bank reconciliation and the Cash at bank general ledger balances.
As a result, audit was unable to substantiate the accuracy and completeness of the closing balance of $338,925 reflected in the Trust Fund Account Statement of Receipts and Payments.

 Included in the Land Water Resource Management (LWRM) Trust Fund Account balance is retention fund of $329,148.

The Ministry was unable to provide appropriate supporting documents to ascertain whether the retention period for the projects of which retention funds were retained are valid.
The balance is brought forward from prior years.

As a result, audit was unable to ascertain the accuracy and obligation of the retention fund of $329,148 included in the LWRM Trust Fund Account balance.
_______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 34 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries/Departments Audit Opinion  The Ministry suffered loss through expiration of drugs and livestock morality amounting to $63,405.
The amount of loss was not expensed, instead was directly adjusted to ending inventory balance thus overstating the cost of goods sold by $63,405.

Ministry Resources of Lands and Mineral  There is an un-reconciled variance of $673,811 in the Land and Property Rent collected as recorded in the Crown Land Lease System of $12,745,771 and FMIS general ledger balance of $13,419,582.

Consequently, audit could not confirm the accuracy and completeness of Land and Property Rent of $13,419,582.
Ministry of Fisheries and Forests  Expenditure amounting to $157,174 in the Statement of Receipts and Expenditures did not relate to the financial year 2016-2017.

This amount relates to the posting of an unsupported journal voucher of $105,870 to clear prior year’s Revolving Fund Account balances and the recording of $51,304 expenditure in 2016-2017 for goods and services received in 2017-2018.

As such, the expenditure balance for the year ended 31 July 2017 is overstated by $157,174.
Operating Fund Account Expenditures amounting to $276,181 were not recorded in the Statement of Receipts and Expenditures for the year ended 31 July 2017.

This amount relates to unrecorded expenditures of $191,147 paid from Standard Liability Account 84 and retired Accountable Advances of $85,034 for the current year which were not cleared from the Revolving Fund Account.

As a result, the expenditure balance of $23,012,137 for the year ended 31 July 2017 is understated by $276,181.
Trading And Manufacturing Account There is an unreconciled variance of $104,597 between the bank reconciliation and the Cash at Bank general ledger balance.

Consequently, audit was not able to confirm the accuracy and completeness of the Cash at Bank balance of $1,896,419 recorded in the TMA Balance Sheet as at 31 July 2017.
The Ministry paid a sum of $2.5 million to the Trading and Manufacturing Activity (TMA) account from its operating budget for the purpose of salvaging logs after Tropical Cyclone Winston.

Of this amount, a sum of $301,451 was utilized for this purpose in 2017 leaving a balance of $2,198,459 as at 31 July 2017.

The cash at bank balance of $1,896,419 recorded in the TMA Balance Sheet is not sufficient to support the remaining balance of $2,198,459.
_______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 35 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries/Departments Audit Opinion The Ministry recorded total expenses of $1,288,574 in the TMA – Profit and Loss Statement for the year ended 31 July 2017.
The Ministry was not able to provide documentations to support expenditures totalling $515,515.

As a result, audit was not able to verify the accuracy and completeness of the total expenses recorded in the Profit and Loss Statement.

The Ministry recorded sales of $1,161,623 in the TMA – Trading Account for the year ended 31 July 2017.

The Ministry was not able to provide documentations to support transactions totalling $306,623.
As a result, audit was not able to verify the accuracy of the Sales amount recorded in the Trading Account.

Trust Fund Account The Ministry did not maintain a detailed listing of the beneficiaries of the Trust Accounts.

Consequently, audit was not able to substantiate the completeness of the closing balances of $190,095 reflected in the Statement of Receipts and Payments for the Trust Fund Account.
Ministry of Local Government and Environment  Revenue totalling $444,780 reported in the Statement of Revenue and Expenditure could not be substantiated as the Ministry could not provide the journal vouchers to support the amount recorded in the general ledger.

As such, audit was unable to verify the completeness and accuracy of revenue recorded in the Statement of Revenue and Expenditure.
 The Ministry was unable to provide appropriate supporting documents including payment vouchers to substantiate payments totalling $874,931 and $1,171,987 for Operating Account and Main Trust Account, respectively.

As such, audit was unable to ascertain if these payments were properly processed and recorded in the Statement of Revenue and Expenditure and Environment Trust Fund Account.
 Expenditure totalling $302,733 relating to Operating Grants and Transfers were recorded as Capital Construction Expenditure in the Statement of Revenue and Expenditure.

As such, the Operating Grants and Transfers Expenditure is understated and Capital Construction Expenditure is overstated in the Statement of Revenue and Expenditure by $302,733.

 The Environment Trust Fund Account had a closing balance of $4,530,939 for the year ended 31 July 2017.
The Ministry did not maintain proper records including cash book, journal vouchers and payment vouchers.
As a result, there was un-reconciled variance of $2,500,755 between the _______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 36 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries/Departments Audit Opinion Ministry of Infrastructure and Transport general ledger balance and the bank reconciliation.
Due to the variance audit was unable to ascertain the accuracy of the closing balance of the Environment Trust Fund Account.

 An unreconciled variance of $1,405,134 exists between the Consolidated TMA balance sheet cash at bank balance of $3,154,993 and consolidated bank reconciliation balance of $1,749,859 as at 31/07/17.

Consequently, audit could not confirm the accuracy and completeness of the Cash at bank balance of $3,154,993 stated in the consolidated TMA balance sheet as at 31 July 2017.
 The Ministry adjusted its VAT receivable balance by $322,428 to reconcile it with the Fiji Revenue Customs Services records by posting journal entries to the TMA Accumulated Surplus Account.

Audit was not provided with appropriate reconciliations to support these journal entries.

As such, audit was unable to ascertain the accuracy of these journal entries posted in the general ledger and its impact on the accounts affected.
Emphasis of Matter Ministry of Employment, Productivity and Industrial Relations Internal controls over management of trust fund receipts were generally found to be weak and if not addressed promptly may result in material misstatements and possible financial losses in the future.
Ministry of Rural and Maritime Development and National Disaster Management Internal controls over revenue, expenses and trust fund accounts were generally found to be weak and if not addressed promptly may result in material misstatements and possible financial losses in the near future.

Republic of Fiji Military Forces The RFMF did not carry out a board of survey to verify the existence and condition of assets under its authority contrary to Section 49 of the Finance Instructions 2010.
Ministry of Health and Medical Services  The Ministry did not prepare the board of survey report on the existence and condition of all assets under its authority contrary to section 49 of the Finance Instruction 2010.

 Internal controls over account reconciliations were generally found to be weak and if not addressed promptly may result in material misstatements and financial implications in future.
_______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 37 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries/Departments Ministry of Agriculture Audit Opinion Internal controls over payroll expenses and management of inventory for Trading Activity were general found to be weak and if not addressed promptly may result in material misstatements and possible financial losses in the future.
Ministry of Fisheries and Forests  The Ministry did not carry out a board of survey to verify the existence and condition of assets under its authority contrary to Section 49 of the Finance Instructions 2010.

 The TMA accounts continue to operate at a loss for eight consecutive years from 2010.

 There was an overall excess of liabilities over assets of $111,344 in the TMA balance sheet as at 31 July 2017.
Ministry of Local Government and Environment Necessary internal controls including timely reconciliations were not performed for Drawings Account, SLG 84 Account, Operating Trust Fund, Environment Trust Fund Account, Advances and Salaries Account during the year.

These are critical areas of the Ministry’s operation and if not addressed promptly may result in financial losses or financial irregularities in the near the future.
Ministry of Infrastructure and Transport  Internal controls over Plumber shop inventory and TMA sales for Plumbing and Joinery were generally found to be weak and if not addressed promptly may result in material misstatements and possible financial losses in the near future.

 The Ministry has disclosed its 17 Trading and Manufacturing Accounts (TMA) in the financial statements Note 7 by consolidating it according to the divisions.
The change in the format of the presentation has resulted in the limited information disclosed in the financial statements for each type of TMA in terms of its performance and cash flows.

 The Energy Trust Account had a balance of $2,232,312 as at 31/7/17.

The closing balance comprises of refunds for the FEA (EFL) Grid and Housing wiring, bond payment for projects and revenue bills collected from the Solar Home Systems.

The Ministry has not maintained appropriate details of this Trust Fund.
_______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 38 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI In addition, the following issues relate to the 2017 Financial Statements of Government: Emphasis of matter  Included in the Trust Fund Account balance of $197,199,489 in the Statement of Assets and Liabilities (Schedule 3) is Main Trust amounting to $168,831,120.
Main Trust Fund Account balance amounting to $50,873,557 was not supported with detailed listing of claimants of the monies held in the trust.

Hence, I was unable to satisfy myself on the accuracy and completeness of the Trust Fund Account balance of $197,199,489 as at 31 July 2017.

Recommendations in relation to the emphasis of matters above are as follows:  The Ministry of Economy should ensure that Ministries/Departments are maintaining detailed listings of claimants of the monies held in Main trust.
Other Matter Internal control deficiencies  Internal controls were generally found to be weak for Ministry of Employment, Productivity and Industrial Relations, Ministry of Rural and Maritime Development and National Disaster Management, Republic of Fiji Military Forces, Ministry of Health and Medical Services, Ministry of Agriculture, Ministry of Fisheries and Forests and Ministry of Local Government and Environment.
These have been reported to the management of the respective agencies in the Auditor General’s report to Parliament.

If not addressed promptly, these may result in material misstatements and possible financial losses in the future.

We received the first complete draft of the Financial Statements of Government for audit on 28 June 2018.

Following the receipt of draft accounts amendments were made on compliance with Cash Basis IPSAS, additional disclosures and correction of errors and omissions.
Refer to Table 1.13 below for details.
Table 1.13: Dates Financial Statements of Government was received Draft Financial Statements First draft Revisions Revisions Revisions Revisions Revisions Revisions Date Received 28/06/18 24/07/18 26/09/18 25/01/19 06/02/19 15/03/19 12/07/19 Our recommendations and management comments in relation to the issue discussed above are as follows: Recommendations The Ministry of Economy should ensure that correct set of Financial Statement of Government is submitted for audit purposes.
Ministry of Economy must emphasise to respective heads of Ministries and Department to be mindful of the significant audit issues and take corrective action to avoid any delays in finalizing the audit.

___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 39 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Management Comments Noted.
MOE and OAG will need to work together as 'way forward' to enhance the audit process.

This has been undertaken.

We also request OAG to advice the MOE of significant audit matters/concerns at Agency level for pro-active actions.

Result of our audits The Permanent Secretary for Economy signed the 2016/2017 Financial Statements of Government on 7 August 2019.
We issued an unmodified audit opinion with emphasis of matter and other matters on the financial statements which was after the legislative deadline of 30 April 2018.

Key Changes in the Financial Statements of Government There were major improvements in the Financial Statements of Government in 2017 when compared to the 2016 Financial Statements.

The key changes were noted in the recognition of assets and liabilities in the Statement of Asset and Liabilities (Schedule 3) as detailed below.
   Tax Receivables which included Inland Revenue Department and Customs Receivables have now been recognised in the Financial Statements of Government under the Statement of Assets and Liabilities; Tertiary Loan Scheme has now been recognised in the Financial Statements of Government under Statement of Assets and Liabilities; Fiji Revenue and Customs Service VAT and Income Tax refunds outstanding has been recognised in the Financial Statements of Government; The key changes above has resulted in a more transparent and reliable financial statements of government which depict a more fair and factual picture of the financial position of the government for the financial year ending 31 July 2017.
The Office of the Auditor-General acknowledges the Ministry of Economy’s agreement to the improvements effected into the Financial Statements of Government.

In the effort to improve the presentation of the financial statements, the timeliness characteristics may have been compromised resulting in the delay in the signing of the financial statements.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 40 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.0 Financial position, performance and sustainability Chapter Summary This chapter details major transactions and events for the Financial Statements of Government.
Our analysis cover the key components of the financial statements which are revenue, expenditure, assets and debt.

Other analysis based on the financial statement of government is provided in Appendix D. Introduction The primary objective of our analysis in this chapter is to help users understand the Financial Statements of Government of Republic of Fiji by clarifying the financial effects of key transactions and events in 2016/2017.
Financial statements also assist users understand the sustainability of the government.

We used a range of ratios to help inform users.

Ratios used were as follows: Operating margin This is calculated by dividing operating revenue by operating expenses with a bench mark of greater than 1.

The Operating margin ratio for the year ended 31/07/17 was 1.63, indicating that for every $1 of operating expenses there is $1.63 of operating revenue to meet those operating expenses.
Current ratio In current ratio, current assets are divided by current liability with a bench mark of greater than 1.

This ratio shows amount of current assets available to meet current liabilities as they fall due.

The current ratio for the year ended 31/07/17 was 0.67 indicating that for every $1 of current liabilities the government has $0.67 of current assets.

Debt to equity ratio Debt to equity ratio, debt divided by total equity for the year ended 31/07/17 was 1: 1.3.
This shows that for every $1 of equity, $1.37 is owed to creditors and lenders.

Debt to assets ratio Debt divided by total assets for the year ended 31/07/17 was 3.73.

This shows that all assets were financed by creditors and lenders.

Sectors of government covered In this chapter, we assess the position, performance and sustainability of government as reported in the Financial Statements of Government of Republic of Fiji.
These financial statements report on the consolidated position of the Government of Republic of Fiji comprising of the general administration, social services, economic services, infrastructure services sectors and those which are unallocable.

The financial statement contain details of ministries and departments in each sector.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 41 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Assessing position and performance We measure performance by looking at the net operating balance for the financial year.
This is a measure of the normal operations of the Government of Republic of Fiji and indicates whether government is earning more than it spends.

We measure position by looking at the net worth or equity at the end of the financial year.

This indicates the degree to which government’s assets exceeds liabilities and indicates the extent to which government would be able to absorb unexpected adverse economic conditions.
We assess sustainability by considering how government’s position and performance change over time.

We also consider how government is able to fund both day to day operations and its investment in assets.

This includes an assessment of whether the revenue the government earns is sufficient to finance its operations and capital investments or whether it needs to borrow for these purposes.

Net operating balance The net operating balance is total revenue less total expenses.
Figure 1.9 shows net operating balance for 2017 and 2016 below.

Figure: 1.9: Net Operating Balance Net Operating Balance (250.31) 2016 (217.74) 2017 (260.00) (240.00) (220.00) (200.00) ($Millions) Net Operating Balance Net operating Result Net operating result with capital and without capital expenses is shown in Table 1.14 below.
Table 1.14: Net Operating result Revenue (Includes TMA revenue) Expenses (Includes TMA expenses) Capital Expenses 31/07/17 ($) 31/07/16 ($) 2,859,097,304 1,514,963,112 3,076,840,916 1,765,277,642 590,688,998 1,025,601,795 Overall Net Operating Deficit (217,743,612) (250,314,530) Net Operating Surplus without Capital Expenses 807,858,183 340,374,468 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 42 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The net operating with capital expenses and without capital expenses remained at a deficit and surplus respectively in both years.
In 2017 the net operating deficit improved from 2016.

Refer to Figure 1.10 for trend of net operating result for the past five years.

Figure 1.10: Trend for Net Operating Result 808 869 340 With Capital Expenses Without Capital Expenses 549 582 31/7/17 31/7/16 31/12/15 31/12/14 (218) (250) (176) (348) (38) 31/12/13 ) m $ ( 1,000 800 600 400 200 - (200) (400) (600) Equity As at 31 July 2017, the Financial Statement of Government showed net liability of $3.6 billion.
This means that total liabilities were more than total assets at balance date.

Refer to Table 1.15 below for details.

Table 1.15: Net liability Total Assets ($) Total Liabilities ($) 1,331,076,272 4,964,936,915 Net Liability ($) 3,633,860,643 Changes in an entity’s net assets/equity between two reporting dates reflect the increase or decrease in its net assets/liabilities during the period.5 Figure 1.11 below shows the total assets, total liabilities and net equity balances for the past 5 years.
Figure 1.11: Equity balance Trend Analysis s n o i l l i M ) $ ( 2,000 1,000 - (1,000) (2,000) (3,000) (4,000) (5,000) (6,000) 971 Assets 992 Liabilities 958 Net Laibilities/Equity 1,150.45 1,331.08 (3,931.18) (4,183.99) (4,427.79) (4,749.93) (4,964.94) (2,960.61) (3,191.76) (3,470.03) (3,599.48) (3,633.86) 2013 2014 2015 Years 2016 2017 5 IPSAS 1 - Presentation of Financial Statements, Section 120 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 43 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Total liabilities had an increasing trend while total assets fluctuated over the past 5 years.
The increase in equity balance in 2017 was due to increase in term loan receivable as result of recognition of outstanding debt from Tertiary Education Loans Scheme (TELS) due to government.

Contingent Liabilities The Government under the authority of the Parliament provides guarantee for the financial liability of entities in respect of loans or otherwise.
A contingent liability is a potential liability that may or may not become due, depending on whether a possible event occurs, such as a claim for compensation, an indemnity or other legal claims.

Government contingent liabilities are classified into two categories namely Government Guarantee (explicit) and Other Contingent Liabilities (implicit).

In Government Guarantee (explicit) the government’s obligation is defined by the deed of guarantee.
The government is legally mandated to settle an obligation should the respective borrowing entity default on its loan repayments.

Other contingent liabilities (implicit) includes guarantee such as that of international agencies securities accounts, and municipal and provisional council’s borrowings which contribute to the overall public sector risk.
These are classified differently on the basis that no deed of guarantee exists for the contingent liabilities and are not officially recognized until a failure occurs.6 Government Guarantees (explicit), is further classified into two sub-sections, explicit and other explicit.

The total contingent liabilities as at 31 July 2017 was $ 1,067,616,141.

The contingent liabilities balance decreased by $198,019,874 or 16% compared to the balance of $1,265,636,015 in 2016.
Refer to Figure 1.12 for a trend analysis of the balances over the past five years.
Figure 1.12: Trend analysis of Contingent Liabilities 3,000.0 2,500.0 2,204.4 2,000.0 ) m $ ( t n u o m A 1,500.0 1,000.0 Government Guarantees 2013 - 2017 2,548.2 869.8 1,265.6 1,067.6 500.0 - 2013 2014 2015 Years 7/31/2016 7/31/2017 The decrease in government’s total contingent liability in 2017 was mainly due to the significant loan repayment by former Fiji Electricity Authority (Energy Fiji Limited) of $225,205,194, and the full settlement of loan balances by Fiji Sports Council of $2,125,452 and Fiji Ports Corporation Ltd of $1,380,637.
6 Contingent Liabilities Report as at 31 July 2017, Debt Management Unit ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 44 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI For the year ending 31 July, 2017, callable capital7 subscribed in International Bank for Reconstruction and Development (IBRD) and Asian Development Bank (ADB) were noted at significant figures of $229,887,817 or 22% and $193,880,399 or 18% of total contingent liability, respectively.
The change in the balances was attributed to the exchange rate used in the conversion of the ‘callable portions’.

Other significant balances included Fiji Development Bank (FDB), Fiji Sugar Corporation (FSC) and Fiji Electricity Authority (Energy Fiji Limited) of 18%, 17% and 9% respectively of total contingent liability.

FDB and FSC had significant balances due to new loan guarantees obtained during the year.

Parliament approved new loan guarantees to three entities during the year.
These were for new loan guarantee of $90,600,000 issued to Fiji Development Bank, $102,097,260 issued to Fiji Sugar Corporation Limited and $3,355,055 issued to Pacific Fishing Company Limited.

Refer to Figure 1.13 for composition of contingent liabilities as at 31/07/17.
Figure 1.13: Composition of contingent liabilities as at 31/07/17 $26m $15m $6m $12m $48m $69m $99m $178m International Bank for Reconstruction and Development (IBRD) Asian Development Bank (ADB) Fiji Development Bank (FDB) $230m Fiji Sugar Corporation Limited (FSCL) Energy Fiji Limited (EFL) Housing Authority (HA) FRCS - litigation claims in relation to tax & customs matters Municipal Council (MC) Fiji Broadcasting Corporation (FBC) $194m National Bank of Fiji (NBF) $191m Others (PAFCO, FPL,PC, FHC) Understanding financial performance The net operating balance is used to measure financial performance.
It shows the difference between revenue earned and expenses incurred from day-to-day operations.

Refer to Table 1.16 for details.
Table 1.16: Net operating deficit Revenue (Includes TMA revenue) Expenses (Includes TMA expenses) Capital Expenses 31/07/17 ($) 31/07/16 ($) 2,859,097,304 1,514,963,112 3,076,840,916 1,765,277,642 590,688,998 1,025,601,795 Overall Net Operating Deficit (217,743,612) (250,314,530) 7 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.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 45 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The estimated net deficit as per budget estimates was $468.0 million and the actual net operating deficit for the year ended 31/07/17 was $217.7 million resulting in reduction in net actual operating deficit by $32.6 million.
This was due to actual total expenditure of $3,060.3 million (excludes TMA expenditure) being within estimated total expenditure of $3,643.4 million resulting in savings of $583.1 million.

Operating ratio is calculated by dividing operating expenses by operating revenue.

This shows the percentage of operating expenses for every $1 of operating revenue.

Refer to line graph below.


Figure 1.14 Operating ratio Operating Ratio 69% 61% ) % ( e g t a n e c r e P 70% 60% 50% 40% 30% 20% 10% 0% 31/07/2016 31/07/2017 Years Within the 7 month financial period of 2016, the Government of Fiji had an operating ratio of 69% or in other terms, from every $1 of operating revenue the government paid out $0.69 of operating expenses.

