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REPORT OF THE AUDITOR-GENERAL OF REPUBLIC OF FIJI 2016/2017 Audit Report on Government Commercial Companies and Commercial Statutory Authorities PARLIAMENT OF FIJI PARLIAMENTARY PAPER NO.
88 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 14 June 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 GOVERNMEMNT COMMERCIAL COMPANIES AND COMMERCIAL STATUTORY AUTHORITIES FOR 2016/2017 In accordance with section 152(13) of the Constitution of the Republic of Fiji, I am pleased to transmit to you my report on Government Commercial Companies and Commercial Statutory Authorities for 2016/2017.
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.


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 Republic of Fiji.

Its roles and responsibilities include expressing an opinion on the financial statements of state- owned entities.

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.


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 STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Table of Content 1.0 2.0 3.0 Introduction........................................................................................................................................ 4 Types of audit opinions issued .......................................................................................................... 5 Results of our audits .......................................................................................................................... 6 3.1 Quality and timeliness of financial reports ......................................................................................... 6 3.2 Audit opinions issued ........................................................................................................................... 6 3.3 Other significant matters .................................................................................................................... 6 3.4 Internal controls ................................................................................................................................... 6 3.5 Delays in completion of audits ............................................................................................................ 7 3.6 Entities not subject to audit by Auditor General ............................................................................... 7 3.7 Audit conclusion ................................................................................................................................... 7 4.0 Context ..................................................................................................................................................... 9 4.1 Legislative framework ......................................................................................................................... 9 4.2
9 4.2 Government Commercial Companies & Commercial Statutory Authorities (GCCs/CSAs) ............. 9 5.0 Types of agencies ................................................................................................................................... 10 6.0 Abridged Financial Information and Other Significant Matter(s) ............................................... 10 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 Pacific Fishing Company Limited ................................................................................................ 11 Airports Fiji Limited ..................................................................................................................... 15 Fiji Public Trustee Corporation Limited ...................................................................................... 19 Unit Trust of Fiji (Management) Limited ................................................................................... 22 Copra Millers of Fiji Limited ........................................................................................................ 24 Fiji Development Bank ................................................................................................................. 28 FDB Nominees Limited ................................................................................................................ 33 Housing Authority of Fiji ............................................................................................................. 35 Fiji Broadcasting Corporation Limited ....................................................................................... 37 6.10 Post Fiji Limited ............................................................................................................................ 41 6.11 Energy Fiji Limited ....................................................................................................................... 48 7.0 Assessment of Internal Controls
 ........................................................................................................... 53 7.1 Auditing internal controls .................................................................................................................. 53 7.2 Internal controls ................................................................................................................................. 53 7.3 Quality of draft financial statements by entities ............................................................................. 54 7.4 Timeliness of draft financial statements for entities ...................................................................... 54 8.0 Results summary .................................................................................................................................... 55 Appendix A: Audits not complete as at 31 October 2017 ........................................................................... 56 Appendix B: Audit Opinion Results ............................................................................................................ 57 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix C: Entities not subject to audit by the Auditor-General ........................................................... 59 Appendix D: Glossary ................................................................................................................................... 60 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 1.0 Introduction All state-owned entities prepare annual financial statements.
Directors and management of these entities are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and requirements of 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 Auditor-General is responsible, on behalf of Parliament, for audit of the accounts of all state-owned entities except for its own office and those entities which may be exempted by law.

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, an audit memorandum or 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).

Those standards require the Auditor General to comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on 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 entity’s 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.

This report summarizes our analysis of the internal controls of state-owned entities for which audit opinions were issued on the 2016 and 2017 financial statements and the timeliness and quality of financial reporting by these entities.
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 entities during 2016 and 2017.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 4 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 Financial Reporting Standards 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.
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 STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 3.0 Results of our audits As at 30 November 2018, we issued 21 audit opinions out of which 11 related to the 2016 financial statements while 10 were on the 2017 financial statements of various entities.
3.1 Quality and timeliness of financial reports The financial statements of most entities audited were timely and generally of good quality.

However, further improvements can be made to enhance the quality and timeliness of submission of financial statements for our audit.

3.2 Audit opinions issued Modified opinions We issued modified opinions on 1 or 9% of the 2016 financial statements completed for the various entities.
Unmodified opinions We issued unmodified opinions on 10 or 91% of the 2016 financial statements audited for the various entities.

For the audits undertaken on the 2017 financial year, we issued unmodified opinions on 10 or all of the financial statements audited for the various entities.

This means that material misstatements were not noted in majority of the entities which were audited.
3.3 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 entities in future, if necessary action is not taken to address them.

3.4 Internal controls Good internal controls provide reasonable assurance that an entity is 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: Control environment – actions, attitudes and values that influence daily operations Risk assessment – processes for identifying, assessing and managing risk (i) (ii) (iii) Monitoring activities – oversight of internal controls for existence and effectiveness (iv) (v) Control activities – policies, procedures, and actions taken to prevent or detect errors 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, ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 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 Results Summary in Section 8; Page 64 shows the strength of controls in key elements for entities for which 2016 financial statements were audited.

Our audit indicated that Controls Activities was an area where majority of the significant deficiencies were identified.
3.5 Delays in completion of audits Audit of eight Government Commercial Companies, Commercial Statutory Authorities and Re-organized entities have been delayed.
Audits of state-owned entities have not been completed primarily due to the following: • Delay in submission of draft accounts for audits or draft accounts submitted were incomplete; • Relevant information/records not provided for audit on a timely basis; and • Entities deciding to address issues raised in draft audit reports and resubmission of financial statements for audit.

Efforts are being made to complete the audit of accounts which have been received.
Details of audits not completed are provided in Appendix A.

3.6 Entities not subject to audit by Auditor General The Auditor-General did not audit the financial statements for a number of entities as their governing bodies had appointed Chartered Accountant firms as external auditors.
Details of entities together with the audit requirements are shown in Appendix C. 3.7 Audit conclusion Unmodified (unqualified) opinions were issued on majority of the 2016 and 2017 financial statements audited which reflects very positively on the entities.

However, close attention should be given to address matters which have been reported as high risk in management letters.

The significant matters have been included in this report.
Timely preparation of quality draft annual financial statements is a major issue which needs to be addressed by those charged with governance of several state-owned entities.

Delays in submission of financial statements for audit prevents the Auditor-General from giving an opinion on them on a timely basis and informing Parliament and other stakeholders of the outcome of such audits.
Furthermore, other significant findings arising from audit of entities for which the Auditor-General is no longer the external auditor cannot be reported to Parliament under the current legislative framework.

Therefore proper consideration should be given prior to change of auditors for state-owned entities.

Identification, valuation and proper accounting of fixed assets needs to be significantly improved in most entities which were audited.
This is particularly important due to huge investments made by entities in fixed assets.

Opportunities also exist for insurance of critical assets so that business continuity risk can be properly mitigated in times of disasters.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The involvement of Ministry of Public Enterprises in improving accountability in state-owned entities is noted.

However, there is room for further improvement through regular and active interaction with the entities.
It has been noted that it becomes challenging for entities to prepare annual accounts when these have not been done for some time resulting in a backlog.

Therefore, those charged with governance in state-owned entities should be directed to prepare and submit draft financial statements for audit annually.
Ajay Nand AUDITOR-GENERAL Date: 14/06/2019 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 4.0 Context 4.1 Legislative framework The following legislation establishes the financial accountability frameworks and legislative time frames to complete financial statements audits for state-owned entities.
Entity Type Legislative Framework Legislative Timeframe Commercial Government Companies, Commercial Statutory Authorities, Re- organized Entities • Public Enterprises Act 30th April 1996 • Finance Management Act 2004 Statutory Authorities • Legislation entity regulations establishing related and • 3-6 months following end of financial year • Not specified/ as soon as • Finance Management Act practicable 2004 • Finance Management (Amendment) Act 2016 The respective legislative frameworks indicate the minimum requirements for financial accountability and reporting such as: • Good governance • Financial management and performance • Entity’s performance against corporate intent or plan • Financial reporting • Annual reports 4.2 Government Commercial Companies & Commercial Statutory Authorities (GCCs/CSAs) Each year, GCCs and CSAs are required to present the Annual Reports containing: • Operations of the company or authority and those of subsidiaries during the financial year.
• Audited consolidated financial statements in case of those which have subsidiaries.

• Auditor’s report on the financial statements.


• Contain such information as may be necessary to show the financial performance of the company or authority and its subsidiaries, including comparison of its performance with its statement of corporate intent The Minister responsible for Public Enterprises is required to lay before Parliament the statement of corporate intent of company or entity for that year together with the annual report and audited financial statements for preceding financial year.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 9 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 5.0 Types of agencies A number of government entities have been reorganized to be: • More efficient and productive; • More accountable; • better organized; and • provide good return on investment.
Government Commercial Companies The primary objective of every government company is to operate as a successful business, be profitable and efficient compared to businesses in the private sector.

Commercial Statutory Authorities Statutory Authorities have been transformed into commercial statutory authorities so that they operate along commercial lines but also undertake non-commercial activities.
Re-organized entities These government departments or state-owned entities are declared as Re-organized Entities and allows the Minister for Public Enterprises to reorganize that particular entity and enables the state as owner, to provide strategic direction to entities by setting financial and non-financial performance targets and non-commercial obligations.

Majority-owned entities Companies where 51% or more shares are owned by Government.
Expectation is that these companies will operate commercially and optimize returns to Government.

6.0 Abridged Financial Information and Other Significant Matter(s) For each GCCs and CSAs, abridge financial statements are presented.

The abridged statement of financial performance reflects revenue, expenses and net income while the abridge statement of financial position presents the authorities assets and liabilities.
In addition, for each GCCs and CSAs, any significant matter(s) noted during the course of audit were brought to the attention of respective authority’s management.

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.

In the following sections, we provide the abridged financial information and significant audit findings for each GCCs and CSAs.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 10 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.1 Pacific Fishing Company Limited Financial Information - 2016 The audit of Pacific Fishing Company Limited (PAFCO) for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of PAFCO.
PAFCO - Abridged Statement of Financial Performance Year ended 31 December 2016 ($) 2015 ($) Sales Other Income TOTAL INCOME Raw materials and consumables used Changes in inventories of raw materials and finished goods Distribution costs Staff and employee benefits Depreciation and amortisation expense Finance costs Other operating expense TOTAL EXPENDITURE OPERATING PROFIT BEFORE INCOME TAX Income tax expense NET PROFIT AFTER INCOME TAX 1,694,936 8,262,988 (110,110) 350,152 9,093,428 2,765,934 103,576 32,170,087 31,317,974 1,140,024 33,865,023 32,457,998 8,210,996 333,516 376,358 8,716,230 1,700,196 162,419 10,834,716 11,274,716 31,300,684 30,774,431 1,683,567 (362,693) 1,320,874 2,564,339 (730,474) 1,833,865 The company’s net profit increased by $512,991 or 39% in 2016 compared to the amount reported in 2015.
This was mostly attributed to the increase in sales by $852,113 or 3%.
PAFCO - Abridged Statement of Financial Position As at 31 December Cash at bank and on hand Trade receivables Inventories Prepayments and other receivables Property, plant and equipment Deferred tax asset TOTAL ASSETS Interest bearing borrowings Deferred tax liability Trade and other payables Provisions Deferred income TOTAL LIABILITIES NET ASSETS 2016 ($) 1,932,341 1,718,910 2,042,050 1,845,139 35,388,074 37,267 42,963,781 14,975,011 107,563 2,187,366 61,237 4,491,232 21,822,409 21,141,372 2015 ($) 1,205,776 2,759,747 2,387,481 1,248,651 33,428,505 660,178 41,690,338 13,952,995 --- 3,596,894 74,590 4,758,352 22,382,831 19,307,507 Net assets of the Company increased by $1,833,865 or 9.5% in 2016 compared to 2015.
This was mainly attributed by increase in cash at bank and increase in value of property, plant and equipment.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 11 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Other significant matters – PAFCO 2016 Anti- Fraud Program It is a good practice to establish an anti-fraud program to have Management, Internal Audit and the Board jointly plan, implement, monitor, and take action on evolving risks of fraud.
In addition, it is a good practice to have an employee awareness program.

