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ACCOUNTABILITY IN THE PUBLIC SECTOR THROUGH QUALITY AUDIT SERVICES REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities, Majority Owned Councils, & Special Projects – December 2011 Provincial Entities, ACCOUNTABILITY IN THE PUBLIC SECTOR THROUGH QUALITY AUDIT SERVICES REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities, Majority Owned Entities, Provincial Councils, & Special Projects – December 2011 REPUBLIC OF FIJI File: 102 6th January, 2012 Commodore Josaia V. Bainimarama Prime Minister and Minister for Finance Office of the Prime Minister Government Buildings SUVA Dear Sir REPORT OF THE AUDITOR GENERAL Audits of Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities, Majority Owned Entities, Provincial Councils and Special Projects – December 2011 In accordance with section 7(7) of the State Services Decree 2009, I am pleased to transmit to you my report on the audits of accounts of the above mentioned entities that were completed as at 31 December, 2011.
The report should be presented to Cabinet within 30 days of receipt as required under section 7 (8) of the State Services Decree 2009.

Tevita Bolanavanua Acting Auditor - General FOREWARD This report discusses the results of financial audits undertaken for the following entities of Government:    8 Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities and Majority Owned Entities; 1 Provincial Council; and 3 Special Projects.
Government Commercial Companies (GCC), Commercial Statutory Authorities (CSA), Off Budget State Entities (OBSE) and Majority Owned Entities (MOE) 7 entities audited under this category of state entities were issued unqualified audit opinions which indicate that their financial statements all give true and fair view (or are presented fairly in all material respects) in accordance with the identified reporting framework.
1 entity was issued a qualified audit opinion which showed that while the financial statement is fairly stated the financial data indicated a failure to follow applicable accounting standards or there was a significant uncertainty concerning certain financial data.

In June 2011 I reported the result of audits of 10 other entities under the same category which were completed during the 1st half of 2011.

Therefore overall a total of 18 entities were audited in 2011.
Out of the 8 entities reported, 1 recorded deficit in its operation while 7 recorded operating profits.

The following table summarizes the status of audits of GCC, CSA, OBSE and MOE to date: Government Entity Audit Completed Audit Opinion Remarks Government Commercial Company (GCC) Airport Fiji Limited Broadcasting Fiji Corporation Limited Fiji Ships & Heavy Industries Limited 2010 2008 2010 Unqualified Unqualified Unqualified Awaiting submission of 2011 account for audit.
2009 audit is in progress by PWC.

Awaiting submission of 2011 account for audit.. Food Processors Limited 2006 Qualified Corporation 2010 Unqualified Ports Fiji Limited Post Fiji Limited Rewa Rice Limited 2010 2007 Qualified Unqualified Unit Trust (Management) of Fiji 2010 Unqualified 9 Viti Corp 2005 Qualified 10 Yaqara Pastoral Company 2010 Unqualified 11 Fiji Public Trustee 2010 Unqualified Corporation Limited the submission of 2011 2007 audit is still in progress due to transition to IFRS.
Awaiting account for audit.

Awaiting the submission of the 2011 account for audit 2008 accounts with the Ministry of Public Enterprise for restructure issue.

Awaiting the submission of the 2011 account for audit.

Audit of 2006 account has been completed and account sent to the Directors for signing on 2/11/2011.

Awaiting the submission of the 2011 account for audit.

Awaiting the submission of the 2011 account for audit.
Government Entity Audit Completed Audit Opinion Remarks Commercial Authority (CSA) Statutory 1 Public Rental Board 2009 Unqualified Housing Authority Fiji Electricity Authority 2010 2010 Unqualified Unqualified Fiji Meat & Industry Board 2010 Unqualified Majority Owned Entities (MOE) 2 3 4 1 2010 audit has been completed and account sent to the Board for signing on 15/12/11.

Awaiting the submission of the 2011 account for audit.

Awaiting the submission of the 2011 account for audit.
Awaiting account for audit.

the submission of 2011 Pacific Fishing Company Limited 2010 Unqualified Awaiting the submission of the 2011 account for audit.

2 Fiji Hardwood Corporation 2007 Unqualified Draft 2008 account submitted to KPMG on 30/11/11 for audit.

Audit is now in progress.

Off Budget State Entity (OBSE) 1 Fiji Development Bank 2011 Unqualified Awaiting the submission of the June 2012 account for audit.
The above entities are established and governed by their respective legislations and some have specific provisions on dates for the submission of their accounts and are meeting them satisfactorily.

Others which have not shown much improvement may have been affected by the lack of capacity in their respective Accounts Sections.

Provincial Councils Only the Tailevu Provincial Council account for 2001 was submitted and audited in 2011 which was issued a qualified audit opinion.
No other provincial councils submitted their accounts for audit in 2011.

Most provincial council audits have lagged over the years and my office together with iTaukei Affairs Board are in the process of updating these audits.

Special Projects Three special projects including the Fiji Road Upgrading Project (FRUP III), ADB Flood Recovery Project and the Sustainable Energy Financing Project (World Bank Funded) were audited during 2011.

All project accounts were issued unqualified audit opinions.
The audit of the Suva/Nausori Regional Water Supply and Sewerage Project (ADB Funded) was in progress in December 2011.

Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities & Majority Owned Entities 1.

2.

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Fiji Development Bank Fiji Meat Industry Board Fiji Ports Corporation Limited Housing Authority Pacific Fishing Company Limited Post Fiji Limited Fiji Public Trustee Corporation Limited Yaqara Pastoral Company Limited ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 1: FIJI DEVELOPMENT BANK The Fiji Development Bank is an autonomous statutory body that was established on 1st July 1967 to provide finance for projects that contribute to the development of Fiji’s economy as well as improving the quality of life of its people.
The Bank’s operations are controlled by a Board of Directors appointed by the Minister of Finance.

Until recently, the Fiji Development Bank depended on Government to finance its operations.

Apart from guaranteeing lines of credit for the Bank, Government also provided annual capital grants until the mid-nineties.
Although capital grants have been infrequent since, Government continues to support development projects/plans and special assistance programs administered by the Bank vide interest subsidies and guarantees annually.

The Bank has now diversified its portfolio to include commercial products and services which also assist in sustaining the Bank’s core business of financing higher risk development projects.
The Fiji Development Bank’s function is to facilitate and stimulate the promotion and development of natural resources, transportation, and other industries and enterprises in Fiji, and in the discharge of these functions the Bank gives special consideration and priority to the economic development of the rural and agricultural sectors of the economy of Fiji.
Table of Content 1.1 1.2 1.3 SECTION 1: FIJI DEVELOPMENT BANK ................................................................................................................................. 1 Part A – Financial information ................................................................................................................................................. 1 Audit Opinion 2011 .................................................................................................................................................. 1 Abridged Statement of Comprehensive Income ...................................................................................................... 1 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Loans and Advances ............................................................................................................................................... 3 Home Finance Company (HFC) term deposit ......................................................................................................... 4 Certificate of Exemption (COE) ............................................................................................................................... 4 1.4 1.5 1.6 PART A – FINANCIAL INFORMATION 1.1 Audit Opinion 2011 The audit of the financial statements of the Fiji Development Bank and its subsidiary for the year ended 30 June 2011 resulted in the issue of an unqualified audit report.
1.2 Abridged Statement of Comprehensive Income For the year ended 30 June Consolidated The Bank Income Interest from Loans Fees Other Income Total Income Expenses 2011 ($) 2010 ($) 2011 ($) 2010 ($) 34,728,532 4,947,203 7,081,974 46,757,709 30,364,508 4,041,258 2,855,221 37,260,987 34,727,731 4,947,203 7,081,974 46,756,908 30,363,558 4,041,258 2,855,221 37,260,037 Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji For the year ended 30 June Consolidated The Bank Interest and other borrowings expenses Operating expenses Employee costs Total Expenses Operating profit before provisions Allowances for credit impairment Diminution in investments Operating profit before income tax expense Income tax expense Operating profit after income tax 2011 ($) 16,897,803 3,828,813 6,670,530 27,397,146 19,360,563 16,858,563 2,502,000 --- 2,502,000 2010 ($) 18,197,122 3,233,360 6,886,168 28,316,650 8,944,337 6,592,440 2,351,897 --- 2,351,897 2011 ($) 16,897,803 3,825,428 6,670,530 27,393,761 19,363,147 16,858,563 2,504,584 --- 2,504,584 2010 ($) 18,197,122 3,226,699 6,886,168 28,309,989 8,950,048 6,592,440 2,357,608 --- 2,357,608 The Bank recorded an operating profit of $2,502,000 in 2011 compared to $2,351,897 in 2010.
This was the result of the increase in total income by 25% and reduction of total expenditure by 3%.

The Bank is also not subject to income tax in accordance with section 17(29) of the Income Tax Act 1985.
1.3 Abridged Statement of Financial Position For the year ended 30 June Consolidated The Bank Assets Cash Loans and advances Investments Non current asset held for sale Land held for resale Property, plant and equipment Intangibles Other debtors Total Assets Liabilities Bonds - Held-to-maturity Borrowings Employee entitlements Defered income Accounts payable and accruals Other liabilities Total Liabilities Net Assets Equity Capital Reserves Accumulated profits Total Equity 2011 ($) 2010 ($) 2011 ($) 2010 ($) Net Assets increased by 2% in 2011 compared to 2010 as a result of decline in total liabilities by 13%.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji PART B – CONTROL ISSUES 1.4 Loans and Advances The loan cycle consists of:  Prequalification process;  Appraisal, approval and disbursement process; and  Monitoring and supervision.
The audit noted several internal control deficiencies within the loans and advances cycle which have been recurring audit issues from prior year audits.

The following issues were noted in the appraisal, approval and disbursement process:  The Bank waived fees of $2,688 including application and establishment fees.

These were waived after submissions made by the customer (a/c # 116479) that unnecessary fees might divert customers to other competitors like commercial banks.
The Corporate department performed an assessment of the financial effect of waving the fees and concluded to waive the fees since the bank will only lose $2,689 but will earn interest of $11,250 per annum on $150,000.
Furthermore an analysis noted was that the bank will lose $43,100 per annum if the bank decides not to waive the fees and the customer opts for other refinancing options;  Review of loan account # 301713 revealed that the SVLR assessed during the appraisal process for the customer's loan application was 72% ratio of security over loan amount.
Even though the SVLR was below required SVLR of 100%, the loan was still approved by the bank without any equity contribution by the customer towards the total project cost.

No detail was filed on what was the mitigating factor;  A loan officer recommended that loan account # 15978 to be declined as the Security Value to loan ratio (SVLR) was only 55.26%.
The loan was approved by Branch manager with conditions that the customer makes an equity contribution of $10,288 and a data bureau search was to be made before release of funds.