The remaining $0.31 was available for use for non-operating expenses.
In 2017, the operating ratio improved to $0.61 indicating that $ 0.39 was available for non-operating expenses.

Revenue The total forecasted revenue by government in 2017 was $3,175,311,256 which comprised of operating revenue of $2,880,592,850 and investing revenue of $294,718,406.

No forecast was provided for revenue generated from government Trading and Manufacturing operations.
However, the actual revenue collections by government in 2017 from its normal operations totalled $2,837,441,6898 , thus recording a shortfall of $337,869,567 or 11% of the total estimated revenue collections.

The contributing factor for the shortfall in revenue was due to zero collections for budgeted revenue totalling $149,769,856.
The categories of revenue is shown in Figure 1.15 below: 8 Excludes revenue from TMA operations ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 46 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.15: Categories of Revenue Sale of Government Assets, 0% Dividends from Investments, 1% Interest from Bank Balances, 0% Repayments of Term Loan … Grant in Aid 1% Reimbursements and Recoveries, 1% Other Revenue and Surpluses, 2% Operating Revenue Sales, 0% Fees, Fines and Charges, 4% Return of Surplus Capital from Investment, 0% Recovery of … Trade and Manufacturing Operations, 1% Direct Taxes, 27% Indirect Taxes, 63% Comparison of Actual Revenue for 2017 and 2015 for the full 12 months is shown in Figure 1.16 below.
Figure 1.16: Comparison of Actual Revenue for 2017 and 2015 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 ) $ ( t n u o m A - Total Operating Revenue Total Investing Revenue TMA Revenue Total Revenue Types of Revenue Actual Revenue 2017 Actual Revenue 2015 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 47 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Total revenue in 2017 increased by $38,682,910 or 1.4% from 2015.
The reason for increase in revenue was due to increase in direct taxes by $160.9 million or 26.6%, Indirect taxes by $58.4 million or 3.3%, fees, fines and charges by $22.3 million or 21.2% and reimbursements and recoveries by $11.6 million or 60.3%.

Comparison of estimated and actual revenue is shown in the Figure 1.17 below.
Figure 1.17: Comparison of Estimated and Actual Revenue ) $ ( t n u o m A 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 - Operating Revenue Investing Revenue TMA Revenue Total Revenue Types of Revenue Budgeted 2017 Actual 2017 Operating revenue formed 97.9% total revenue, investing revenue was 1.3% and revenue from trading and manufacturing operations was 0.8%.
Major revenue types were Indirect Taxes of $1,813.1 million or 63.4%, Direct taxes of $766.1 million or 26.8% and Fees, Fines and Charges of $127.8 million or 4.5%.
Revenue collections which exceeded budget estimates included direct taxes of $106.2 million or 16.1%, fees, fines and charges $16.0 million or 14.3%, other receipts of $5.1 million or 13.1%, reimbursements and recoveries $13.8 million or 81%, repayments of term loan receivables of $1.0 million or 268%, interest from bank balances by $1.1 million or 11,040% and return or surplus capital from investment by $0.8 million or 15.7%.
Expenditure The total revised estimate was $3,643 million, with actual expenditure of $3,060 million resulting in savings of $583 million or 16%.

Figure 1.18 shows percentages of utilization by categories of expenditure groups.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 48 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.18: Utilization of Government Expenditure by Standard Expenditure Group Charges on Account of Public Debt, 9% Value Added Tax, 1% Established Staff, 26% Unestablished Staff, 2% Pensions, Gratuities & Compassionate Allowances, 1% Capital Grants and Transfers, 29% Capital Purchase, 2% Capital Construction, 3% Special Expenditures, 2% Travel and Communications, 1% Maintenance and Operations, 2% Operating Grants and Transfers, 17% Purchase of Goods and Services, 5% Comparison of Actual Expenditure for 2017 and 2015 for full 12 months is shown in Figure 1.19 below.
Figure 1.19: Comparison of Actual Expenditure for 2017 and 2015 ) $ ( t n u o m A 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 - Total Operating Expenditure Total Capital Revenue Value Added Tax Total Expenditure Types of Expenditure Actual Expenditure 2017 Actual Expenditure 2015 The actual expenditure increased by $199 million or 7% in 2017 in comparison to 2015.
The increase in expenditure was due to increase in expenditure of established staff by $27.3 million or 3.5%, government wage earners by $8.4 million or 18.6%, travel and communication by $7.1 million or 24.2%, purchase of goods and services by $50.7 million or 56.6%, operating grants and transfers by $82.4 million or 18.9%, capital purchases by $2.7 million or 5.9% and capital grants and transfers by $96 million or 12%.E.6.

Expenditure cell F and G 117.


Comparison of Revised Estimate and Actual Expenditure is shown in Figure 1.20 below.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 49 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.20: Comparison of Revised Estimate and Actual Expenditure ) $ ( t n u o m A 4,000,000,000 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 - Operating Expenditure Capital Expenditure Value Added Tax Total Expenditure Types of Expenditure Revised Estimate 2017 Actual 2017 All standard expenditure group from 1 - 13 had savings resulting in overall savings of $583,082,123 or 16%.
Significant savings was in special expenditure of $45.3 million or 40%, Capital construction of $76.6 million or 48% and Capital grants and transfers of $323.0 million or 26.5%.

For total expenditures, operating expenditure was 55.1%, capital expenditure was 34%, charges on public debt was 9%, pensions and gratuities and compassionate allowances and value added tax was 1% each.

Payroll expenditures The total Government Payroll expenditure for the year ended 31 July 2017 was $854,008,270.
94% or $800,546,116 was paid to Established Staff while 6% or $53,462,154 was paid to Government Wage Earners.

Refer to Table 1.17 below for comparison of revised estimate and actual expenditure.
Table 1.17: Comparison of Revised Estimate and Actual Expenditure for Payroll SEG SEG Description 1 2 Established Staff Government Wage Earners Total Revised Estimate ($) 837,823,002 55,866,975 893,689,977 Actual Expenditure ($) 800,546,116 53,462,154 854,008,270 Variance Percentage ($) 37,276,886 2,404,821 39,681,707 (%) 4.4 4.3 4.4 The total payroll expenditure for Established Staff was $800.5 million against a revised budget estimate of $837.8 million resulting in a savings of $37.3 million.
The total expenditure for Government Wage Earners was $53.5 million against a revised budget of $55.9 million resulting in savings of $2.4 million.

The savings was due to the number of post being vacant across ministries/departments.

The Total Payroll expenditure increased by $35.7 million in 2017 when compared to 20159.

This was due to the implementation of the Job Evaluation Exercise across whole of Government.

Refer to Table 1.18 below for comparison of actual payroll expenditure for 2017 and 2015.
9 Financial period for 2016 was for seven months hence 2015 figures was used ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 50 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Table 1.18: Comparison of Actual Payroll Expenditure for 2017 and 2015 Actual SEG SEG Description Expenditure 2015 ($) 781,720,316 45,089,205 826,809,521 Actual Expenditure 2017 ($) 800,546,116 53,462,154 854,008,270 Established Staff Government Wage Earners Total 1 2 Variance Percentage ($) 18,825,800 8,372,949 27,198,749 (%) 2.4 18.6 3.3 Number of employees for established staff and government wage earners for years 2017 and 2015 are shown in Table 1.19 below.
Table 1.19: Payroll details Established Staff Actual Payroll Number of Employees Average Cost per employee Government Wage Earners Actual Payroll Number of Employees Average Cost per employee Overall Total Actual Payroll Number of Employees 2017 ($) 2015 ($) 800,546,116 781,720,316 23,126 33,803 23,932 33,451 53,462,154 4,642 11,517 45,089,205 4,351 10,363 854,008,270 826,809,521 27,477 28,574 Source: Actual payroll amount for Established and Government Wage Earners were extracted from Notes to 2015 and 2017 financial statements of Government.
Number of established staffs was extracted from payroll reports from FMIS.

Number of Government Wage Earners was provided by the Salaries Section of Ministry of Economy The total number employed by the Government of Fiji was 28,574 as at 31 July 2017 which increased by 1,097 or 4% from 2015.
Investments The total investments in 2017 of $440,342,400 decreased by $4,960,922 or 1% in comparison to 2016 due to liquidation of Daily Post, Air Fiji Limited and National Trading Corporation and winding-up of Yaqara Group Limited.

The investment values for these entities is reduced to zero in 2017.

In addition the decrease in investment for International Bank for Reconstruction and Development and Asian Development Bank was due to exchange rate adjustments.
There was no sale of investments for the year ended 31/07/17.

Governments investments in the Economic Services sector entities comprises majority of government investments totalling $231,157,071 or 52%.

Investments in the Infrastructure sector entities make up 46% or $202,556,386 while the remaining 2% or $6,628,943 comprises of governments investments in Social Services sector entities.

Refer to Figure 1.21 below for the composition of government investments by sector.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 51 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 1.21: Composition of Investment by Sector Social Service Entities 2% Infrastructure Service Entities 46% Economic Service Entities 52% Social Service Entities Economic Service Entities Infrastructure Service Entities Changes in investment from 2016 to 2017 is shown in Table 1.20 below.
2016 ($) Increase/ (Decrease) ($) Table 1.20: Changes in investment by sector Description Investment in Social Services Post Fiji Limited Unit Trust of Fiji (Trustee) Limited Unit Trust of Fiji (Management) Limited Daily Post Fiji Broadcasting Corporation Limited Walesi Ltd Fiji Public Trustee Corporation Limited Total Investment in Economic Services Fiji Airways Limited Fiji Hardwood Corporation Pacific Fishing Company Limited Air Fiji Limited Assets Fiji Limited Fiji Pine Limited Fiji Sugar Corporation Limited National Trading Corporation Limited Rewa Rice Limited.
Viti Corps Company Limited Yaqara Pastoral Company Limited Food Processors (Fiji) Limited Air Terminal Services International Finance Corporation International Bank Development Copra Millers Fiji Limited Asian Development Bank Subscription Yaqara Group Limited Total for Reconstruction and 2017 ($) 5,600,000 778,839 50,000 --- 200,002 100 2 6,628,943 13,307,075 90,000,000 14,728,956 --- 2 61,002,064 15,119,580 --- 1,506,224 6,000,000 1,191,846 687,679 765,000 577,349 9,634,905 5,600,000 778,839 50,000 951,620 2 --- --- 7,380,461 13,307,075 90,000,000 14,728,956 171,804 --- 61,002,064 15,119,580 3,358,186 1,506,224 6,000,000 1,191,846 687,680 765,000 596,550 9,955,334 6,429,183 10,207,208 --- 231,157,071 6,429,183 10,455,426 91,567 235,366,475 --- --- --- (951,620) 200,000 100 2 (751,518) --- --- --- (171,804) 2 --- --- (3,358,186) --- --- --- (1) --- (19,201) (320,429) --- (248,218) (91,567) (4,209,404) ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 52 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Description Investment in Infrastructure Services Airports (Fiji) Limited Amalgamated Telecom Holdings Limited Fiji Ports Corporation Limited Total 2017 ($) 2016 ($) Increase/ (Decrease) ($) 92,300,180 80,262,716 29,993,490 202,556,386 92,300,180 80,262,716 29,993,490 202,556,386 --- --- --- --- Total Investments 440,342,400 445,303,322 (4,960,922) Term loan Receivable Term loan receivable as at 31/07/17 was $481,928,586.
Refer to term loans receivable by sector below in Table 1.21 below.
Table 1.21: Term loans Receivable by sector Term Loan Receivables for Social Services Public Officers and Ministers I-Taukei Affairs Board PSC Scholarship Lending Tertiary Education Loan Scheme Loans to Fiji Sports Council Total for Economic Term Loan Receivables Services Fiji Pine Commission Fiji Sugar Corporation Limited Viti Corporation Limited National Trading Corporation Limited Rewa Rice Limited Pacific Fishing Company Limited South Pacific Fertilizer Housing Authority Public Rental Board Total 2017 ($) 2016 ($) Increase/ (Decrease) ($) 14,476 5,778,924 9,041,153 209,060,301 4,450,611 228,345,465 14,476 6,158,924 1,463,143 124,175,975 4,450,611 136,263,129 --- (380,000) 7,578,000 84,884,326 --- 92,082,336 8,400,000 173,816,930 2,905,000 1,900,000 1,900,000 9,000,162 9,722,100 36,230,048 9,708,881 253,583,121 10,200,000 173,816,930 3,189,667 1,900,000 1,900,000 9,000,162 9,722,100 40,626,724 10,887,097 261,242,680 (1,800,000) --- (284,667) --- --- --- --- (4,396,676) (1,178,216) (7,659,559) Total Term Loan Receivable 481,928,586 397,505,809 84,422,777 WOG Audited Account 31 July 2017: Note 17 – 19 The term loan receivable balances increased by $84,422,777 or 21% compared to 2016 as a result of recognition of outstanding debt from Tertiary Education Loans Board.
Arrears of revenue Arrears of revenue in 2017 was $83,575,308 in comparison to $151,426,557 in 2015.

This was a decrease of $67,851,049 or 45%.
The decrease in arrears of revenue was mainly due the recognition of the Fiji Revenue and Customs Service arrears into the Statement of Assets and Liabilities as Accounts Receivables ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 53 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The huge proportion of debt were in relation to water rates for Water Authority of Fiji totalling to $33,006,642 followed by land rental due to Department of Lands of $21,820,630.
Refer to Table 1.22 and Figure 1.22 for details of arrears of revenue.
Table 1.22: 2017 Arrears of Revenue Ministry/ Department 2017 ($) Percentage of Total (%) Water Authority of Fiji Department of Lands Judiciary Ministry of Communications Others Total 33,006,642 21,820,630 13,450,691 7,599,780 7,697,565 83,575,308 40 26 16 9 9 100% Figure 1.22 Others 9% Min of Communications 9% Judicial 16% Min of Lands & Mineral 26% Accounts payable Water Authority of Fiji 40% Water Authority of Fiji Min of Lands & Mineral Judicial Min of Communications Others The accounts payable balance as at 31/07/17 was $95,014,885 and decreased by $5,933,368 or 6% from 2016 balance of $100,948,253.
The balance of $95,014,885 is made up of VAT & Income Tax Refunds Outstanding of $94,467,190 or 99%, litigation claims of $466,490 or 0.5%, Withholding tax of $196,225 or 0.2% and Trading and Manufacturing Trade and Sundry Creditors $115,020 debit or 0.1%.
Results from operation of Trading & Manufacturing Accounts The revenue and expenses from Trading and Manufacturing operations carried out by various government ministries and departments were $21,655,615 and $16,566,320 as at 31/07/17, respectively resulting in surplus of $5,089,295 or 24% of revenue earned.

Viability of some Trading and Manufacturing Accounts needs to be analysed as some are operating at a loss.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 54 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Trust Fund Accounts The trust fund account consisted of operating trust fund account and main trust fund account.
The operating trust fund account records payroll deductions including income tax, Fiji National Provident Fund (FNPF) contributions and other payments to third parties.

The main trust fund account records tender deposits, retention monies and trust funds set up for specific activities within Ministries/Departments.

The total trust fund account balance for the year ended 31 July 2017 was $197,199,489.

Refer to Table 1.23 below.
Table 1.23: Trust fund account balances Deposits, Deductions and Retention (Operating Trust Fund Money Account) Consolidated Trust Fund (Main Trust Fund Account) Total WOG Audited Account 31 July 2017: Note 17-39 31/07/17 ($) 28,368,369 31/0716 ($) 22,741,423 Variance ($) 5,626,946 168,831,120 120,588,162 48,242,958 197,199,489 143,329,585 53,869,904 Percentage (%) 25 40 38 The operating trust fund account balance as at 31/07/17 was $28,368,369 which increased by $5,626,946 or 25% from 2016.
The increase in balance was due to inclusion of dormant and carried forward balances and new balances for the year.

In comparison the consolidated trust fund account balance as at 31/07/17 was $168,831,120 which increased by $48,242,958 or 40% from 2016.

The reason for increase in main trust fund account balance was largely due to opening of five new trust fund accounts in 2017 and increase in balances of existing trust fund accounts.
Refer to Table 1.24 below for new trust fund accounts opened in the year ended 31 July 2017.
Table 1.24: New Main Trust Fund Accounts Opened in 2017 Ministry Description New Main Trust Account Created in 2016 -2017 Attorney General’s Office Ministry of Economy Ministry of Economy Ministry of Economy Laws of Fiji Trust Fund COP 23 Trust Fund EU Grant Trust Account Adopt – A - School Programme Prog Trust Adopt – A - School Programme Prog Trust Total Ministry of Economy Increase in Closing balance for existing Main Trust Account Republic of Fiji Military Forces Total Engineer Trust Fund Account Ending Balance as at 31/07/17 ($) 931,144 11,837,452 22,553,548 2,382,415 2,716,788 40,421,347 3,891,624 44,312,971 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 55 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The main trust fund account cash balances as per FMIS general ledger as at 31/07/17 was $169,295,442.
This is sufficient to cover main trust fund account liability of $168,831,120.

However, the operating trust fund accounts do not have separate bank accounts and funds from the consolidated fund account is used to settle payments.

The Domestic cash at bank balance net of unpresented cheques as at 31 July 2017 was $87,966,550 which was more than sufficient to cover total operating trust fund account balance of $28,368,369.
This shows that 32% of the total net domestic cash as at 31/07/17 will be utilized to settle payments for operating trust fund account.

Term loans payable Public debt in 2016-2017 totalled $4,667,607,532.

This comprised of domestic borrowings of $3,204,762,346 which made up 69% of total debt; overseas borrowings of $1,367,960,883 or 29%; and Treasury Bills of $94,884,303 which made up the remaining 2%.

These are illustrated in Figure 1.23 below.


Figure 1.23: Composition of Public Debt in 2016/2017 Overseas Loan, 29% Treasury Bils, 2% Domestic Debt, 69% The government also receives short term advances from the Reserve Bank of Fiji referred to as Ways and Means.

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

During the year, Government had utilized $107,500,000 of this facility through the Reserve Bank of Fiji.
For the year ended 31/07/17, a principal loan repayments for overseas loans and domestic loans was $49,336,100 and $99,643,000, respectively totalling to $148,979,100.

Interest payments were $45,538,172 for overseas loans and $229,340,752 for domestic loans.

Treasury bills fees and charges were $1,722,933.

Other charges totalling $144,236 included Reserve bank of Fiji Registry fees of $137,901 and agency and management fees of $6,335.
Public debt sustainability The total Gross Domestic Product (GDP) as at 31/07/17 was $9,865,489,759 which increased by $12,785,646 or 0.13% from $9,852,704,113 in 2016.

The total debt as at 31/07/17 of $4,667,607,532 also increased by $165,183,746 or 4%.

Total debt as a percentage of GDP was 47% as at 31/07/17.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 56 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Total government revenue was $2,859,097,304 and total debt was $4,667,607,532.

Debt to revenue ratio was 1: 1.61 indicating that for every $1 of government revenue there is $1.61 of government debt.
Interest charges on loans and other charges on public debt was $276,746,093, Interest expense to revenue was 1: 0.10, indicating that 10% of total revenue can be used for repayment of interest expenses on loans.

Appropriation Statement The Appropriation Statement for Government is shown in Table 1.25 below.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 57 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Table 1.25: Appropriation Statement Summary by Standard Expenditure Group (SEG) 1.

Established Staff 2.

Unestablished Staff 3.

Travel and Communications 4.


Maintenance and Operations Original Budget 2017 ($) 858,177,689 45,760,695 34,820,423 75,635,040 ($) --- --- --- --- Redeployment Virements Revised Estimate 2017 ($) Actual Expenditure 2017 ($) ($) ($) Surplus/ (Deficit) (Over) / Under Expenditure (20,354,687) 837,823,002 800,546,116 37,276,886 10,106,280 55,866,975 53,462,154 2,404,821 5,658,039 40,478,462 36,571,471 3,906,991 1,198,565 76,833,605 69,927,885 6,905,720 5.
Purchase of Goods and Services 149,379,483 221,396 1,608,030 151,208,909 140,315,711 10,893,198 6.

Operating Grants and Transfers 522,928,042 8,303,934 8,125,736 539,357,712 518,445,776 20,911,936 7.

Special Expenditure 8.

Capital Construction 9.

Capital Purchase 113,966,050 169,752,580 55,255,821 --- --- --- (824,214) 113,141,836 67,863,214 45,278,622 (10,168,564) 159,584,016 83,016,151 76,567,865 10,135,411 65,391,232 48,526,290 16,864,942 10.
Capital Grants and Transfers 1,229,056,796 (8,547,226) (3,461,181) 1,217,048,389 894,059,354 322,989,035 11.

Pensions, Gratuities & Compassionate Allowances 42,409,700 12.

Charges on Account of Public Debt 10,500,000 --- --- --- --- 42,409,700 34,880,413 7,529,287 10,500,000 1,867,170 8,632,830 13.

Value Added Tax 50,775,600 21,896 (2,023,414) 48,774,081 35,913,968 12,860,113 14.

Interest Payment on overseas loans 15.