The Company does not have an anti-fraud and employee awareness program in place.

The company agreed to develop an anti-fraud program and create staff awareness on fraud detecting and reporting.

Financial Information - 2017 The audit of Pacific Fishing Company Limited (PAFCO) for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of PAFCO.
PAFCO - Abridged Statement of Financial Performance Description Sales Other Income Total Income Raw materials and consumables used Changes in inventories of raw materials and finished goods Distribution costs Staff and employee benefits Depreciation and amortisation expense Finance costs Other operating expense Total Expenditure Operating profit before tax Income tax expense Net profit after tax 2017 ($) 33,183,538 1,795,050 34,978,588 9,562,519 (1,031,896) 373,453 8,737,381 2,848,952 88,237 12,582,659 33,161,305 1,817,283 (197,990) 1,619,293 2016 ($) 32,170,087 1,694,936 33,865,023 8,262,988 (110,110) 350,152 9,093,428 2,765,934 103,576 10,834,716 31,300,684 2,564,339 (730,474) 1,833,865 The company’s net profit decreased by $214,572 or 12% in 2017 compared to the amount reported in 2016.
This was mostly attributed to the increase in freight and cartage expense in which increased by $387,741 in 2017.
PAFCO - Abridged Statement of Financial Position Description 2017 ($) 2016 ($) Cash at bank and on hand Trade receivables Inventories Prepayments and other receivables Property, plant and equipment Deferred tax asset Total Assets Interest bearing borrowings ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 1,932,341 1,718,910 2,042,050 1,845,139 35,388,074 37,267 42,963,781 14,975,011 907,679 2,554,867 5,951,803 1,061,527 36,545,104 214,074 47,235,054 16,401,498 12 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Description Deferred tax liability Trade and other payables Provisions Deferred income Total liabilities Net Assets 2017 ($) 374,796 3,396,332 77,362 4,224,436 24,474,424 22,760,630 2016 ($) 107,563 2,187,366 61,237 4,491,232 21,822,409 21,141,372 Net assets of the Company increased by $1,619,258 or 7.7% in 2017 compared to 2016.
This was mainly attributed by increase in inventories which increased by $3,909,753 in 2017.

This was due to increase in raw materials as result of large quantity of raw fish supplied to the company in the month of December.

Other significant matters – 2017 Inadequate documentation to support monthly consultancy payment The company pays monthly consultancy fees to a staff of a major customer who manages the maintenance of the Company.
It was noted that this consultancy payment is deducted from the invoice sent to the customer by PAFCO for loin processing fees.

However, an agreement between PAFCO and the customer in relation to this arrangement was not provided for our review.

The company agreed with the audit finding and informed that the Board will liaise with customer to have an agreement which outlines the terms and conditions of consultancy payments.
Provision of motor vehicle to employee of the customer PAFCO provides a vehicle to a General Manager who is the employee of its major customer who is based at PAFCO’s office.

We further noted that PAFCO pays for the fuel and maintenance of the vehicle.

However, it was noted this arrangement is not documented through an agreement.

The company has indicated that a formal agreement outlining all the company’s obligation to the Customer will be put into place will be put into place.
Lack of internal orders for stock movement Movement of inventory is recorded when purchased finished goods or raw materials are received in stores.

Production department requests raw material from stores department.

Finished goods leave for warehouse for sale at Levuka /Suva.

It is imperative that an internal request document is used to request for inventory items from stores.

There was no internal request document requirement to request inventory items from stores.
Instead a verbal request is made whenever items are required by individual departments.

While stock cards are maintained for inventory movement, we are of the view that this is not sufficient as there is no trail for the authorization of the stock requested.

The company assured that an internal request document will be used when requesting inventory items from the stores.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 13 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Review of finance manual The following current financial practices are not documented in the finance manual of the company: instructions on recording of overseas and local sales; instructions on the reviewing of the payroll reconciliations; • • • no indication that the Accountant shall approve payment vouchers and purchase requisitions in the absence of the Financial Controller; and • clear instructions of a journal voucher system.
The company agreed to review the finance manual.

Absence of Disaster Recovery Plan Disaster recovery plan involves a set of policies, guidelines and procedures to enable the recovery or continuation of technology infrastructure and systems following a natural disaster.

The company did not have an approved Disaster Recovery/Data Recovery Plan.

The company agreed with the audit finding and advised expert advice would be obtained to develop this document.
Policy on Bonus Payout Establishing and implementing bonus policy will result in a more accurate estimate of the provisions and improve periodic financial reporting by providing management with a consistent method of performing the review of bonus provisions.

In addition, the policy will ensure consistent application of rewards to staffs.

The company did not have a documented bonus policy in place to guide them in awarding bonus to staff.
The Company agreed to include bonus payout policy in the job evaluation exercise.

___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 14 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.2 Airports Fiji Limited Financial Information - 2016 The audit of Airports Fiji Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of Airports Fiji Limited.
Airports Fiji Limited - Abridged Statement of Financial Performance Year Ended 31 December Revenue Navigation charges Concessions Landing and parking fees Airport security/development fee Departure tax share Rental Domestic passenger service charge Other income Total Revenue Expenditure Administrative expenses Operating expenses Personnel expenses Finance expenses Loss on demolition of old assets due to Nadi Airport Modernization Project Total Expenditure Profit before tax Income tax expense Net Profit for the Year 2016 ($) 2015 ($) The net profit recorded in 2016 increased by $24.4 million or 97% compared to 2015.
The increase in net profit was largely due to increase in concession revenue and revenue generated from navigation services provided by the company.
Airports Fiji Limited - Abridged Statement of Financial Position As at 31 December Cash and cash equivalents Term deposits Trade receivables Other current assets Property, plant and equipment Investment property Total Assets Trade and other payables Bank overdraft Other current liabilities Borrowings 2016 ($) 16,345,000 57,700,246 13,516,678 5,215,146 2015 ($) 17,997,002 42,161,600 12,697,168 3,097,933 200,384,246 168,381,765 8,969,645 301,870,618 253,305,113 6,063,776 3,869,201 1,895,049 42,495,659 9,755,310 1,744,399 10,809,468 62,352,370 8,709,302 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 15 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI As at 31 December Deferred tax liability Other non-current liabilities Total Liabilities Net Assets 2016 ($) 2015 ($) 3,347,962 11,212,372 99,221,881 3,927,360 11,881,794 70,132,839 202,648,737 183,172,274 The company recorded significant increase in net assets by $19.5 million or 10.6% in 2016 compared to 2015.
The increase in net assets was mainly due to significant increase in funds held as term deposits and increase in value of property, plant and equipment due to Nadi Airport Modernization Project.

Other significant matters – Airports Fiji Limited - 2016 Depreciation rates for property plant and equipment The following were noted in relation to depreciation of property, plant and equipment: • Buildings are currently depreciated over a period of 40 years which is the tax depreciation rate.
Comparing this depreciation rate to the frequency of renovations and upgrades at the Airport would indicate that 40 years is too long period over which to depreciate these items; and • AFL presently depreciates most infrastructure assets over 13 years which, in comparison to other airports would appear to be short period.
Depreciation rates for certain classes of infrastructure used by similar entities compared with the rates used by AFL are as follows: Table 1.1: Comparison of Depreciation Rates Asset Category Aero pavements Roads and car parks Other infrastructure Airport lighting Line marking and asphalting Runways, taxiways and aprons Similar Entities1 Depreciation Rates % 4.50 4.49 9.25 6.00 11.00 1 – 17 AFL Depreciation Rates % 7.7 7.7 7.7 7.7 7.7 7.7 AFL informed us that it plans to engage an independent consultant to review the fixed asset register to determine the expected useful life and value in use.
Depreciation rates will be based on this evaluation exercise.

The scope will also involve getting the fixed assets register in a structured layout and proper classification of additions for NATMP project.

While AFL has capacity internally to carry out this exercise, it prefers an independent assessment to get an objective outcome in compliance to IFRS.
Zero written-down-value assets Included in the fixed asset register are assets with an original cost amounting to $25 million with a zero written down value (WDV).

It was noted that majority of these assets relate to plant and equipment which we understand are still being used in the company’s operating activities.
If the assets are still in use, this suggests that management’s initial estimate of the useful life of these assets may not have been correct or had not 1 The depreciation rates of other Airports are compared against the rates used by AFL ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI been revised to take account of a revision in the estimated useful lives.
The company intends resolve the issue together with the issue of review of fixed assets.

Financial Information - 2017 The audit of Airports Fiji Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of Airports Fiji Limited.
Airports Fiji Limited - Abridged Statement of Financial Performance Description Revenue Other Income Finance Income Total Income Other Expenses Operating Expenses Personnel Expenses Loss on Demolition of Old Terminal Assets Due Finance Cost Total Expenditure Profit Before Income Tax Income Tax Expense Net Profit For The Year 2017 ($) 130,264,311 8,000,140 1,877,937 140,142,388 21,407,262 19,143,294 17,539,621 --- 1,865,798 59,955,975 80,186,413 15,946,426 64,239,987 2016 ($) 111,216,194 4,907,329 1,931,088 118,054,611 20,474,312 14,174,228 16,195,860 3,702,157 1,350,310 55,896,867 62,157,744 12,691,421 49,466,323 Net profit substantially increased by 30% or $14.7 million in 2017 compared to 2016.
This was mainly due to the increase in revenue generated by air navigation charges, concessions, landing and parking fees international, terminal navigation aid charges, and rental offices and warehouses.
Airports Fiji Limited - Abridged Statement of Financial Position Description Cash on Hand and at Bank Trade Receivables Inventories Other Receivables and Prepayments Term Deposits Property, Plant and Equipment Investment Property Total Assets Bank Overdraft Trade and Other Payables Loans and Borrowings Employee Benefits Deferred Income Current Tax Liability Deferred Tax Liability Total Liabilities Net Assets 2017 ($) 55,210,940 18,125,039 483,298 4,612,538 11,000,000 233,790,792 8,453,793 331,676,400 --- 10,961,908 81,073,156 844,057 11,212,372 2,982,032 2,875,478 109,949,003 221,727,397 2016 ($) 16,345,000 13,516,678 758,282 4,456,864 57,700,246 200,384,246 8,709,302 301,870,618 1,744,399 9,755,310 65,736,875 756,061 11,881,794 5,999,480 3,347,962 99,221,881 202,648,737 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 17 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Net assets increased by $19.07 million or 9% in 2017 compared to 2016.
This was mainly attributed by the increase in cash on hand and at bank, trade receivables and property, plant and equipment.
Other significant matters – Airports Fiji Limited – 2017 Impairment Assessment and Useful Lives of Plant and Equipment There was no evidence to support that the management has carried out the impairment assessment, review of the depreciation rates and assessed the remaining economic useful lives of individual major classes of infrastructure and equipment in a structured manner progressively, and provided for consideration and review by the directors.
Furthermore, as per paragraph 43 of IAS 16 – Property Plant and Equipment, each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

The company agreed to continuously review the carrying value, residual value and useful economic life of infrastructure and equipment, to ensure that the depreciation is reasonable and adequate, and any impairment adjustment is made on a timely/progressive basis.
Accordingly, the company also agreed to consider depreciating significant components of individual major assets based on the expected useful lives of their major components (taking into consideration the requirement for major replacements of different components of these major assets), instead of uniformly applying a single depreciation rate to the entire asset.
VAT Reconciliation and Taxable Supplies Incorrectly Declared in VAT Returns In addition, we noted that Statement of VAT Account (SVA) to VAT account reconciliation is not carried out by management on a monthly basis.