We noted at year end, the loan account has been graded as G with real risk of credit loss;  Review of loan account # for 31285 revealed that the SVLR assessed during the appraisal process for the customer's loan application was 61% ratio of security over loan amount.
Even though the SVLR was below 100%, the loan was still approved by the bank without any equity contribution by the customer towards the total project cost; and  We noted that some loan have land or buildings as securities but there is evidence of these securities being valued by a bank's authorized valuer recently.
Discussion with the SME, Suva Agriculture and Corporate Division managers revealed that the bank policy was to accept or maintain a valuation report for securities on loans that have been performed for 2 years.

However, for securities that have an estimated value of less than $200,000, these are to be valued in house.
The following loan accounts have valuation reports of securities that are more than 2 years old: Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Account # 116454 116482 116472 Division Suva Corporate Suva Corporate Suva Corporate Loan balance ($) 628,256 214,305 137124 Non-adherence to approved policies and procedures increases the risk of financial losses to the Bank.
Recommendation The Management should ensure that lending policies and procedures are strictly enforced.

Management comments No comment was provided by the Bank.

1.5 Home Finance Company (HFC) term deposit Our substantive review of the term deposits held by FDB Nominees Ltd in HFC noted a term of 1 year.

However, the bank has disclosed the term deposit as ‘Cash and Cash Equivalents’ in the consolidated financial statements.
IFRS requires the term deposits to be classified as Cash and cash equivalents if the term of the deposit if less than 3 months.

The financial statements do not comply with IFRS.

Recommendation: The Bank should ensure that disclosures in the financial statements are consistent with requirements of IFRS standards.

Management comments: No comment was provided by the bank.
1.6 Certificate of Exemption (COE) Under Legal notice 70 of the Income Tax Act of Fiji, the Bank, as a contracting entity is required to deduct a 15% provisional tax for contractual payments to entities that do not produce a valid Certificate of Exemption (COE).

Audit noted that 15% provisional tax has not been deducted from some payments made to various solicitors when no record of a COE is kept or documented by the Bank.
The Bank is in breach of the Income Tax Act and may be liable for the contractors’ tax liabilities to the Fiji Revenue & Customs Authority (FRCA).

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The Bank should comply with the requirement of the Income Tax Act for any contract payment.

Management comments No comment provided by the bank.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 2: FIJI MEAT INDUSTRY BOARD The Fiji Meat Industry Board was established in 1976 by the Meat Industry Act of 1970 to regulate and control the slaughtering of livestock.

The Fiji Meat Industry Board became a restructured Commercial Statutory Authority from 2006.
The functions of the Board include the following:   to construct and operate public slaughtering facilities as approved by the Minister; to take all steps, with the approval of the Minister, deem desirable for purposes connected with the protection, preservation and expansion of the meat industry in Fiji;  with the approval of the Minister, to borrow such capital monies as may be required; and  when directed by the Minister, to purchase trade or deal in livestock or meat.
The functions of the Board are largely servicing and regulatory.
Table of Content 2.1 2.2 2.3 SECTION 2: FIJI MEAT INDUSTRY BOARD ............................................................................................................................ 1 PART A - FINANCIAL INFORMATION ...................................................................................................................................... 1 Audit Opinion - 2010 ................................................................................................................................................ 1 Abridged Consolidated Income Statement .............................................................................................................. 1 Abridged Consolidated Statement of Financial Position .......................................................................................... 2 PART B - CONTROL ISSUES ................................................................................................................................................... 3 Daily Banking ........................................................................................................................................................... 3 Debt Collection ........................................................................................................................................................ 4 Reconciliation of Fixed Asset Register and General Ledger ................................................................................... 5 2.4 2.5 2.6 PART A - Financial Information 2.1 Audit Opinion - 2010 The audit of the financial statements of the Fiji Meat Industry Board for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
2.2 Abridged Consolidated Income Statement Year Ended 31 December 2010 ($) 2009 ($) Revenue Abattoir Other Income Total Revenue Expenditure Staff Costs 3,626,285 100,679 3,726,964 3,303,959 58,336 3,362,295 848,881 901,776 Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Year Ended 31 December 2010 ($) 2009 ($) Change in Inventories – Finished Goods Raw Materials and Consumables Used Other Operating Expenses Total Expenditure Profit From Operations Finance Cost Profit/(Loss) Before Tax Income Tax Expense Profit/(Loss) After Tax 1,290,712 267,478 1,125,438 3,532,509 194,455 (148,260) 46,195 - 46,195 1,107,158 198,862 929,899 3,137,695 224,600 (155,773) 68,827 - 68,827 The Board recorded a net profit after tax of $46,195 in 2010 compared to $68,827 in 2009.
The decline in net profit after tax was due to increase in expenditure by$378,301 or 12%.
2.3 Abridged Consolidated Statement of Financial Position As at 31 December 2010 ($) 2009 ($) Assets Cash And Cash Equivalents Receivables Inventories Property, Plant & Equipment Total Assets Liabilities Trade and Other Payables Borrowings Total Liabilities Net Assets Total Equity 326,799 386,762 127,825 1,288,626 2,130,012 309,707 1,285,045 1,594,752 535,260 535,260 335,579 443,008 160,390 1,342,396 2,281,373 424,270 1,368,037 1,792,307 489,065 489,065 The Board’s net assets increased by $46,195 or 9.4% in 2010 compared to 2009 since total liabilities declined significantly by $197,555 or 11% compared to decline in total assets by $151,361.
Decline in total liabilities was due to the repayment of loan in 2010.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji PART B - Control Issues 2.4 Daily Banking Banking of revenue should be done on a daily basis.1 Instances were noted where revenues collected were not lodged with the bank on a daily basis.
Refer to Table 2.1 below for examples: Table 2.1: Delay in banking Collection Date 21/01/10 22/01/10 25/01/10 18/02/10 19/02/10 18/03/10 19/03/10 22/03/10 23/03/10 24/03/10 26/03/10 21/04/10 22/04/10 23/04/10 19/05/10 20/05/10 21/05/10 17/06/10 21/06/10 22/07/10 09/09/10 14/09/10 16/09/10 24/09/10 27/09/10 30/09/10 07/10/10 Amount ($) 6,505.55 5,208.15 3,507.50 6,637.05 9,936.55 5,496.15 14,150.25 3,215.55 2,272.85 4,749.80 6,525.75 5,457.45 3,887.55 5,598.75 3,956.20 6,425.25 2,878.75 11,218.05 5,841.70 10,985.05 10,003.80 3,657.85 5,590.20 9,724.10 2,452.30 10,447.10 7,869.75 Date Banked 26/01/10 27/01/10 28/01/10 22/02/10 24/02/10 24/03/10 23/03/10 26/03/10 28/03/10 30/03/10 31/03/10 27/04/10 28/04/10 28/04/10 27/05/10 25/05/10 27/05/10 22/06/10 28/06/10 27/07/10 21/09/10 24/09/10 24/09/10 05/10/10 05/10/10 07/10/10 27/10/10 No.
of Days Delayed 5 5 3 4 5 6 4 4 5 6 5 6 6 5 8 5 6 5 7 5 12 10 8 11 8 7 20 Furthermore, audit was informed that a sum of $23,557.25 was misappropriated by the former cashier.
Refer to Table 2.2 below for details: 1 Finance Manual 7.2 Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 2.2: Funds Misappropriated Date 26/10/10 02/11/10 Total Amount ($) 4,596.50 18,960.75 23,557.25 The misappropriation was reported to the Board and subsequently referred to the Police Department.
As at the date of audit2, the matter was still under court deliberation.

There is a high risk of misappropriation of funds when lodgements are not done on a daily basis and cash records not thoroughly checked by the Finance Manager.

Recommendations  The Board should ensure that all revenues collected are lodged with the bank on a daily basis.

 Cash management is a high risk area therefore cash records should be thoroughly scrutinized by the Finance Manager on a regular basis.
Board’s Comments The Board has a policy of daily banking and makes effort to follow it; however, there are instances when this does not eventuate for example, when the cashier is on sick leave.

The Board’s cash is reconciled daily and is supervised by the assistant accountant and the report is forwarded to the Manager Finance on a daily basis.

The Board takes note of the audit recommendation.


2.5 Debt Collection Debtors’ statements are to be issued to all customers who do business with the Board on credit within the first seven days of every month.3 Collection of outstanding debts with the customers should be made before the 20th day of every month.4 Our analysis of the accounts receivable records revealed 13% improvement in debt collection in 2010 compared to the previous year.
However, concern is raised on debts which have remained outstanding for a long period of time.

Refer to Table 2.3 for details.
Table 2.3: Long Outstanding Debtors Name Debtor 1 Debtor 2 Debtor 3 Debtor 4 Amount Outstanding ($) 2,954.70 11,322.38 2,197.46 952.00 Date of Last Payment 31/07/08 10/06/10 13/02/08 20/08/10 2 19/08/11 3 Finance Manual 6.0 4 Finance Manual 6.2 Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Name Debtor 5 Debtor 6 Debtor 7 Debtor 8 Total Amount Outstanding ($) 3,060.00 1,770.33 8,511.15 2,374.88 33,142.90 Date of Last Payment 06/06/08 30/12/09 20/11/09 2009 In addition, a significant amount of outstanding debts are over 30 days.
Refer to Table 2.4 for a detailed breakdown: Table 2.4: Aging of Debtors Aging 1 – 29 days 30 - 59 days 60 - 89 days 90 days+ Total Amount ($) 176,932.12 134,233.24 49,783.28 72,917.91 433,866.55 Lack of monitoring and follow up may result in the accumulation of outstanding debts which could affect the Board’s cash flows and operation.

Recommendations  The Board should take concerted efforts to recover the dues from the above debtors.
Possible write-off should be considered if all avenues to recover the debts have been exhausted.

 The Board should improve its debt recovery strategies to ensure that debts are settled early.

 The Board should ensure compliance with its Finance Manual with regards to debt management.

Board’s Comments The long outstanding debtors are in dispute.

The Board is trying to do all it can to recover the amounts.