Interest Payment on domestic loans Grand Total 52,478,440 232,460,357 3,643,356,716 --- --- --- --- --- --- 52,478,440 45,538,170 6,940,270 232,460,357 229,340,750 3,119,607 3,643,356,716 3,060,274,593 583,082,123 The revised estimate was $3,643,356,716 and actual expenditure was $3,060,274,593 resulting in a savings of $583,082,123 or 16%.
This was due to significant saving in special expenditure, capital construction and capital grants and transfers in various Heads of Appropriations as reported in the Sector Reports.
_______________________________________________________________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 58 % 4 4 10 9 7 4 40 48 26 27 18 82 26 13 1 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 5.0 Assessment of Internal Controls Chapter summary In this chapter we detail our assessment of the strength of the internal controls designed, implemented and maintained by the 33 ministries and departments to ensure reliable financial reporting.
We assess financial controls using the guidelines provided in the International Standards on Auditing/International Standards for Supreme Audit Institutions.

We have noted the similarities of the controls in these standards with that of the internal control framework of the Committee of the Sponsoring Organisations of the Treadway Commission (COSO), which is widely recognised as a benchmark for designing and evaluating internal controls.
Introduction This chapter evaluates the effectiveness of the internal controls maintained by 33 ministries and departments.
Internal controls are processes designed and implemented by Permanent Secretaries, Heads of Departments and other personnel of ministries and departments to provide reasonable assurance about the achievement of a ministry or department’s objectives with regard to reliability of financial reporting effectiveness and efficiency of operations, and compliance with applicable laws and regulations.

The term “control” refers to any aspects of one or more components of internal control.
Permanent Secretaries, Heads of Departments and other personnel of ministries and departments are responsible for the preparation of the financial statements in accordance with the Financial Management Act 2004, and Finance Instructions 2010, and for such internal controls as they determine is necessary to enable preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Internal control issues noted during our audit are reported to the Permanent Secretary or Head of Department of ministries and departments.

Summary of our internal control assessments for each ministry and department against each element of internal controls is shown in Appendix A.

Internal control framework.

During our audits, we assess the design and implementation of controls to ensure that they are suitably designed to prevent, detect and correct material misstatements.
Where audit strategy requires, we also test the operating effectiveness to ensure the internal controls are functioning as designed.

A deficiency occurs when internal controls are unable to prevent, detect or correct errors in the financial statements or where controls are missing.

A significant deficiency is a deficiency that either or alone or in combination with multiple deficiencies may lead to a material misstatement in the financial statements.

It requires immediate management action.


___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 59 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Internal controls Internal controls are categorized against the following five components of internal control.
 Control Environment (CE) – is the set of standards, processes and structures that provide the basis for carrying out internal controls across the entity.

These include commitment to integrity and ethical values, independence of management to exercise oversight for the development and performance of internal control, documented structures, reporting lines and appropriate authorities such as delegated levels of authority and responsibilities in the pursuit of the entity’s objectives.
It is also includes commitment to attract, develop and retain competent individuals, and holding them accountable for their internal control responsibilities.

Examples of issues which fall under this category are ethical breaches, gaps in internal controls or controls are non-existent, individuals are not held accountable for breaches in control or entities code of ethics, staff recruitment, and training and professional development, performance assessment and succession planning matters.
The control environment of the Ministries and Departments was assessed and categorized as effective, generally effective and ineffective in the line graph below.
Figure 1.24: Categories of Control Environment Control Environment (CE) 18 16 14 12 10 8 6 4 2 0 18 6 9 Effective Generally Effective Ineffective INEEFFECTIVE Effective Generally Effective Ineffective EFFECTIVE •Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of iTaukei Affairs, Ministryof Defence, National Security and Immigration, Ministry of Foreign Affairs, Parliament, Office of the Director of Public Prosecutions, Ministry of Justice, Fiji Corrections Service, Department of Information and Communication, Information Technology & Computing Services, Ministry of Civil Service, Ministry of Rural and Maritime Development and National Disaster Management, Fiji Police Force, Ministry of Youth and Sports, Ministry of Industry, Trade and Tourism and Ministry of Public Enterprise.
• Ministry of Economy, Republic of Fiji Military Forces, Ministry of Health and Medical Services, Ministry of Women, Children and Poverty Alleviation, Ministry of Sugar and Ministry of Infrastructure and Transport.
GENERALLY EFFECTIVE •Ministry of Employment, Productivity and Industrial Relations, Judiciary, Peacekeeping Missions, Ministry of Education, Heritage and Arts, Department of Housing, Ministry of Agriculture, Ministry of Fisheries and Forests, Ministry of Lands and Mineral Resources and Ministry of Local Government, Housing and Environment .
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 60 18 16 14 12 10 8 6 4 2 0 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI  Risk Assessment (RA) – involves a dynamic process for identifying and analysing risks to achieve the entity’s objectives, forming a basis for determining how risks should be managed.
Examples of issues which would fall under this category are absence of risk management framework, operational including fraud and enterprise risks not identified, assessed and mitigated and impact of changes in business processes on controls not identified and assessed.

The risk assessment of the Ministries and Departments was assessed and categorized as effective, generally effective and ineffective in the line graph below.
Figure 1.25: Categories of risk assessment Risk Assesment (RA) EFFECTIVE •Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Economy, Ministry of iTaukei Affairs, Ministry of Employment, Productivity and Industrial Relations, Parliament, Office of the Director of Public Prosecutions, Ministry of Justice, Communication, Information Technology & Computing Services, Ministry of Civil Service, Peacekeeping Missions, Ministry of Education, Heritage and Arts, Ministry of Youth and Sports, Ministry of Industry, Trade and Tourism and Ministry of Public Enterprise .
Department Information and of 17 10 6 GENERALLY EFFECTIVE • Ministry OF Defense, National Security and Immigration, Ministry of Foreign Affairs, Fiji Corrections Service, Ministry of Rural and Maritime Development and National Disaster Management, Republic of Fiji Military Forces, Fiji Police Force, Ministry of Health and Medical Services, Ministry of Women, Children and Poverty Alleviation, Ministry of Lands and Mineral Resources and Ministry of Sugar.
Effective Generally Effective Ineffective INEEFFECTIVE •Judiciary, Department of Housing, Ministry of Agriculture, Ministry of Fisheries and Forests, Ministry of Local Government, Housing and Environment and Ministry of Infrastructure and Transport.
Effective Generally Effective Ineffective ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 61 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI  Control Activities (CA) – these are established by policies and procedures to help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out.
Control activities are performed at all levels of an entity and at various stages within business processes, and over the environment.

Examples of issues which would fall under this category are general controls relating to information technology, documentation of procedures which have in-built checks and balances which are aligned to the policies of the entity.
Specific control activities include those relating to authorization, performance reviews, information processing, physical controls, and segregation of duties.

The control activities of the Ministries and Departments was assessed and categorized as effective, generally effective and ineffective in the line graph below.
Figure 1.26: Categories of control activities Control Activities (CA) 16 14 12 10 8 6 4 2 0 15 12 6 Effective Generally Effective Ineffective EFFECTIVE •Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Economy, Ministry of iTaukei Affairs, Ministry of Employment, Productivity and Industrial Relations, Parliament, Office of the Director of Public Prosecutions, Fiji Corrections Service, Department of Information and Communication, Information Technology & Computing Services, Ministry of Civil Service, Ministry of Education, Heritage and Arts, Ministry of Industry, Trade and Tourism, Ministry of Sugar and Ministry of Public Enterprise.
GENERALLY EFFECTIVE • Ministry of Economy, Ministry Defense, National Security and Immigration, Ministry of Foreign Affairs, Ministry of Justice, Ministry of Rural and Maritime Development and National Disaster Management, Republic of Fiji Military Forces, Fiji Police Force, Peacekeeping Missions, Ministry of Health and Medical Services, Ministry of Women, Children and Poverty Alleviation, Ministry of Youth and Sports, and Ministry of Infrastructure and Transport.
INEEFFECTIVE •Judiciary, Department of Housing, Ministry of Agriculture, Ministry of Fisheries and Forests, Ministry of Lands and Mineral Resources and Ministry of Local Government, Housing and Environment.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 62 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI  Information and Communication Control (IC) – information is necessary for the entity to carry out internal control responsibilities in support of achievement of its objectives.
Communication occurs both internally and externally and provides the entity with the information needed to carry out day-to-day controls.

Communication enables personnel to understand internal control responsibilities and their importance for the achievement of objectives.

Examples of issues which would fall under this category are reporting to boards and line ministries of entities on matters relating to internal controls.
The information and communication control of the Ministries and Departments was assessed and categorized as effective, generally effective and ineffective in the line graph below.
Figure 1.27: Categories of information and communication control Information and Communication Control (IC) 25 20 15 10 5 0 24 5 4 Effective Generally Effective Ineffective Effective Generally Effective Ineffective •Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Economy, Ministry of iTaukei Affairs, Ministry of Defence, National Security and Immigration Ministry of Foreign Affairs, Parliament, Office of the Director of Public Prosecutions, Ministry of Justice, Fiji Corrections Service, Department of Information and Communication, Information Technology & Computing Services, Ministry of Civil Service, Ministry of Rural and Maritime Development and National Disaster Management, Fiji Police Force, Peacekeeping Missions, Ministry of Education, Heritage and Arts, Department of Housing, Ministry of Youth and Sports, Ministry of Industry, Trade and Tourism, Ministry of Sugar, and Ministry of Public Enterprise,Ministry of Employment, Productivity and Industrial Relations.
EFFECTIVE GENERALLY EFFECTIVE •Republic of Fiji Military Forces, Ministry of Health and Medical Services, Ministry of Women, Children and Poverty Alleviation, Ministry of Lands and Mineral Resources and Ministry of Infrastructure and Transport.
•Judiciary, Ministry of Agriculture, Ministry of Fisheries and Forests, INEEFFECTIVE Ministry of Local Government, Housing and Environment ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 63 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI  Monitoring Activities (MA) – on-going evaluations, separate evaluations or some combination of the two are used to ascertain whether controls are present and functioning.
Findings are evaluated and deficiencies are communicated in a timely manner.

Examples of issues which would fall under this category are self-assessment by entities to determine whether internal controls are present and function.

This may include the establishment of independent internal audit functions within entities which would assist in identifying any gaps in controls.
The monitoring activities of the Ministries and Departments was assessed and categorized as effective, generally effective and ineffective in the line graph below.
Figure 1.28: Categories of monitoring activities Monitoring Activities (MA) 25 20 15 10 5 0 23 5 5 Effective Generally Effective Ineffective EFFECTIVE •Office of the President, Office of the Prime Minister, Office of the Attorney General, Ministry of Economy, Ministry of iTaukei Affairs, Ministry of Defence, National Security and Immigration, Ministry of Foreign Affairs, Parliament, Office of the Director of Public Prosecutions, Ministry of Justice, Fiji Corrections Service, Department of Information and Communication, Information Technology & Computing Services, Ministry of Civil Service, Ministry of Rural and Maritime Development and National Disaster Management, Fiji Police Force, Department of Housing, Ministry of Women, Children and Poverty Alleviation, Ministry of Youth and Sports, Ministry of Lands and Mineral Resources, Ministry of Industry, Trade and Tourism, Ministry of Sugar and Ministry of Public Enterprise.
•Ministry of Employment, Productivity and Industrial Relations, Republic of Fiji Military Forces, Peacekeeping Missions, Ministry of Education, Heritage and Arts and Ministry of Health and Medical Services .

GENERALLY EFFECTIVE •Judiciary, Ministry of Agriculture, Ministry of Fisheries and Forests, Ministry of Local Government, Housing and Environment and Ministry of Infrastructure and Transport.
INEEFFECTIVE ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 64 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.0 Significant Audit Matters In this chapter we discuss significant audit matters in the 2017 Financial Statements of Government.
The significant audit matters in ministries and departments is reported in the other Sector Reports Key findings Summary of control issues cutting across agencies  Absence of risk management policy;  Delay in preparation of reconciliations;  Anomalies in drawings account and main trust fund account;  Expenditure charged to incorrect allocation; and  Anomalies in inventory Significant control deficiencies  Detailed listings of work permit holders equating to the security bond of $25,215,349 held in trust are not maintained by the Department of Immigration.
 Included in the Suitors Trust Fund Accounts are funds received on behalf of deceased persons who do not have nominees at Fiji National Provident Fund as required under section 57 of the FNPF Act 2011.

The Judicial department does not maintain detailed breakdown listing of these funds received from FNPF, funds paid out to beneficiaries, and balance of fund to be refunded to FNPF where no application has been made to claim the funds from High Court.
 The Ministry of Justice did not maintain detailed listings of the companies under provisional liquidations and the individuals under receiverships.

Consequently, audit was not able to substantiate the completeness of the closing balances of $587,437 and $255,603 reflected in the Statement of Receipts and Payments for the Official Receiver Liquidation Trust Fund Account and the Official Receiver Trust Fund Account and the Official Receiver Bankruptcy Trust Fund Account, respectively.
 The Ministry of Fisheries and Forests did not maintain a detailed listing of the beneficiaries of the Trust Accounts.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 65 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix A: Assessment of Financial Governance Internal controls The following table outlines the rating we have used to assess internal controls: Rating Internal control assessment  Effective  Generally effective  Ineffective No deficiencies identified in internal controls Deficiencies identified in internal controls Significant deficiencies identified in internal controls Preparation of Draft 2016-2017 Agency Financial Statements On 1 June 2017, the Permanent Secretary for Economy issued Circular No.
04/2017 to Permanent Secretaries, Heads of Departments, High Commissioners and Ambassadors in Fiji Overseas Missions in which procedures for closing of 2017 accounts and times were detailed.

The final day for closing the 2017 accounts was 4 August 2017.
The key focus areas in the circular were:  Closing date for journal adjustments by 11 August 2017  Clearance of Inter-departmental clearance accounts by 4 August 2017  Monitoring of unpresented cheques by 31 July 2017  Clearance of stale cheques by 4 August 2017  Annual Board of Survey on Drawings Account cheques by 29 September 2017  Retirement of imprests by 21 July 2017  Cancellation of unprocessed purchase orders by 14 July 2017  Processing of payments and virements by 21 July 2017  Completion of reconciliations by 29 September 2017  Submission of arrears of revenue returns by 30 August 2017 When ministries and departments achieve the key focus areas highlighted by the Permanent Secretary for Economy by the given dates, they are more likely to prepare accurate and timely draft financial statements for audit.
Rating Year-end close process assessment  Effective  Generally effective  Ineffective All 10 key processes completed by due date Five of 10 key processes completed within two weeks of due date Less than five of 10 key processes completed within two weeks of due date Quality of Draft Financial Statements by Entities The extent of audit adjustments made to draft financial statements indicates the effectiveness of an entity’s internal review processes before the accounts are submitted for audit.
We assessed the quality of financial statements by the impact these adjustments had on the operating results or net assets of the entity subject to out audit.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 66 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Rating Quality of draft financial statements assessment  Effective  Generally effective  Ineffective No adjustments were required and no re-submission of financial statements Adjustments on operating results/net assets were less than one percent Adjustments on operating results/net assets were more than one percent Re-submission of draft financial statements more than once Timeliness of Draft Financial Statements for Entities To assess the timeliness of acceptable draft financial statements, we have compared the date the draft financial statements were due and the date it was received.
Rating Timeliness of draft financial statements assessment  Effective  Generally effective  Ineffective Acceptable draft financial statements received before or on 16 October 2017 Acceptable draft financial statements received on or before 15 November 2017 Acceptable draft financial statements received after 15 November 2017 Timeliness of Management Comments To assess the timeliness of management comments, we have compared the date agency financial statement draft management letter (DML) was issued and the date management comments was received.
Rating Timeliness of management comments  Effective Management comments received within 14 days  Generally effective Management comments received within 21 days  Ineffective Management comments received after 21 days Timeliness of Signed Accounts Received To assess the timeliness of signed accounts received, we have compared the date financial statements were sent to ministries/departments for signing and the date signed financial statements was received.
Rating Timeliness of signed accounts received  Effective Received signed accounts within 5 days  Generally effective Received signed accounts within 15 days  Ineffective Received signed accounts after 15 days ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 67 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Result summary The following table summarizes our assessment of controls and the 2016-2017 financial statement preparing processes across ministries and departments which were audited.
Ministries / Departments by Sector Internal Controls Financial Statement Preparation Management Comments Signing of Accounts CE RA CA IC MA YE Q T MC SFS General Administration 1.

Office of the President 2.

Office of the Prime Minister 3.

Office of the Attorney General 4.

Ministry of Economy 5.

Ministry of iTaukei Affairs 6.

Ministry Defence, National Security and Immigration of 7.

Ministry Employment, Industrial and Productivity Relations 8.

Ministry of Foreign Affairs 9.

Judiciary 10.


Parliament 11.

Office of the Director of Public Prosecutions 12.

Ministry of Justice 13.

Fiji Corrections Service 14.

Department of Information and Communication 15.

Information, Technology & Computing Services 16.

Ministry of Civil Service 17.

Ministry of Rural and Maritime and National Development Disaster Management 18.

Republic of Fiji Military Forces 19.

Fiji Police Force 20.

Peacekeeping Missions Social Services 21.


Ministry of Education, Heritage and Arts                                                                                                                                                                                                                22.
Ministry of Health and Medical        Services 23.

Department of Housing 24.

Ministry of Women, Children               and Poverty Alleviation 25.

Ministry of Youth and Sports Economic Services 26.

Ministry of Agriculture 27.

Ministry Forests of Fisheries                      and 28.

Ministry of Lands and Mineral        Resources 29.

Ministry of Industry, Trade and        Tourism 30.

Ministry of Sugar 31.
Ministry of Public Enterprise                                                ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 68 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Ministries / Departments by Sector Internal Controls Financial Statement Preparation Management Comments Signing of Accounts 32.
Ministry of Local Government, Housing and Environment Infrastructure Services 33.
Ministry of Infrastructure and Transport CE RA CA IC MA YE Q        T          MC SFS     CE=Control Environment RA=Risk Assessment CA=Control Activities IC=Information and Communication Control MA=Monitoring Activities T=Timeliness of draft financial statements Q=Quality of draft financial statements YE= Year-end close processes MC = Management comments received SFS = Signing of Financial Statements ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 69 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix B: Audit Opinion Results The following tables present the results of our audit of 2016-2017 financial statements for ministries and departments.
Consistent with presentation in this report, the results have been summarized by general administration, social services, economic services and infrastructure services sectors.

General Administration Ministry/Department Legislative time frame 1.

Office of the President 2.

Office of the Prime Minister 3.

Office of the Attorney General 4.

Ministry of Economy 5.

Ministry of iTaukei Affairs 6.


Ministry of Defence, National 31 December 2017 31 December 2017 31 December 2017 31 December 2017 31 December 2017 31 December 2017 Security and Immigration Date audit report signed Audit opinion type 8 March 2018 Unmodified 13 February 2018 Unmodified 29 January 2018 Unmodified 9 August 2019 Unmodified 30 April 2018 Unmodified 7 May 2018 Modified 7.

Ministry of Employment, Productivity 31 December 2017 24 July 2018 Modified and Industrial Relations 8.
Ministry of Foreign Affairs 9.

Judiciary 10.

Parliament 11.

Office of the Director of Public Prosecutions 12.

Ministry of Justice 13.

Fiji Corrections Service 14.

Department of Communication Information and 15.

Department Technology Services (ITC) of and Information, Computing 16.

Ministry of Civil Service 17.
Ministry of Rural and Maritime Development and National Disaster Management 31 December 2017 31 December 2017 31 December 2017 31 December 2017 20 June 2018 Unmodified 2 July 2018 Modified 22 November 2017 Unmodified 18 December 2017 Unmodified 31 December 2017 31 December 2017 31 December 2017 22 May 2018 Modified 4 September 2018 Unmodified 14 March 2018 Unmodified 31 December 2017 11 May 2018 Unmodified 31 December 2017 31 December 2017 23 May 2018 Unmodified 3 April 2018 Modified 18.
Republic of Fiji Military Forces 19.

Fiji Police Force 20.

Peacekeeping Missions 31 December 2017 31 December 2017 31 December 2017 3 May 2018 16 April 2018 Modified 19 March 2018 Unmodified Unmodified Emphasis Matter - of Social Services Entity 21.

Ministry of Education, Heritage and Education and Higher Arts Institutions Legislative time frame Date audit report Audit opinion type 31 December 2017 signed 15 October 2018 Unmodified 22.
Ministry of Health and Medical 31 December 2017 14 August 2018 Modified Services 23.

Department of Housing 24.

Ministry of Women, Children and 31 December 2017 31 December 2017 16 October 2018 23 May 2018 Poverty Alleviation 25.
Ministry of Youth and Sports 31 December 2017 11 January 2018 Unmodified Unmodified - Emphasis of Matter Unmodified ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 70 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Economic Services Entity Legislative time frame Date audit report Audit opinion type 26.

Ministry of Agriculture 31 December 2017 27.


Ministry of Fisheries and Forests 31 December 2017 31 December 2017 28.

Ministry of Lands and Mineral signed 2 July 2018 Modified 18 September 2018 Modified Modified 8 March 2018 Resources 29.

Ministry of Tourism Industry, Trade and 31 December 2017 12 February 2018 Unmodified 30.

Ministry of Sugar 31.

Ministry of Public Enterprise 32.


Ministry of Local Government, 31 December 2017 31 December 2017 31 December 2017 14 March 2018 18 January 2018 30 July 2018 Unmodified Unmodified Modified Housing and Environment Infrastructure Services Entity Legislative time frame Date audit report Audit opinion type 33.
Ministry of Infrastructure and 31 December 2017 Transport signed 13 November 2018 Modified ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 71 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix C: Glossary Term Accountability Accounting estimates Appropriation Audit evidence Audit Memorandum Audit strategy Consolidated fund account Deferred income Deficiencies Express an opinion Fraud Governance International Public Sector Accounting Standards (IPSAS) under cash basis of accounting Management Material misstatement Misstatement Definition in the includes information contained Responsibility of public sector entities to achieve their objectives in reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws.
An approximation of a monetary amount in the absence of a precise means of measurement.