From our review of monthly lodged VAT returns, we noted that “total taxable supplies” includes sales income and other credits such as loan drawdowns and term deposits withdrawn.

Further, these credits forming part of total taxable supplies are then subtracted from “zero rated supplies”.
Credits such as loan drawdowns and term deposits are not subject to VAT and are not zero-rated supplies.

Accordingly, these should not be included in the VAT returns as part of taxable supplies and subsequently deducted as zero-rated supplies.

The company agreed that the taxable and zero rated supplies were incorrectly stated on the VAT returns.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 18 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.3 Fiji Public Trustee Corporation Limited Financial Information - 2016 The audit of Fiji Public Trustee Corporation Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of Fiji Public Trustee Corporation Limited.
Fiji Public Trustee Corporation Limited - Abridged Statement of Financial Performance Year ended 31 December Fees Interest Income Other Revenue Total Income General and Administration Expenses Selling Expenses Staff and Employee Costs Total Expenditure Operating Profit Before Income Tax Income Tax Expense Net Operating Profit After Tax Other comprehensive income Net Profit for the Year 2016 ($) 639,025 568,634 24,105 1,231,764 2015 ($) 635,250 512,650 21,470 1,169,370 223,314 17,300 547,024 787,638 444,126 80,411 363,715 22,730 386,445 187,793 20,232 483,424 691,449 477,921 88,526 389,395 21,334 410,729 The Corporation recorded a decrease in net profit by 6% in 2016 compared to the previous year.
Although there was growth in total income recorded, it was not significant enough to cover the increase in total expenditures.
Fiji Public Trustee Corporation Limited - Abridged Statement of Financial Position As at 31 December Cash and Cash Equivalents Trade and Other Receivables Other Current Assets Deferred Tax Asset Financial Assets Property, Plant and Equipment Total Assets Trade Payables & provisions Dividend Payable Total Liabilities Net Assets 2016 ($) 282,934 433,251 80,522 --- 6,145,358 1,933,675 8,875,740 64,436 --- 64,436 8,811,304 2015 ($) 499,425 490,027 229,493 4,059 6,872,603 1,891,581 9,987,188 60,410 1,500,000 1,560,410 8,426,778 Total assets decreased as a result of reductions in cash at bank, and financial assets, however, net assets increased by 5% in 2016 compared to 2015, which was due mainly from the Corporation not recording dividend payable as at 31 December 2016.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 19 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Other significant matters – Fiji Public Trustee Corporation Limited - 2016 Provisions for Trust Claims and Investment impairment not reviewed A review of the Corporations Trust Company general ledger revealed provision for investment impairment of $5,034,075 as at 31 December 2016.
We noted that the Corporation has not carried out any review of the opening balances set aside since 2006 and has not developed any guidance on the basis of determining the provision amount at the end of the financial year or setting aside the provision for investment impairment amount at the end of the financial year.
The company noted the recommendation for the review of the provisions of Trust Claims opening balance and together with the review of the provisions for Investment impairment opening balance is noted.

Financial Information - 2017 The audit of Fiji Public Trustee Corporation Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.
However, attention was drawn to Note 15 of the financial statements which included assets and liabilities of the Trust and Estate under management.

As in previous years, the Trust and Estate financial statements are not presented separately from the Corporation’s financial statements.

Presented below is the abridged financial information of Fiji Public Trustee Corporation Limited for financial year 2017.
Fiji Public Trustee Corporation Limited - Abridged Statement of Financial Performance Year ended 31 December Fees Interest Income Other Revenue Total Income General and Administration Expenses Selling Expenses Staff and Employee Costs Total Expenditure Operating Profit Before Income Tax Income Tax Expense Net Operating Profit After Tax Other comprehensive income NET PROFIT FOR THE YEAR 2017 ($) 592,446 578,633 28,682 2016 ($) 639,025 568,634 24,105 1,199,761 1,231,764 223,314 17,300 547,024 787,638 444,126 80,411 363,715 22,730 386,445 280,979 26,811 579,987 887,777 311,984 52,461 259,523 196,402 455,925 The net profit for the year increased by $69,480 or 18% compared to the previous year.
This was mainly attributed to substantial increase of other comprehensive income from unrealised gain on market valuations of financial assets at year end.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 20 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Fiji Public Trustee Corporation Limited - Abridged Statement of Financial Position As at 31 December Cash and Cash Equivalents Trade and Other Receivables Other Current Assets Financial Assets Property, Plant and Equipment Total Assets Trade Payables & provisions Dividend Payable Total Liabilities NET ASSETS 2016 ($) 2017 ($) 456,747 282,934 469,048 433,251 120,808 80,522 12,410,943 6,145,358 1,881,646 1,933,675 15,339,192 8,875,740 118,327 64,436 --- 500,000 618,327 14,720,865 64,436 8,811,304 The Corporation’s net asset increased by $5.9 million or 67% in 2017 compared to 2016.
This was mainly attributed to the increase in financial assets as a result of investments held in trust in 2017.

In 2017, upon the review of the provisions in Trust, it was assessed that the provision for investment impairment and part of the provision for trust claims be withdrawn, which was part of the surplus funds from establishment.
The decision is based on audit recommendation to comply with International Financial Reporting Standards and verification conducted by the consultants followed by a formal Board resolution.

Other significant matters – Fiji Public Trustee Corporation Limited – 2017 Absence of Business Continuity and Disaster Recovery Plans It is a best practice to have a Business Continuity and Disaster Recovery Plan.

The Corporation does not have a documented business continuity and disaster recovery plan in place.
The Corporation advised that the development of Business Continuity and Disaster Recovery Plans were work in progress.

Absence of Internal Audit Function The audit noted that the Corporation does not have an internal audit function although Finance Manual requires that internal audits and checks are done on a monthly basis.

The Corporation advised that the formulating a Risk Governance Framework was in process which will also cover the internal audit function if applicable.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 21 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.4 Unit Trust of Fiji (Management) Limited Financial Information - 2016 The audit of Unit Trust of Fiji (Management) Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of Unit Trust of Fiji (Management) Limited for the financial year 2016.
Unit Trust of Fiji (Management) Limited - Abridged Statement of Financial Performance Year Ended 31 December Operating Revenue Other Operating Income Total Operating Revenue Personnel Expenses Other Operating Expenses Depreciation and Amortization Total Operating Expenditure Profit before Income Tax Income tax expenses Net profit for the year 2016 ($) 2,145,032 78,669 2,223,701 582,110 823,190 78,827 1,484,127 739,574 154,071 585,503 2015 ($) 1,832,749 57,891 1,890,640 518,815 681,741 87,823 1,288,379 602,261 130,819 471,442 UTOF recorded a net profit of $585,503 in 2016, an increase of $114,061 or 24% compared to 2015.
The increase in net profit was mainly due to the increase in management fee which is based on the total value of the Unit Trust of Fiji deposited property.

As at 31 December 2016, the company was entitled to 1.5% of the total deposited property.
Unit Trust of Fiji (Management) Limited - Abridged Statement of Financial Position As at 31 December Cash at Bank and on Hand Investment – Held to Maturity Receivables Future Income Tax Benefit Plant and Equipment Intangible Assets Total Assets Creditors and Accruals Provisions Income Tax Payable Deferred Tax Liability Total Liabilities Net Assets 2016 ($) 2015 ($) 59,045 282,899 1,726 209,788 --- 1,820,141 1,730,290 59,045 180,807 --- 244,892 41 2,373,599 2,215,075 308,251 79,501 60,410 1,655 449,817 1,983,378 1,765,258 274,643 85,977 29,601 --- 390,221 Net assets increased by $218,120 or 12% in 2016.
This was mainly due to increases in holding of cash at bank by $89,851 or 5% and receivables by $102,092 or 56% in 2016.

The increase in cash at bank and receivable was mainly due to increase in management fees.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 22 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Unit Trust of Fiji (Management) Limited Financial Information - 2017 The audit of Unit Trust of Fiji (Management) Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of Unit Trust of Fiji (Management) Limited for the financial year 2017.
Unit Trust of Fiji (Management) Limited - Abridged Statement of Financial Performance Year Ended 31 December Operating Revenue Other Operating Income Total Operating Revenue Personnel Expenses Other Operating Expenses Depreciation and Amortization Total Operating Expenditure Profit before Income Tax Income tax expenses Net profit for the year 2017 ($) 2,632,031 45,716 2,677,747 767,966 806,332 75,613 1,649,911 1,027,836 203,503 824,333 2016 ($) 2,145,032 78,669 2,223,701 582,110 823,190 78,827 1,484,127 739,574 154,071 585,503 UTOF recorded a net profit of $824,333 in 2017, an increase of $238,830 or 41% compared to 2015.
The increase in net profit was mainly due to the increase in management fee which is based on the total value of the Unit Trust of Fiji deposited property.

As at 31 December 2017, the company was entitled to 1.5% of the total deposited property.
Unit Trust of Fiji (Management) Limited - Abridged Statement of Financial Position As at 31 December Cash at Bank and on Hand Investment – Held to Maturity Receivables Future Income Tax Benefit Plant and Equipment Intangible Assets Advance to Fiji Wai Limited Total Assets Creditors and Accruals Provisions Income Tax Payable Total Liabilities Net Assets 2017 ($) 2016 ($) 1,311,092 1,820,141 59,045 99,045 282,899 558,002 1,726 3,059 209,788 253,957 --- 7,377 1,239,186 --- 3,471,718 2,373,599 362,343 96,877 204,787 664,007 274,643 85,977 29,601 390,221 2,807,711 1,983,378 The increase in total assets by $1,098,119 in 2017 compared to 2016 was mainly due to the advance given to Fiji Wai Limited.
Unit Trust of Fiji (Management) Limited has 1% share in Fiji Wai Limited.

___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 23 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.5 Copra Millers of Fiji Limited Financial Information - 2016 The audit of Copra Millers of Fiji Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.
However, without qualifying the accounts, attention was drawn on the following matters: • The Company did not have a Risk Management Policy in place.

• The Company did not have a policy for classification of spare parts when purchased.

All spare parts are transferred to property, plant and equipment from inventory upon issue for use.

Presented below is the abridged financial information of Copra Millers of Fiji Limited.
Copra Millers of Fiji Limited - Abridged Statement of Financial Performance As at 31 December Operating Revenue Cost of Goods Sold Gross Profit Other Income Total Gross Profit Selling and Distribution Administrative and Operating Loss from Operations Finance Cost Loss before income tax expenses Income tax expense Net Loss for the year after Income Tax 2016 ($) 2,630,383 (2,475,165) 155,218 130,512 285,730 (94,695) (530,662) (339,627) (20,544) (360,171) (98,672) (458,843) Restated 2015 ($) 3,640,789 (3,317,034) 323,755 207,669 531,424 (126,440) (671,100) (266,116) (20,237) (286,353) 51,600 (234,753) Total operating revenue decreased by a little over $1 million or 28% in 2016 compared to the 2015 financial year.
The decrease was mainly due to the reduction in the sale of oil and coconut meal as a direct result of low copra supply.

Both cost of goods sold and total expenditures decreased in 2016 by $841,869 or 25% and $171,876 or 21% respectively.

The decrease were mainly due to decline in expenditure incurred for salaries & wages, FNPF expenses, Copra Truck expenses, purchases of copra and coconut oil, and factory costs.
The decline in operating revenue resulted in the increase in net deficit by $224,090 or 95% in 2016 compared to 2015.
Copra Millers of Fiji Limited - Abridged Statement of Financial Position As at 31 December Cash and term deposit Trade & other receivables Inventories 2016 ($) 66,965 124,321 375,216 Re-stated 2015 ($) 289,143 252,103 325,566 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 24 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI As at 31 December Property, plant & equipment – noncurrent Other non–current assets Total Assets Trade and other payables Interest bearing borrowing Other non-current liabilities Deferred Grant income - non-current assets Total Liabilities Net Assets 2016 ($) 6,134,699 127,536 6,828,737 311,672 589,101 2,073 834,161 1,737,007 5,091,730 Re-stated 2015 ($) 5,479,680 226,207 6,572,699 84,976 198,677 3,453 735,020 1,022,126 5,550,573 Total assets increased by $256,038 or 4% in 2016 compared to the 2015 financial year.
The increase in total assets resulted mainly from the increase in property, plant and equipment.