In year 2011, accounts management will recommend to the Board for write-offs.
2.6 Reconciliation of Fixed Asset Register and General Ledger A Fixed Asset Register is to be maintained and updated by the finance and administration section in the head office for all fixed assets belonging to the Fiji Meat Industry Board.5 Variances were noted from our reconciliation of the Fixed Asset Register (FAR) and the General Ledger (GL) balances.
Details are shown on Tables 2.5 and 2.6: 5 Finance Manual 14.0 Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 2.5: Analysis - Suva Abattoir Particulars FAR Balances Cost ($) GL Balances Cost ($) Variances ($) Land Yards & Roadways Buildings Loose Tools Motor Vehicles Plants Furniture and Fittings WIP 440,542 630,379 36,936 501,811 1,366,776 318,305 0 3,294,749 439,780 761,635 6,067 500,900 1,425,062 181,143 8,519 3,323,106 762 -131,256 30,869 911 -58,286 137,162 -8,519 -28,357 Table 2.6: Analysis - Vuda Abattoir Particulars FAR Balances Cost ($) GL Balances Cost ($) Variances ($) Buildings Land Yards & Roadways Loose Tools Plants Furniture and Fittings Quarters 367,373 228,745 1,218 358,016 8,795 50,691 1,014,838 367,188 233,054 1,151 364,670 2,256 51,831 1,020,150 185 -4,309 67 -6,654 6,539 -1,140 -5,312 Furthermore, the audit also noted that more than 50% of fixed asset listed in the FAR for Suva and Vuda Abattoirs have zero written down value (WDV), but are still being used by the Board.
Recommendations  The Board should conduct a board of survey of its fixed assets and ensure that all assets listed on the FAR exist and are accurately recorded in the both the FAR and the General Ledger.

 The Board should consider revaluing those assets with zero WDV if they are still providing economic benefit to the Board.

 The variances noted above should be reconciled and adjustments, if any, should be made to the FAR and the GL.
Board’s Comments The management has take note of the audit recommendations.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 3: FIJI PORTS CORPORATION LIMITED The Fiji Ports Corporations Limited was incorporated in 2004 to take over the operations of the Maritime Ports Authority of Fiji.
The principal activity of the Corporation is providing and managing the port infrastructure and services within declared ports.

The company conducts its business within the legal framework of the Companies Act, VAT Decree, Income Tax Act, Sea Ports Management Act and the Public Enterprises Act.

The company has two subsidiaries trading as Ports Terminal Ltd and Fiji Ships & Heavy Industries Ltd.

The company took over the operation of Fiji Ships & Heavy Industries Ltd in June 2009.
Table of Content 3.1 3.2 3.3 SECTION 3: FIJI PORTS CORPORATION LIMITED ................................................................................................................ 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Income Statement .................................................................................................................................... 1 Abridged Balance Sheet .......................................................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Inadequate Post Terminal Limited Loan Repayments ............................................................................................. 3 Fraud Reporting System .......................................................................................................................................... 4 Board of Survey ....................................................................................................................................................... 4 Fiji Military Forces Long Outstanding Reimbursement Cost ................................................................................... 5 3.4 3.5 3.6 3.7 PART A – FINANCIAL INFORMATION 3.1 Audit Opinion The audit of the financial statements of the Fiji Ports Corporation Limited and subsidiary for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
3.2 Abridged Income Statement As at 31 December Revenue Operating Revenue Other Revenue Total Income Expenditure Operating Expenses Salaries and Benefits Property Depreciation Marine Service Charge Group 2010 $ 2009 $ Company 2010 $ 2009 $ Report of GCC, CSA & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji As at 31 December Finance Expenses Total Expenditure Group Company 2010 $ 2009 $ 2,219,474 38,086,995 2,526,375 38,152,052 2010 $ 2,135,230 26,365,933 2009 $ 2,425,122 26,924,514 Operating (loss)/profit before income tax 6,983,021 10,746,310 7,145,293 9,930,460 Income tax (expense)/ credit (1,699,736) (884,730) (1,644,248) (491,790) Net (loss)/ Profit for the year after Income Tax 5,283,285 9,861,580 5,501,045 9,438,670 The company and subsidiaries recorded net profit after tax of $5,283,285, a significant decrease of $4,578,295 or 46.4% compared to 2009.
The decline was mainly attributed to the normalisation of the other revenue collections which was inflated in 2009 due to the gain on; bargain procurement made from subsidiary Fiji Ships and Heavy Industries Limited and sale of assets.
3.3 Abridged Balance Sheet As at 31 December Current Assets Cash and cash equivalents Trade and other receivables Investments Other current assets Total Current Assets Non - Current Assets Property, plant and equipment Intangible asset Investment property Loan to subsidiaries Investment in FSHIL Deferred tax assets Total Non–Current Assets Group Company 2010 $ 2009 $ 2010 $ 2009 $ 7,833,856 2,883,759 8,000,000 1,960,022 20,677,637 8,445,337 3,432,429 4,000,000 6,453,149 22,330,915 5,227,941 2,538,970 7,750,000 959,352 16,476,263 6,002,217 2,220,670 4,000,000 1,403,982 13,626,869 131,188,195 176,460 3,366,122 - - 469,807 135,200,584 131,074,792 224,718 3,493,375 - - 1,172,322 135,965,207 113,920,907 165,022 3,366,122 5,644,375 6,660,000 132,404 129,888,830 119,537,164 219,551 3,493,375 3,888,605 6,660,000 908,568 134,707,263 Total Assets 155,878,221 158,296,122 146,365,093 148,334,132 Current Liabilities Trade Payables and Accruals Interest Bearing Borrowings Provisions Employee entitlements Income tax liability Total Current Liabilities Non-Current Liabilities 4,050,526 2,547,081 273,045 609,725 70,313 7,550,690 4,233,481 2,856,735 280,000 485,171 (536,053) 7,319,334 2,719,587 2,338,309 273,045 495,089 88,771 5,914,801 2,924,928 2,586,975 280,000 334,197 (681,466) 5,444,634 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji As at 31 December Group Company Interest bearing borrowings Deferred tax liability Total Non-Current Liabilities 2010 $ 55,419,227 819,312 56,238,539 2009 $ 62,175,311 687,076 62,862,387 2010 $ 54,805,794 - 54,805,794 2009 $ 61,437,351 - 61,437,351 Total Liabilities 63,789,229 70,181,721 60,720,595 66,881,985 Net Assets 92,088,992 88,114,401 85,644,498 81,452,147 Share Capital Accumulated Profits Total Shareholder’s Equity 73,154,852 18,934,140 92,088,992 73,154,852 14,959,549 88,114,401 73,154,852 12,489,646 85,644,498 73,154,852 8,297,295
 81,452,147 The net asset positions of the company and subsidiaries improve by $3,974,591 or 4.5% in 2010 compared to 2009.
This resulted mainly from the reduction in interest bearing borrowings.

The financial position of the company remained strong in 2010.

PART B – CONTROL ISSUES 3.4 Inadequate Post Terminal Limited Loan Repayments Prudent financial practices require that repayments cover current interest payments and a portion of the principal amount of the loan.

The monthly loan repayments ($20,000) from Ports Terminal Limited does not cover the interest portion of the inter company loan.
Since the interest portion of the intercompany loan is not covered in the repayments, it would not be possible to meet the terms and conditions of the loan agreement, more specifically the terms/period of the loan.

Current arrangement for the loan repayments results in the increasing loan balances at each repayment period.
Refer the Table 3.1 below: Table 3.1: Loan Schedule for 2011 (Based On Current Arrangement) Month Repayment $ 20,000.00 Interest $ 7.50% Balance $ Opening balance - December 2010 3,790,242.62 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 20,000.00 20,000.00 20,000.00 20,000.00 23,689.02 3,793,931.64 23,712.07 3,797,643.71 23,735.27 3,801,378.98 23,758.62 3,805,137.60 20,000.00 23,782.11 3,808,919.71 20,000.00 20,000.00 23,805.75 3,812,725.46 23,829.53 3,816,554.99 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Month Repayment $ Interest $ Balance $ Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 23,853.47 3,820,408.46 23,877.55 3,824,286.01 23,901.79 3,828,187.80 23,926.17 3,832,113.98 23,950.71 3,836,064.69 240,000.00 285,822.07 Recommendation The Management should amend the monthly loan repayment amount to ensure that the loan repayments are adequate to cover interest portion of the intercompany loan and loan balance to be fully repaid by the end of the loan period.
Company’s Comments Please note the repayment amount was decided by the Board while considering Ports Terminal Limited’s (PTL) financial status last year which was not at par to Board’s expectation hence the Board decided to reduce the repayment amount.

However, PTL’s financial status has improved since then and management plans to resubmit a revised repayment schedule for PTL to be endorsed by the Board this year.
3.5 Fraud Reporting System There is no formal fraud reporting or whistle blowing policy in place to provide guidance on how to report unethical practices by staff.

This increases the risk of misappropriation of assets by staff being unreported.

Instances of unethical practices by staff may not be reported by staff or third parties.

Recommendation The Management should formulate a fraud reporting or whistle blowing policy.
Company’s Comments The whistle blowing policy has been subsequently endorsed by the Board in its meeting held on Thursday 30th June 2011 and is now in force.

3.6 Board of Survey The company’s policy1 requires a board of survey to be performed at least once a year.

This is to ensure assets exist and those not in existences are investigated.
1 Finance Policy and Procedures Manual section 7.4.6.2- physical identification Report of GCC, CSA & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji There has been no board of survey carried out to verify the company’s fixed assets.

The last survey was carried out in 2007.

The lack of regular surveys increases the risk of misappropriation of assets.
Recommendation The Management should ensure that a board of survey of the company’s fixed assets is performed in accordance with company policy.

Company’s Comments An extensive asset tagging process began in October 2010 and is in progress, after which a final Board of Survey Report will be prepared for the management and the Board’s information this year.
Please note since we have a huge list of fixed assets, especially Office Equipment, asset tagging and Board of Survey is a very expensive and time consuming exercise to carry out on an annual basis.

Therefore, Management will do a thorough study on how better this process can be managed to keep a tight control on all assets while minimising the risk of misappropriation.

If necessary a suggestion will be put to the Board for amendment of Finance Policy accordingly.
3.7 Fiji Military Forces Long Outstanding Reimbursement Cost The general ledger includes an outstanding reimbursement cost of $195,941 to the Fiji Military Forces for the provision of security in 2007.

Management on various occasions have written to the Fiji Military Forces regarding the documentation to be supplied to FPCL for the payment to be processed.

No response has been received from the Fiji Military Forces to date.

The lack of information increases the risk that the amount due may be incorrect.
Recommendation The Management should liaise with the Fiji Military Force to resolve the issue.

Company’s Comments As noted by the auditors, management has continued to write to RFMF to pursue the collection of this debt which the PSU team has invoiced during their time of operation at the wharf , and since FPCL does not have the men power required to do collection on behalf of PSU.

However, so far we have not received any response from RFMF.
Management has also taken the matter up to the Board level, and is seeking Board’s involvement to solve this issue as soon as possible.

.

Report of GCC, CSA & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 4: HOUSING AUTHORITY The Housing Authority was established by an Act of Parliament in 1955.

The Authority became an operating entity in 1958.


It began operations with the development of rental flats and progressed into the development of lots and the designing and building of homes.