This term is used for an amount measured at fair value where there is estimation uncertainty, as well as for other amounts that require estimation.

A sum of total budget for the ordinary services of government for the financial year ending 31 July 2017.

All the information used by the auditor in arriving at the conclusions on which the audit opinion is based.
Audit the evidence accounting records underlying the financial statements and other information.

Management Letter highlighting areas where improvements can be made by an entity following an audit.

The strategy that sets the scope, timing and direction of the audit, and guides the development of the more detailed audit plan.

The main bank account of the government where public monies are paid into for the operations of government.

Trust money is not paid into this account.


Deferred income refers to money received by an entity before it provides the related goods or services to the customer.

Failing, weakness or shortcoming.

A written expression of the auditor’s overall conclusion on the financial report based on audit evidence obtained.

An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.
The control arrangements in place at an entity that are used to govern and monitor its activities to achieve its strategic and operational goals.

Standards adopted by Government of Fiji for financial reporting of Financial Statements of Government.

Those with the executive responsibility for conducting an entity’s operations.
A significant difference between the amounts, classification, presentation, or disclosure of a reported financial statement the amount, classification, presentation, or item and disclosure that is required for the item to be in accordance with the applicable financial reporting framework.
A difference between the amounts, classification, presentation, or disclosure of a reported financial report item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 72 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Term Definition Other significant matters Reasonable assurance Re-deployment Revaluation Risks Standards on auditing Trading and Manufacturing activities Value-adding Virements applicable financial reporting framework.
Misstatements can arise from error or fraud.

Include control weaknesses which could cause or is causing severe disruption of the process or severe adverse effect on the ability of an auditee to achieve process objectives and comply with relevant legislation.

It is likely that these issues may have an impact on the operations of the entities in future, if necessary action is not taken to address them.

A high but not absolute level of assurance.


Transfer of budgeted funds from one appropriation head to another which is approved by Cabinet.

The action of assessing the value of something again.

The probability or threat of quantifiable damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action.
International Standards on Auditing adopted by Fiji Institute of Accountants and applied by Office of the Auditor-General for audits carried out.

Are operated on semi-commercial basis to increase the returns which are derived from them and to provide goods, services or works more cost-effectively.

Financial or non-financial gains arising from improved compliance or mitigation of risks.
Permanent Secretaries of ministries and departments may authorise the transfer of budgeted funds between Standard Expenditure Groups as per section 10(1) of the Finance Instructions 2010.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 73 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix D: OAG Analysis Based on the 2016-2017 Financial Statements of Government 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.10 The cash and cash equivalents balance increased from $218,496,898 in 2016 to $289,753,141 in 2017.

Major increases were noted in Trust Fund Account and Domestic Fund Account bank balances by 41% and 17%, respectively.

Overseas cash significantly reduced by 61% and unpresented cheque by 25%, respectively in 2017.

The table below shows changes in net cash.
Account Overseas Agencies Domestic Account Trust Fund Account Trading & Manufacturing Account (TMA) Unpresented Cheques Net Cash 2017 Balances($) 2016 (7 months) Balances($) Variance ($) % Change 18,546,563 169,913,602 169,295,442 47,411,540 145,705,229 119,788,149 (28,864,977) 24,208,373 49,507,293 13,944,586 15,462,371 (1,517,785) (81,947,052) 289,753,141 (109,870,391) 218,496,898 27,923,339 71,256,243 (61) 17 41 (10) (25) 33 A graphical presentation of the account balances for the past five years is provided below.
250.0 200.0 150.0 100.0 50.0 0.0 (50.0) (100.0) ) s n o i l l i M $ ( Overseas Agencies Domestic Account Trust Fund Account TMA Bank 2013 2014 2015 2016 2017 Year Cash balances in Domestic and Trust Fund Accounts make up majority of the government’s cash holdings at year end.
10 Finance Instructions 2010 – Section 32(1) & (4) ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 74 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI BORROWING FUND ACCOUNT The government also receives short term advances from the Reserve Bank of Fiji (RBF) referred to as Ways and Means.

These advances are raised to meet immediate cash needs of government.
During the year, Government had utilised $107,500,000 of this facility through the Reserve Bank of Fiji.

Borrowings over the 15 Year Period Government borrowed a total of $688,865,448 in 2017 which increased by $101,243,118 or 17% from a total of $587,622,330 borrowed in 2016.

Of the total amount borrowed in 2017, 32% or $223,042,448 was borrowed from Overseas, 35% or $241,600,000 were from Treasury Bills and 33% or $224,223,000 was borrowed through domestic bonds.
Tabulated below are the total amounts borrowed by government from 2003 to 2017.
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 Domestic Bonds Overseas Borrowings Treasury Bills Total Amount $’000 291,000.0 449,218.2 319,967.0 356,778.6 100,536.3 341,266.9 404,239.8 452,734.1 81,470.5 192,102.0 172,822.0 233,405.8 257,356.1 295,167.0 224,223.0 % Change (3) 54 (29) 12 (72) 239 18 12 (82) 136 (10) 35 10 15 (24) Amount $’000 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 99,466.3 120,241.3 478,804.8 80,667.6 223,042.4 % Change 10 (68) (7) 3,178 (93) 5 22 143 819 (76) (27) 21 298 (83) 176 Amount $’000 580,634.6 189,256.7 326,951.1 528,715.4 685,889.2 391,725.9 253,821.7 687,313.1 411,970.9 306,664.5 138,122.1 306,883.4 332,840.6 211,787.7 241,600.0 % Change 33 (67) 73 62 30 (43) (35) 171 (40) (26) (55) 122 8 (36) 14 Amount $’000 900,379.9 647,742.6 655,559.4 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 1,069,001.6 587,622.3 688,865.4 % Change 18 (28) 1 78 (31) (7) (9) 76 (12) (40) (35) 61 62 (45) 17 * 7 months An increase was noted for overseas and treasury bills borrowing.
Overseas borrowing increased by 176% in 2017 from a total of $80,667,618 borrowed in 2016 while treasury bills raised in 2017 increased by 14% from $211,787,728 raised in 2016.

Domestic borrowings decreased by 24% from $295,166,984 in 2016.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 75 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Trends in Government Borrowing by Category The total public debt at the end of each year from 2003 to 2017 and its composition for the last 15 years are summarised in the Table below.
Year Domestic Bond 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($) 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 2016* 3,079,850,613 2017 3,204,762,346 * 7 months Percentage of Total Borrowing (%) Treasury Bills ($) Percentage of Total (%) Overseas Loan ($) Percentage of Total Borrowing (%) 8 7 7 15 15 16 17 16 24 25 28 31 29 28 29 Total ($) The government bonds mature between 3 to 15 years.
In contrast, the term of Treasury Bills which constitute 2% of the borrowings ranges between 14 days to 245 days.

Over the last 15 years, the percentage of overseas borrowings constituted an average 20% of the borrowings.

A graphical representation of the outstanding government borrowings position is provided below.
Treasury Bills Overseas Loans Domestic Loans Total Borrowings m ) $ ( t n u o m A 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 00 2003 2004 2005 2006 2007 2008 2009 2010 Years 2011 2012 2013 2014 2015 2016(7 months) 2017 Public debt has been increasing over the years and in 2017, a further increase of $165,183,746 or 4% was noted when compared to the debt of $4,502,423,786 owed in 2016.
The rise in the national debt level was due to increases in domestic debt by $124.9 million, overseas debt by $109.2 million and a decrease in treasury bills by $68.9 million.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 76 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The figure below shows the relationship between actual revenues and expenditures over the last 15 years.
4,000 3,000 2,000 1,000 s n o i l l i M ) $ ( t n u o m A 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Years Revenue Expenditure *Year 2016 was for 7 months The figure below reveals that government expenditure of $3,076,840,916 exceeded revenue of $2,859,097,304 during 2017 resulting in a net deficit of $217,743,612 for the year 2017.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ) m $ ( t n u o m A 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900 -1000 Year *Year 2016 was for 7 months 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.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 77 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The repayment of the borrowings of the Government of Fiji over the past 15 years is represented in the table below.
Year Domestic Bonds Principal ($) Interest ($) Overseas Borrowings Interest Principal ($) ($) Treasury Bills Principal ($) Interest ($) Total Repayment & Interest ($) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* * 7 months Principal repayments for domestic bonds increased by $47,838,000 or 92%, principal repayments for overseas borrowings increased by $9,890,345 or 25% and treasury bills increased by $48,517,790 or 25%.
Overall the total principal debt repayments increased by $106,246,135 or 38% in 2017.

Principal payments in 2017 for government borrowings totalled $388,695,690 whilst interest payments amounted to $275,034,915.

Refer to the table below for details.


Description Principal Repayment ($) Domestic Bonds Overseas Borrowings Treasury Bills Total 99,643,000 49,336,100 239,716,590 388,695,690 Interest Repayment ($) 229,342,301 43,809,204 1,883,410 275,034,915 The interest repayment on Domestic Borrowings for 2017 was $229,342,301 compared to $43,809,204 for Overseas Borrowings and $1,883,410 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%.

We noted that the Fiji Government had recorded a loan amounting to 40 million RMB Yuan as Chinese Interest Free Loan.

The total interest free loan recorded in the books of the government amounts to $12 million Fiji dollars when converted to the local currency as at 31/07/17.
The Chinese Government had written to the Fiji Government to exempt the Fiji Government from having to repay the debt.
On 16 May 2017, the Government of the People’s Republic of China and the Government of the Republic of Fiji signed a partial debts exemption protocol in Beijing, China whereby the Government of the People’s Republic of China exempted the loan repayment obligation of two ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 78 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI interest free loans to support the development of the national economy and reduce the debt burden of the Republic of Fiji.
Refer to the table below for details.

Loan Agreement on Economic and Technical Cooperation between the Government of the People’s Republic of China and Government of the Republic of Fiji Agreement on Economic and Technical Cooperation between the Government of the People’s Republic of China and Government of the Republic of Fiji Date Loan greement was Signed 2nd May 1989 Amount (RMB Yuan) 10,000,000 19th April 1990 30,000,000 The total amount used from these two interest free loans was RMB Yuan 40,000,628.
As at 31 July 2017 the equivalent amount of these two interest free loans was FJ $11,943,653 and outstanding overseas loan balance was adjusted downwards by the same amount.

Domestic Bonds The total domestic bonds as at 31 July 2017 amounted to $3,204,762,346 or 69% of total Government borrowings.

The table below shows the amounts that are owed by the Government of Fiji to bond holders.
Bond Holder FNPF Insurance Companies Commercial Banks RBF Trust Fund (excluding UTOF) Unit Trust of Fiji Others Total Amount ($) 2,290,903,500 603,358,000 119,270,000 75,830,000 30,136,950 22,970,000 61,952,050 3,204,420,50011 Percentage of Outstanding Debt (%) 71 19 4 2 1 1 2 100 Fiji National Provident Fund (FNPF) held 71% of the bonds as at 31 July 2017; Insurance Companies 19%; Commercial Banks 4%; RBF 2%; the remaining 4% of the bonds were held by Trust Fund, Unit Trust of Fiji and others.
The composition of outstanding government bonds is shown in the figure below.
Trust Fund (excluding UToF) 1% Unit Trust of Fiji 1% RBF 2% Commercial Banks 4% Insurance Companies 19% Others 2% FNPF 71% 11 Amount is reflected at face value and excludes accrued Interest earned and unamortized premium less discount of $341,846 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 79 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Borrowings & Interest Payments Details of outstanding borrowings over the past 15 years with the total interest paid and its budgetary provision is shown in the table below.
Interest payments are made every six months.
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 * 7 months Domestic Borrowings ($m) 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 3,079.9 3,204.8 % Increase /(Decrease) 12 18 7 8 (5) 7 7 10 (5) 0.2 0.4 2 5 9 4 Interest Paid ($m) 102.0 108.6 120.2 129.5 148.0 147.4 165.3 190.7 213.2 210.5 207.5 209.4 210.3 125.1 229.3 % Increase/ (Decrease) 7 6 11 8 14 (0.4) 12 15 12 (1) (1) 1 0.4 (41) 83 Budgetary Provision ($m) % Change 110.0 121.5 124.0 127.7 148.2 151.4 156.7 190.6 225.4 211.7 208.3 209.5 210.5 219.3 232.5 8 10 2 3 16 2 4 22 18 (6) (2) 1 1 4 6 Total domestic borrowings outstanding increased by $124.9 million or 4% in 2017 compared to 2016.
Interest paid on domestic borrowings increased by $104.2 million or 83%.

The Government had allocated $232.5 million in the 2017 Budget for interest payments of which $229.3 million was paid during the year.

The interest expense and the principal repayments over the past 15 years are shown in the figure below. )
m $ ( t n u o m A 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Year Principal Interest ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 80 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Overseas Borrowings The total outstanding overseas borrowing of Government as at 31 July 2017 was $1,367,960,883 which represents 29% of the total outstanding borrowings.
Majority of the overseas borrowings obtained were to finance capital projects.

Yearly Overseas Borrowings The figure below shows the trend of the yearly cash overseas borrowings over the past 15 years.

m ) $ ( 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0 2003 3004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year *Year 2016 was for 7 months 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 $US200 million in global bonds.

However, in 2016 there was a sharp decline in borrowing trend due to no issuance of bonds by the Government.

In 2017, borrowing increased significantly due to cash borrowing by the Government.

The Government borrowed a total of $223,042,448 from overseas which consisted of cash disbursements of $211,440,261 and direct disbursements of $11,602,187.
Overseas loan repayments totalling $93,145,304 were made in 2017, which comprises of $43,809,20412 in interest and $49,336,100 in principal payments.

Refer to the table below for details of overseas borrowings made in the year 2017.
12 Amount reflected is external interest paid and excludes capitalized interest, amortization and front-end fee of $1,728,966 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 81 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Loan Cash ($) Capitalisation of Interest ($) Direct Disbursement ($) Front End Fee ($) Loan Amortisation ($) Total ($) 1,064,050 332,754 3,095,836 --- --- 246,561 6,264,848 258,425 --- --- 4,492,640 6,769,834 Road Upgrading Projects ADB Transport Sector Infrastructure Project World Bank Transport Infrastructure Investment Project Post Cyclone Projects Post Cyclone Winston Emergency Development Policy Operation Emergency Assistance for Recovery from Cyclone Winston Water Project Urban Water Supply & Wastewater Management Program Telecommunication Project Pacific Regional Connectivity Project: Fiji Connectivity Project Agriculture Project Fiji Agricultural Partnership Project Global Bond 2015 Global Bond Borrowing Total 102,919,934 105,065,000 --- --- --- --- --- 102,919,934 --- --- --- 105,065,000 --- --- 2,241,503 --- --- 2,241,503 422,921 1,968,356 --- --- --- --- --- 31,237 --- 454,158 --- --- --- --- --- 1,968,356 859,989 859,989 211,440,261 579,315 11,602,187 289,662 859,989 224,771,414 Borrowings in relation to the Post Cyclone Project comprised of 93% or $207.98 million of the total overseas borrowings by Government as at 31 July 2017.
The funds obtained for this project were utilised for recovery and rehabilitation purposes after the destruction left behind by Tropical Cyclone Winston in 2016.

The composition of the Overseas Borrowings is illustrated in the figure below.
Telecommunication Project 0% Global Bond 0% Agriculture Project 1% Road Upgrading 5% Water Project 1% Post Cyclone Projects 93% ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 82 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Overseas Borrowings Outstanding & Interest Paid The table below provides details of overseas borrowings outstanding over the past 15 years with the total interest paid each year.
Year Overseas Borrowings ($m) % Increase/ (Decrease) Interest Paid ($m) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 * 7 months 174.1 168.7 164.1 416.7 397.1 476.0 527.2 548.5 832.1 935.5 1,081.0 1,254.3 1,241.4 1,258.7 1,367.9 (10) (3) (3) 154 (5) 20 11 4 52 12 16 16 (1) 1 9 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 22.6 43.8 % Increase/ (Decrease) (23) (15) (10) 4 289 (6) 17 (6) 88 7 12 4 44 (71) 94 Budgetary Provision ($m) Variance ($m) 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 48.2 52.5 (6) (26) (4) (4) 266 6 17 (3) 60 14 12 10 44 (47) 9 In 2017, the outstanding overseas borrowings increased by 9% compared to 2016.
A sum of $52,478,400 was provided in the 2017 Budget Estimates (revised) for interest expense of which $43,809,204 was actual interest payment made in 2017.

The principal and interest payments are illustrated in the figure below.
Principal Repayments Interest 600.00 500.00 400.00 300.00 200.00 ) m $ ( t n u o m A 100.00 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year 2016(7 months) 2017 Principal repayment for overseas loans in 2017 amounted to $49.3 million while interest payment totalled $43.813 million.

This is an increase by $31 million or 50% compared to 2016.
13 Amount reflected as external interest paid and excludes capitalized interest, amortization and front-end fee of $1,728,966 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 83 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Revaluation of Overseas Borrowings Overseas borrowings are revalued at year end using the Reserve Bank Fiji (RBF exchange rate as at 31/07/17) 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.

The table below outlines the amounts attributed to overseas borrowings due to revaluation over a 15-year period.
Year Revaluation Increase/ (Decrease) ($) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 * 7 months (31,859,534) (3,554,545) (534,342) (17,120,505) (21,844,864) 70,352,312 46,988,862 22,885,617 1,537,285 14,895,650 65,295,314 65,340,835 70,666,171 (24,319,154) (54,259,170) Overseas Borrowings ($) 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 1,241,407,387 1,258,728,393 1,367,960,883 Unrealised Exchange (Gain)/Loss as a % of Overseas Borrowings (18) (2) (0.3) (4) (6) 15 9 4 0.2 2 6 5 6 (2) (4) The value of the overseas borrowings decreased by $54,259,170 or 4 % due to floating exchange rates14 in 2017.
Treasury Bills The Government through the Reserve Bank of Fiji 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 $241,600,000 in Treasury bills of which $239,716,590 constituted net borrowings by the government whilst $1,883,410 represented discounts, as summarised in the table below.
Bank Commercial Banks Others Total Face Value ($) 241,500,000 100,000 241,600,000 % of Total 99.9 0.1 100 Discount ($) 1,881,275 2,135 1,883,410 % of Total 99.9 0.1 100 Net Receipts ($) 239,618,725 97,865 239,716,590 % of Total 99.9 0.1 100 14 In a floating rate system, the exchange rate is determined directly by market forces, and is liable to fluctuate continually.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 84 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Of the total Treasury bills issued in 2017, 99.9% were purchased by commercial banks and the remaining 0.1% was purchased by other entities and individuals.

This composition is graphed below.


Others 0.1% Commercial Bank 99.9% The Treasury bills are issued by the Government through the RBF and have maturity periods ranging from 14 to 245 days.

The table below show details the total Treasury bills raised in the year together with their maturity dates and discount.
Maturity in Days Face Value Discount 14 28 56 91 182 245 Total ($) 25,100,000 59,000,000 5,000,000 70,000,000 58,400,000 24,100,000 241,600,000 ($) 5,388 39,518 8,424 396,120 912,372 521,588 1,883,410 Treasury Bill Cost ($) 25,094,612 58,960,482 4,991,576 69,603,880 57,487,628 23,578,412 239,716,590 The discount increases as the maturity date increases.
Refer to figures below for these details: Discount and Maturity of Treasury Bills Percentage of Treasury Bills Face Value ) $ ( t n u o m A 1000000 800000 600000 400000 200000 0 245 Days 10% 182 Days 24% Discount 14 28 56 91 182 245 Maturity in Days 91 Days 29% 14 Days 10% 28 Days 24% 56 Days 2% ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 85 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Treasury Bills Over a 15-year Period Treasury bills issued and redeemed over the last 15 years is summarised in the table below for details.
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * 7 months Balance Brought Forward ($) 196,432,453 276,925,838 126,987,822 136,018,388 141,311,687 141,160,433 64,552,990 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 128,583,452 143,255,852 163,844,780 Issues Redemption Outstanding ($) 580,634,561 189,256,716 326,951,124 528,715,414 685,889,234 391,725,937 253,821,653 687,313,133 411,970,874 306,664,544 138,122,146 306,883,399 336,000,000 213,200,000 241,600,000 ($) 500,141,176 339,194,733 317,920,558 523,422,114 686,040,488 468,333,380 220,653,349 710,064,626 416,019,281 265,852,974 147,577,053 280,578,003 321,327,600 192,611,072 310,560,47716 ($) 276,925,838 126,987,821 136,018,388 141,311,688 141,160,433 64,552,990 97,721,294 74,969,801 70,921,393 111,732,963 102,278,056 128,583,45215 143,255,852 163,844,780 94,884,303 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 the figure below 15 Excludes discount of $2,016,548.07 16 Excludes unamortised interest of $1,883,410 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 86 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 800,000,000 600,000,000 400,000,000 200,000,000 ) $ ( t n u o m A 0 (200,000,000) (400,000,000) (600,000,000) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Issues Redemption Outstanding Budget Deficit Year In 2017 a budgeted gross deficit of $620.7 million was recorded, with treasury bills outstanding totalling $94.9 million.
Treasury Bills Management Treasury bills are short-term financial instruments used by Ministry of 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: *Budgeted revenue was for 12 months; however actual revenue was for 7 months due to the change in the financial year.