The Company constructed a plant for Virgin Coconut Oil during the 2016 financial year.

Total liabilities increased by $714,881 or 70% in 2016 compared to the 2015 financial year.

The increase in total liabilities was a result of the increase in trade and other payables, interest bearing borrowing and deferred grant income.
The Company took additional loans during the financial year and received capital grant for its Virgin Coconut Oil Project.

Other significant matters – Copra Millers of Fiji Limited - 2016 Absence of risk management policy A risk management policy statement expresses an organization’s commitment to risk management and clarifies its general direction or intention.
Although the company had disclosed in the financial statements that its activities expose it to a various financial risks, the audit noted that it did not have a risk management policy in place.

This contradicted the financial risk management disclosures made by the company in the 2016 financial statements.

While the company agreed with the audit finding, it argued that the management addresses the risks in staff and board meetings.
Financial Information - 2017 The audit of the financial statements of Copra Millers of Fiji Limited for the year ended 31 December 2017 resulted in an unqualified audit opinion.

Presented below is the abridged financial information of Copra Millers of Fiji Limited.
Copra Millers of Fiji Limited - Abridged Statement of Financial Performance Description Operating Revenue Cost of goods sold Gross Profit Proceeds from Insurance 2017 ($) 2,898,684 (2,348,304) 550,380 29,350 2016 ($) 2,630,383 (2,475,165) 155,218 --- ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 25 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Description Other income Selling & distribution Administrative & operating Loss from operations Finance Cost Loss before income tax expense Income tax credit/(expense) Loss after income tax expense Total comprehensive loss for the year 2017 ($) 103,918 683,648 148,543 686,049 (150,944) (46,980) (197,924) 35,631 (162,293) (162,293) 2016 ($) 130,512 285,730 94,695 530,663 (339,628) (20,544) (360,172) (98,673) (458,845) (458,845) The Company’s net loss decreased by $296,552 or 65% in 2017 compared to the amount reported in 2016.
This was mainly due to increase in operating revenue which increased by $268,301 or by 10% in 2017.

This increase was due to increase in overseas sales and coconut meal which improved in 2017 compared to 2016.
Copra Millers of Fiji Limited - Abridged Statement of Financial Position Description 2017 ($) 2016 ($) Assets Cash on hand and at bank 10,609 Trade and other receivables 308,302 310,962 Inventories 6,091,511 Property, plant and equipment Deferred tax asset 163,167 Total Assets 6,884,551 Liabilities Trade and other payables Interest bearing debt Deferred grant income Copra price stabilization fund – Ministry of Economy Total Liabilities Net Assets 146,054 848,834 907,976 52,250 1,955,114 4,929,437 66,965 187,680 375,216 6,071,340 127,536 6,828,737 311,672 589,101 834,161 2,073 1,737,007 5,091,730 Net assets decreased by $162,293 or 3% in 2017 compared to 2016.
This was mainly attributed to increase in interest bearing debt which increased by $259,733 in 2017 due to the new loan taken for mill upgrade and construction of coconut shed.

Other significant matters – Copra Millers of Fiji Limited - 2017 Exceeding of Bank Overdraft Limit The Company has a bank overdraft limit of $125,000 with the Bank of South Pacific.

The company has exceeded its bank overdraft limit for the Suva account on various occasions during the year.
The findings indicate that the company is unable to generate sufficient cash to meet its operating expenditure.

___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 26 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The company agreed with the audit finding.
It was further stated that the cash flow issue would be resolved as CMFL is now receiving $500,000 as operating grant from government.

The company has made arrangement to increase overdraft limit from $250,000 to $400,000 in view of more local sales with payment terms of 30 days.

Lack of supporting documents for other receivables Supporting documents for clearing account number 1-1131 amounting to $12,246, disclosed as other receivables in the financial statements were not provided for audit verification.
The company agreed with the audit finding and assured that it would maintain all records for future verification and correspondence.

Inventory obsolescence The company did not take any actions to identify obsolete spare part inventory during the period.

In addition, the company did not maintain an aged inventory listing for spare parts.

The company agreed to prepare the aged listing of the spare parts as recommended.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 27 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.6 Fiji Development Bank Financial Information - 2016 The audit of Fiji Development Bank for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of Fiji Development Bank.
Fiji Development Bank - Abridged Statement of Financial Performance For the year ended 30 June Consolidated The Bank 2016 ($) 2015 ($) 2016 ($) 2015 ($) Income Interest from Loans Fees Other Income Total Income Expenses Interest and Other Borrowings Expenses Operating Expenses Total Expenses 23,854,646 24,241,576 23,854,646 24,241,082 3,280,088 3,702,170 34,698,189 31,249,730 34,697,365 31,223,340 3,280,088 3,728,066 3,576,481 7,266,238 3,576,481 7,267,062 5,376,158 6,525,024 5,376,158 12,291,253 11,980,752 12,289,081 11,904,075 18,816,277 17,356,910 18,814,105 17,280,233 6,525,024 Operating profit before allowances 15,881,912 13,892,820 15,883,260 13,943,107 Allowances for Credit Impairment Allowance for Interest and Fees 6,929,397 1,648,571 5,815,476 1,987,725 6,929,397 1,648,571 5,815,476 1,987,725 Operating profit before income tax expense Income Tax Expense Other Comprehensive Income Operating profit after income tax 7,303,944 6,089,619 7,305,292 6,139,906 --- 2,513,217 9,817,161 --- --- 6,089,619 --- 2,513,217 9,818,509 --- --- 6,139,906 The Bank’s consolidated operating profit after tax for the year ended 30 June 2016 increased by $3,727,542 or by 61%.
The increase was mainly attributed by the recovery of bad debts totaling $3,593,159 in 2016.
Fiji Development Bank - Abridged Statement of Financial Position As at 30 June Assets Cash and Cash Equivalents Loans and Advances Investment in Subsidiary Investments Investment Held to Maturity Property, Plant and Equipment Intangibles Other Debtors Receivable due from Subsidiary Total Assets Consolidated The Bank 2016 ($) 2015 ($) 2016 ($) 2015 ($) 56,566,428 294,844,851 --- 15,001 2,030,650 17,795,839 211,438 3,440,924 --- 374,905,131 49,596,669 291,628,618 --- 15,001 2,029,850 16,011,849 45,949 2,504,217 --- 361,832,153 56,549,281 294,844,851 20,000 15,001 2,000,000 17,795,839 211,438 3,065,409 404,820 374,906,639 49,579,398 291,628,618 20,000 15,001 2,000,000 16,011,849 45,949 2,127,543 401,359 361,829,717 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 28 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI As at 30 June Consolidated The Bank 2016 ($) 2015 ($) 2016 ($) 2015 ($) Liabilities Accounts Payable and Accruals Debt Securities Other Liabilities Employee Entitlements Deferred Income Total Liabilities Net Assets 3,037,338 220,918,643 4,656,379 1,471,177 2,415,103 232,498,640 142,406,491 2,124,833 217,818,631 5,474,755 1,810,117 2,014,487 229,242,823 132,589,330 3,032,339 220,918,643 4,656,379 1,471,177 2,415,103 232,493,641 142,412,998 2,117,238 217,818,631 5,474,755 1,810,117 2,014,487 229,235,228 132,594,489 The Bank’s net consolidated assets increased by $9,817,161 or by 7% in 2016 compared to 2015.
The increase was mostly attributable to increase in holding of cash at bank and cash equivalent in 2016, which increased by $6,969,759.

Other significant matters – Fiji Development Bank - 2016 Revaluation of Property During the 2016 financial year, there was one instance where the assumption by the Bank’s valuer was that the land lease for the Nadi Property would be extended, and as a result a revaluation gain was recorded.
However, at year end, the lease was not extended, and an impairment loss of $494,782 was recognised.

The Bank noted the audit recommendation and further stated that the Bank will be mindful of the remaining lease term when taking up any future revaluations.
Security margin percentages being utilized deferring from the Bank’s Lending manual Our review of the loan files noted instances whereby the shares of a Company other than Fijian Holdings Limited and Unit Trust of Fiji were assigned a security margin of 80%.

The bank may be exposed to inadequate security risk in the above case, if the account becomes non-performing.
The bank agreed with the audit recommendation to comply with the loan security requirements in the bank’s Lending Manual and reassess and update the security margin guidance in the manual to reflect the current market, if considered appropriate.

Financial Information - 2017 The audit of Fiji Development Bank for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of Fiji Development Bank.
Fiji Development Bank - Abridged Statement of Comprehensive Income For the year ended 30 June Consolidated The Bank Income Interest from Loans 2017 ($) 2016 ($) 2017 ($) 2016 ($) 25,369,427 23,854,646 25,369,427 23,854,646 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 29 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI For the year ended 30 June Consolidated The Bank Fees Other Income Total Income and Other Expenses Interest Expenses Operating Expenses Total Expenses 2017 ($) 3,801,367 2,763,885 31,934,679 34,698,189 31,933,438 34,697,365 2017 ($) 3,801,367 2,762,644 2016 ($) 3,576,481 7,267,062 3,576,481 7,266,238 2016 ($) Borrowings 7,411,560 6,525,024 7,411,560 6,525,024 12,364,041 12,291,253 12,363,319 12,289,081 19,775,601 18,816,277 19,774,879 18,814,105 Operating profit before allowances 12,159,078 15,881,912 12,158,559 15,883,260 Allowances for Credit Impairment Allowance for Interest and Fees 1,772,938 2,230,872 6,929,397 1,648,571 1,772,938 2,230,872 6,929,397 1,648,571 Operating profit before income tax expense Income Tax Expense Other Comprehensive Income Operating profit after income tax 8,155,268 7,303,944 8,154,749 7,305,292 --- --- --- 2,513,217 9,817,161 8,155,268 --- --- --- 2,513,217 9,818,509 8,154,749 The Bank’s consolidated operating profit before tax for the year ended 30 June 2017 increased by $851,324 or by 12%.
The increase was mostly attributable to decline in allowances for credit impairment by $5,156,459 or 74%.

This was mostly because lesser accounts was considered to be impaired in 2017 compared to 2016.
Fiji Development Bank - Abridged Statement of Financial Position As at 30 June Assets Cash and Cash Equivalents Loans and Advances Investment in Subsidiary Investments Investment Held to Maturity Property, Plant and Equipment Intangibles Other Debtors Receivable due from Subsidiary Total Assets Liabilities Accounts Payable and Accruals Debt Securities Other Liabilities Employee Entitlements Deferred Income Total Liabilities Net Assets Equity Capital Reserves Consolidated The Bank 2017 ($) 2016 ($) 2017 ($) 2016 ($) 24,566,853 56,566,428 24,549,882 56,549,281 354,820,471 294,844,851 354,820,471 294,844,851 20,000 15,001 2,000,000 17,795,839 211,438 3,065,409 404,820 402,059,256 374,905,131 402,060,157 374,906,639 20,000 15,001 2,000,000 17,637,904 180,567 2,431,512 404,820 ---- 15,001 2,032,397 17,637,904 180,567 2,806,063 --- --- 15,001 2,030,650 17,795,839 211,438 3,440,924 --- ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 30 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI As at 30 June Consolidated The Bank Accumulated Fund Total Equity 2017 ($) 79,462,615 2016 ($) 71,307,347 2017 ($) 79,468,603 71,313,854 150,561,759 142,406,491 150,567,747 142,412,998 2016 ($) The Bank’s net consolidated assets increased by $8,155,268 or 5.7% in 2017 compared to 2016.
The increase was mostly attributable to increase in loans and advances which increased significantly by $60 million or by 20% in 2017.