The rental function of the Authority was separated from its core operations in 1989 and the Public Rental Board was created.

In 1996, the Authority was declared a Commercial Statutory Authority and is now required to provide returns to Government.
The Authority moved away from the designing and building of homes to concentrate on the production of land lots and the provision of financing in 1997.

With the initial vision to provide affordable housing for low income earners in urban centres who would otherwise be unable to secure a permanent residence for themselves, the Authority has in recent years expanded its services to include mortgage financing for middle to high income earners.
Table of Content 4.1 4.2 4.3 SECTION 4: HOUSING AUTHORITY ....................................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Statement of Financial Performance ........................................................................................................ 2 Abridged Statement of Financial Position ................................................................................................................ 2 PART B CONTROL ISSUES ................................................................................................................................................. 3 Inconsistent Loan Mortgage Portfolio Generated by Lendsphere System .............................................................. 3 4.4 Portfolio Variance .................................................................................................................................................... 3 4.5 Variances between Navision Trial Balance And Navision General Ledger ............................................................. 4 4.6 Cash and Cash at Bank ........................................................................................................................................... 4 4.7 IT Project Flaws ....................................................................................................................................................... 6 4.8 Daily Cashier Report ............................................................................................................................................... 6 4.9 Accounting Reconciliations and Supporting Documents
 ......................................................................................... 7 4.10 4.11 Provision for Development Works in Progress ........................................................................................................ 7 4.12 Maturity Mismatch and Absence of ALCO Committee ............................................................................................ 8 Squatter Resettlement ............................................................................................................................................. 8 4.13 Provision for Repairs to Infrastructure and Medical Insurance ................................................................................ 9 4.14 Capital Accruals ....................................................................................................................................................... 9 4.15 Liquidity Risk Management ................................................................................................................................... 10 4.16 Provision for Stock Obsolescence - Criteria .......................................................................................................... 10 4.17 Ageing of Inventories ............................................................................................................................................. 11 4.18 Stale Cheques ....................................................................................................................................................... 11 4.19 Credit Balance Refund .......................................................................................................................................... 12 4.20 PART A – FINANCIAL INFORMATION 4.1 Audit Opinion The audit of the financial statements of the Housing Authority for the year ended 31 December 2010 resulted in an issue of an unqualified audit report.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 4.2 Abridged Statement of Financial Performance Year Ended 31 December Income Interest Income Interest Expense Net Interest Income Other Operating Income Total Income Expenditure Staff Costs Bad & Doubtful Debts Other Operating Expenses Total Expenditure Result for the year from Ordinary Activities 2010 $’000 2009 $’000 11,951 (6,633) 5,318 6,301 11,619 4,602 1,008 5,055 10,665 954 10,871 (6,382) 4,489 4,693 9,182 4,670 609 3,355 8,634 548 The Authority recorded a net profit of $954,000 in 2010 compared to $548,000 in 2009.
This is due to the increase in interest income by $1,080,000 or 10% as well as other operating income which has increased by $1,607,234 or 34%.
4.3 Abridged Statement of Financial Position As at 31 December Assets Cash & Cash Equivalents Loans Inventories Land held for future development Property, Plant & Equipment Other Total Assets Liabilities Borrowings Employee Entitlements Provisions Other Total Liabilities Net Assets Accumulated Funds Capital Government Grant Asset Revaluation Reserve Accumulated Losses Total Accumulated Funds 2010 $’000 2009 $’000 7,149 115,316 12,306 6,623 9,333 10,446 161,173 96,059 687 971 6,908 104,625 56,548 41,772 15,958 6,834 (8,016) 56,548 2,412 121,058 12,222 6,627 9,732 474 152,525 86,988 742 712 8,489 96,931 55,594 41,772 15,958 6,834 (8,970) 55,594 The increase in the total assets by $8,648,000 or 6% in 2010 was mainly due to the increased cash held at year end by $4,737,000.
In addition, part of the loan from EXIM Bank of China amounting to $9,991,935 was Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji released to the Authority through their contractor namely China Railway First Group (Fiji) Limited for the construction of the Fiji low cost housing project.

This amount is disclosed in the financial statements as other assets.
Liabilities also increased by $7,694,000 or 8% as the result of increase in borrowings by $9,071,000 or 10%.

PART B CONTROL ISSUES 4.4 Inconsistent Loan Mortgage Portfolio Generated by Lendsphere System The Authority’s Lendsphere system records all transactions relating to loans and advances to individual customers.

Reports from the system are used to update the loan and advance balances in the Authority’s Navision general ledger.
Customer balances on Lendsphere are interfaced with Navision and then reviewed to ensure they agree.

The interface has resulted in a number of errors and the Authority has to manually reconcile the balances.

The manual reconciliation performed by the Authority assumes that the Lendsphere report is correct.

The audit revealed that the data corrections are performed on a daily basis to correct customer accounts before monthly customer statements are printed.
However, for the audit purposes, the Authority was able to generate correct loan portfolio for the year ended 31 December 2011 after liaising with the IT support and vendor based in India.

Recommendation The Authority should resolve this with its IT Support and vendor based in India immediately.

Management Comments No comment was provided by the Authority.
4.5 Portfolio Variance At balance date, the total loan portfolio balance as per the general ledger (Navision) differed from the Lendsphere system balance by $1,267,846.

The Lendsphere system recorded a higher balance.

All customer loan transactions such as disbursements, repayments and interest and charges are recorded in Lendsphere.

Customer loan statements are generated from the Lendsphere system.

This is then interfaced to Navision.


The interface does not transfer the totals of the loan balances but the individual customer balances from Lendsphere to Navision.

The interface results in errors resulting in the balance being out of sync with the other.

Theoretically, if the interface is working correctly, Navision will replicate the exact total and individual customer balances from Lendsphere.

Recommendations  The Authority should reconcile the data in both the Navision and Lendsphere systems.
 Monthly reconciliations for loans and advances balance should be prepared between the general ledger and Lendsphere.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji  The flow of data should be monitored to ensure all data has been captured at general ledger level.

Management Comments No comment was provided by the Authority.
4.6 Variances between Navision Trial Balance And Navision General Ledger The Navision system hosts the general ledger of the Authority.

To compare the total loans and advances balance held in Navision with the total balance of the Lendsphere portfolio report, one could generate a trial balance report or a general ledger report comprising loan and advance accounts from the Navision system.
However, it has been noted that when a request is submitted in Navision system for a trial balance report on loans and advances, the amount returned on the report varies from a general ledger report submitted to the same system for the same period.

At 31 December 2010, the variance between the two reports is $1,454,514.

A higher balance was recorded in the trial balance (which acts as a control account).
The audit noted that some manual adjustments were posted directly to the control account to reconcile Navision balance with Lendsphere report.

The Authority processed an entry of $672,234 to reconcile Navision with Lendsphere report.

The difference noted after this adjustment shows an unreconciled variance of $60,847.

The variance may be due to incorrect set-up of the Navision report writing function.
Inconsistent reports increase the risk of incorrect financial reporting if different types of reports are used from the same system for different purposes.

Recommendations  Monthly reconciliations should be prepared for loans and advances balance between the control and subsidiary accounts in Navision.

 The Authority should review the report generation function of Navision and ensure it is correctly set up.

Management Comments No comment was submitted by the Authority.
4.7 Cash and Cash at Bank There were numerous issues noted with the various bank reconciliations prepared by the Authority.

Some of the said issues are as follows:  The 11 AM Deposit account is used to transfer cash to and from the Westpac main operating account.
The bank reconciliation of the Westpac main operating account has the 11 AM Deposit Page 4 Report of GCC, CSA, & Off Budget State Entities – December 2011 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji account closing balance as a reconciling item.
The audit noted that a variance of $87,951 existed between the closing balance of 11 AM bank account statement and the balance noted in the bank reconciliation of Westpac main operating account;  Unpresented cheques for the Westpac main operating account could not be traced to subsequent month’s bank statements or to the following month’s bank reconciliation’s unpresented cheque listing.
The audit noted cheques totalling $29,235 in December 2010, $3,200 in November and $1,817 in July bank reconciliations;  A few of the cheques raised prior to November and December and presented in the November and December 2010 bank statements for Westpac main operating account could not be traced to October and November bank reconciliations unpresented cheque listings respectively;  A variance of $54,852 and $527 existed between the lodgment not credited balances in the December and November 2010 Westpac main operating account reconciliation and the balance deposited in the subsequent month’s bank statements respectively;  Numerous direct credits, cancelled receipts and short banking in the Westpac main operating account were not posted in the general ledger as at 31 December 2010.
Numerous transactions make up these reconciling items.

The items were not posted to the general ledger subsequent to year end;  The November and July Westpac main operating account reconciliation had a variance of $39,887.06 and $1,092 respectively;  For the Colonial Bank account, a few cheques prepared in 2009 and 2010 were not posted in the general ledger as at 31 December 2009.
A majority of these cheques have been presented to the bank but are yet to be posted to the general ledger;  For the WBC Imprest account, the amount stated in the bank reconciliation as a reconciling item for a cheque incorrectly posted was different from the value stated on the cheque;  For the ANZ bank account, cheques 176432 and 176521 prepared in the month December and presented in the bank but were not processed in the general ledger.
Despite this, these cheques did not form part of reconciling items in the year end bank reconciliation;  The Westpac main operating account and WBC Imprest account reconciliations had variances of $19,793 and $20,298 respectively; and  The 11 AM bank account is kept to maintain liquid cash in an account with higher than commercial interest rate.

The transactions processed in this bank account are captured in the Westpac main operating general ledger account.
There is no separate account created in the Navision system to record all transactions in 11 AM bank account separately.

As a result, there is no reconciliation prepared for 11 AM bank account.

The closing balance of 11 AM bank account is treated as a reconciling in the Westpac main operating account reconciliation.

Bank reconciliations contain many reconciling items that are not supported.
The number of errors noted in the bank reconciliations indicated a lack of adequate review of the bank reconciliation.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji With the issues faced by the Authority on IT applications such as Lendsphere and Navision, the lack of effective review of bank reconciliations and rigorous investigation of reconciling items significantly increase the risk of fraud and incorrect financial reporting.
Recommendations  Management should ensure that monthly bank reconciliations are reviewed and approved by senior personnel.

All reconciling items must be cleared on a timely manner.

 A separate general ledger be created in Navision system to record all transactions occurring in 11 AM bank account and a separate monthly reconciliation prepared.

Management Comments No comment received from the Authority.

4.8 IT Project Flaws Many Information Technology related irregularities were noted.
Most of these emerged from the implementation of general ledger system - Navision and the lending system – Lendsphere.

The audit noted that some account reconciliations included manual adjustments after using reports from Navision or Lendsphere.