Hence there is a significant shortfall.
Revenue 2008 ($m) 2009 ($m) 2010 ($m) 2011 ($m) 2012 ($m) 2013 ($m) 2014 ($m) 2015 ($m) 2016 (7 2017 ($m) months) ($m) Budgeted Revenue Operating Receipts & 1,411.50 1,522.40 1,496.50 1,745.70 1,942.80 2,108.40 2,721.80 3,122.40 3,128.7 3,175.3 Investing Loan Receipts 370.20 522.50 497.50 734.50 338.40 398.90 385.40 891.90 445.4 620.7 Total 1,781.70 2,044.90 1,994.00 2,480.20 2,281.20 2,507.30 3,107.20 4,014.30 3,574.1* 3,796.0 Actual Revenue Operating Receipts & 1,454.9 1,412.80 1,536.50 1,801.30 1,937.10 2,098.40 2,371.0 2,943.5 1,500.8 2,837.4 Investing Loan Receipts 345.60 405.40 463.00 693.40 192.20 173.10 353.60 801.8 305.5 447.3 Total 1,800.50 1,818.20 1,999.50 2,494.70 2,129.30 2,271.50 2,724.60 3,745.3 1,806.3 3,284.7 Revenue Variance 18.80 (226.70) 5.50 14.50 (151.90) (235.80) (382.60) (269.00) (1,767.8) (511.3) Treasury Bills raised 391.73 253.82 687.31 411.97 306.66 138.12 306.88 336.00 213.2 241.6 Excess/((shortfall) 410.53 27.12 692.81 426.47 154.76 (97.68) (75.72) 67 (1,554.6) (269.7) ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 87 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 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 $241.6 million was raised through Treasury bills in 2017.
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 the figure below. )
m $ ( t n u o m A 400 350 300 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Year Government utilised this facility and borrowed $107,500,000 in 2017 compared to $84,000,000 utilised in 2016.

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.
The table below 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 flexibility analysis includes revenue data and loan components.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 88 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Revenue Debt Repayments Interest Bite Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ($) 1,386,009,960 1,634,663,320 1,550,489,828 2,035,207,842 ($) 737,597,477 617,152,850 646,463,603 857,682,649 1,510,117,953 1,091,633,056 1,800,583,846 1,818,235,071 896,317,497 683,801,800 1,999,480,409 1,155,094,117 2,451,779,618 1,176,866,114 2,129,334,959 2,119,975,211 2,393,392,529 775,194,479 576,915,467 746,927,616 2,793,515,336 1,286,113,338 2016* 1,500,808,190 432,538,185 2017 * 7 months 2,837,441,689 663,730,605 % 53 38 42 42 72 50 38 58 48 36 27 31 46 29 23 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.

e g a t n e c r e P 80% 70% 60% 50% 40% 30% 20% 10% 0% Interest Bite 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years 2016(7 months) 2017 In 2017, the financial flexibility measure was 23% indicating that the total debt repayment was equivalent to 23% of the revenue received by the Government during the year compared to 29% during 2016.
Hence, 77% of revenues collected were available for government programs compared to 71% during 2016.

Financial Vulnerability Financial Vulnerability is the measure of the degree of dependence of Government on sources of borrowing outside its control or influence.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 89 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 * 7 months Outstanding Overseas Borrowings ($) 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,104 935,530,587 1,081,097,414 1,254,277,326 1,241,407,386 1,258,728,393 1,367,960,883 Government Debt % ($) In 2017, overseas borrowings made up 29% of outstanding government borrowings which increased by 1% when compared to 2016. e g a t n e c r e P 35% 30% 25% 20% 15% 10% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Years The overall trend indicates an increasing reliance by Government on overseas borrowings from 2006.
There were sharp increases in 2006, 2011 and 2014 followed by a slightly decreased reliance in 2016 and a slight increase in 2017.

Another measure of Financial Vulnerability is the comparison of overseas borrowings to Gross Domestic Product (GDP).

The table below compares overseas borrowings to GDP over a period of 10 years.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 90 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Year Overseas Borrowings Nominal GDP % of Overseas Borrowings/GDP ($) ($) 5,614,900,000 475,994,415 2008 5,614,100,000 527,248,475 2009 6,024,400,000 548,461,798 2010 6,768,500,000 832,147,104 2011 7,109,500,000[r] 935,530,587 2012 7,715,700,000[r] 1,081,097,414 2013 8,435,900,000[r] 1,254,277,326 2014 2015 1,241,407,386 9,210,800,000[p] 2016* 1,258,728,393 9,852,704,113[p] 1,367,960,883 9,865,489,759(p) 2017 [r]: GDP Revised Figure [p]: GDP Provisional Figure [*]:* 7 months Source: Macroeconomic Committee 8 9 9 12 13 14 15 13 13 14 e g a t n e c r e P 16% 14% 12% 10% 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Years Moreover, the comparison of the domestic debt to GDP is another measure of Financial Vulnerability.
The table below compares Domestic Borrowings to GDP for a period of 10 years.
Year Domestic Borrowings Nominal GDP 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 ($) 2,346,258,150 2,505,092,150 2,759,292,150 2,663,382,087 2,631,565,650 2,641,564,500 2,698,317,500 2,836,488,629 3,079,850,613 3,204,762,346 ($) 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] 9,210,800,00017[p] 9,852,704,113 9,865,489,759(p) [r]: GDP Revised Figure [p]: GDP Provisional Figure [*]: 7 months Source: Macroeconomic Committee % of Domestic Borrowings/G DP 42 45 46 39 37 34 32 31 31 32 17 Excludes Treasury Bills outstanding at year end ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 91 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Domestic Borrowing as a percentage of GDP remained stagnant at 31% in 2015 and 2016 and slightly increased to 32% in 2017. e g a t n e c r e P 46% 44% 42% 40% 38% 36% 34% 32% 30% 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Years The figure above 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.
The table below shows the comparison between Tax Revenue and the GDP.
Year 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 Tax Revenue ($) 1,243,057,337 1,209,223,648 1,302,130,578 1,512,378,397 1,616,297,515 1,879,243,556 2,117,742,442 2,359,863,231 1,314,519,968 2,579,175,444 GDP ($) 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] 9,852,704,113 9,865,489,759(p) % of Tax Revenue/GDP 22 22 22 22 23 24 25 26 13 26 [r]: GDP Revised Figure [p]: GDP Provisional Figure [*]: 7 months Source: Macroeconomic Committee The figure below shows that the Tax Revenue as a percentage of GDP in the last 10 years has been between 22% - 26%.
In 2017, this percentage increased from 13% to 26% due to change in the financial year from 7 months in 2016 to 12 months in 2017. e g a t n e c r e P 30 25 20 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 Years 2016(7 months) 2017 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 92 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Another measure of Financial Vulnerability is the comparison of tax revenue to debt.
The table below compares tax revenue to debt for a period of 10 years.
Year 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 Tax Revenue ($) 1,243,057,337 1,209,223,648 1,302,130,578 1,512,378,397 1,616,297,515 1,879,243,556 2,117,742,442 2,359,863,231 1,314.519,968 2,579,175,444 Debt ($) 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 4,502,423,786 4,667,607,532 % of Tax Revenue/Debt 43 39 38 43 44 49 52 56 29 55 [*]: 7 months The tax revenue as a percentage of debt has significantly increased to 55% compared to 2016.
This indicates that 55% of total government debt can be met from tax revenue in 2017.

60% 55% 50% 45% 40% 35% 30% 25% 20% e g a t n e c r e P 2008 2009 2010 2011 2012 2013 2014 2015 2016(7 months) 2017 Years The ability of tax revenue to meet the debt over the 10-year period was on a declining trend since 2008 and gradually increased from 2010 to 2015 due to increase in tax collections during these years.
However, a sharp decrease in 2016 was due to the change in accounting period from 12 months in 2015 to 7 months in 2016.

Hence the revenue collected was for 7 months only.

There has been a sharp increase in 2017 as tax collections has increased for the 12 months ended 31 July 2017.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 93 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The table below shows the comparison of government surplus/ (deficit) to GDP.
Year Gross Surplus/ (Deficit) GDP 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017 ($) 120,093,824 (93,167,378) 99,398,751 49,027,101 (136,880,612) (37,583,667) (554,256,802) (859,086,199) (347,124,981) (371,812,004) ($) 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] 9,852,704,113 9,865,489,759(p) % of Gross Surplus (Deficit) /GDP 2.1 (1.7) 1.6 0.7 (1.9) (0.5) (6.6) (9.3) (3.5) (3.8) [r]: GDP Revised Figure [p]: GDP Provisional Figure [*]: 7 months Source: Macroeconomic Committee 4% 2% 0% -2% -4% -6% -8% -10% e g a t n e c r e P 2008 2009 2010 2011 2012 2013 2014 2015 Years 2016(7 months) 2017 In 2017, the gross deficit as a percentage of GDP decreased to 3.8% when compared to 2016.
___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 94 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI INVESTMENTS Return on Investments Return on investment is a performance measure used to evaluate the efficiency of Government investments.
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.18 Government’s return on investment over the past five years from Government Commercial Companies and Commercial Statutory Authorities is highlighted in the table below and figure below.
Year 2013 2014 2015 2016 2017 Total Government Shareholding ($) 495,975,041 548,888,805 456,439,892 445,303,321 440,342,400 Dividends on Investment ($) 11,980,221 24,816,121 33,243,215 36,230,778 11,210,806 Return on Investments (%) 2 5 7 8 3 ) ' % ( e t a R 15 10 5 - Expected Baseline (%) Return on Investment (%) Years Analysis of governments return on investments indicates that the overall average rate of return on investment has steadily increased from 5% in 2014 to 8% in 2016 and decreased to 3% in 2017.
Over the five years period, an overall average rate of return on investments of 5% has been recorded with the highest overall average of 8% attained in 2016.

Collectively, the 10% baseline as required by the 2003 Corporate Governance Policy Framework has not been achieved.
18 Corporate Governance Policy Framework – December 2003, Part II, Section 22 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 95 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Analysis of Dividends and Investments The forecast for dividend revenue in 2017 was $39.0 million19 while actual dividend revenue received for the year totalled only $11.2 million resulting in short collections of $27.8 million or 71%.
The movement of dividend received over the past five years is shown in the table below.
Year Total Government Shareholding Dividends on Investment ($) ($) 495,975,041 11,980,221 548,888,805 24,816,121 456,439,892 33,243,215 445,303,321 36,230,778 440,342,400 11,210,806 2013 2014 2015 2016* 2017 [*]: 7 months Percentage Change in Dividend (%) Number of Dividend Paying Entities 14 107 34 9 (69) 6 6 5 4 5 Number of Entities Holding Government Investments 26 24 24 25 21 Percentage of Dividend Paying Entities (%) 23 25 21 16 24 Refer to the figure below for the graphical analysis of dividends collected over the 5-year period: ) $ ( t n u o m A 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 ($) 2013 2014 2016(7 months) 2017 2015 Years Over the past five years, the number of entities paying dividends to Government averaged five compared to the average of 24 companies in which investments have been made.
The low average number of entities remitting dividends to Government indicates the high number of non- performing portfolios and thus warrants stringent review of the investments, in order to receive maximum returns.

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.20 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 Economy, and relevant Minister.21 19 2016-2017 Budget Estimates 20 Corporate Governance Policy Framework – December 2003, Part II, Section 22 21 Corporate Governance Policy Framework – December 2003, Part II, Section 26 ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 96 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI A total of $11.2 million was received by government as dividends in 2017 from three22 government commercial companies and two23 minority owned company.
In addition to dividends received from the above companies, the government also received a sum of $14 million as dividend from Reserve Bank of Fiji and JP Morgan.

For details of dividends remitted to government in the past five years refer to the table below.
Description Post Fiji Limited UTOF (Management) Limited Air Terminal Services Yaqara Pastoral Company Ltd Fiji Ports Corporation Limited Airports (Fiji) Limited ATH Limited** Fiji Public Trustee Corporation Limited* Pacific Forum Line(2006) Dividends from Investments Value of Investments as at 31/07/2017 ($) 5,600,000 50,000 765,000 1,191,846 Percentage of Dividend to total Investments value --- 735% --- 159% Dividend for 2017 Dividend for 2016 (7 months) Dividend for 2015 Dividend for 2014 Dividend for 2013 ($) --- 367,383 ($) --- --- ($) 1,249,574 --- ($) --- 119,526 ($) --- 113,574 --- 1,900,000 --- 1,424,941 528,768 --- 401,006 3,300,000 235,530 1,226,224 29,993,490 8% 2,335,796 2,616,854 3,719,191 3,698,979 3,654,877 92,300,180 80,262,716 2 --- 210,163,234 --- 6% 750,000 --- 5,107,627 1,500,000 30,000,000 2,188,983 --- 17,528,344 10,217,338 --- 10,000,000 7,296,610 -- --- 6,566,949 --- --- 5% --- --- --- --- 183,167 11,210,806 36,230,778 33,243,215 24,816,121 11,980,321 The above table shows that Yaqara Pastoral Company Limited, and Unit Trust of Fiji (Management) Limited and Fiji Public Trustee Corporation Limited have met the 10% required dividend remittance in accordance with Public Enterprises Corporate Governance Policy Framework.
A graphical representation of budgeted and actual dividend revenue remitted by Government entities over the five-year period is outlined in the table and figure below.
Descriptions 2017 ($) 2016 (7 months) ($) 2015 ($) 2014 ($) 2013 ($) Actual Dividends Budgeted Dividends % of Budgeted Dividends collected 11,210,806 39,000,000 29% 36,230,778 32,860,165 110% 33,243,215 41,290,000 81% 24,816,121 36,121,700 69% 11,980,221 38,281,000 31% ) m $ ( t n u o m A 50 40 30 20 10 - 2013 2014 2016(7 months) 2017 2015 Year Budget Actual 22 Fiji Public Trustee Corporation Limited, Unit Trust of Fiji (Management) Limited and Yaqara Pastoral Company Limited 23 Amalgamated Telecom Holdings Limited and Fiji Ports Corporation Limited ___________________________________________________________________________________________________ REPORT ON 2016-2017 FINANCIAL STATEMENTS OF GOVERNMENT & ANNUAL APPROPRIATION STATEMENT 97 Part C: 2016-2017 Statement Economy Agency of Ministry Financial of REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Section 4 Ministry of Economy Role and Responsibilities The Ministry of Economy manages the finances of Government.
It ensures that public funds are used as its elected leaders intend and that all spending adheres to Fijian law.

The work of the Ministry of Economy helps put the economy on a path to sustainable long-term development by ensuring that the national economy is well managed and meets its macroeconomic targets.
To carry out this responsibility, the Ministry of Economy must provide sound economic and financial forecasting and analysis, manage the nation’s financial assets and debts, oversee fiscal policy and tax collection, carry out Government-wide financial management reforms, manage the national budget and ensure that Government can procure the goods and services it needs to serve the people of Fiji.
As part of the Ministry of Economy, the Strategic Planning Office (SPO) formulates and coordinates the implementation of the national development plan including monitoring of Annual Corporate Plans, capital projects and climate change, and providing input to the Office of the Prime Minister.

The Office also coordinates with the budget division on operating expenditure.
The Fiji Bureau of Statistics [FBOS] is responsible for the analysis and publication of all statistical information in a timely and coherent manner.
TABLE OF CONTENTS PART A: FINANCIAL STATEMENT .......................................................................................................... 3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Audit Opinion ......................................................................................................................... 3 Statement of Receipts and Expenditure – Head 4 ............................................................... 3 Statement of Receipts and Expenditure – Head 50 ............................................................. 4 Statement of Receipts and Expenditure – Head 51.............................................................. 4 Statement of Receipts and Expenditure – Head 52 ............................................................. 4 Statement of Receipts and Expenditure – Head 13 .............................................................. 5 Appropriation Statement - Head 4 ........................................................................................ 5 Appropriation Statement - Head 50 ...................................................................................... 7 Appropriation Statement - Head 51 .................................................................................... 10 4.10 Appropriation Statement - Head 52 ..................................................................................... 11 4.11 Appropriation Statement - Head 13 ..................................................................................... 11 4.12 Statement of Losses ............................................................................................................. 12 4.13 Fiji Procurement Office Trading & Manufacturing Activity – Profit & Loss Statement..... 12 4.14 Fiji Procurement Office Trading & Manufacturing Activity - Balance Sheet ...................... 12 4.15 Office Accommodation and Government Housing Trading & Manufacturing Activity – Profit & Loss Statement
 ................................................................................................................... 13 4.16 Office Accommodation and Government Housing Trading & Manufacturing Activity – Balance Sheet ................................................................................................................................... 14 4.17 Consolidated Trust Account Statement ............................................................................. 14 Ministry of Economy Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI PART B: INTERNAL CONTROLS ........................................................................................................... 16 4.18 Assessment of Financial Governance ................................................................................. 18 PART C: OTHER SIGNIFICANT MATTERS ............................................................................................ 20 4.19 Presentation of Main Trust Fund Account ......................................................................... 20 4.20 Delay in Finalisation of Financial Statements ..................................................................... 22 4.21 FINANCIAL STATEMENTS OF GOVERNMENT ..................................................................... 24 4.21.1 Ministries and Departments Accounts Not Prepared on IPSAS Cash ....................... 24 4.21.2 Whole of Government Current Assets and Current Liabilities .................................. 25 4.21.3 Absence of Statement of Management Responsibility ............................................. 25 4.21.4 Delay in finalisation of Whole of Government Accounts ........................................... 26 4.22 REVENUE .............................................................................................................................. 28 4.22.1 Undisclosed Revenue in Agency’s Financial Statement ............................................ 28 4.23 EXPENDITURE
28 4.23 EXPENDITURE ...................................................................................................................... 29 4.23.1 Annual Report on Whole of Government Not Tabled in Parliament ........................ 29 4.24 ARREARS OF REVENUE........................................................................................................ 30 4.24.1 Increasing Trend in Arrears of Revenue for Past 5 Years .......................................... 30 4.24.2 Ageing and Recovery of Arrears of Revenue .............................................................. 31 4.25 TRUST FUND ACCOUNT ....................................................................................................... 33 4.25.1 Detailed Listing Not Maintained for Main Trust Fund Accounts ............................... 33 4.25.2 Variances in Main Trust Accounts ............................................................................... 34 4.25.3 Reconciliations not prepared for Main Trust Fund Account - Judicial Department .
34 APPENDIX 1: STATEMENT OF RESPONSIBILITY.................................................................................. 36 APPENDIX 2: AMENDMENTS TO THE FINANCIAL STATEMENTS OF GOVERNMENT ....................... 37 Ministry of Economy Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI PART A: FINANCIAL STATEMENT 4.1 Audit Opinion The audit of the 2017 accounts of the Ministry of Economy resulted in the issue of unqualified audit opinion.
4.2 Statement of Receipts and Expenditure – Head 4 The Ministry of Economy budget is appropriated as Head 4 in the 2016 – 2017 Budget Appropriation Act with Fiji Procurement Office (FPO), Strategic Planning Office (SPO) and Fiji Bureau of Statistics (FBOS).

The Ministry of Economy recorded revenue totalling $3,209,177,240 and incurred expenditure totalling $84,069,596 for the year period ended 31 July 2017.

Refer to Table 4.1 for details.
Table 4.1: Head 4 – Consolidated Statement of Receipts and Expenditure in 2017 Description RECEIPTS State Revenue Operating Revenue Investing Revenue Borrowing Revenue Total State Revenue Agency Revenue Board Member Fee Miscellaneous Revenue Sales of Publications Total Agency Revenue TOTAL REVENUE EXPENDITURE Operating Established Staff Government Wage Earners Travel and Communication Maintenance and Operations Purchase of Goods and Services Operating Grants and Transfers Special Expenditure Total Operating Expenditure Capital Expenditure Capital Purchases Capital Grants and Transfers Total Capital Expenditure Value Added Tax TOTAL EXPENDITURE 31 July 2017 (12 months) ($) 31 July 2016 ( 7 months) (Restated) ($) --- 5,641,266 5,641,266 397,829 45,624,908 Operating Revenue consisted of Direct and Indirect Taxes, Fees, Fines & Charges, Commission, Reimbursement & Recoveries and Grant in Aid.
Investing revenue consisted of dividends from Investments, Repayments from Term Loan Receivables, Interest Income and Return of Investment Surplus.

Borrowing revenue was mainly from issue of Domestic bonds and overseas borrowings.

Ministry of Economy Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.3 Statement of Receipts and Expenditure – Head 50 The Ministry incurred expenditure amounting to $381,700,309 from Head 50 for the year ended 31 July 2017.

Refer to Table 4.2 for details.
Table 4.2: Head 50 - Statement of Receipts and Expenditure in 2017 Description EXPENDITURE Operating Expenditure Established Staff Travel & Communications Purchase of goods & services Operating grants & transfers Special expenditures Total Operating Costs Capital Expenditure Capital Construction Capital Purchases Capital Grants & Transfers Total Capital Expenditure Value Added Tax TOTAL EXPENDITURE 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 2,962,036 4,729,246 30,392,595 16,267,753 7,936,547 62,288,177 687,163 1,740,196 19,432,100 7,298,933 2,803,397 31,961,789 1,109,060 17,664,495 295,806,195 314,579,750 4,832,382 381,700,309 --- 5,954,755 176,701,594 182,656,349 2,675,751 217,293,889 The total expenditure increased by $164,406,420 or 76% in 2017 compared to 2016.
4.4 Statement of Receipts and Expenditure – Head 51 The Ministry incurred expenditure amounting to $34,880,413 from Head 51 for the year ended 31 July 2017.