Other significant matters – Fiji Development Bank - 2017 Inconsistency of loan data recorded in Bank Management System (BMS) We noted from the testing of new loans that there were instances whereby details as per the loan contract did not match the details loaded in the BMS system.
Our enquiries with management and review of the loan files did not note variation letters for the anomalies.

The above issue has a pervasive effect on loan accounts and diminishes the accuracy of data which the management relies on to compute interest calculations, arrears, loan grading, suspension of interest and provisions.

It may undermine any economic decision made by management based on incorrect loan data.
The bank explained that prior to October 2016, all Loans Officers and Administration Officers were allowed to do data entry on BMS irrespective of which Centre/Branch they were based in.

This resulted in a number of data entry discrepancies.

A new unit namely the Credit Administration Unit was then set up to centralize the data entry and documentation process and to eliminate such data entry discrepancies.

This unit was set up in October 2016 and has been in operation for around 9 months.
The Bank is also looking at streamlining its processes to assist the unit in performing data validation at entry level thus enhancing data integrity.

Loan account reviews not conducted in conformity with lending policy requirements The Lending policy of the Bank specifically outlines the requirements and frequency of conducting loan account reviews.

However, we noted from review of loan accounts that the credit reviews of the respective loans were outdated and not reviewed in conformity to the policy.
Loan reviews not done result in latest client information not being used to assess the client recoverability of its debts, which will impact the grading and calculating of suspense interest.

The bank informed us that the respective Centre Managers would be reminded of their responsibility to ensure that timely loan reviews are carried out as part of loan management and supervision.
Lack of issue of variation advices Our testing of restructured loans noted that in 10 instances out of 40 samples tested, variation advices were not sent to the respective customers however, BMS had been updated for the variation at the date of testing.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 31 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI In the absences of a formal variation letter with the customer may open up the Bank to dispute if the customer does not agree with the variation that has been made to the account.

The bank concurred that this is in breach of loan policy and procedure.
The bank informed that the management is going to enforce this important issue as this forms part of the loan contract.

Centre Managers are responsible for this and is part of Branch portfolio management, and monitored by their respective Regional Managers.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 32 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.7 FDB Nominees Limited Financial Information - 2016 The audit of FDB Nominees Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of FDB Nominees Limited.
FDB Nominees Limited - Abridged Statement of Financial Performance For the year ended 30 June Interest from Loans Total Income Operating expenses Total Expenses Operating (loss)/profit before provisions Operating (loss)/profit before income tax Income tax expense Operating loss after income tax 2016 ($) 824 824 2,171 2,171 (1,347) (1,347) --- (1,347) 2015 ($) 494 494 76,677 76,677 (76,183) (76,183) --- (76,183) The Company recorded operating loss after tax of $1,347 for 2016 compared to a loss of $76,183 in 2015.
The decline in loss was the result of nil employee cost in 2016 compared to $68,273 in 2015.
FDB Nominees Limited - Abridged Statement of Financial Position For the year ended 30 June Cash Accounts receivable Held to maturity investment Other receivable Deferred tax asset Total Assets Amount owing to FDB Other current liabilities Total Liabilities Net Assets 2016 ($) 17,147 373,750 30,650 547 1,218 423,312 402,305 7,513 409,818 13,494 2015 ($) 17,271 373,750 29,850 522 2,402 423,795 392,245 16,709 408,954 14,841 The Company recorded a decrease in the net assets by $1,347 or 9% in 2016.
The slight decrease in net asset was due to the increase in the amount owed to Fiji Development Bank.

Financial Information - 2017 The audit of FDB Nominees Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.

However, attention was drawn to the statement of Financial Position and in the notes to the financial statements shows receivable amounting to $373,750 which relates to management fees due from Fiji Investment Corporation Limited (FICL).
The Management of FICL is currently undertaking due diligence on FDBNL’s operation to substantiate their claims.

Presented below is the abridged financial information of FDB Nominees Limited.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 33 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI FDB Nominees Limited - Abridged Statement of Financial Performance For the year ended 30 June Interest income Total Income Operating expenses Total Expenses Operating profit/(loss) before income tax Income tax expense Operating profit/(loss) after income tax 2017 ($) 1,241 1,241 721 721 520 --- 520 2016 ($) 824 824 2,171 2,171 (1,347) --- (1,347) The Company recorded operating profit for 2017 compared to operating loss of $1,347 in 2016.
The operating profit was due to increase in interest income in 2017 which increased by $417 in 2017 compared to 2016.
FDB Nominees Limited - Abridged Statement of Financial Position For the year ended 30 June Cash Accounts receivable Held to maturity investment Other receivable Deferred tax asset Total Assets Amount owing to FDB Other current liabilities Total Liabilities Net Assets 2017 ($) 16,971 373,750 32,397 40 761 423,919 404,819 5,086 409,905 14,014 2016 ($) 17,147 373,750 30,650 547 1,218 423,312 402,305 7,513 409,818 13,494 The Company recorded an increase in net assets which increase by $520 or by 4% in 2017.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 34 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.8 Housing Authority of Fiji Financial Information - 2016 The audit of Housing Authority of Fiji for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of Housing Authority of Fiji.
Housing Authority of Fiji - Abridged Statement of Financial Performance Year Ended 31 December Interest Income Interest Expense Net Interest Income Other Operating Income Total Revenue Staff Costs Bad & Doubtful Debts Depreciation of Property, Plant and Equipment Amortisation of Intangible Asset Cost of Sales Other Operating Expenses Total Expenditure Total Comprehensive Income for the year after Tax 2016 ($)’000 2015 ($)’000 7,259 (4,562) 2,697 18,685 21,382 4,620 790 520 260 11,262 2,457 19,909 1,473 7,640 (4,644) 2,996 24,755 27,751 4,829 40 607 244 17,169 2,628 25,517 2,234 The total comprehensive income after tax decreased by $761,000 or 34.1% in 2016 compared to 2015 which was largely attributed by decrease in interest income.
Housing Authority of Fiji - Abridged Statement of Financial Position As at 31 December Cash & Cash Equivalents Loans and Advances Inventories Land held for future development Property, Plant & Equipment Investment Property Other Assets Held to maturity investments Intangible Assets Total Assets Borrowings Trade and other Payables Employee Benefit Liability Provisions Total Liabilities Net Assets 2016 ($)’000 2015 ($)’000 2,323 86,173 31,019 3,755 7,515 --- 4,286 41,950 406 177,427 102,055 16,928 511 25 119,519 57,908 3,170 79,745 36,008 2,022 7,909 994 4,673 49,450 663 184,634 112,184 15,290 546 179 128,199 56,435 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 35 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The Authority’s net asset increased by $1,473,000 or 2.6% in 2016 compared to 2015.
The increase in net assets was largely attributed by increase in land held for future development and decrease in total liabilities.

Other significant matters – Housing Authority of Fiji - 2016 Methodology of calculating impairment of loans and advances The Authority has made specific and collective provision for doubtful debts taking into account the risk of non-recovery of each category of accounts.
Provision is calculated based on the shortfall between the security value for an account in arrears and the loan balance after deducting any suspended interest.

The age of arrears determine the level of provisioning against the shortfall in security value and the carrying amount after adjusting for suspended interest.
While the method is in accordance with Reserve Bank of Fiji guidelines, the method is inconsistent with International Financial Reporting Standards, the framework on which the financial statements are prepared.

The current practice of the Authority in calculating provision for doubtful debts is not in accordance with International Accounting Standard 39 (IAS 39), Financial Instruments: Recognition and Measurement.
The Authority noted the audit finding and agreed to review its policy in accordance with statutory requirements and compliance.

Review of risk grading and annual provisioning The loan provisioning is based entirely on arrears Days Past Due (“DPD”) of the loan account.

Even though DPD calculations are correct, the Authority is in breach of part 5 of its Credit Management Policy, which states that "...at least 60% by value of all loans and advances will be assessed on an annual basis.
All significant loan accounts should be assessed individually, at least annually."

The Authority agreed to implement an ‘ACCOUNT REVIEW CHECKLIST’ to be filled and placed in customer files when the Account Collectors review each account.

Also, a target would be set to review 60% or more accounts by value of all.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 36 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.9 Fiji Broadcasting Corporation Limited Financial Information - 2016 The audit of Fiji Broadcasting Corporation Limited for the financial year 2016 resulted in the issue of modified opinion (qualified) audit opinion.
The qualification issue was related to the following: The company accounted for all government grants received from 1 January 2016 to 7 March 2016 as a capital contribution.

This is a departure from IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” which requires government grants provided to compensate the Company for expenses incurred to be recognized in profit or loss as other income on a systematic basis in the same period that the expenses are recognized.
The Company’s records indicate that, had the Company complied with IAS 20 the impact would be to increase other income by $2,075,785 and reduce capital contribution by $2,075,785 for the current year and increase retained earnings by $16,413,911 and reduce capital contribution by $16,413,911 for prior years.

Presented below is the abridged financial information of Fiji Broadcasting Corporation Limited.
Fiji Broadcasting Corporation Limited- Abridged Statement of Financial Performance Items Income from Advertising, Programs and Special Events Other Income Total Income Administration and Other Operating Expenses Marketing Expenses Finance Costs Total Expenditure Operating profit/(loss) before income tax Income tax expense Net Profit/(loss) for the year after income tax 2016 ($) 2015 ($) 19,202,108 418,925 19,621,033 12,272,541 2,163,728 921,995 15,358,264 4,262,769 --- 4,262,769 8,174,598 359,479 8,534,077 10,101,865 777,685 1,016,285 11,895,835 (3,361,758) --- (3,361,758) The corporation made a net profit of $4,262,769 in 2016 compared to a net loss in 2015.
The profit was due to recognition of public service B=broadcast revenue of $9,201,615 recorded in 2016 compared to nil in 2015.

This relates to Government assistance to the corporation to provide broadcasting services to the public which is not charged by the corporation.
Fiji Broadcasting Corporation Limited- Abridged Statement of Financial Position As at 31 December Cash and Cash Equivalent Trade and Other Receivables Held to Maturity Investment Other Current Assets Property, Plant & Equipment Total Assets Trade & Other Payable Interest Bearing Borrowings 2016 ($) 6,205,105 1,836,608 360,606 694,191 17,938,361 27,034,871 2,383,751 1,966,321 Restated 2015 ($) 866,072 1,759,363 355,815 727,127 17,428,331 21,136,708 1,010,139 1,817,005 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 37 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI As at 31 December Other Current Liabilities Interest Bearing Borrowings Deferred Income Deferred Tax Liability Total Liabilities Net Assets 2016 ($) 167,151 13,792,862 19,032 835,303 19,164,420 7,870,451 Restated 2015 ($) 138,603 15,764,729 39,032 835,303 19,604,811 1,531,897 The corporation’s net assets increased by $6,338,554 or 413.7% in 2016 compared to 2015.
The increase was mainly due to the increase in cash and cash equivalent by $5,339,033 or by 616.46% in 2016 compared to 2015.

This was mainly attributable to special funding received from the Government of $9,201,615 for public service broadcast.

Other significant matters – Fiji Broadcasting Corporation Limited - 2016 Absence of a risk register It is imperative that a risk register is maintained by the Corporation to list all the risk that is identified.
This can assist management in mitigating those risks.

However, the Corporation does not maintain a risk register.

The company agreed to maintain a risk register.

Financial Information - 2017 The audit of Fiji Broadcasting Corporation Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.
However, attention was drawn to Note 3(l) of the financial statements which states that grants and/or special funding from Government up to 7 March 2016 were treated as capital contribution in accordance with Cabinet Decision No.

357 of 2012.