Variances in reports between the two reports could not be explained satisfactorily.
It has been established that this was largely due to the following:    Interface problems between the two resulting in data being lost on transfer from Lendsphere to Navision; Issues with Lendshphere report writing function resulting in inconsistent reports generated; and Incorrect set-up of Navision trial balance and general ledger report writing function.

These irregularities greatly affected the preparation of reconciliations by Authority staff.
Recommendation Management should take immediate steps to rectify the installation issues, programming and other technical aspects of both applications.

Management Comments No comment provided by the Authority.

4.9 Daily Cashier Report Audit test of controls on receipts and banking noted variances between the Daily Cashier Reports and Daily Cashier Reconciliation.

The Daily Cashier Report is system generated whereas Daily Cashier Reconciliation is a manual reconciliation prepared by staff.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji These reports did not reconcile to the relative deposits in the bank statements.

Manual reconciliations were prepared to account for receipts missed by the system.
The manual cash reconciliations prepared by the cashiers had numerous receipts marked as cancelled or presented as other reconciling items between cash collected and receipts issued for a day.

However, these receipts were not attached to the manual cashier reports.

Management attribute the issue to incorrect report generated by the system which somehow jumbles receipts from one day to the next and as a result, implemented the use of a manual reconciliation.
There is a risk that all receipts have not been captured in the general ledger or incorrectly coded.

Due to the inaccurate reports and lack of audit trail to deposits, there is a significant risk of fraud.

Recommendation Variances in the Daily cashier reports need to be verified and resolved before the end of the respective day.

Manual reconciliation should agree to deposits banked.

Management Comments No comment provided by the Authority.
4.10 Accounting Reconciliations and Supporting Documents The audit was not provided the reconciliations or supporting documents for the following accounts.

 Excess received from customers $414,825; and  House/Fire insurance $603,487.

Alternative tests noted that insurance premiums purchased by the Authority for itself or customers have been paid.

There is no outstanding balance.

Therefore, there should be no accrual for these as there is no present obligation due.
The Authority may be overstating its liabilities as a result of the above.

Recommendation Reconciliations should be maintained on a monthly basis.

Where there is no present obligation, a liability should not be recorded.

Management Comments No comments received from the Authority.

4.11 Provision for Development Works in Progress The basis for the calculation of provision on development WIP was not supported.
The balance has been carried forward from prior years with no supporting explanation of how it was determined.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The provision made by the Authority may not be in accordance with International Financial Reporting Standards (IAS 39).
Recommendation Any provision made against assets should have supporting documentation and a basis of calculation.

Management Comments No comments provided by the Authority.

4.12 Maturity Mismatch and Absence of ALCO Committee The audit noted absence of an effective Assets and Liabilities Committee.

The Authority does not use maturity ladders to compare cash inflows and outflows daily and over a series of time bands to calculate cumulative net excess of deficit funds at selected maturity dates.
This would be a useful tool to determine net funding requirements by analyzing its present and future cash flows based on assumptions of the behaviour of the assets, liabilities and off-Balance Sheet items.

This would assist in assessing the liquidity.

The Authority may face liquidity risks in the absence of proper cash flow forecasts or planning.

Improper decisions may be made in absence of proper cashflow forecasts.

Recommendation An Assets and Liabilities Committee (ALCO) should be set up.
This will oversee the Authority’s plan in managing liquidity risk and assist in dealing with these issues in greater detail before deliberation by the full board.

Management Comments No comments provided by the Authority.

4.13 Squatter Resettlement The Authority incurred an expenditure of $327,764 on behalf of Ministry of Health for squatter resettlement.

However, the audit noted that this amount is yet to be recovered from Ministry of Health.
No confirmation or arrangement of recovery has been made with the Ministry.

In addition, no recovery plan exists in the Authority.

If the Authority does not take any immediate action to collect this debt, the amount may be deemed as doubtful.

Recommendation The Authority should start liaising with the Ministry of Health for the recovery of $327,764.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 8 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments No comment was provided by the Authority.

4.14 Provision for Repairs to Infrastructure and Medical Insurance The Authority had made a provision for repairs (Infrastructure & Houses) and medical insurance.

Audit did not receive any supporting documentation or basis to justify this provision.
Standard accrual journals are processed each month.

Bulk of this amount has been carried forward from past year.

IAS 37.C11 states that "Repairs and Maintenance of own assets cannot be provided for since these costs are associated with future use of assets.

These costs are generally expensed when incurred."

The total provision made for repairs and medical insurance at 31 December 2010 amounted to $1,033,240.

Refer to the Table 4.1 below for details.
Table 4.1: Details of Provisions Made Account Provision for Repairs - Infrastructure Amount ($) 933,240 Monthly journals are passed without any basis of Remarks calculation Provision for Medical Insurance 100,000 Monthly accruals passed and maximum limit per Total 1,033,240 annum is $100,000 The provision made for repairs should be supported by a legal obligation to repair infrastructure and houses (a contract) or the Authority has to demonstrate a constructive obligation (through prior practice) to support the making of this provision.
On the other hand, the Authority’s current policy is to cater for medical expenses of staff up to $100,000 per annum.

Therefore, the total provision made for medical expenses should be a maximum of $100,000 less any amount utilised during the year.

To conclude, the recognition of liabilities which do not meet the recognition criteria under IAS 37 results in non-compliance with the financial reporting framework of the Authority.
Recommendation The financial statements prepared by the Authority should comply with the requirements of its adopted financial reporting framework and IAS 37.

Management Comments No comment was provided by the Authority.

4.15 Capital Accruals The Authority has made capital accruals based on its budget but no present obligation existed for the accruals at balance date as contracts or purchase orders have been issued to suppliers.
Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 9 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji No supporting details were provided for these capital accruals.

The lack of a present obligation indicates that there is no liability.

There is a risk that liabilities are overstated at balance date.
Recommendation Management ensure liabilities are only recognised once contracts with external parties are signed or purchase orders issued committing the Authority to the purchase.

Management Comments No comment received from the Authority.

4.16 Liquidity Risk Management The audit noted that there is no Assets and Liabilities committee of the Board to oversee liquidity risk.

Audit has not reviewed any liquidity risk management tool used by the Authority.
The management of liquidity risk appears to be performed on an informal basis and based on management’s review of financial information from time to time.

Using an effective liquidity risk management tool is important for a lending institution to minimise credit exposure and effectively match debt repayments from cash flows and/or refinancing.
The lack of formal Board monitoring on liquidity risk and without an effective liquidity risk management tool there is a risk that the Authority can find itself in a liquidity crisis that could affect going concern and business reputation.

Recommendations  An Assets and Liabilities Committee of the Board be set up.

 The Authority’s management of liquidity risk should be formalised and an effective tool be designed or used to manage this risk.

Management Comments No comment received from the Authority.
4.17 Provision for Stock Obsolescence - Criteria Provision against land and houses is based on internal valuation reports.

If the book value was greater than the valuation, the Authority creates a provision for the difference.

Other factors such as land disputes, free-rider problems, unbuildable lands and land erosion has been ignored in the assessment of provision by the Authority.

These factors should be reviewed with necessary amendments made to the provision.
The state and circumstances of these properties may have changed since valuation date.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 10 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Apart from this, the audit also noted the inclusion of some land which may not be sold such as those land classified as either Civic, School, Community, playground etc.

The provision for stock obsolescence may be incorrect.
Recommendation Management should ensure that all factors affecting the value of the land and houses must be considered in assessing the provision for stock obsolescence.

Management Comments No comment was provided by the Authority.

4.18 Ageing of Inventories On average, land and houses in inventory has been held for 11.48 years.

This indicates that the Authority is facing difficulties in selling them.

The Authority has not made any provision for impairment for some of these.
Some land cannot be sold due to illegal occupants not willing to move, properties occupied by religious groups, disgruntled tenants, squatter settlement, landslides and some are unbuildable lots.

The provision for stock obsolescence has not been re-assessed at year end taking into consideration the above factors.

As a result the provision may be incorrect.

Recommendation Management should consider stock ageing when assessing the provision for stock obsolescence.
Management Comments No comment was received from the Authority.

4.19 Stale Cheques The stale cheques account has not been cleared in a timely manner.

Cheques have been carried forward from 2003 and those more than six months old amount to $241,236.

No proper review of this account has resulted in the balance being accumulated over time.

Recommendation Management should ensure all account reconciliations are reviewed and long outstanding items be cleared accordingly.
Management Comments No comment was provided by the Authority.

Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 11 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 4.20 Credit Balance Refund Incomplete “Credit Balance Refund” account reconciliation was provided for both the West and Central accounts.

It had an opening balance of $11,159 and $64,194 respectively for which no breakdown is available.
The lack of reconciliation may increase the risk of fraud and error.

Recommendation Management should ensure that all account reconciliations are prepared and reviewed in a timely manner.

All reconciling items must be cleared with proper authorization.
Management Comments No comment was provided by the Authority Report of GCC, CSA, & Off Budget State Entities – December 2011 Page 12 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 5: PACIFIC FISHING COMPANY LIMITED Pacific Fishing Company Limited (PAFCO) has been trading since 1987 and is owned principally by the Government of Fiji.
The company is 98% owned by the Government of the Fiji Islands with local investors owning the remaining 2%.

The company is controlled by board of directors appointed by the Government.