Refer to Table 4.3 for details.


Table 4.3: Head 51 - Statement of Receipts and Expenditure in 2017 Description EXPENDITURE Operating Expenditure Pensions Gratuities Compassionate Allowance TOTAL EXPENDITURE 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 26,981,472 1,844,669 6,054,272 34,880,413 16,193,233 886,487 3,674,347 20,754,067 4.5 Statement of Receipts and Expenditure – Head 52 Finance Charges on Public Debt amounted to $423,997,774 in 2017 compared $240,484,614 in 2016.
Details are shown in Table 4.4: Table 4.4: Head 52 - Statement of Receipts and Expenditure in 2017 Description EXPENDITURE Operating Expenditure Finance Charges on Public debt – Miscellaneous Payment Finance Charges on Public debt – Overseas Loans Finance Charges on Public debt – Domestic Loans TOTAL EXPENDITURE 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 1,867,169 93,145,304 2,612,686 61,077,127 328,985,301 176,794,801 423,997,774 240,484,614 Ministry of Economy Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.6 Statement of Receipts and Expenditure – Head 13 Operating grants and transfers totalling $8,480,987 was paid to Fiji Independent Commission Against Corruption to finance its operations.
Refer to Table 4.5 for details.

Table 4.5: Head 13 - Statement of Receipts and Expenditure in 2017 Description EXPENDITURE Operating Operating Grants and Transfers TOTAL EXPENDITURE 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 8,480,987 8,480,987 4,428,374 4,428,374 The financial year-end of Government was changed from 31 December to 31 July in accordance with the Financial Management (Amendment) Act 2016.
The financial statements for the period ended 2016 reflected transactions for a seven-month period whereas the financial statements for the year ended 2017 was for a 12-month period.

This contributed to the significant variances with the comparative balances for some account areas.

4.7 Appropriation Statement - Head 4 The Fijian Government had budgeted asset sales amounting to $250 million in the financial year 2016-2017 which did not eventuate.
Consequently, expenditure control was applied across Government to ensure all committed and mandatory expenditures were duly met.

The divestment did not take place as the bid price for the asset was unacceptable and Government took a policy stance to secure as much better deal in due course.

The Ministry incurred expenditure totalling $84,069,596 against a revised budget of $94,416,594 resulting in savings of $10,346,998 or 11%.

Details of expenditure against the revised budget are provided in Table 4.6.
(i) Reason for savings are as follows: The saving of $3,812,512 in personal emolument was due to high staff turnover and positions were not filled immediately after they became vacant.
(ii) Savings in travel and subsistence vote of $535,636 was due to:  Low volume of travel in Corporate Services and Strategic Planning Office;  Budget division travel expenses were borne by the line agencies with whom the officers travelled to inspect projects;  Debt Unit - majority of official travel were fully funded by third parties;  Internal Audit Unit - due to audits being concentrated to Central Division and Unit’s efforts was concentrated in assistance for auditing works relating to rehabilitation and special requests from the Minister and Departments.
Also there was a substantial number of vacant positions;  Small number of trainings and less overtime done at FMIS section;  Non-approval of Trading and Manufacturing Account (TMA) site visit in Asset Management and Monitoring Unit (AMMU);  Staff shortage in Procurement Unit which did not allow much travelling for existing staff given the workload that had to be undertaken to meet deadlines; and Ministry of Economy Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI  Construction Implementation Unit - due to teams’ involvement in administrative works such as vetting of drawings, contract compilation and formulations, tender evaluations and the team was unable to go out for inspection.
Hence the accumulated savings.

(iii) Savings in Special expenditure of $4,407,286 was due to:  Non implementation of Land Sales Act;  The allocation namely “Implementation Cost” was for promotion materials and advertisements on the Green Growth Framework for Fiji.

This was stalled and to be undertaken as part of the approved 5-year and 20-year National Development Plan (NDP).
No expenditure was incurred as the NDP was launched in November 2017;  The allocation namely “Other Setup and Implementation” was for the second round of consultation on the NDP, layout and printing.
The expenses incurred were only for the second round of consultations, hence the low utilisation rate;  The recruitment process did not take place due to the need to establish the National Fixed Asset Management Framework (NFAMF) whilst the work was shared and carried out by the established staff of AMMU; and  Workshop for capacity building on climate change finance for the Pacific sub-region was funded by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).
(iv) Savings in Capital construction vote of $100,000 was due to the non-utilisation of funds for MIS Infrastructure Construction since the construction work did not start until the contractor paid the performance bond and after which the contract was signed which was in the following financial year.

Details of expenditures against the budget estimates are provided in Table 4.6.
SEG Table 4.6: Head 4 - Appropriation Statement for 2017 Changes Item & & Established Staff Government Wage Earners Travel Communication Maintenance Operations Purchase of Goods & Services Operating Grants & Transfers Special Expenditure Total Operating Costs Capital Construction Capital Purchases Capital Grants and Transfers Total Expenditure Value Added Tax TOTAL Capital Budget Estimate ($) 14,144,370 514,693 Revised Estimate ($) ($) (45,700) 14,098,670 640,393 125,700 Actual Expenditure ($) 10,286,158 531,772 Lapsed Appropriation ($) 3,812,512 108,621 1,262,309 25,339 1,287,648 752,012 535,636 1,543,000 147,411 1,690,411 1,293,354 397,057 2,184,830 (289,250) 1,895,580 1,590,294 305,286 51,743,782 --- 51,743,782 51,743,773 9 9,727,150 --- 9,727,150 81,120,134 100,000 114,760 11,750,000 (36,500) 81,083,634 100,000 151,260 --- 11,750,000 --- 36,500 5,319,864 71,517,227 --- 131,564 11,750,000 4,407,286 9,566,407 100,000 19,696 --- 11,964,760 36,500 12,001,260 11,881,564 119,696 1,331,700 94,416,594 --- 1,331,700 --- 94,416,594 670,805 84,069,596 660,895 10,346,998 Savings (%) 27 17 42 23 16 --- 45 12 100 13 0 1 50 11 Ministry of Economy Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.8 Appropriation Statement - Head 50 Miscellaneous Services is administered by the Ministry of Economy.
The funding provided under Head 50 includes the contingency funding and other common central pools of funds that are available to the whole of Government.

It also includes funding for activities that require scrutiny and monitoring by the Ministry of Economy.

The Ministry incurred expenditure totalling $381,700,309 in Head 50 in 2017 against a revised budget of $468,725,656 resulting in savings of $87,025,347 or 19%.
Reasons for savings were as follows:  Savings in Established staff of $3,037,964 was due to no shortfalls in Ministries/Departments budget;  Savings in Purchase of Good and Services of $4,788,284 was realised due to the processes required to review the rental rates whereby all relevant stakeholders need to be consulted and come to an agreement with the terms and conditions of the tenancy agreement.

There were negotiation phase which also involved time after the valuation of the premises are done.
The Unit has to involve Ministry of Lands for valuation purchases and if the landlord does not agree then a private valuation is done to justify the market rate, which also involved other procurement process.
Hence all processes needs to be adhered to safeguard government resources;  Savings in operating grants and transfers was due to non-utilization of fund for rental subsidy for disadvantaged persons since there was no set criteria;  Savings in Special Expenditure of $24,217,069 was due to: o Funding was not received from donor for financial assistance towards TC Winston and Support measures for European Development Fund (EDF) 11; o Funds for senior citizens’ home were not provided to Ministry’s SLG 84 account; o The funding utilized was sufficient to cover the cost of establishing the Complaints Public Relations (PR); o Funding released for establishment of Apex body catered only for the consultancy payment for the review of the Micro, Small and Medium Enterprise Landscape; o Funding released catered for the geotechnical survey conducted by the Mineral Resources Department at the proposed manufacturing park at Drasa and Wairabetia in Lautoka and for the geotechnical survey review at the Wairabetia site.
 Savings in Capital Construction of $4,235,940 were due to the following: Prime Minister’s Residence o Delay in tender process and vetting of contract; o Latent conditions due to existing building being old resulted in extra work and change in scope; o Delay in approval of variations; o Delay in delivery of materials from overseas; and o Unfavourable weather conditions.
State House Residence o Delay in tender process and vetting of contract; o Latent conditions due to existing building being old resulted in extra work and change in scope; o Delay in approval of variations; o Delay in delivery of materials from overseas; Ministry of Economy Page 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI o Client request for additional scope; and o Asbestos Variation works was not included in the original scope.
All the walls and ceiling upstairs plus some downstairs had to be removed.

Commissioner’s Residence o Tender re-advertised since it was difficult getting contractors; o Delay in contract vetting and finalisation; o Latent conditions due to existing building being old resulted in extra work and change in scope; o Delay in approval of variations; and o Unfavourable weather conditions.

Chief Justice Residence o Delay due to changes in project design.

Borron House o Awaiting completion of State house.


 Savings in Capital Purchase of $1,762,596 were due to non-utilisation of funds for new and replacement IT equipment and savings from vehicle lease and because funds for purchase of new and replacement vehicles were only released as and when requests were received from Ministries.
 Savings in Capital Grants and Transfers of $46,196,751 were due to the following: o Utilisation of funds in miscellaneous grant in aid were dependent on request received from Ministries and; o Funds allocated for Land Acquisition and Compensation – WAF Complex were underutilised due to: - - processes still in progress with external stakeholders including: land title documentation still in progress and;  Director of Town & Country Planning – Scheme Plan Approvals;  Surveyor General – Scheme plan checks;  Registrar of Titles office – Title registrations;  I-Taukei Land Trust Board – Lease Processing (Landowners Consultations, Joint Inspections, Boundary Demarcations, Offer computations) o Delay in agreement; o Delay in resolving disputes between property owners and landowners; o Compensation cases were being vetted by Solicitor General’s Office; and o Some properties cannot be compensated yet due to change and death of property owners.
o Funds for Cyclone Rehabilitation of 250 schools were underutilised due to the following Lack of skilled tradesman; reasons: - Wet weather caused works to be delayed; - - Shortage of construction materials; - Due to geographic location of some schools, the contractor had to hire trucks or barge to cart materials.
The unavailability of the hire trucks or barge was a major cause of delay for these school in rural and maritime islands; - Administration issues such as changing of layout plans, re-advertisements when there were no bidders and contractors to mobilize to sites after submission of performance bond; - Change of scope on site and variation.
Ministry of Economy Page 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI o Tender to purchase machines for maritime pine tendered twice since after a complaint was received after the initial tender in July 2017.

The second was awarded in October 2017 in the new financial year.

o Savings from commercial agriculture scholar was due scholarships provided to a certain number of students.
o Savings in I-Taukei Land Development was due to changing of layout plans, re- advertisements due no bidders, contractors to mobilise to sites after submission of performance bond, changes in scope and variations o Savings in Grants to Disabled Persons Organization was due to non-utilisation of funds for construction of western disability centre, funds were disbursed based on applications received and Fiji National Council for Disabled Persons (FNCDP) purchased a minivan instead of coaster bus which was out of stock.
o Savings was recorded in contingency funds for disaster risk as no major disaster occurred in the 2016-2017 financial year.

o Savings in Rural Maritime Livelihood Training was because no further requests for funds were received from Fiji National University (FNU) after funds were released for training purposes.

o Savings were in Fiji Electricity Subsidy allocation as electricity subsidy was locked to combined household income of $30,000 per annum.
o Savings in Northern Division Projects, FDB – Subsidy grant to Fijians and Small Business Scheme allocation was due to non-processing of subsidy claims for the month of July, 2017.

The claims were submitted in August (new financial year).

Details of expenditure against the budget estimates are provided in Table 4.7.
Table 4.7: Head 50 - Appropriation Statement for 2017 SEG Item 1 3 & Established Staff Travel Communications Purchase of Goods & Services Operating Grants & Transfers Special Expenditure Total Operating Costs Capital Construction Capital Purchases Capital Grants and Transfers Total Expenditure Value Added Tax TOTAL Capital Budget Estimate ($) 7,000,000 4,523,600 Changes ($) (1,000,000) 830,000 Revised Estimate ($) Actual Expenditure ($) Lapsed Appropriation ($) Savings (%) 6,000,000 5,353,600 2,962,036 4,729,246 3,037,964 624,354 31,900,879 3,280,000 35,180,879 30,392,595 4,788,284 16,711,677 (249,753) 16,461,924 16,267,753 194,171 32,963,863 93,100,019 (810,247) 2,050,000 32,153,616 95,150,019 7,936,547 62,288,177 24,217,069 32,861,842 10,000,000 (4,655,000) 5,345,000 1,109,060 4,235,940 19,477,091 286,855,318 (50,000) 55,147,628 19,427,091 342,002,946 17,664,495 295,806,195 1,762,596 46,196,751 316,332,409 50,442,628 366,775,037 314,579,750 52,195,287 6,800,600 416,233,028 --- 52,492,628 6,800,600 468,725,656 4,832,382 381,700,309 1,968,218 87,025,347 51 12 14 1 75 35 79 9 14 14 29 19 A sum of $57,492,628 was redeployed from Head 43 – Fiji Roads Authority budget into Head 50 to fund payments for National Toppers Scholarship Scheme, Tertiary Education Loan Scheme, Other Existing Scholarship and Overseas Scholarship Support Scheme.
In addition, $5 million was redeployed from Head 50 – Miscellaneous Services budget into Head 25 – Ministry of Youth & Sports for the Upgrade and Maintenance of Fiji Sports Council.

Ministry of Economy Page 9 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.9 Appropriation Statement - Head 51 The Pensions Section manages the computation and payment of various pensions in accordance with existing pension legislation.
The Section also processes re-engagement benefits for prisons military officers and forest guards.

The section oversees the payment of pensions to Government Pensioners, Ex-Parliamentarians, Ex-Prime Ministers and Presidents, Ex-Chief Justices and Retired Judges, Service Pensioners and the widows and orphans of deceased public officers.

The Ministry incurred expenditure totalling $34,880,413 in Head 51 in 2017 against a revised budget of $42,409,700 resulting in savings of $7,529,287 or 18%.
The reasons for the savings are tabulated below.

Table 4.8: Reasons for Savings in Head 51 Description Savings ($) Reasons Pension Civil Compassionate and Widows & Orphan War pensions 3,561,211 Savings is due to deletion cases due to deaths and non-submission of renewal forms (Life Certificate form).

388,273 Deletions due to death and non- submission of renewal forms.

Not all 60% dependent widows are entitled for Widows & Orphan.

Only widows of those who contributed to the W/O Scheme.
21,417 Deletion due to deaths and non-submission of renewal forms.

As of last year, we had only 3 recipients of War pension.
$19000 was deployed to other items in Head 51 in the 2017-2018 budget FMF 1,646,453 Savings is due to deletions cases due to deaths and non-submission of renewal forms Ex-Parliamentarian 603,214 Savings is due to deletion cases due to deaths and non-submission of renewal forms Ex-CJ 83,822 Savings is due to deletion cases due to deaths and Prison Gratuities non-submission of renewal forms 159,785 A virement of $150,000 was injected into the Prisons vote because we were advised by FCS that some re- engagements were due to be paid before the end of financial year in July 2017.
But these were not paid due to late processing and submission from FCS, thus the savings.

These were then paid in August.

Contract Gratuities Officers 605,546 Expiry of contracts for contracted officers (expatriates) in other ministries.

There were significant savings in Pensions (19%) and Gratuities (29%).

Details of expenditure against the budget estimates are provided in Table 4.9.
Table 4.9: Head 51 - Appropriation Statement for 2017 SEG Item Changes Budget Estimate ($) 42,409,700 Revised Estimate ($) 42,409,700 Actual Expenditure ($) 34,880,413 Lapsed Appropriation ($) 7,529,287 ($) --- 11 Gratuities Compassionate Pensions, and allowance TOTAL 42,409,700 --- 42,409,700 34,880,413 7,529,287 Ministry of Economy Page 10 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.10 Appropriation Statement - Head 52 Appropriation Head 52 – Charges on Account of Public Debt was allocated for the repayment of domestic and overseas loans.
The Ministry incurred expenditure totalling $423,997,774 in Head 52 in 2017 against a revised budget of $448,056,200 resulting in savings of $24,058,426 or 5%.

The significant savings was primarily due to significant savings in Miscellaneous Payment (82%) and Overseas Loans (12%).

Details of expenditure against the budget estimates are provided in Table 4.10.
Table 4.10: Head 52 - Appropriation Statement for 2017 SEG Item 12 Finance Charges on Public Debt TOTAL Budget Estimate ($) 448,056,200 Changes ($) --- Revised Estimate ($) 448,056,200 Actual Expenditure ($) 423,997,774 Lapsed Appropriation ($) 24,058,426 448,056,200 --- 448,056,200 423,997,774 24,058,426 Savings in miscellaneous payments of $8,632,831 was due to:  Non-utilization of provision for contingent liabilities of $5,000,000;  Discount on treasury bills was $1,722,933 against revised budget of $4,000,000 resulting in savings of $2,277,067 in short term financing;  Agency and management fees was $6,334 against revised budget of $1,350,000 resulting in savings of $1,343,666.
Savings in overseas loans charges of $12,307,496 was due to:  Actual loan repayments of $49,336,100 was within revised budget of $52,974,400 resulting in  savings of $3,638,300; Interest payments of $43,809,204 was within revised budget of $52,478, 400 resulting in savings of $8,669,196.

Savings in domestic loans charges of $3,118,099 was due to actual interest payment of $229,342,301 within revised budget of $232,460,400.
4.11 Appropriation Statement - Head 13 The Ministry incurred expenditure totalling $8,480,987 in Head 13 in 2017 against a revised budget of $8,480,987.

Details of expenditure against the budget estimates are provided in Table 4.11.
Table 4.11: Head 13 - Appropriation Statement for 2017 SEG Item 6 Operating Grants & Transfers TOTAL Budget Estimate ($) 8,480,987 8,480,987 Changes ($) --- --- Revised Estimate ($) Actual Expenditure ($) Lapsed Appropriation ($) 8,480,987 8,480,987 8,480,987 8,480,987 --- --- Ministry of Economy Page 11 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.12 Statement of Losses The Ministry of Economy did not record any loss of cash or revenue in 2017.
However, items worth $676,720 were written off following the Board of Survey conducted by the Ministry in 2016/2017.

4.13 Fiji Procurement Office Trading & Manufacturing Activity – Profit & Loss Statement The Fiji Procurement Office (FPO) operates a Trading Manufacturing Account (TMA) selling Fiji flags.

The TMA was transferred from the former Government Supplies Department, a retail arm of Government.
The Profit & Loss Statement – Trading & Manufacturing Activity showed a net profit of $1,153,785 as at 31 July 2017 compared to $497,740 in 2016.

Sales increased by $643,009 or 111% in 2017 as the financial year for the Government was changed from 31 December to 31 July as stipulated in the Financial Management (Amendment) Act 2016.
The financial statement for the period ended 2016 reflect transactions for a seven months period whereas the financial statements for the year ended 2017 is for a twelve month period, thus the significant variances with comparative balances.

Refer to Table 4.12 for details.
Table 4.12: Profit & Loss Statement - Fiji Procurement Office Description Income Sales Cost of Finished Goods Sold Gross Profit Expenses Maintenance & Operations Other Expenses Total Expenses Net Profit 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 1,221,436 (50,229) 1,171,207 1,991 15,431 17,422 1,153,785 578,427 (19,918) 558,509 57,084 3,685 60,769 497,740 4.14 Fiji Procurement Office Trading & Manufacturing Activity - Balance Sheet In 2017, the net assets of the Fiji Procurement Office Trading and Manufacturing Account in 2017 totalled $1,776,485 which increased by $659,374 or 59% compared to 2016 due to increase in Cash at Bank by $782,016 or 79%.
Refer to Table 4.13 for details.
Table 4.13: Balance Sheet Description Current Assets Cash at Bank Finished Goods Accounts Receivable 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 1,776,427 24,915 --- 994,411 75,144 --- Ministry of Economy Page 12 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Description Total Assets Liabilities VAT Payable VAT Refund Total Liabilities 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 1,801,342 1,069,555 24,857 --- 24,857 --- (47,556) (47,556) Net Assets 1,776,485 1,117,111 Equities TMA Surplus Transferred to Consolidated Fund TMA Accumulated Surplus Net Profit Total Equity (5,281,815) (4,787,404) 5,904,515 1,153,785 1,776,485 5,406,775 497,740 1,117,111 4.15 Office Accommodation and Government Housing Trading & Manufacturing Activity – Profit & Loss Statement The Office Accommodation was transferred from the Public Service Commission to provide housing to eligible civil servants.
In 2009, the responsibility of the function was extended to commercial rental to interested members of the public resulting in the establishment of the TMA in 2011.

The TMA was solely responsible for semi-commercial nature that caters for commercially renting out of quarters.1 The Profit & Loss Statement – Trading & Manufacturing Activity showed a net profit of $2,968,328 as at 31 July 2017 compared to $3,751,882 in 2016.
This was attributed to the decrease in total income by $631,381 or 14% and increase in total expenses by $152,173 or 21% in 2017.