Presented below is the abridged financial information of Fiji Broadcasting Corporation Limited.
Fiji Broadcasting Corporation Limited- Abridged Statement of Financial Performance Description Operating revenue Other revenue Total Revenue Administrative and Operating Expenses Marketing Expenses Finance costs Total Expenditure Profit before income tax Income tax expense Profit after income tax 2017 ($) 2016 ($) 1,074,153 22,332,621 19,202,108 418,925 23,406,774 19,621,033 13,120,352 12,272,541 2,534,853 817,450 2,163,728 921,995 16,472,655 15,358,264 4,262,769 180,147 4,082,622 6,934,119 183,611 6,750,508 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 38 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The increase in net profit after income tax by $2.7 million or 65% in 2017 compared to 2016 was largely due to increase in government grant for public service broadcast by $2.1 million.
There was also increases in advertising revenue from radio and television.

Other income increased by $655,228 which was largely due to the insurance proceeds for towers destroyed by Tropical Cyclone Winston and sale of towers to Telecommunication Fiji Ltd in 2017.
Fiji Broadcasting Corporation Limited- Abridged Statement of Financial Position Description Cash and cash equivalent Trade and other receivable Held to maturity term deposit Other current assets Property, plant and equipment Deferred tax asset Total Assets Trade and other payable Interest bearing borrowings Other current liabilities Deferred tax liabilities Deferred income Total Liabilities Net Assets 2017 ($) 5,486,265 95,893 436,961 29,241,863 35,260,982 2016 ($) 6,776,564 77,585 156,222 28,424,228 35,434,599 31,659,759 27,068,266 1,973,254 13,827,603 162,711 546,627 19,032 16,529,227 15,130,532 2,383,751 15,759,183 167,151 546,627 19,032 22,717,336 8,380,024 Net assets decreased by $6.7 million or 80% in 2017 compared to 2016 mainly due to the increase in held to maturity investments by $2 million, increase in cash at bank by $2.7 million and decline in interest bearing borrowing by $1.9 million.
Other significant matters – Fiji Broadcasting Corporation Limited - 2017 Incorrect Capitalisation of Work In Progress Items Included in the Fixed Assets Register (FAR) were various capital expenditures that were effectively work-in-progress at year-end.

Electrical works on the Outside Broadcast Van were still underway at balance date.

However, cost of the van, associated design and equipment costs, and freight charges were capitalized as motor vehicle and plant and equipment respectively.
Depreciation on some of the items commenced from the date payment was made, although the Outside Broadcast Van as a unit was not in its required condition to be used at balance date.

According to International Accounting Standard 16: Property, Plant and Equipment, "depreciation of an asset begins when it is available for use, i.e.

when it is in the location and condition necessary for it to be capable of operating in the manner intended by management".
The company agreed to review the Fixed Asset Register (FAR) and reflect changes in the financial statements of the current (2018) financial year.

___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 39 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Inadequate provision for doubtful debts At year-end, receivable from a debtor amounting to $23,981 was deemed doubtful.
From the total balance, $17,207 related to interest accumulated on outstanding balance.

FBCL recorded only the initial invoice value as doubtful which totaled $6,774.

This resulted in understatement of provision for doubtful debts by $17,207 The company agreed to include provisions on interest accumulated in the 2018 financial reports.

Incorrect treatment of staff receivables Included in trade and other receivables were negative staff debtors of $10,864.
The negative balance originated from incorrect entries processed in the general ledger to record staff debtors and deductions.

The company agreed to review staff debtor’s account and make necessary adjustments in 2018 financial reports.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 40 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.10 Post Fiji Limited Financial Information - 2016 The audit of Post Fiji Limited for the financial year 2016 resulted in the issue of unmodified (unqualified) audit opinion.

Presented below is the abridged financial information of Post Fiji Limited for the financial year 2016.
Post Fiji Limited - Abridged Statement of Financial Performance Description 2016 ($) 2015 ($) Sales Revenue Postage, Stamp and Other sales Rental – Postal box and Bag Agency Commission and Other Services Other Operating Revenue Finance Income Total Income Cost of Sales Depreciation and Amortization Expenses Employee Benefits Expense Administration and Operating Expenses Selling, Marketing and Distribution Expenses Other Operating Expenses Total Expenditure Operating profit/ (loss) before income tax Income Tax Expense Net Loss/(profit) for the year after Income Tax (857,215) 121,452 (735,763) The Company recorded a net loss after income tax of $735,763 in 2016 compared to a net profit of $1,638,923 in 2015, a change of $2,374,686 or 144%.
The net loss after income tax was largely due to an increase in administration and operating expenses which was the result of an increase in doubtful debts by $2,728,393 in 2016.
Post Fiji Limited - Abridged Statement of Financial Position Description Cash and Cash Equivalent Trade and Other Receivables Other Current Assets Property, Plant & Equipment Other Non-Current Asset Total Assets Trade and Other Payable Other Current Liabilities Trade and Other Payables Other Non-Current Liabilities Total Liabilities Net Assets 9,735,509 2,408,012 2015 2016 ($) ($) 2,810,074 4,875,508 9,009,851 10,826,485 12,272,906 10,335,871 9,532,789 2,115,938 36,236,352 37,686,591 17,583,757 18,086,256 992,553 2,951,592 1,338,255 22,654,180 23,368,656 13,582,172 14,317,935 826,080 2,991,569 1,252,774 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 41 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Net assets decreased by $735,763 or 5% in 2016 compared to 2015.
The decrease is mainly attributable to significant decline in trade and other receivables which decreased by $1,816,634 in 2016 which was mostly attributable to increase in provision for doubtful debts by $$2,728,393.

Other significant matters – Post Fiji Limited - 2016 Absence of risk management policy A risk management policy statement expresses an organization’s commitment to risk management and clarifies its general direction or intention.
We noted that the Company does not have a risk management policy in place.

The Company agreed to incorporate the risk management policy into the Finance Manual.

Internal audit From our review of the work of the internal audit function in the company, it was noted that there was no internal audit carried out to review the effectiveness of the internal controls, systems and processes of the company in 2016.
The Company agreed to ensure that the internal audit work should also include looking at the effectiveness of internal controls.

Assessment for Impairment on property, plant and equipment not carried out The company did not carry out an assessment for impairment for its property, plant and equipment.

There were some assets which were damaged during Tropical Cyclone Winston and by fire but were not subject to impairment assessment.
The Company agreed and noted the audit recommendation regarding the impairment of assets.

Anomalies noted in the procurement process In 2016 three new overseas suppliers were engaged by Post Fiji Limited for the supply of stationeries.
Our review of the overseas purchases noted the following: • Although purchases from the suppliers were over $100,000, agreements or contracts were not drawn between the company and the suppliers; • No documentary evidence was provided to audit to substantiate how these suppliers were selected; and • Advance payments were made to these suppliers amounted to $901,636.77 (FJD).

The company explained that most stationery stock items were procured from a major local supplier for years.
As part of its overall strategy and to improve profitability and competitiveness, the company undertook the initiative to identify overseas suppliers for stationery at much lower prices.

However, the company agreed to manage the risks associated with procurements without contract and advance payments.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 42 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Anomalies in staff advances Cash advance to staffs are normally for short term period and are generally paid in an accounting period.

In most cases this is paid through salary deductions.
Our review of staff advances noted the following: • • • • There has been no movement in the staff advance – salary account of $40,384.92 from prior year; Staff advance account reconciliations were not provided; Listing of the staff advance – salary account was not provided; and There was no documented policy on staff advance.

The company agreed with the audit recommendation to perform monthly reconciliation and maintain an updated staff advance listing.
Financial Information - 2017 The audit of Post Fiji Limited for the financial year 2017 resulted in the issue of unmodified (unqualified) audit opinion.

However, attention was drawn to the following matter: There are lack of documented policies and standard operating procedures in place which can lead to inconsistencies in practices by employees thus providing the opportunity for fraud.

Presented below is the abridged financial information of Post Fiji Limited for the financial year 2017.
Post Fiji Limited - Abridged Statement of Financial Performance Description Revenue Postage, Stamp and Other Sales Rental – Postal Box and Bag Agency Commission and Other Services Other Operating Revenue Finance Income Total Income Cost of Sales Depreciation and Amortization Expense Employee Benefits Expenses Administration and Operation Expenses Selling, Marketing and Distribution Expenses Other Operating Expenses Total Expenditure Profit/ (loss) from Operations Income Tax Expenses Profit/(loss) for the Year after Income Tax 2017 ($) 8,971,892 4,430,446 2,257,419 9,178,792 1,850,098 329,198 27,017,845 6,862,860 1,181,176 7,949,757 10,216,578 141,484 17,957 26,369,812 648,033 (172,389) 475,644 Restated 2016 ($) 7,594,582 4,450,375 2,231,045 10,352,731 2,024,414 301,036 26,954,183 5,938,471 1,090,191 8,008,874 12,762,334 119,218 15,913 27,935,001 (980,818) 137,912 (842,906) The Company recorded a net profit of $475,644 in 2017 compared to a net loss of $842,906 in 2016.
This was mainly attributed to the decrease in administration and operating expenses by $2,545,756 (19%) and increase in sales revenue by $1,377,310 (18%).
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 43 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Post Fiji Limited - Abridged Statement of Financial Position Description Cash and Cash Equivalents Trade and Other Receivables Financial Assets – Held to Maturity Inventories Other Assets Property, Plant and Equipment Intangible Assets Deferred Tax Assets Total Assets Trade and Other Payables Employee Entitlements Deferred Income Finance Lease – Postal Global Current Tax Liability Total Liabilities Net Assets 2017 ($) 2,503,582 9,851,379 4,723,604 6,439,585 473,741 9,487,528 605,793 2,102,550 36,187,762 19,899,559 1,624,002 708,332 417,624 283,276 22,932,793 13,254,969 Restated 2016 ($) 2,741,702 9,009,851 5,271,187 5,640,000 1,246,452 9,735,509 837,994 2,098,846 36,581,541 20,785,326 1,428,768 735,106 607,375 245,641 23,802,216 12,779,325 Net assets increased by $475,644 or 4% in 2017 compared to 2016.
This was mainly due to the decrease in trade and other payables by $885,767 (4%) and finance lease – postal global by $189,751 (31%).

Other significant matters – Post Fiji Limited - 2017 Absence of Policy and Guidelines Although employees are aware of the practices of carrying out their particular tasks, these processes and procedures of accounting and operations are not documented.

In addition, the Company does not have policies to govern some aspects of its operations and activities.
For example, debt recovery policy, investment policy, risk management policy and disaster recovery plan for postal offices and agencies.

The company agreed with audit recommendation to establish policies and document the processes and procedures for accounting and operations.

Outdated Corporate Instructions Manual The Company’s corporate instructions manual was developed in 1998 and was last revised in 2003.
Consequently, numerous policies, processes and procedures applied currently including amendments to leave entitlements and payment of allowances are not updated in the existing manual.

The company agreed with audit recommendation to review and update the Corporate Instructions Manual.

Absence of Evidence to Confirm Approval of the 2017 Budget by the Board There was no evidence to indicate that the 2017 budget was deliberated and approved by the Board.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 44 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI The company agreed with the recommendation that the annual budgets should be submitted for the Board’s deliberation and endorsement, which should be documented.
Significant Long Outstanding Local Debtors A balance of $754,012.49 or 25% of the total local debtors was long outstanding or 90 days old and over, out of which 20% or $147,721.43 was provided for doubtful debts.

Management was in the process of implementing stringent debt recovery policy where debts will be closely monitored.
Ineffective Controls over Management of Inventory Our review of the inventory account and related records revealed the following anomalies: • Reconciliation were not performed to monitor requests made by the offline stations against their sales to ensure that increases in requests for each item correlates with sales.

Moreover, current stock on hand is not monitored when a request is made from the offline Post Shops.
• The Company did not have documented policy/procedures in place to govern the management of inventories.

For instance, the process to be followed when accounting for offline stores stock requests, cash accounts or monthly stock reconciliation for all stations.