The principal activity of the company is processing and canning fish for local and overseas markets.
Table of Content 5.1 5.2 5.3 SECTION 5: PACIFIC FISHING COMPANY LIMITED ............................................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion - 2010 ................................................................................................................................................ 1 Abridged Income Statement .................................................................................................................................... 1 Abridged Balance Sheet .......................................................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 General Ledger –Reconciliations and Adjustments ................................................................................................. 3 5.4 Revenue and Cash Receipts ................................................................................................................................... 4 5.5 Journal Vouchers ..................................................................................................................................................... 4 5.6 Value Added Tax (VAT) Returns ............................................................................................................................. 5 5.7 Bank Account and Reconciliations .......................................................................................................................... 6 5.8 Assets - Impairment ................................................................................................................................................. 6 5.9 5.10 Minutes for Commitment ......................................................................................................................................... 7 PART A – FINANCIAL INFORMATION 5.1 Audit Opinion - 2010 The audit of the financial statements of the Pacific Fishing Company Limited for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
5.2 Abridged Income Statement Items Revenue Sales Other Income Total Revenue Cost and Expenses Cost of Production Finance costs Administration expense Total Cost and Expenses Operating (loss)/profit before income tax Income tax benefit/(expense) 2010 $ 2009 $ 29,896,444 1,155,509 31,051,953 29,074,905 1,576,581 30,651,486 28,184,249 286,996 1,164,004 29,635,249 1,416,704 (182,485) 26,564,199 313,632 1,070,165 27,947,996 2,703,490 418,383 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Items Net (loss)/ Profit for the year after Income Tax 2010 $ 1,234,219 2009 $ 3,121,873 The company recorded a net profit of $1,234,219, which is a significant decrease of $1,887,654 from $3,121,873 recorded in 2009.
This is attributed to the increase in total expenditure by $1,687,253 or 6% in 2010.
5.3 Abridged Balance Sheet As at 31 December Current Assets Cash at bank and on hand Trade receivables Inventories Other receivables Total Current Assets Non Current Assets Property, plant and equipment Deferred tax asset Total Non Current Assets Total Assets Current Liabilities Interest bearing borrowings Trade and other payables Provisions Total Current Liabilities Non-Current Liabilities Deferred income Deferred tax liability Total Non Currents Liabilities Total Liabilities Net Assets Total Shareholder’s Equity Share Capital Retained earnings 2010 $ 2009 $ 48,630 4,079,404 4,666,364 1,821,086 10,615,484 10,354 3,584,996 3,548,761 2,103,042 9,247,153 23,320,730 1,118,957 24,439,687 21,950,562 1,317,682 23,268,244 35,055,171 32,515,397 5,005,311 3,070,331 93,532 8,169,174 3,906,313 2,609,432 74,281 6,590,026 5,654,421 - 5,654,421 5,911,774 16,240 5,928,014 13,823,595 12,518,040 21,231,576 19,997,357 14,800,000 6,431,576 21,231,576 14,800,000 5,197,357 19,997,357 The company’s net asset position was strengthened by $1,234,219 or 6% in 2010 compared to 2009.
The increase in net assets was due to the increase in Property, Plant and Equipment.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji PART B – CONTROL ISSUES 5.4 General Ledger –Reconciliations and Adjustments Based on our review of books of account and reconciliations, we are of the view that the quality of reconciliations and maintenance of accounting schedules and records requires improvements.
The following anomalies were noted:     Considerable time was taken up during our audit to identify the required adjustment entries and amounts, in order to process the entries in the financial statements for the year ended 31 December 2010.

During our year-end audit, more than 30 late annual adjustments were processed, including reclassification adjustments.

These adjustments were identified by us during our audit.
There were delays in providing statutory financial statements and tax worksheets in accordance with International Financial Reporting Standards (IFRS’s).

Subsequently, when statutory financial statements and tax workings were provided, our review revealed further errors and omissions in tax effect reconciliations and disclosures.

Accordingly, additional disclosure and policy notes were compiled to meet IFRS requirements.
The number and nature of adjustments indicate that reconciliations and review of account balances are not carried out critically and diligently.

As such, there is a need to improve reconciliation processes, review processes, and year end reporting processes.

Inadequate and inconsistent controls in reconciliation review process could lead to inaccurate accounting recording and reporting.
Recommendations  Reconciliation process is a key control and should be used to identify and correct anomalies or miss-postings.

For this control to work successfully, reconciliations must be prepared and reviewed consistently on a monthly basis by independent senior personnel and signed as evidence of the review.

 The company should improve its preparation of monthly and annual accounts ensuring accurate balances are incorporated and year end adjustments are kept at minimal.
 Late adjustments should be kept at minimum as it affects the timely completion of the audit and results in delay in finalisation of audit and reporting.

Company’s Comments Proper preparation of monthly and annual accounts will be done to keep year end adjustment entry at minimal level.

Before final papers are forwarded, individual accounts will be thoroughly reconciled and reviewed by senior personnel.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 5.5 Revenue and Cash Receipts Review of the receipts issued for Levuka gate sales, noted that certain receipts were not posted into the system nor deposited in the bank.
Upon discussion with Financial Controller, it was noted that a sum of $58,610 out of the total unaccounted receipts of $79,785 were recovered and recorded respectively.

However, $21,175 worth of receipt remained unaccounted as at 31/12/10.

The matter has been reported to the police.

In addition, on number of occasions significant delays were noted on lodgement of revenue receipts.
Refer to Table 5.1 below for examples: TABLE 5.1: DELAYS IN BANK LODGEMENT Receipt Number 86173 86245 86596 86734 87236 87664 87701 91432 Receipt Date 25/02/10 03/03/10 29/03/10 06/04/10 04/05/10 27/05/10 02/06/10 24/03/10 Receipt Amount $ Date Deposited 98.00 90.00 120.00 30.00 60.00 180.00 66.00 181.50 14/05/10 18/05/10 20/05/10 10/06/10 15/07/10 31/08/10 31/08/10 31/03/10 The supervising officer failed to scrutinise the work performed by the subordinate officers with due diligence and care.
Failure to this has resulted in misappropriation of substantial amount of revenue.

Recommendations  The systems and procedures including internal controls relating to revenue recording, receipting, banking, updating of books and reconciliation process should be reviewed and enhanced for gate sales.

 The receipts must be reconciled and banked on a daily basis.

This needs to be verified by the supervising officer.

 PAFCO should consistently follow up with police on the status of the report.
Company’s Comments All the receipts are reconciled and banked on daily basis.

The practice is done from late October 2010.

The supervising officer as well as Financial Controller ensures that all receipts are banked.

The report is being followed up on a timely basis 5.6 Journal Vouchers Our review of journal entries noted that copy of journal vouchers are not printed and filed.

Instead all journal vouchers are maintained in the system.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Furthermore, the journals processed during the financial year were not printed and approved by independent senior person.

As such, audit was unable to verify the authorization and approval of these journals before being entered into the system.
This matter was also highlighted in prior years audit reports, however no improvement is noted.

Recommendations:  All journal entries should be well documented with proper reference to the amounts in supporting documents and details, and be initialled by the person preparing the journal and the person approving them.

 To ensure the accuracy of information processed, all journal entries be prepared by a competent personnel and should be reviewed and authorized by an independent person.
 Complete narrations should be written for all journal entries with this information recorded in the journal file.

Company’s Comments Before any journal is passed in the system, it is approved by senior personnel by referring to proper details attached.
5.7 Value Added Tax (VAT) Returns Audit noted the following anomalies in relation to VAT:     High level indicative difference of $472,421 on comparing the total taxable supplies as per the VAT return and Vatable revenue as per the financial statements, whereby the total taxable supplies as per the VAT returns was understated.

The difference was a result of VAT not charged on miscellaneous income such as fish eggs sales and service fees.
VAT input claim amounting to $41,427 was recorded in general ledger, however this was not recorded in the VAT returns lodged for the month.

Delay in lodgement of VAT returns.

Inaccurate and delay in lodgement of VAT returns could result in unnecessary penalties being imposed by Fiji Revenue and Customs Authority.
Recommendations  The Management of PAFCO should carry out special review of VAT recording and VAT returns preparation procedure with a view to improve the existing system and thereby ensuring the risk of potential VAT liability and penalties is reduced.

 The Management should also ensure timely and accurate lodgement of VAT returns with adequate supporting details.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Company’s Comments PAFCO has already started practicing to charge Vat on income such as fish egg sale, drums, services fees etc.

This will give true picture of vatable revenue.

At the same time, we will ensure that Vat is lodged on timely basis.
5.8 Bank Account and Reconciliations Our review of bank reconciliations revealed the following:  Main operating overdraft account (account #: 1471030000) with Westpac Banking Corporation had exceeded its overdraft limit.

Details are as follows: Balance as per bank statement as at 31/12/10 Overdraft limit $ 3,841,904 3,500,000 Amount in excess $ 341,904  No evidence of independent check and date of review of the bank reconciliations.
Failure to check the bank reconciliation on a timely basis could result in misappropriations being concealed.

Also, excess fees could be charged on the excess overdraft amount.

Recommendations  The Management of PAFCO should critically review the cash flow position and monitor its cash flow needs on a continuous basis.

 Bank reconciliations should be signed by preparer and by person reviewing and approving the reconciliations.
Company’s Comments Cash flow is daily monitored by the Financial Controller and the CEO to ensure that PAFCO is always operating below its maximum overdraft limit.

Bank Reconciliations are also signed by the officer preparing it and by the FC on a monthly basis.

5.9 Assets - Impairment The company has significant investment in property, plant and equipment.

Recently, the company has made significant investments in building, plant and equipment.
Impairment of assets test should be carried out in a structured manner at each reporting date and its outcome should be documented.

International Financial Reporting Standards and best accounting and reporting practices require that the entity should undertake impairment assessment in a structured manner with adequate documentation.

The company should continuously review the current value of all assets and in particular, processing equipments ensuring that the carrying values are not impaired.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The Company should assess at each balance date whether there is any indication that an asset has been impaired.

Where a risk of impairment exits, the Company should perform impairment assessment, in a structured manner, and maintain documentation.
Company’s Comments The company will carry impairment of asset test and maintain documentation at balance date.

5.10 Minutes for Commitment Minutes for approval by the Board for capital commitment amounting to $3,860,000 were not made available for our review.

In absence of the proper documentations of the approvals it is difficult to ascertain the authorisation of the capital commitment.
Recommendation The Company should maintain complete set of Board minutes to document all resolutions of the board during the year.

If the approval has not been documented previously, then it needs to be discussed and documented in the next Board meeting.

Company’s Comments Agreed.


Report of GCC, CSA & Off Budget State Entities – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 6: POST FIJI LIMITED On 1 July 1996, Post Fiji Ltd began operation as a Government Commercial Company and is registered and incorporated under the Companies Act as a private company with the shareholding wholly owned by the Government.
The company is managed by a Board of Directors, appointed by the Government.

The core activities of the company include message communication in letters and distributing courier and parcel items.

It also provides stamps, financial transactions, telegram services, data processing and mail production services.

Over the years, the company has also diversified its revenue earning activities to include Post Shops and agency services.

.
Table Of Content 6.1 6.2 6.3 SECTION 6: POST FIJI LIMITED ............................................................................................................................................. 1 PART A – FINANCIAL INFORMATION .................................................................................................................................... 1 Audit Opinion 2010 ................................................................................................................................................. 1 Abridged Statement of Financial Performance ....................................................................................................... 1 Abridged Statement of Financial Position – Balance Sheet ................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................. 3 Inventory Costing .................................................................................................................................................... 3 Fraud in the Money Order Account ........................................................................................................................ 4 Inventory Control .................................................................................................................................................... 4 Profit Margin ........................................................................................................................................................... 5 Tender Irregularities ............................................................................................................................................... 5 Debtors Control ...................................................................................................................................................... 6 Data Backups ......................................................................................................................................................... 6 No Assets Tag ........................................................................................................................................................ 7 Debtor Account not Updated for Dishonored Cheque ............................................................................................ 7 Trust Account ......................................................................................................................................................... 7 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 PART A – FINANCIAL INFORMATION 6.1 Audit Opinion 2010 The audit of the financial statements of the Post Fiji Limited for the year ended 31 December 2010 resulted in the issue of a qualified audit report as follow: The Balance Sheet includes inventory with the value of $3,976,454.
In practice, Post Fiji Limited uses the last in first out (LIFO) formula to measure the cost of inventories, contrary to its accounting policy and the International Accounting Standards 2 – Inventories, which only allows the use of either first in first out (FIFO) or the weighted average for inventory costing.