Refer to Table 4.14 for details.
Table 4.14: Profit & Loss Statement – Office Accommodation and Government Housing Description Income Rental from Quarters Expenses Other Expenses Total Expenses Net Profit 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 3,857,870 4,489,251 889,542 889,542 2,968,328 737,369 737,369 3,751,882 1 Office Accommodation & Government Housing, Construction Implementation Unit, Ministry of Economy TMA Business Plan 2016 Ministry of Economy Page 13 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.16 Office Accommodation and Government Housing Trading & Manufacturing Activity – Balance Sheet In 2017, the net assets of the activity totalled $3,469,290 which decreased by $1,092,346 or 24% compared to 2016 due to decrease in Cash at Bank by $1,073,096 or 23% and increase in total liabilities by $18,901 or 11%.
Refer to Table 4.15 for details.
Table 4.15: Balance Sheet Description Current Assets Cash at Bank Accounts Receivable Total Assets Liabilities Accounts Payable Deposits & Deductions VAT Liability Total Liabilities 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 3,661,515 --- 3,661,515 4,734,611 349 4,734,960 45,875 13,020 133,330 192,225 36,333 136,991 --- 173,324 Net Assets 3,469,290 4,561,636 Equities TMA Surplus Transferred to Consolidated Fund TMA Accumulated Surplus Net Profit Total Equity (3,735,666) (3,735,666) 4,236,628 2,968,328 3,469,290 4,545,420 3,751,882 4,561,636 4.17 Consolidated Trust Account Statement The Ministry had 10 types of main trust fund accounts, details of which are provided below: 1.
Performance Bond - These are performance bonds for tenders awarded by Fiji Procurement 2.

Office for which payments are made according to the tender contracts.

IHRDP Trust Account - Integrated Human Resource Development Programme (IHRDP) account is used for the 1/3 contribution received for projects in small communities.

This account was maintained by National Strategic Planning in 2016 but has been transferred to Ministry of Industry & Trade in the 2017 financial year.

3.
3.

Tuna Stabilisation Fund - is to facilitate the Tuna Stabilisation Fund (TSF) Policy.

The underlying purpose of the TSF policy is to transfer a portion of fuel subsidies received by foreign fishing companies and vessels from their states and distribute it to locally owned fishing companies as a form of subsidy.

4.

Winston Trust - This account is used for donations received for Cyclone Winston relief from various donors.
Donors either directly deposit funds into the bank accounts, or issued cheques which are received and receipted at the Treasury section in Ministry of Economy.

5.

Group Insurance Trust Account - This trust account receives insurance payment and after assessment pay-out is made to the nominees of the Insurance Policy Holders upon their death.

6.

Miscellaneous Fund v Others - This account was opened following Cabinet decision "Effective management of trust monies - FIN 60/16" CP (09)72 of 16/06/09.
Surplus funds in Agency trust Ministry of Economy Page 14 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI bank accounts was transferred into the Consolidated Trust Fund account.

The funds in the consolidated trust fund account will be used for investments and to fund Government's expenditures during tight cash flow situation.

7.

ODA Performance and Tenancy Bond - Tenancy bonds are paid by tenants for occupation of quarters on rent.

8.
8.

Adopt a School Trust Fund was established specifically to record funds received from donors who were willing to carry out the rehabilitation of schools.

9.

COP 23 Trust Fund - Conference of Parties 23 (COP 23) Trust is a trust fund account related to "COP 23 Presidency - Fiji" established via the COP 23 Presidency Trust Fund that receipt and disburse funds related to COP 23 activities.

10.
10.

European Union Grant Assistance Trust Fund was set up specifically for the budget support funding given by the Commission Des Communautes (European Union) to assist post TC Winston for the cyclone recovery programme.

Total trust funds for the Ministry increased by $41,982,416 or 222% in 2017 compared to 2016 due to creation of three new trust fund accounts for European Union Grant Assistance, Adopt a School Trust Fund and COP 23 Trust Fund.

Refer to Table 4.16 for details.
Table 4.16: Trust Fund Accounts Description Opening Balance 1 January Receipts Performance Bond - Tender Deposit, Performance Bond, Retention Monies & Bank Interest IHRDP Trust Account - Lawaki Bakery Community Contribution Government Tuna Stabilisation Fund - Bunker levy (FRCA) & Interest Prime Minister’s National Disaster Relief and Rehabilitation: Cyclone Winston - Donation, Interest & Bank Reversal Group Insurance Trust - Insurance proceeds Miscellaneous Fund v Others - Bank Interest ODA Performance and Tenancy Bond - Funds received from Performance, Tenancy Bond, Bank Reversal & Interest Adopt A School – Donation, Interest and Bank Reversal COP 23 Trust Fund – Donation and Interest EU Grant Assistance – Grant Fund and Interest Total Receipts Payments Performance Bond – Refund of Tender Deposit, Performance Bond, Retention Fund & Bank Fees IHRDP Trust Account - Payment to Ministry of Agriculture for the purchase of Fertilizer for the Waimalua Ginger Project Government Tuna Stabilization Fund - Bank Charges & Reversal Prime Minister’s National Disaster Relief and Rehabilitation: Cyclone Winston - Payment to Help for Home Initiative, Bank Charges & Bank Reversal Group Insurance Trust - Insurance Payment made to beneficiaries & Bank Charges Miscellaneous Fund v Others - Bank Reversal ODA Performance and Tenancy Bond - Bank Charges Adopt A School – Cost for School Construction and Interest Charges COP 23 Trust Fund – COP 23 Secretariat Payment and Interest Charges Total Payments Closing Balance 31 July 2017 (12 months) ($) 31 July 2016 (7 months) ($) 18,878,719 12,459,423 2,864,863 1,468,636 --- 35,997 94,799 7,165,730 856,594 10,767,003 195,000 107,047 1,217 487,551 26,798 192,674 --- 8,814,249 --- 17,919,991 22,553,548 --- 53,348,506 20,203,191 1,305,978 1,860,732 84,799 86,673 3,658 329 3,582,859 8,012,356 344,062 237,084 --- 24,434 3,520,291 6,082,539 3,829 362 --- --- 11,366,090 13,783,895 60,861,135 18,878,719 Ministry of Economy Page 15 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI PART B: INTERNAL
 CONTROLS During our audits, we assess the design and implementation of controls to ensure that they are suitably designed to prevent, detect and correct material misstatements.
Where audit strategy requires, we also test the operating effectiveness to ensure the internal controls are functioning as designed.

A deficiency occurs when internal controls are unable to prevent, detect or correct errors in the financial statements or where controls are missing.

A significant deficiency is a deficiency that either or alone or in combination with multiple deficiencies may to lead to a material misstatement in the financial statements.

It requires immediate management action.


Internal controls are categorized against the following five components of internal control.

 Control Environment (CE) – is the set of standards, processes and structures that provide the basis for carrying out internal controls across the entity.
These include commitment to integrity and ethical values, independence of management to exercise oversight for the development and performance of internal control, documented structures, reporting lines and appropriate authorities such as delegated levels of authority and responsibilities in the pursuit of the entity’s objectives.

It is also includes commitment to attract, develop and retain competent individuals, and holding them accountable for their internal control responsibilities.
Examples of issues which fall under this category are ethical breaches, gaps in internal controls or controls are non-existent, individuals are not held accountable for breaches in control or agencies code of ethics, staff recruitment, and training and professional development, performance assessment and succession planning matters.
 Risk Assessment (RA) – involves a dynamic process for identifying and analysing risks to achieve the entity’s objectives, forming a basis for determining how risks should be managed.

Examples of issues which would fall under this category are absence of risk management framework, operational including fraud and enterprise risks not identified, assessed and mitigated and impact of changes in business processes on controls not identified and assessed.
 Control Activities (CA) – these are established by policies and procedures to help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out.

Control activities are performed at all levels of an entity and at various stages within business processes, and over the technology environment.
Examples of issues which would fall under this category are general controls relating to information technology, documentation of procedures which have in-built checks and balances which are aligned to the policies of the entity.

Specific control activities include those relating to authorization, performance reviews, information processing, physical controls, and segregation of duties.
 Information and Communication Control (IC) – information is necessary for the entity to carry out internal control responsibilities in support of achievement of its objectives.

Communication occurs both internally and externally and provides the entity with the information needed to carry out day-to-day controls.

Communication enables personnel to understand internal control responsibilities and their importance for the achievement of objectives.
Ministry of Economy Page 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Examples of issues which would fall under this category are reporting to those charged with governance of agencies on matters relating to internal controls.

 Monitoring Activities (MA) – on-going evaluations, separate evaluations or some combination of the two are used to ascertain whether controls are present and functioning.

Findings are evaluated and deficiencies are communicated in a timely manner.
Examples of issues which would fall under this category are self-assessment by agencies to determine whether internal controls are present and function.

This may include the establishment of independent internal audit functions within entities which would assist in identifying any gaps in controls.
Ministry of Economy Page 17 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.18 Assessment of Financial Governance 4.18.1 Internal controls A summary of assessment of key controls based on our audit was as follows: Control Environment Risk Assessment Control Activities    Information & Communication Control  Monitoring Activities  In view of the above, we have assessed the internal controls of the Ministry as: Rating Internal control assessment  Generally effective Deficiencies identified in internal controls 4.18.2 Submission of FY 2016-2017 Draft Agency Financial Statements On 1 June 2017, Permanent Secretary for Economy issued Circular No.
04/2017 to Permanent Secretaries, Heads of Departments, High Commissioners and Ambassadors in Fiji Overseas Missions in which procedures for closing of 2017 accounts and times were detailed.

The final day for closing the 2017 accounts was 4 August 2017.
The key focus areas in the circular were:  Closing date for journal adjustments by 11 August 2017  Clearance of Inter-departmental clearance accounts by 4 August 2017  Monitoring of unpresented cheques by 31 July 2017  Clearance of stale cheques by 4 August 2017  Annual Board of Survey on Drawings Account cheques by 29 September 2017  Retirement of imprests by 21 July 2017  Cancellation of unprocessed purchase orders by 14 July 2017  Processing of payments and virements by 21 July 2017  Completion of reconciliations by 29 September 2017  Submission of arrears of revenue returns by 30 August 2017 When ministries and departments achieve the key focus areas highlighted by the Permanent Secretary for Economy by the given dates, they are more likely to prepare accurate and timely draft financial statements for audit.
Based on information received, we have assessed the year-end close process as: Rating Year-end close process assessment  Generally effective Five of 10 key processes completed within two weeks of due date 4.18.3 Quality of draft financial statements by entities The extent of audit adjustments made to draft financial statements indicates the effectiveness of an entity’s internal review processes before the accounts are submitted for audit.
Ministry of Economy Page 18 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI We assessed the quality of financial statements by the impact these adjustments had on the operating results or net assets of the entity subject to our audit.
Our assessment for the Ministry was: Rating Quality of draft financial statements assessment  Generally effective Adjustments on operating results/net assets were less than one percent 4.18.4 Timeliness of draft financial statements To assess the timeliness of acceptable draft financial statements, we have compared the date the draft financial statements were due and the date it was received.
Accordingly, we have assessed timeliness as: Rating Timeliness of draft financial statements assessment  Effective Acceptable draft financial statements received before or on 31 October 2017 4.18.5 Timeliness of Management Comments To assess the timeliness of management comments, we have compared the date agency financial statement draft management letter (DML) was issued and the date management comments was received.
Accordingly, we have assessed timeliness as: Rating Timeliness of draft financial statements assessment  Ineffective Management comments received after 21 days from the date agency financial statement draft management letter (DML) was issued Rating Timeliness of draft financial statements assessment  Generally effective Signed financial statements received within 10 days Ministry of Economy Page 19 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI PART C: OTHER SIGNIFICANT MATTERS The Audit Act 1969 requires, amongst other things, that the Auditor-General must report on other significant matters which the Auditor-General wishes to bring to the attention of Parliament.
Other significant matters highlighted in this report, include control weaknesses which could cause or is causing severe disruption to the process or on the ability of an auditee to achieve process objectives and comply with relevant legislation.

It is likely that these issues may have an impact on the operations of the Ministry in future, if necessary action is not taken to address them.
It is important to note that the deficiencies detailed in this report were identified during our audit and may have been subsequently resolved by the Ministry.

These have been included in this report as they impacted on the overall system of control of the Ministry as at 31 July 2017.
4.19 Presentation of Main Trust Fund Account Each agency must include the following statements in its annual financial statements - a trust account statement of receipts and payments (where applicable).2 There were 16 main trust fund accounts held by the Ministry in 2017.

Refer to Table 4.17 below for main trust fund accounts held by the Ministry.

Table 4.17: Number of Main Trust Fund Accounts No.


Main Trust Fund Account Performance Bond Tuna Government Stabilisation Fund Prime Minister’s National Disaster and Rehabilitation Relief Group Insurance Trust Miscellaneous Fund Others ODA Performance Tenancy Bond Adopt A School v and COP 23 Trust Fund Integrated Human Resource Development Programme (IHRDP) No.
of Allocations in FMIS general ledger 1 Comments 1 6 1 1 1 2 1 1 Funds are held in each bank account namely ANZ, Bank of Baroda, Bank of South Pacific, Bred Bank, HFC Bank and Westpac Bank.

Each bank account has a separate allocation in FMIS general ledger.

Funds are held in ANZ and Bank of Baroda.

Each bank account has a separate allocation in FMIS general ledger.
This trust was under Strategic Planning in 2016 but has been budgeted under Head 34 - Ministry of Industry, Trade & Tourism for the financial year 2016/2017.

10 EU Grant Assistance Total 1 16 2 Finance Instructions 2010, Section 71 (1) Ministry of Economy Page 20 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI We noted that in the Ministry’s financial statement the opening and closing balances of these sixteen (16) main trust fund accounts are consolidated.
While receipts and payments during the year in respective trust fund accounts are shown separately, all the accounts are reflected in one statement of trust fund account.

The current presentation makes it difficult for the users of financial statement to determine the opening and closing balances for each Main Trust Fund account and movements therein during the year.
The current presentation limits the usefulness of the Trust Account financial statement in assisting the Ministry and other users in their understanding and decision-making regarding the operations of the Trust Fund Accounts.

Recommendations The Ministry should:  prepare separate statement for each main trust fund account held; and  consider reflecting the nature or types of receipts and payments in the Trust Fund Account’s Statement of Receipts and Payments.

Ministry’s Comments Noted.


The review of the presentation of the Statement of Receipts and Payments of Trust Fund accounts part of the cash based IPSAS accounting at agency level planned for 2019-2020 financial year.
Ministry of Economy Page 21 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.20 Delay in Finalisation of Financial Statements Each agency must prepare an annual report for submission to its Minister by 31st December in the following year.3 Each annual report must include financial statements which are prepared and signed in accordance with these instructions, audited by the Auditor-General and accompanied by the audit opinion provided by the Auditor-General.4 The Ministry is therefore responsible for preparing accounts which are complete.
The audit of the financial statements of the Ministry of Economy for the year ended 31 July 2017 was finalised after the above deadline.

The delay in the finalisation of the audit was due to the following reasons:  Improvements in disclosures, adjustments to Head 4 and 50 and amendments to the amounts for various account areas in the draft financial statements are shown in Table 4.18 below.
Table 4.18: Amendments to Financial Statements Amendments Date 29/11/17  Changes in presentation of equity accounts for Trading and Manufacturing accounts of Fiji Procurement Office and Office Accommodations 29/12/17  Correction of domestic debt interest and principal repayments amounts in the financial statements 01/02/18  A total sum $161,842 was debited to Head 50 allocation number 1-50101-50999- 019901 namely salary adjustment on 01/02/18 to regularise over-expenditure in Head 5 established staff and government wage earners allocations following the Job Evaluation Exercise (JEE).
02/02/18  Amendments to amount of items written off in statement of loss from $350,318 to $676,720  new notes for main trust fund account namely Prime Minister’s National Disaster 18/04/18  Relief and Rehabilitation Inclusion of cash receipts from overseas agencies totalling $211,440,261 in borrowing receipts  Posting of Fiji Bureau of Statistics expenditure totalling $79,488 into FMIS general ledger on 26/03/18.

This expenditure was not posted into FMIS general ledger as at 31/07/17.
A misposting of $1,805 was adjusted in FMIS general ledger on 25/04/18.

04/07/18  Amendments to Note 1- Reporting 21/08/18  Amendments to Value Added Tax (VAT) note 16/04/19  Ministry’s accounts issued for signing 28/05/19  The Permanent Secretary for Ministry of Economy requested to format the presentation of MOE accounts.

03/06/19  Soft copy of MOE accounts (through flash drive) were hand delivered to officer in charge at Treasury section.
22/06/19  Received from the Ministry formatted accounts which included rephrased sentences/words and removal of items with nil amounts in 2017 and 2016.

The figures and sentences were checked against audited financial statements issued and clarifications made.

18/07/19  Ministry’s accounts issued for signing for the second time.
3 Finance Instruction 2016 – Section 69 4 Finance Instruction 2016 – Section 70 (2) Ministry of Economy Page 22 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The Draft Management letter and Supplementary Draft Management letter were issued to the Ministry on 17 April and 14 May 2018, respectively.

However, the management comments were submitted on 14 June 2018.
Verification of management comments was carried out in July as the Ministry’s accounting staff were assisting in the preparation of the National Budget.

Delay in finalising the Ministry’s financial statement will result in the delayed submission of the Ministry’s Annual Report to Parliament.

Updates were provided to the Ministry which included a correspondence to the Permanent Secretary for Ministry of Economy on 18 April 2018 on the update of the progress of the audits of the individual agencies.
Recommendations The Ministry should ensure that:  accurate financial statements are submitted for audit; and  approved additional spending are regularised on a timely basis.

Ministry’s Comments Noted.

MOE and OAG will need to work together as 'way forward' to enhance the audit process.
Ministry of Economy Page 23 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.21 FINANCIAL STATEMENTS OF GOVERNMENT 4.21.1 Ministries and Departments Accounts Not Prepared on IPSAS Cash The International Public Sector Accounting Standards Board (the IPSASB) develops accounting standards for public sector entities referred to as International Public Sector Accounting Standards (IPSAS).
The IPSASB recognizes the significant benefits of achieving consistent and comparable financial information across jurisdictions and it believes that the IPSAS will play a key role in enabling these benefits to be realised.

The adoption of IPSAS by governments will improve both the quality and comparability of financial information reported by public sector entities around the world.
The IPSASB recognizes the right of the governments and national standard setters to establish accounting standards and guidelines.
The IPSASB considers that this Standard is an important step forward in improving the consistency and comparability of financial reporting under the cash basis of accounting and encourages the adoption of this standard.5 We noted the Ministries/departments financial statements have not adopted the International Public Sector Accounting Standard under the Cash Basis of Accounting while Whole of Government financial statements which consolidates the accounts of the Ministries/Departments is prepared on IPSAS financial reporting under the cash basis of accounting.
Recommendations The Ministry of Economy should ensure that:  Ministries’ and Department’s accounts are prepared on International Public Sector Accounting Standard financial reporting under the Cash Basis of Accounting; and  adequate training is provided to Accounting Officers in Ministries and Departments to build capacity on preparing financial statements on IPSAS Cash.
Management Comments Adoption of IPSAS basis of reporting is already part of the broad Public Financial Management Reform Agenda for Government.

However, it should be noted that a number of other PFM actions are being pursued which includes review of the Financial Management Act, review of the chart of accounts and the upgrade/replacement of the Financial Management Information System.
All this actions has been systematically sequenced and IPSAS reporting at agency level will be rolled out for the preparation of the 2018/19 agency accounts.

On the same note, Training has already been arranged for accountants based at Ministries/Departments to equip them in understanding the fundamentals of the IPSAS cash accounting basis for reporting.
However, it should be noted that there will not be much deviation in the presentation of the accounts at Ministry/department level to what is currently being presented.

5 IPSAS Cash Basis 2007 Introduction Ministry of Economy Page 24 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.21.2 Whole of Government Current Assets and Current Liabilities The current ratio is a traditional method of assessing an entity's ability to meet its obligation as and when they fall due.
It is calculated by dividing current assets by current liabilities.

A ratio of more than one is generally accepted to show a low risk.

Review of the Whole of Government Financial Statements revealed that the current assets were not sufficient to cover the current liabilities as at balance date in the past four years.
Table 4.19: Showing Current Assets/Current Liabilities at WOG Level Description Total Current assets [A] Total Current liabilities [B] Ratio Current Ratio (A/B) Recommendation 2017 ($) 408,805,286 609,573,521 2017 0.67 2016 (7 months) ($) 307,638,302 563,970,111 2016 (7 months) 0.55 2015 ($) 233,749,579 507,363,036 2015 0.46 2014 (Restated) ($) 244,422,322 380,294,657 2014 (Restated) 0.64 The Ministry must ensure that a healthy WOG balance sheet is maintained to ensure that there are adequate cash to pay off the immediate obligations.
Management Comments It should be noted that Government has a deficit Budget, which means that part of the expenditure will be financed through borrowings.

Government is very mindful of the inherent risks in relation to maintaining adequate level of liquidity and appraises refinancing/rollover risk.

OAG may have noted that our balance sheet is a construction of balances that is readily available, merely recording, all cash balances with to some extent of accrual information.
Also, our major current assets, that is debtors in the formula for the calculation of current assets is yet to be recorded on the balance sheet including other items such as prepayments.
4.21.3 Absence of Statement of Management Responsibility The permanent secretary responsible for finance is responsible for the preparation of whole of government annual reports and the statements required to be included in them.6 The Financial Statements of Government must be signed by the permanent secretary responsible for finance.7 We noted that no certification is provided by the Permanent Secretary on the responsibility for preparation of the Whole of Government Accounts.
Please refer sample statement in Appendix 1.