The company indicated that it was in the process of reviewing inventory management controls.
Absence of Valid and Proper Rental Agreements There were no valid and proper agreements in place for crown lease rental and the rental space for the Government Building Post Office.

Accordingly, rent totalling $79,879 for the crown lease and government building post office have not been settled since 2009.

The company indicated that some contracts had expired but rental space still used through mutual agreement.
Absence of Valid and Proper Written Agreements with the Billpay Vendors There were no valid and proper agreements between the Company and the Billpay vendors.

Rights and obligations of the Company and the Vendors are not clearly outlined thus increasing the risk of uncertainty in an event of dispute.

The company stated that in most cases there is continuity of the Bill Pay Services based on mutual agreement.
Back to School Credit not properly managed The Company offers credit facility for “Back to School” (BTS).

As at 31/12/17, the Company recorded a total of $92,898.13 of BTS receivable, and made a provision for doubtful debts of $75,088.45 or 81% of the amount.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 45 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI We noted that proper screening were not done consistently and completely for BTS credit customers.
For instance, forms had incomplete details such as EDP/ FNPF numbers, and fortnightly deductions; no evidence of vetting done by authorised officer; applications were not supported with identification cards; and agreements were not witnessed.

The company does not have documented policies / procedures in place to govern the credit facility offers for BTS.

The company stated that it will pursue further recovery action with individual customers.
Furthermore, management will ensure that proper vetting is done before any credit is approved in future.

Incorrect disclosures of losses and shortages as receivables A number of accounts were incorrectly recorded and classified as receivables in the financial statements, as there were uncertainty that the amount will be received by the Company through insurance claims.
Shortages and losses are subject to the outcome of police investigations and as such contingent assets should have been more appropriate disclosure.

Details of the accounts are provided below.

2017 • Shortage money order - $1,298,795.07 • Shortage cash account - $412,402.12 • • Voter Service Payments - $82,451.55 • GSF Grant – 255,777.11 Losses Post Office’s & Postal Agencies - $1,251,373.85 The company had allocated full provision as there were uncertainty that these funds will be received.
However, the company will reassess and reconsider the audit recommendations to comply with the International Financial Reporting Standards.

No Policy and Guideline for holding of Excess Cash d for Postmasters cash account The Post Offices have been allowed to maintain a certain limit of cash due to nature of operations of the company.

Any excess over the authorised limit should either be banked or transferred to the Headquarters through Remittance between Post Offices (RBPO).
If the Post Offices need to maintain excess cash, approval should be sought from the Headquarters.

The excess limit is approved after taking into consideration the need for a certain level of excess cash.

However, there is no guideline on which approval for holding excess cash is based.

The company agreed to review and update its Corporate Instructions Manual to suit the current business environment.

This will be incorporated with the risk management policy with strict timeline.
Anomalies in Business Engagement with an international mail logistic company Post Fiji Ltd engaged the services of an international mail logistic company that offers cross border solutions for international mail shipments, and ceased the engagement in March 2016.

As at 31 December 2017, the total amount owed to Post Fiji Ltd by the international mail logistics company totalled $9,789,291.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 46 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Our audit revealed the following anomalies: • There was no written agreement between Post Fiji Limited and the international mail logistic company; Approval of Board was not obtained for the use of Post Fiji Limited’s logo by the company; • The company stated that necessary action will be undertaken to recover the outstanding amount through legal action.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 47 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 6.11 Energy Fiji Limited Financial Information – 2016 The audit of Energy Fiji Limited for the financial year 2016 resulted in the issue of unmodified opinion (unqualified) audit opinion.
Presented below is the abridged financial information of Energy Fiji Limited for the financial year 2016.
Energy Fiji Limited - Abridged Statement of Financial Performance Year Ended 31 December Revenue Operating revenue –electricity sales Other operating income Total Revenue Expenditure Personnel expenses Fuel costs Lease and rent expenses Electricity purchases Depreciation Amortisation of intangible assets Other operating expenses Total Expenditure Profit before Finance Costs & Income Tax Finance costs Operating profit before restoration cost and income tax Cyclone restoration costs Profit before income tax Income tax expense Net profit for the year after income tax 2016 ($‘000) 317,835 10,550 328,385 21,723 89,849 12,262 1,620 39,268 112 48,041 212,875 115,510 10,791 104,719 30,066 74,653 15,055 59,598 2015 ($’000) 311,989 9,877 321,866 19,975 140,704 16,894 1,567 37,714 180 48,924 265,958 55,908 10,554 45,354 - 45,354 5,664 39,690 EFL recorded net profit of $59.6 million in 2016, an increase of $19.9 million or 51% compared to 2015.
The increase was mostly attributable to substantial decrease in fuel cost which declined by $50.9 million or 37% in 2015 compared to 2014.
Energy Fiji Limited - Abridged Statement of Financial Position As at 31 December Cash and cash equivalents Held to maturity financial assets Receivables and prepayments Other current assets Property, plant and equipment Other non-current assets Total Assets Interest bearing borrowings Deferred tax liabilities Other current liabilities Other non-current liabilities Total Liabilities Net Assets 2016 $’000 119,466 - 36,459 32,362 1,035,332 157 1,223,776 319,459 45,344 38,410 114,256 517,469 706,307 2015 $’000 57,343 12,468 39,587 29,874 1,030,530 2,009 1,171,811 340,629 40,718 51,753 91,537 524,637 647,174 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 48 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Net assets increased by $59.1 million or 10% in 2016 compared to 2015.
The increase was mostly attributable to increase in holding of cash and cash equivalent of $62.1 million compared to 2015.

Other significant matters – Energy Fiji Limited – 2016 Management of Fuel/Hydro/Windmill Mix EFL uses hydro, thermal and wind power as energy sources for generation of power in the Country.

We were informed by EFL personnel that it makes decision on the generation mix that is economical and sustainable.

This is based on Hydro Dam level, fuel prices and predicted weather forecast.
However, we believes that it is not possible for EFL to determine power generation from various sources.

Hence we were not able to generate the contribution of non-fossil energy to the Authority’s revenue base and how the Authority was able to measure effectiveness of these sources.

In addition, documented procedures were not able to determine how and when the various fuel combinations were used for different scenarios.
The recommendations made were noted by EFL and explained by stating that the mix hydro, thermal and wind power stations is recognized as one of the most complex systems to control because of seasonal nature of water and wind availability.

The dispatch plan is prepared weekly by the FEA System Control Department and send to the Management Team for its decision on the generation mix.

This plan is based on the weather forecast provided by the Meteorological Office.
The aim of the dispatch plan is to minimize spill from any of the reservoirs and to maximize the head in order to maximize energy production.

Internal Audit – Tropical Cyclone Winston Restoration Works It is imperative that Internal Audit team is prepared to take responsibility of reviewing the processes and procedures of any significant unplanned capital and revenue expenditures.

This becomes important because in crisis time there is a high risk of non-compliance with required procurement procedures.
Whilst the scope of internal audit review covers the core business processes of the Authority on a rotational basis, no specific review had been carried out for Tropical Cyclone Winston Restoration works during the year amounting to approximately $31m.

EFL argued that its Internal Audit team was engaged to carry out audits on payroll, stores and stock.
Financial Information - 2017 The audit of Energy Fiji Limited for the financial year 2017 resulted in the issue of unmodified opinion (unqualified) audit opinion.

Presented below is the abridged financial information of Energy Fiji Limited for the financial year 2017.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 49 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Energy Fiji Limited - Abridged Statement of Financial Performance Year Ended 31 December Revenue Operating revenue –electricity sales Other operating income Total Revenue Expenditure Personnel expenses Fuel costs Lease and rent expenses Electricity purchases Depreciation Amortisation of intangible assets Other operating expenses Total Expenditure Profit before Finance Costs & Income Tax Finance costs Operating profit before restoration cost and income tax Cyclone restoration costs Profit before income tax Income tax expense Net profit for the year after income tax 2017 ($‘000)) 2016 ($’000) EFL recorded net profit of $67.4 million in 2017, an increase of $7.8 million or 13% compared to 2016.
The increase was mostly attributable to decrease in cyclone restoration cost which declined substantially in 2017 by $29 million.

This was because most of the restoration work was carried out in 2016.
Energy Fiji Limited - Abridged Statement of Financial Position As at 31 December Cash and cash equivalents Held to maturity financial assets Receivables and prepayments Other current assets Property, plant and equipment Other non-current assets Total Assets Interest bearing borrowings Deferred tax liabilities Other current liabilities Other non-current liabilities Total Liabilities Net Assets Retained profits Capital contribution Total Capital and Reserves 2017 $’000 158,345 - 38,612 37,646 1,056,899 198 1,291,700 297,566 50,066 28,081 164,710 540,423 751,277 656,082 95,199 751,281 2016 $’000 119,466 - 36,459 32,362 1,035,332 157 1,223,776 319,459 45,344 38,410 114,256 517,469 706,307 611,132 95,175 706,307 Net assets increased by $44.97 million or 6% in 2017 compared to 2016.
The increase was mostly attributable to increase in intangible asset which increase by $1.3 million in 2017 due to upgrade of the Company’s billing system software amounting to $1,462 million.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 50 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Other significant matters – Energy Fiji Limited - 2017 Impairment Assessment and Useful Lives of Plant and Equipment EFL should continuously review the carrying value, residual value and useful economic life of plant and equipment, ensuring the depreciation is reasonable and adequate, and also ensuring any impairment adjustment is made on a timely/progressive basis.
As per paragraph 43 of IAS 16 – Property Plant and Equipment, each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

The Authority needs to undertake a formal process with reasonable documentation for: Impairment analysis of plant and equipment.

• • Review of the residual value and estimated useful lives of plant and equipment (mainly wind mill, power generating assets and capital spares).
Our review of useful lives and impairment assessment of EFL’s property, plant and equipment revealed the following anomalies: • There was no evidence to support that the management carried out the impairment assessment, review of the depreciation rates and assessed the remaining economic useful lives of individual major classes of plant and equipment in a structured manner progressively, and provided for consideration and review by the Directors.
• EFL has not considered depreciating significant components of individual major assets such as dams, windfarms, power plants based on the expected useful lives of their major components (taking into consideration the requirement for major replacements/overhauls of different components of these major assets), instead of uniformly applying a single depreciation rate to the entire asset.

EFL agreed and noted the recommendations made by audit.
Rights over Assets Resulting from Rural Electrification Schemes We noted that EFL has been recording capital assets generated from Rural Electrification Schemes as part of its property, plant and equipment in the books of account over the years.
It was difficult for EFL to justify the rights over certain capital assets generated from Rural Electrification Schemes and there is a lack of audit evidence on the rights over the assets in the absence of proper formal documented arrangement with Ministry of Public Enterprises.
EFL noted the audit recommendations and further informed that the issued will be discuss with the relevant Ministry to either include the rights over the assets in the individual contract for Rural Electrifications or obtain a letter from the Minister.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 51 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Assets with Zero Written down Values EFL carries approximately $113m assets in its register with zero written down value.

Based on the discussions with the management, we understand that certain assets with zero written down value are still in use.
However, it appears that EFL has not recently carried out a proper exercise to check whether these assets with zero written down values are in use or partially needs to be removed from the Fixed Asset Register.

EFL agreed to commence with the exercise in 2018 to physically identify the assets that have zero book value.
Assets that are no longer in use, will be removed from the Fixed Asset Register and those that are still in use and deriving a benefit to EFL will be revalued and assigned an revised depreciation rates based on the assessed remaining life of the asset.

Insurance of the Authority’s Power Infrastructure System We noted that significant assets included as part of property, plant and equipment and in particular forming part of the Authority’s Power Infrastructure System (overhead lines) are not insured.
The absence of the insurance cover has been disclosed by the management in the financial statements.

However, there is an increased risk of loss to EFL for damages as a result of assets not being insured.

This matter was highlighted in previous years audit but necessary action is yet to be taken by the Management.