The audit was not unable to determine the exact adjustment if FIFO method was used due to limitation of scope of audit.
6.2 Abridged Statement of Financial Performance Items Income Sales Revenue 2010 $ 2009 $ 11,013,522 13,340,059 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Items Other Operating Revenue Total Revenue Expenditure Cost of Sales Depreciation and Amortisation Expenses Employee Benefits Expense Administration and Operating Expenses Selling, Marketing and Distribution Expenses Other Operating Expenses Finance Costs Total Expenditure Operating (loss)/profit before income tax Income tax benefit/(expense) Net (loss)/ Profit for the year after Income Tax 2010 $ 15,160,454 26,173,976 2009 $ 15,714,859 29,054,918 9,157,298 1,122,053 6,804,765 9,645,950 241,074 50,001 228,164 27,249,305 (1,075,329) 279,834 (795,495) 11,682,498 1,056,881 6,621,677 7,844,916 616,415 51,537 400,200 28,274,124 780,794 88,845 869,639 Post Fiji Limited recorded a net loss after income tax of $795,495 in 2010 compared to a surplus of $869,639 in 2009.
The decrease in sales revenue by 17% in 2010 contributed towards the net loss after tax.
6.3 Abridged Statement of Financial Position – Balance Sheet As at 31 December Current Assets Cash and Cash Equivalent Trade and Other Receivables Financial Assets – held to maturity Inventories Other Current Assets Total Current Assets Non Current Assets Financial Assets – held to maturity Property, Plant & Equipment Deferred Tax Asset Intangible Assets Total Non Current Assets Total Assets Current Liabilities Trade & Other Payable Interest Bearing Borrowings Employee Entitlements Provision for Income Tax 2010 $ 2009 $ 2,069,483 5,090,590 1,200,000 3,976,454 470,717 12,807,244 3,873,022 6,366,557 1,200,000 5,035,768 324,393 16,799,740 100,000 12,008,321 694,072 806,155 13,608,548 100,000 13,409,750 536,898 60,452 14,107,100 26,415,792 30,906,840 9,311,491 1,334,520 493,001 (347,232) 9,998,672 2,496,785 542,872 225,428 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji As at 31 December Total Current Liabilities Non-Current Liabilities Trade and Other Payables Interest Bearing Borrowings Employee Entitlements Deferred Income Total Non Current Liabilities Total Liabilities Net Assets Total Shareholder’s Equity Share Capital Accumulated Profits 2010 $ 10,791,780 2009 $ 13,263,757 1,766,482 941,043 222,840 788,577 3,718,942 1,768,894 1,619,513 306,549 812,742 4,507,698 14,510,722 17,771,455 11,905,070 13,135,385 5,600,000 6,305,070 11,905,070 5,600,000 7,535,385 13,135,385 Post Fiji’s net assets declined by $1,230,315 or 9% in 2010 compared to 2009.
This was due to the decreases in cash and cash equivalent (47%), trade and other receivables (20%), inventories (21%) and property, plant and equipment (10%).

Total liabilities also declined by 18% in 2010.

PART B – CONTROL ISSUES 6.4 Inventory Costing Post Fiji Ltd uses the last-in-first-out (LIFO) formula to measure the cost of inventories.

Under International Accounting Standard (IAS) 2 – Inventories, the LIFO as a cost formula is prohibited.
IAS 2 allows the use of both the first-in-first-out (FIFO) and the weighted average method for inventory costing.

The LIFO method treats the newest items of inventory as being sold first.

This is not a reliable representation of actual inventory flows.

The new inventory module system in IMAS was supposed to solve this problem, however relevant modifications required in IMAS module to support FIFO costing method is not yet done.
An incorrect valuation of inventories at year end using the LIFO method of valuation was recorded and this has resulted in the overstatement of inventories.

Recommendation Management should liaise with the IMAS and Web Riposte Essentials (WRE) programmers to customize the costing in the inventory module to comply with IAS 2 costing of FIFO or weighted average costing.

Company’s Comments Your recommendation is noted and work has been done to address this.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 6.5 Fraud in the Money Order Account Fraud of $257,700 was committed by the Accounts Clerk in charge of money order reconciliations and the General Post Office (GPO) cashier in the money order account.

This was discovered after there was a rotation of duties of staff.
The two staffs were terminated and the case was reported to FICAC.

The company has stated that $320,709 (including prior year amounts) is recoverable from Money Order Shortage insurance.

However, this amount will be provided as doubtful in 2011 if the amount is not recovered during the year.

Inadequate controls over money order procedures increases the risk of misappropriation of cash by staff.
Recommendations  Management should rotate the Post Master Business Account (PMBA) reconciliations among the staff on a regular basis and ensure that all money order forms for offline stations paid to be strictly cancelled with a ‘Paid Stamp’ to reduce the risk of misappropriation of cash.

Senior staff should review monthly PMBA reconciliations on a timely basis.

 Company’s Comments Corrective measures have now been taken.
This includes monthly reconciliation from January 2011 and daily reconciliation from September.

In addition to this, reconciliation are now reviewed by the line manager.

6.6 Inventory Control There were several variances in the year end stock take for online Post shops when compared to the perpetual records.

The surplus and shortages are aggregated to an extrapolated overstatement of $68,254.
Some examples of variances noted are shown in Table 6.1 below: TABLE 6.1: VARIANCE IN INVENTORY RECORDS Location Code Description Suva Suva Suva Nausori MR382 MS866 MM795 MB652 String Name Card Holder Glue Stick BIC 21g Umbrella Local Myths Legends Fiji & Rotuma Perpetual quantity variance – surplus/ (shortage) Surplus/ (shortage) $ 620 480 96 30 415 994 384 210 Inadequate control over inventory at Post shops increases the risk of misappropriation of assets by staff.
Recommendation Management should ensure that stock take variances against perpetual inventory are properly investigated for theft, error in counting or recording.

Report of GCC, CSA & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Company’s Comments Your recommendation is noted.

We will be informing the Postmasters on this issue.
6.7 Profit Margin Upon performing sales to cost of sales analysis, audit noted that the percentage profit margin over cost of sales was not realistic for some products: Refer to Table 6.2 below for details.
TABLE 6.2: ERRORS IN CODING FOR COST OF SALES Product Cards Household consumables Miscellaneous Code 500/562 500/566 500/568 Total Sales ($) 23,064 6,302 123,364 Total COS ($) 23,829 92,136 811,184 Margin ($) % over COS (764) (85,834) (687,820) (3%) (93%) (85%) The above is anomaly is due to errors in coding of cost of sales (COS) to products for off-line stations.

This results in distorted sales to cost of sales analysis which cannot be relied on by management for decision making.
Recommendation Management should ensure that cost of sales (COS) is properly allocated to correct account.

Company’s Comments Your comments are noted and the issue are currently being addressed.

6.8 Tender Irregularities The following irregularities were noted in the tendering process and documentations:    For tender for supply of groceries/frozen and household goods, bidders were required to submit $50 non refundable deposit with tender.
However, the audit noted that in the tender file four cheques from bidders; Bidder 1, Bidder 2, Bidder 3 and Bidder 4 were still attached to tender documents and not banked.

Also there is an envelope from the 5th Bidder containing $50 dollars cash.

There was no evidence for approval of tender for sale of motorcycle fleet filed in the tender file.

Management has not provided audit with reason for tender approvals not being filed.
No tender committee meeting minutes were filed in the tender file for the sale of motor cycles.

It appears that the tender has not yet been finalised and awarded to any bidder.

Furthermore management could not provide us with reasons as to why the tender was not awarded to any bidder.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji   Tender documents were not filed in an orderly manner.

All tender documents are held in a loose manila folder; and Tender file for the supply of fuel was not provided to audit.

Non compliance with the tendering process and proper documentation increases the risk of fraud and error.
Recommendation The Management should ensure that the tender process and documentation requirements are strictly adhered to.

Lack of compliance with the guidelines set out in the Corporate Manual exposes the company to risk of loss and fraud.

Company’s Comments The tender process is currently being reviewed.

6.9 Debtors Control Poor debt collection was noted as 66% ($3.4m) of debtors are over 90 days.

This was attributed to poor record keeping.


Furthermore, credit limits were not established for all customers in the IMAS system.

Only new customers credit limits were established.

In addition, in the WRE (point of sale) system credit limits were not established at all.

There is a risk that debtors would default in payment.

As a result, this will have a negative impact on the company’s cash-flow.

Recommendations  Management should ensure that records are corrected to improve debt collection.
 It should continually review the application of its credit policies to ensure that only credit worthy customers receive credit.

It should establish credit limits to all its customers in order to avoid excessive credit given to customers.

 Company’s Comments Your comments are noted.

However, the current WRE system does not have provision for the insertion of credit limits into the credit account details.

The issue has been brought to the attention of the WRE supplier.
6.10 Data Backups Management has provided, as doubtful debts of $195,976 which is equivalent to 88% of the total Post shop debtors.

The reason for this provision was when the company was using QuickBooks system in 2009, it crashed in September 2009 and no backup was available to recover lost data.

Hence, management was not able to provide documentations for customer disputes in relation to payments of long outstanding debts.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Lack of adequate backups resulted in irrecoverable loss to the company.

Recommendation Management should ensure that data backups are performed on a regular basis.

Company’s Comments Your commnets are noted and back ups are currently being performed and stored offsite.
6.11 No Assets Tag Fixed assets are not tagged by the company despite a board of survey being conducted during the year.

This implies that fixed assets cannot be identified and verified with ease.

Recommendation Management should tag each asset with a unique ID number.

Company’s Comments Your comments are noted.

The matter will be reviewed.


6.12 Debtor Account not Updated for Dishonored Cheque Post Fiji Limited has not updated individual debtor accounts for dishonored cheques but has created and posted all dishonored cheques to a dishonored cheque account.

Examples include Lihave Investments and the Australian High Commission.
There is a risk that the company will not be aware of the true status of debtors at a given point in time and may grant further credits to the debtor even though the debtor still has outstanding balances.

Recommendation Management should ensure that individual debtor accounts are updated accordingly for dishonoured cheques.

Company’s Comments Your comments are noted and this is currently being done.
6.13 Trust Account Local money order, bill pay and deposit money amounting to $4,630,019 received from customers are banked into Post Fiji Limited’s operating account.