We also noted that the Permanent Secretary for Economy is only signing on certain schedules namely Statement of Cash Receipts and Payments (Schedule 1), Statement of Assets and Liabilities (Schedule 3) and Details of Expenditure Reportable Authorisations (Schedule 10).
6 Financial Management Act 2004 [FM45] 7 Financial Management Act 2004 FM 46 (2a) Ministry of Economy Page 25 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The audit noted that the following schedules have not been signed off:  Schedule 2 – Statement of Comparison of Budget and Actual Amounts by Budget Funding Programme;  Schedule 2A - Statement of Comparison of Budget and Actual Amounts by Expenditure Economic Classifications;  Schedule 4 – Statement of Revenue and Expenses;  Schedule 5 – Statement of Contingent Liabilities;  Schedule 6 – Segmentation Report by Fund Classification;  Schedule 7 – Summary of Revenue;  Schedule 8 – Detailed Revenue Comparison;  Schedule 9 – Statement of Expenditure Against Appropriation Heads;  Schedule 11 – Budget Results, Estimates and Projections;  Schedule 12 – Disaggregation of Actual Revenue and Expenditure by Economic Type; and  Schedule 13 – Estimates and Actual budget results.
Without the Statement of Responsibility, the officer responsible for the preparation of the financial statement has not made it explicit his or her responsibility in the preparation of the financial statements of government that is accordance with the legislations and fairly reflects the financial operation and performance of the entity.
Recommendation Ministry of Economy should consider including a statement of responsibility, signed by the Permanent Secretary for Economy and the Head of Treasury in the Whole of Government Accounts.

Management Comments Noted.

The Financial Management Act 2004 is under review and we will have the recommendation appraised for the sign off of the Head of Treasury accordingly.

In respect of not all schedules being signed off, the key statements are signed off by the Permanent Secretary.
This is consistent with that of financial statements sign off as prepared internationally, where not all statements of the financials are signed off.

4.21.4 Delay in finalisation of Whole of Government Accounts The Minister must table in Parliament a whole of Government Annual Report for each financial year.

The annual report for a financial year must be tabled within 9 months after the end of that year or within a longer period approved for that year by resolution of Parliament.
The annual report for a financial year must include – (a) the whole of Government financial statements referred to in section 46; (b) the annual appropriation statement referred to in section 47; and (c) the annual budget statement referred to in section 48.

The permanent secretary responsible for finance is responsible for the preparation of whole of government annual reports and the statements required to be included in them.
Ministry of Economy Page 26 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI We noted that the 2017 Financial Statements of Government were submitted to audit after the due date.

Furthermore, the accounts were revised by Ministry of Economy during the audit due to errors and omissions identified during our audit.

The first set of accounts were submitted on 28 June 2018 which were revised on 24 July 2018, 26 September 2018, 25 January 2019, 06 February 2019 and 15 March 2019.
Refer to Appendix 2 for details of amendments.

The audited financial statements were sent to the Ministry for signing on 18 July 2019 after incorporating all the changes made by the Ministry.

The Ministry returned the signed the financial statements on 07 August 2019.

The audit report was issued on 10 August 2019.


Hence, there were delays in finalizing the Financial Statements of Government for the year ended 31 July 2017 which should not be dependent upon the audit of other Agency Financial Statements as it is prepared from FMIS and has a common financial year.

Recommendations The Ministry of Economy should ensure that correct set of Financial Statement of Government is submitted for audit purposes.
Ministry of Economy must emphasise to respective heads of Ministries and Department to be mindful of the significant audit issues and take corrective action to avoid any delays in finalizing the audit.

Management Comments Noted.

MOE and OAG will need to work together as 'way forward' to enhance the audit process.

This has been undertaken.

We also request OAG to advice the MOE of significant audit matters/concerns at Agency level for pro-active actions.
Ministry of Economy Page 27 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.22 REVENUE 4.22.1 Undisclosed Revenue in Agency’s Financial Statement Each Accounting Head must ensure that:8 a) revenue is recorded against the correct account as per the Chart of Accounts; b) the Ministry of Economy (FMIS) is consulted before collecting a totally new revenue type; and c) the recording of revenue is reconciled monthly with the Ministry of Economy.
Revenue amounting to $2,364,524 was collected in relation to the sale of Fiji’s Australian Mission Residence in Canberra.

The audit noted that even though this revenue was recorded in the Ministry of Foreign Affairs FMIS general ledger, it was not reflected in any Agency Financial Statements for the year ended 31 July 2017.
The sale of fixed assets is not a core function of the Ministry of Foreign Affairs and therefore the proceeds from the sale would distort the financial statements of the Ministry of Foreign Affairs if it was to be recorded in its financial statements.

An Asset Management Unit for government is with the Ministry of Public Enterprises which facilitates transaction relating to government assets.
Recommendation The Ministry should develop a guideline outlining treatment of sale of government assets for future transaction.

Management Comments From MOE perspective, the recording of the sale of assets in clear as the agency in 'control' of the asset, expenditure on the maintenance of property recorded with the line Ministry and that receipted the sale proceeds on cash based accounting accordingly.

To oblige to the satisfaction of OAG, we will proceed to develop the guideline reiterating the same.
8 Finance Instructions 2010, Section 21 Ministry of Economy Page 28 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.23 EXPENDITURE 4.23.1 Annual Report on Whole of Government Not Tabled in Parliament The Minister must table in Parliament a whole of Government annual report for each financial year.
The annual report for a financial year must be tabled within 9 months after the end of that year or within a longer period approved for that year by resolution of the Parliament.9 The annual report for a financial year must include: (a) the whole of government financial statements referred to in section 46; (b) the annual appropriation statement referred to in section 47; and (c) the annual budget statement referred to in section 48.
The Permanent Secretary responsible for finance is responsible for the preparation of whole of government annual reports and the statements required to be included in them.

We noted that Ministry of Economy has not tabled in Parliament the whole of Government annual report for the financial year ended 31 July 2016.

Audit report on Financial Statements of Government and Annual Appropriation Statements should not be taken as whole of Government annual report.
The Ministry has not complied with Section 45 of the Financial Management Act 2004 when the Annual Report is not tabled in Parliament.

Recommendations  Ministry of Economy must ensure to table in Parliament the whole of Government annual report in a timely manner.

 Auditor General’s report to Parliament should not be taken as whole of Government annual report.
Management Comments The annual financial statements are prepared by the Ministry of Economy and do not form part of the report of the Auditor General.

9 Financial Management Act 2004 FM 45 – Annual Reports Ministry of Economy Page 29 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.24 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 existing credit policies applied.

Outstanding amounts due to government are classified as ‘arrears of revenue’.

Arrears of revenues generally arise when credit is extended for supply of goods and services.

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.
4.24.1 Increasing Trend in Arrears of Revenue for Past 5 Years Arrears of revenue as at 31 July 2017 was $83,575,308, a decrease of $808,583 or 1% from 2016 arrears of revenue of $84,575,308.

Refer to Table 4.20 for details.


Table 4.20: Arrears of Revenue from 2013 to 2017 Year 31/07/16* 31/07/17 (*2016: 7 months) Arrears of Revenue Amount ($) 84,383,891 83,575,308 % Increase Total Revenue Amount ($) 1,500,808,190 2,837,441,689 (1%) Arrears of Revenue % of Total Revenue 3% Refer to Table 4.21 and Figure 4.1 for details of arrears of revenue.
Table 4.21: Top 5 Agencies with Significant Arrears of Revenue Ministry/Department Water Authority of Fiji Min of Lands & Mineral Judicial Min of Communications Others Total 2017 ($) 33,006,642 21,820,630 13,450,691 7,599,780 7,697,565 83,575,308 % of Total 40 26 16 9 9 100 Figure 4.1: Composition of Agencies with Significant Arrears of Revenue Others 9% Min of Communications 9% Judicial 16% Min of Lands & Mineral 26% Water Authority of Fiji 40% Water Authority of Fiji Min of Lands & Mineral Judicial Min of Communications Others Ministry of Economy Page 30 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Some of the strategies which have been developed to recover the arrears are as follows: Water Authority of Fiji has established a debt management team that is responsible to resolve accumulating arrears of revenue, payment arrangements are made to ease financial burden, focusing on replacement of faulty meters to reduce the incidents of estimated billings and establishing a new billing system for better monitoring of debts and follow up on arrears.
Ministry of Lands and Mineral Resources provides amnesty period for waiver of interest for Lessees to clear their arrears, developing debt management policy and designing a fact sheet on rental payment including details such as how much to pay, when to pay and how often to pay and making this fact sheet available to Lessees during site visits.

Ministry is also liaising with Media Liaison Officers and increasing its visibility on rental collection through Ministry’s Facebook page and radio talk back shows.
Judicial Department is providing resources such as vehicles to assist Police Officers in execution of warrants and to collect arrears.

The Department is also negotiating with Ministry of Economy to provide additional vehicles to be sent to other districts in order for Police Officers to execute warrant in the Divisions and collect outstanding Revenue.
Ministry of Communication issues monthly statement to all unpaid license fees followed by letters, follow up emails, phone calls and face to face discussions with major telecom holders who have arrears.
4.24.2 Ageing and Recovery of Arrears of Revenue Accounts which are overdue must be promptly followed up in accordance with the debt recovery procedures in the Finance Manual.10 Refer to Table 4.22 and Figure 2 for ageing of arrears of revenue Table 4.22: Ageing of Arrears of Revenue Age of Debtors 3 Months 6 Months 9 Months 1 Years 2 – 5 Years >5 Years Total Arrears Arrears of Revenue ($) 5,007,790 1,404,828 13,585,820 15,588,518 17,920,976 30,067,376 83,575,308 Percentage of Total Arrears (%) 6 2 16 19 21 36 100 It is apparent that a large portion (36%) of arrears of revenue have been outstanding for more than a year and indicate the existence of weak and ineffective debt recovery procedures.
10 Finance Instructions 2010 – Section 41 Ministry of Economy Page 31 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Figure 4.2: Ageing of Arrears of Revenue $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 In addition, our audit noted the following anomalies:  Ministry of Lands & Mineral Resources did not include the Arrears of Revenue for expired leases totalling $13.5 million; and  Ministry of Economy was not able to provide the amount of arrears recovered in the current financial year.
The exclusion of arrears of revenue on expired leases for Ministry of Lands and Mineral Resources has resulted in the understatement of the arrears of revenue balance disclosed in the Financial Statements of Government.

There is a high risk of arrears not recovered for a longer period of time becoming irrecoverable and may have to be written-off resulting in loss of government revenue.
Recommendations The Ministries/Department should: implement strategies to reduce the accumulating arrears of revenue; and   obtain the amount of arrears recovered from prior years at the end of the financial year.

Management Comment Agreed.


Ministry of Economy Page 32 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.25 TRUST FUND ACCOUNT 4.25.1 Detailed Listing Not Maintained for Main Trust Fund Accounts The names and balances of each account must be listed and the reconciliation shall be signed by the responsible officer.

Unreconciled items must be investigated and resolved promptly.11 We noted that there was no listing of claimants for monies held in trust for the amount totalling $50,873,557.
Refer to Table 4.23 below for details: Table 4.23: Trust Accounts with no Detailed Listing Ministries/Departments Description Judiciary Ministry of Justice Ministry of Health and Medical Services Ministry of Fisheries and Forests Department of Immigration Suitors Trust Fund Account Official Receiver Bankruptcy Trust Fund Account Official Receiver Liquidation Trust Fund Account Sahyadri Trust Fund Account Fisheries 1/3 Subsidy Scheme Trust Fund Account Immigration Bond Trust Fund Account Total Amount ($) 24,286,148 255,603 587,437 338,925 190,095 25,215,349 50,873,557 As such, we could not ascertain the accuracy and completeness of the Consolidated Trust Fund Account balance of $168,831,120 as at 31 July 2017.
This issue was also included as an Emphasis of Matter paragraph in the audit report for the year ended 31 July 2016.

The respective Ministries have agreed to the recommendations provided in their management letters.

Recommendations The Ministry of Economy should ensure that Ministries/Departments are maintaining detailed listings of claimants of the monies held in Main trust.
The FMIS Division should ensure that Ministries/Departments are submitting the detailed listing of claimants of the monies held in trust in its monthly reconciliation.

Management Comments Unclaimed Listing refers to 30% of the total trust balance.

Alternative documents are available for the auditors in the absence of complete listing.

These include: Immigration Trust Fund — Bond Register and its supporting documents by port.
Judicial Trust Fund - $17.982 million has been listed and case files have identified who these funds are held in for.

Official Receiver Trust — list has been compiled and verification is in process as balance has increased.

Individual files are also available for audit.

11 Finance Instructions 2010 section 58(3) Ministry of Economy Page 33 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Sahyadri Trust Fund — balance is only of $20,609 only.
These are charges that are retained as per the agreement in place and is fees for the use of the Fijian Government premises for the surgeries.

These will be transferred to Consolidated Fund Account.

The listing is not applicable for this.

Fisheries 1/3 Subsidy Scheme — listing is available.

Further, an action plan is in place for implementation by the Judicial and Immigration Department.
4.25.2 Variances in Main Trust Accounts Each month, the trust account must be balanced and reconciled with the trust bank account.

Un- reconciled items must be investigated and resolved promptly.12 We noted the following variances from the review of the trust accounts: (i) Variances were noted between the main trust cash and trust liability balance.

Refer to Table 4.24 below for details.


Table 4.24: Variance between Trust Fund Cash and Trust Fund Liability Account Account Name Account Trust Fund Cash Trust Fund Liability 9-00000-00000-520000 9-00000-00000-890000 Variance Amounts ($) 169,295,442 (167,973,129) 1,322,313 The above findings indicate lack of adequate review by the FMIS Division on the reconciliations submitted by the Ministries/Departments.
Recommendation Ministry of Economy’s FMIS Division should identify those variances and take corrective actions in consultation with the respective Ministries/Department.

Management Comments Agreed.

Environment Trust Account Reconciliation and all necessary steps and documentation completed.

Judicial Trust Account Judicial Trust Fund - $17.982 million has been listed and case files are also identified who these are held in for.

Further, an action plan is in place to reconcile.


4.25.3 Reconciliations not prepared for Main Trust Fund Account - Judicial Department The receipt and payment of trust money must be recorded in a separate cashbook or set of ledger accounts.

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.13 12 Finance Instructions 2010 section 58(3) 13 Finance Instructions 2010 – Section 58 (2 & 3) Ministry of Economy Page 34 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The Judicial Department maintains Judicial Trust Fund Account which consists of three trust fund accounts: Suitor’s Trust, Maintenance Trust and Sundries Trust accounts.
We noted that Judicial Department’s reconciliations for Suitors, Sundries and Maintenance Trust Fund were only prepared up to January 2015, January 2000 and December 1994 respectively as at 31 July 2017.

Due to significant lapse in the years of reconciliation balance, audit was not able to confirm the accuracy of the closing balance of $31,623,770 reflected in the Judicial Trust Fund Account Statement of Receipts and Payments.
Recommendation The Ministry of Economy must liaise with Judicial Department to ensure that reconciliation team immediately undertake the exercise of updating the backlog in the trust account detailed reconciliations.

Management Comments Judicial Trust Fund - $17.982 million has been listed and case files are also identified who these are held in for.

Further, an action plan is in place to reconcile.


Ministry of Economy Page 35 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI APPENDIX 1: STATEMENT OF RESPONSIBILITY GOVERNMENT OF REPUBLIC OF FIJI STATEMENT OF RESPONSIBILITY FOR THE YEAR ENED 31 JULY 2017 The Financial Statements of Government have been prepared by the Treasury Division in accordance with the provisions of the Financial Management Act 2004, Finance Instructions 2010 and the Finance (Amendment) Instructions 2016.
The financial statements also comply with International Public Sector Accounting Standards on Cash Basis.

The Treasury Division is responsible for the management of the Government Accounting and the delivery of its outputs which includes preparation of whole of government Financial Statements, whole of government Annual Report, establishing and monitoring government accounting policies so that they are consistent with generally accepted accounting practice in Fiji.
This would include provision of comprehensive accounting and financial advisory service to government entities.

I accept responsibility for the integrity of these financial statements, the information they contain and their compliance with the Financial Management Act 2004, Finance Instructions 2010 and the Finance (Amendment) Instructions 2016.
In my opinion, the financial statements fairly reflect the financial operations and performance of the Government of Fiji and its financial position for the year ended 31 July 2017.

……………………………… Permanent Secretary Date:……………… ………………………………… Head of Treasury Date:……………….
Ministry of Economy Page 36 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI APPENDIX 2: AMENDMENTS TO THE FINANCIAL STATEMENTS OF GOVERNMENT Date 24 July 2018 Reference to Financial Statements Schedule 1 Amendments     Reimbursements and recoveries were changed from $33,038,490 to $30,858,490 Receipts from Lending and on Lending from Nil to $2,180,000 Proceeds from Borrowings changes from $124,610,397 to $435,693,658.
Repayment of borrowings changes from $162,104,162 to $148,979,100 26 September 2018 Note 9 Disclosure on re-statement of prior year balances Schedule 10 Disclosure on the carryover of the funds Note 9 Disclosure on re-statement of prior year balances with the amounts from prior year, changes and new opening balances.
Note 10 & 11 Additional disclosure provided on the reasons for under- Note 19 Note 2.8 Note 35(ii) Schedule 1 25 January 2019    Indirect taxes from $1,734,014,728 to utilization of the budgeted funds Disclosure of entities that have Zero Fair Value, Liquidated and Winding Up Disclosure on the changes in financial year Disclosure of government liabilities of $182,637,899 was made  Changes in Direct taxes amount from $846,839,214 to $766,055,195 Changes in $1,813,120,249.
Changes to Sales Revenue TMA from $17,408,277 to $18,056,598.

Changes $48,157,894 to $44,298,661.

Changes in net receipts into Trust Fund Accounts from $45,447,254 to $50,745,573.

Trading and Manufacturing Accounts Other Expenses changed from $21,328,282 to $16,035,740.

Capital Expenditure $1,006,891,281 to $1,004,959,257.

Cash booked directly to equity amended to Nil from $7,673,042.

Effects of Exchange rate changes changed from $439,847 to $479,415.
to Other Revenues and Surplus changed amount from from      Schedule 2 Note 3 Note 9 Note 14a Note 15 Note 20 Change in Nominal GDP from $10,252,854,556 to $9,865,489,759.

This resulted in Change in Net Deficit as a Percent of GDP from 2.2% to 2.3%.

Comparative figures were added Disclosures on the statement was made for re-statement of prior year figures.

Cash flow balances were amended Tax receivables from IRD and Customs were included.

This changed Schedule 3.


VAT refunds outstanding and Income Tax refunds Outstanding were included.

This changed Schedule 3.


Ministry of Economy Page 37 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Date Reference to Financial Statements Note 23d Note 24 Note 27 Note 35 Note 36 Note 37-39 Schedule 5 Note 15 Note 20 Note 35 Note 36 Note 39 Schedule 3 Note 18 Note 19 Note 36 Schedule 6 Note 19(b) Note 39 9 15 18(a) 20 24 35 36 38 15 March 2019 18 March 2019 12 July 2019 Amendments Disclosures on the utilization of cash borrowings were added.
Government contingent asset were also included and additional paragraph was added to account for government contingent assets and contingent liabilities.

Environmental Levy which was included with Direct Tax was separately disclosed.

This also led to change in Schedule 8.

Arrears of Revenue for FRCS was removed.

Adjustment of underlying account balances and equity were included.

New disclosures provided on waivers, government liabilities and TELS debt.
Litigation claims of Government of $47,796,909 were included.

This also changed balances in note 24.

Tax receivables from IRD and Customs were removed.

This changed Schedule 3.

VAT refunds outstanding and Income Tax refunds Outstanding were removed.

This changed Schedule 3.

FRCS Arrears were included Adjustment of underlying account balances and equity were amended.
Details on TELS balances were amended from $209,060,301 to $218,101,454 Statement of Assets & Liabilities (Change in Note 18,19 & 36) Term-Loans Receivable [Changed due to inclusion of TELS] Equity Investments [Changes in disclosure notes and inclusion of Assets Fiji Ltd, Walesi Ltd & Fiji Public Trustee Corporation Ltd shares Equity movement – as highlighted in Note 18 & 19 Changes in Investments, Term Loans Receivable & Amount reconciled to net Equity.
Fiji Hardwood Corporations shareholding interest amended Amended disclosure on Tertiary Education Loans Scheme Details of the re-statement of the account balances have been included Tax Receivable – IRD and Customs balance have been included for 2017 and 2016 Tertiary Education Loan Scheme balance for 2017 and 2016 have been included VAT & Income Tax Refunds Outstanding balance have been included for 2017 and 2016 FNPF Decree changed to FNPF Act Tax Receivable – IRD and Customs have been excluded from note 35 and have been recognised in Statement of Assets and Liabilities.
A note on the exclusion have also been provided Balance have been amended due to Receivables and Payable’s and TELS balance.

Below disclosure has been included in the Accounts: inclusion of FRCS Ministry of Economy Page 38 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Date Amendments Reference to Financial Statements Total Income Tax refunds for the year 2016/2017 has been restated from $106,865,387 to $18,694,678 to reflect the correct treatment for all refunds.
The reason for the restatement is to exclude taxes received progressively during the year.

The $18,694,678 includes only individual income tax refunds as at 31 July 2017.

Accounts Receivables and Accounts Payables balances have changed due to recognition of FRCS Receivables, FRCS Payables and TELS balance.

Assets and Liabilities balance have been changed due to inclusion of FRCS Receivables and Payable and TELS balance.

Schedule 6 Schedule 3 Ministry of Economy Page 39 www.oag.gov.fj