EFL indicated of doing its level best to get these assets insured.
However in terms of cost benefit analysis, the cost of coverage will be substantial and not economically viable if matched against the benefit.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 52 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 7.0 Assessment of Internal Controls 7.1 Auditing 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.

7.2 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 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.
internal control, documented structures, reporting 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.
• Risk Assessment (RA) – involves a dynamic process for identifying and analyzing 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.
Examples of issues which would fall under this category are reporting to boards and line ministries of entities on matters relating to internal controls ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 53 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.
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.
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 7.3 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.
We assessed the quality of financial statements by the number of audit adjustments made to the first draft of financial statements and the impact these adjustments had on the operating results or net assets of the entity subject to out audit.
Rating Quality of draft financial statements assessment  Effective  Generally effective  Ineffective No adjustments were required Adjustments on operating results/net assets were less than five percent Adjustments on operating results/net assets were more than five percent 7.4 Timeliness of draft financial statements for entities To assess the timeliness of draft acceptable financial statements, we have compared the date the date the draft financial statements were received for audit after allowing for at least 30 days before the legislative deadlines for our audit.
Rating  Effective  Generally effective  Ineffective Timeliness of draft financial statements assessment Acceptable draft financial statements received within 60 days before legislative deadline Acceptable draft financial statements received within 30 days before legislative deadline Acceptable draft financial statements received less than 30 days before legislative deadline ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 54 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI 8.0 Results summary The following table summarizes our assessment of controls and the 2016 financial statement preparing processes across the entities which were audited.
Entity Internal controls Financial Statement Preparation Government Commercial Companies 1.

Airports Fiji Limited 2.

Fiji Broadcasting Corporation Limited CE RA CA IC MA T             3.

Fiji Public Trustee Corporation       Limited 4.

Post Fiji Limited 5.

Unit Trust of Fiji (Management)             Limited Commercial Statutory Authorities 6.

Energy Fiji Limited 7.

Housing Authority Majority- owned entities 8.

Copra Millers of Fiji Limited 9.


Pacific Fishing Company Limited Other entities 10.

FDB Nominees Limited 11.

Fiji Development Bank                                     Q            The following table summarizes our assessment of controls and the 2017 financial statement preparing processes across the entities which were audited.

Entity Internal controls Financial Statement Preparation Government Commercial Companies 1.

Airports Fiji Limited 2.


Fiji Broadcasting Corporation Limited 3.

Fiji Public Trustee Corporation Limited CE RA CA IC MA                T    4.

Post Fiji Limited 5.

Unit Trust of Fiji (Management)             Limited Commercial Statutory Authorities 6.

Energy Fiji Limited Majority- owned entities 7.

Copra Millers of Fiji Limited 8.

Pacific Fishing Company Limited Other entities 9.

FDB Nominees Limited 10.
Fiji Development Bank                               CE=Control Environment RA=Risk Assessment CA=Control Activities IC=Information and Communication Control MA=Monitoring Activities Q           T=Timeliness of draft financial statements Q=Quality of draft financial statements ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 55 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix A: Audits not complete as at 30 November 2018 Entity Government Commercial Companies 1.
Fiji Rice Limited Year Last Audited Comments 2014 2015 2016 Prior 2013  2.

Viti Corporation Limited  3.

Yaqara Pastoral Limited  4.

Food Processors Fiji Limited  5.

Fiji Hardwood Cooperation Commercial Statutory Authorities 1.

Fiji Meat Industry Board   audit 2016-2017 being finalized.

Audited financial statements for 2007 issued for signing 21/11/18.

2008 – 2016 to be submitted for audit.

2015 audit finalized on 07 June 2019.

2016 draft accounts yet to be submitted.


2009 accounts yet to be received 2017 audit progress.

in 2017 audit was finalized after 30 November 2018.

Draft accounts for 2018 yet to be submitted for audit.

audited accounts were sent for on signing 18/04/19  2017 2.

Housing Authority Re-organized entities 1.

Biosecurity Authority of Fiji  for 2013 – Audit 2016 in progress.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 56 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 and 2017 financial statement for state- owned entities.
The results have been summarized into government commercial companies, commercial statutory entities, re-organized entities, majority- owned and other entities, and statutory authorities.

Government Commercial Companies (FY 2016) Entity 1.

Airports Fiji Limited 2.

Fiji Broadcasting Corporation Limited 3.

Fiji Public Trustee Corporation Limited 4.

Post Fiji Limited 5.


Unit Trust of Fiji (Management) Limited Legislative time frame 30 April 2017 30 April 2017 Date audit report signed 10 May 2017 26 May 2017 Audit opinion type Unmodified opinion Modified opinion 30 April 2017 26 May 2017 Unmodified opinion 30 April 2017 28 September 2017 Unmodified opinion Unmodified opinion 30 April 2017 13 April 2017 Commercial Statutory Authorities (FY 2016) Entity 6.

Energy Fiji Limited 7.


Housing Authority Date audit report signed Legislative time frame 30 April 2017 Unmodified opinion 30 April 2017 02 August 2017 Unmodified opinion Audit opinion type 09 May 2017 Majority-owned Entities (FY 2016) Entity 8.

Copra Millers of Fiji Limited Legislative time frame 30 April 2017 Date audit report signed 06 April 2018 Unmodified opinion Audit opinion type with EOM 9.
Pacific Fishing Company 30 April 2017 28 April 2017 Unmodified opinion Limited Other Entities (FY 2016) Entity 10.

FDB Nominees Limited 11.

Fiji Development Bank Legislative time frame 31 October 2016 31 October 2016 Date audit report signed Audit opinion type 28 September 2016 Unmodified opinion 01 November 2016 Unmodified opinion Government Commercial Companies (FY 2017) Entity 1.
Airports Fiji Limited Legislative time frame 30 April 2018 Date audit report signed 04 June 2018 Audit opinion type Unmodified opinion ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 57 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Entity 2.

Fiji Broadcasting Corporation Limited 3.

Fiji Public Trustee Corporation Limited 4.


Post Fiji Limited Legislative time frame 30 April 2018 Date audit report signed 21 June 2018 30 April 2018 08 May 2018 Audit opinion type Unmodified opinion with EOM Unmodified opinion with EOM 30 April 2018 13 November 2018 Unmodified opinion 5.

Unit Trust of Fiji 30 April 2018 14 August 2018 (Management) Limited with EOM Unmodified opinion Commercial Statutory Authorities (FY 2017) Entity 6.
Energy Fiji Limited Legislative time frame 30 April 2018 Date audit report signed 24 May 2018 Audit opinion type Unmodified opinion Majority-owned Entities (FY 2017) Entity 7.

Copra Millers of Fiji Limited Legislative time frame 30 April 2018 8.

Pacific Fishing Company 30 April 2018 Limited Date audit report signed 13 November 2018 08 May 2018 Audit opinion type Unmodified opinion Unmodified opinion Other Entities (FY 2017) Entity 9.
FDB Nominees Limited Legislative time frame 31 October 2017 Date audit report signed Audit opinion type 12 October 2017 Unmodified opinion with EOM 10.
Fiji Development Bank 31 October 2017 27 October 2017 Unmodified opinion ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 58 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix C: Entities not subject to audit by the Auditor-General Entity Audit requirement Audited by/Comments 1.

Fiji Pine Limited As per Companies Act - 2.


Fiji Sugar Corporation As per Companies Act Chartered Accounting appointed auditor firm, BDO 3.

Fiji Airways As per Companies Act Chartered Accounting appointed auditor.

firm, PWC 4.

Air Terminal Services 5.

Fiji Ships & Heavy Industries Ltd As per Companies Act - Auditor-General • Auditor-General last audited 2014 financial statements.

• Declared as Enterprise with effect November 2015 Re-organized from 13 6.
Fiji Ports Auditor-General • Auditor-General last audited 2014 Corporation Limited financial statements.
• Declared as Enterprise with effect November 2015 Re-organized from 13 ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 59 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Appendix D: Glossary Term Accountability Accounting estimates Definition 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.

Amortised Gradually write-off the initial cost of an asset.
Assessment for impairment Audit evidence Audit Memorandum Audit strategy Business continuity risk Capital works Assessment done to ensure that an entity's assets are not carried at more than their recoverable amount (i.e.
the higher of fair value less costs of disposal and value in use) A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.

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 Business interruption can result from natural occurrences and accidental or deliberate criminal acts.

Those interruptions can have significant financial and operational ramifications.

Over time, an organization will experience an event that will result in the loss of information, access to properties (tangible or intangible), or the services of personnel.
Exposure to those types of risks and the planning for business continuity is an integral part of an organization s risk management process.

Amount capitalized to the balance sheet for contributions by an entity to major assets owned by the entity, including expenditure on: • capital renewal of existing assets that returns the service potential or the life of the asset to that which it had originally • capital expansion which extends an existing asset at the same standard to a new group of users.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 60 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Term Definition Consolidated fund account Credit rating Customer credit Risk Deferred income Deficiencies Depreciation Estimated useful lives 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.

A credit rating is an assessment of a borrower's credit worthiness.

It takes into account their ability to repay a debt or their likelihood of defaulting.

A credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.

Deferred income) refers to money received by an entity before it provides the related goods or services to the customer.
Failing, weakness or shortcoming The systematic allocation of a fixed asset's capital value as an expense over its expected useful life to take account of normal usage, obsolescence, or the passage of time.

Estimated lifespan of a depreciable fixed asset, during which it can be expected to contribute to an entity’s operations Express an opinion A written expression of the auditor’s overall conclusion on the financial report based on audit evidence obtained.
Fraud Governance Governance Governing bodies Impairment 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.
Governance is defined as the manner in which those in vested authority uses its powers to achieve the institution’s objectives, including its powers to design, implement and innovate the organization’s policies, rules, systems and processes and to engage and involve its stakeholders.

The control arrangements in place at an entity that are used to govern and monitor its activities to achieve its strategic and operational goals.

A body of persons or officers having ultimate control.
They ar mainly constituted for the purpose of administration.

When an asset’s carrying amount exceeds the amount that can be recovered through use or sale of the asset.

International Financial Reporting Standards Standards adopted by Fiji Institute of Accountants for financial reporting by large and medium entities in Fiji.
___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 61 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Term Loan risk grade Definition Rating systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose.

Management Those with the executive responsibility for conducting an enti operations.
Management services Organisation and coordination of the activities of a business done by another person or entity outside the business.

Material misstatement Materiality Misstatement Other significant matters A significant difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.
This relates to the size or nature of the item or error judged in the particular circumstances of its omission or misstatement.

Information is material if its omission or misstatement could influence the economic decisions of users, taken on the basis of the financial statements.
A difference between the amount, 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 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.
Provision for loan accounts A provision made to allow for the possibility that some debts due for payment in the future may never be paid.

Reasonable assurance A high but not absolute level of assurance Recognition criteria Criterion which is used to recognise assets, liabilities, expenditure and revenue in financial statements.

Revaluation Risks 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 preemptive action ___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 62 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Term Definition Standards on auditing State-owned entities Leasehold land Valuation Value-adding Work in progress Written- down value International Standards on Auditing adopted by Fiji Institute of Accountants and applied by Office of the Auditor-General for audits carried out.
Include Government Commercial Companies, Commercial Statutory Authorities, Re-Organized Entities & Statutory Authorities Real property held by a tenant (lessee) under a lease for a fixed term, after which it is returned to the owner (the lessor).

The process of determining the fair value of an asset.

Financial or non-financial gains arising from improved compliance or mitigation of risks.

The total value of the materials and labor for unfinished projects.
The value of an asset after accounting for depreciation or amortization.

Zero-book values Arises when fixed assets are fully depreciated.

___________________________________________________________________________________________ REPORT ON STATE-OWNED ENTITIES – 2016 AND 2017 FINANCIAL STATEMENTS AUDIT 63 www.oag.gov.fj