Under the Trust Act, Post Fiji Limited needs to hold these funds in a trust account and not in the operating account.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Trust funds are used by the company as its own money.

Recommendation Management should set up a trust account to hold funds separately for trust deposits.

Company’s Comments Your comment is noted.


However, the current practice as noted above is prudent in light of the nature of how trust funds are being kept and managed.

We will however bring this to the attention of our line ministry.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 8 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 7: FIJI PUBLIC TRUSTEE CORPORATION LIMITED Programme Statement The Corporation was established through the Fiji Public Trustee Corporation Act 2006.
The principal activity of the Corporation is to act as a custodian and provide administrative services to estates of those persons who are deceased, of unsound mind or persons incapable of conducting their own affairs.
Table of Content 7.1 7.2 7.3 SECTION 7: FIJI PUBLIC TRUSTEE CORPORATION LIMITED ............................................................................................................. 1 PART A – FINANCIAL INFORMATION ...................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Income Statement .................................................................................................................................... 1 Abridged Balance Sheet .......................................................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Inadequate size of Board ......................................................................................................................................... 3 Risk Management Policy ......................................................................................................................................... 3 Individually Held Investments Not Stated At Market Value ..................................................................................... 4 Balancing Off Item ................................................................................................................................................... 4 Overstatement of VAT ............................................................................................................................................. 5 Debit balances in the Trust Account ........................................................................................................................ 6 Discrepancies in the Closed Trust Account Files .................................................................................................... 7 Discrepancies in the Interest due for Distribution Reconciliation ............................................................................. 8 Discrepancies in Interest Distribution ...................................................................................................................... 9 Discrepancies in Fee & Other Payables to Corporation from Trust Account ......................................................... 10 Over Provision for Impairment against Investments .............................................................................................. 11 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 PART A – FINANCIAL INFORMATION 7.1 Audit Opinion The audit of the financial statements of the Fiji Public Trustee Corporation Limited for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
7.2 Abridged Income Statement Year ended 31 December Revenue Fees Interest income Aid Other revenue Total revenue Expenditure General and administration expenses 2010 ($) 2009 ($) 815,807 1,032,584 70,607 24,697 1,943,695 785,293 768,391 33,075 5,614 1,592,373 275,859 260,151 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Year ended 31 December Selling expenses Staff and employee costs Total expenditure Operating profit before income tax Income tax expense Net profit after income tax 2010 ($) 10,715 446,178 732,752 1,210,943 340,343 870,600 2009 ($) 5,030 478,125 743,306 849,067 246,304 602,763 The Corporation recorded a net operating profit after tax of $870,600 compared to a net profit after tax of $602,763 in 2009.
The increase in operating profit was due to increase in interest income which is attributed to better investment returns and recording of gross amount for interest income that was previously stated net of resident withholding tax.
7.3 Abridged Balance Sheet As at 31 December Assets Cash and cash equivalents Trade and other receivables Other current assets Deferred tax asset Financial assets Property, plant and equipment Intangible assets Total Assets Liabilities Deferred revenue Trade and other payables Provisions Deferred tax liability Total Liabilities Net Assets Shareholders’ Equity Share capital Share premium reserve Capital reserve Retained earnings Total Shareholders’ Equity 2010 ($) 2009 ($) The company’s net asset decreased by $2,078,971 or 21% in 2010 compared to 2009.
The decrease is attributed to the payment of $3,000,000 to Government in the form of dividend and share of capital reserve.

The payment required the Corporation to withdraw significant amount of investment to facilitate the payment resulting in the decrease in net assets of the Corporation.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji PART B – CONTROL ISSUES 7.4 Inadequate size of Board In terms of its composition, size and commitment the Board of the Corporation should be structured in a way that it effectively carries out its responsibilities.
It is good practice to have a right size and mixture of Board of Directors for the proper oversight and control of the entity.

The Corporation had three directors until 16th July 2010 and 2 directors from that date until 31 December 2010.

The audit considers that the size of the Board is inadequate considering the size and the nature of the Corporation’s operation.

Inadequate size of the Board can have an effect on the effective overseeing of key aspects and control functions of the Corporation.
Recommendation It is highly imperative that a correct size and mixture of Board is maintained at all times.

This will ensure that important business matters of the Corporation are properly deliberated and important decisions properly taken.

Corporation’s Comments Board appointments for the Corporation are made by the Minister after consulting the Minister of Justice and with the endorsement of the Prime Minister in accordance with Article.37 (a) of the Articles of Association of FPTCL.
Board is aware of this limitation and has consulted the Minister and the Ministry on a number of occasions on this matter.

At this stage it is beyond the scope of the Board and Corporation as these are mandated by shareholders.

7.5 Risk Management Policy Risk Management Policy involves identification, measurement and control of key risks that impacts on the financial affairs and operations of the Organizations.
The Fiji Public Trustee Corporation Limited has no written Risk Management Policy in place to address possible risk issues that may affect its operations.

The Corporation’s major financial and operational risk areas include Corporation and Trust’s investments with Financial Institutions and safeguard of the Trust files.

The absence of Risk Management Policy can have a detrimental effect on the Corporation both financially and operationally.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The Corporation should prepare a written policy on Risk Management to safeguard the Corporation from any potential loss.

Corporation’s Comments The Corporation notes the recommendation and will be sorting Board decision on the implementation of an Integrated Risk Management system for the company.
7.6 Individually Held Investments Not Stated At Market Value Financial assets should be classified as fair value in accordance with IFRS IAS 39.1 The Trust Individual Investments held with Unit Trust, Amalgamated Telecom Holdings and Fijian Holdings Unit Trust were not reported at fair value.

The measurement of individually held investments is not in accordance with the prescribed treatment under IFRS IAS 39.

Accordingly, the General Ledger balance may be misstated.
Recommendation The Corporation should report individually held investment to fair value in the books of the Trust.

Corporation’s Comments The market value of investments held with Unit Trust of Fiji, ATH & Fijian Holdings Unit Trust was not readily available as at year end closing.

However, adjustments to the value of Unit Trust of Fiji investments were adjusted on January 1st 2011 once the information was provided by Unit Trust of Fiji.
Going forward, the corporation will try and ensure that investment values are adjusted to reflect fair market value as at year end.

7.7 Balancing Off Item Any adjustments made to the amounts reported in the financial statements should be appropriately supported.
Audit noted that the Corporation passed an adjustment made to a ledger account, Receivable from Trust Others amounting to $33,183.21 in order to balance the general ledger account, Receivable from Trust to the independent reconciliation carried out by the Corporation.

Audit was not able to verify the accuracy of this adjustment due to lack of supporting documents.

There is a risk that the adjustment may result in overstatement of Accounts Receivable in Corporation’s balance sheet.
1 International Accounting Standards (IAS) 39- Recognition and Measurement of Financial Instruments Report of GCC, CSA & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The Corporation should investigate the difference in general ledger and the reconciliation and take corrective actions to correct its general ledger.
Corporation’s Comments The management is currently working on rectifying all the reconciliations for the receivable account to correct the general ledger as per the recommendation.

This arise from the clearing of the accounts receivable when the corporation tried to clear prior years receivables after the audit of 3 years accounts.

The corporation was required to reflect a true and correct financial position after the 3 years audit was left with those un-reconciled differences.
7.8 Overstatement of VAT The net amount receivable or payable in respect of VAT should be included as part of accounts receivable or payable.

Assets should be recorded net of VAT if the TAX is recoverable.2 The Corporation’s VAT account should be reconciled on a monthly basis with the statement of VAT account issued by Fiji Revenue and Customs Authority.
The monthly reconciliations will allow Corporation to identify and rectify the understatement or overstatement of VAT input and VAT output in the VAT returns on a timely basis.

Registered persons providing exempt supplies and all persons other than registered persons incur irrecoverable VAT on their related inputs.

For these persons, VAT increases the cost of the goods and services they supply.

VAT should therefore be included in such costs.


In particular in these circumstances VAT on fixed assets should be added to the purchase cost of the fixed assets concerned.3 Audit noted the following anomalies:  As per VAT reconciliation with the Statement of VAT account, VAT payable to Fiji Revenue and Customs Authority, as at 31 December 2010 was more than the amount in the financial statement.

Refer to Table 7.1 for details.


Table 7.1: Variance in VAT Particulars VAT payable as per VAT Reconciliation VAT receivable as per Financial Statements Variance Amount ($) 17,435 (19,935) 37,370  The Corporation did not prepare monthly VAT reconciliations for the year 2010.

As a result, current asset in the financial statement was overstated by $19,935 while current liability was understated by $17,435.
2 Fiji Accounting Standard 103 – Section 7 3 Fiji Accounting Standard 103 – Section 8 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation Monthly VAT reconciliations should be prepared comparing the Corporation’s records and FRCA’s statement of VAT account.
Variance arising thereon from the reconciliation should be properly investigated and resolved.

Corporation’s Comments Since incorporation, the Corporation was always lodging monthly Vat Returns but due to continuous delays in the receiving of Assessment from FRCA, we were not able to reconcile to agree with any statement of vat account.

Management will continue to persist with the following up with outstanding assessments and reconciliation of the Vat account accordingly with FRCA.
7.9 Debit balances in the Trust Account The company’s maintenance of trust accounts policy defines standards and procedures that are to be applied with the objective of maintaining accurate balances for individual trust accounts as well as all relevant records, through effective funds management.
The maintenance of accurate account balances falls within the jurisdiction of the Manager Finance & Admin (MFA) and the safeguarding of all relevant records and files is the responsibility of the Manager Trust and Estate (MTE).

4 The Company should not allow any trust/estate account to be overdrawn or have debit balance.
5 Trust accounts shall be subject to independent reconciliation and audit procedures by the Internal Auditor with priority given to accounts with debit balances.6 Scrutiny of the trust/estate General Ledger, statement of accounts and file records revealed that the following Trust accounts had a debit balance as at 31 December 2010.

Refer to Table 7.2 for details.


Table 7.2: Accounts with Debit Balance Account No: Account Type Account Initial 18392 FNPF 12536 FNPF 24529 FNPF 24230 FNPF MJS KNN JR SN 24637 FNPF KN Debit Balance as per statement of account ($) 28,076.74 10,476.75 Reason for the Debit Balance Incorrect opening balance entered in trustsoft on 02/04/06.

Incorrect opening balance entered in trustsoft on 02/04/06.

The correct balance on 02/04/06 was $24,996.20 but only $14,160.75 was entered.
15,484.02 The receipt of $15,484.02 cheque from FNPF was not 25,586.51 entered in trust soft.

Incorrect opening balance entered in trustsoft on 02/04/06.

The correct balance on 02/04/06 was $25,858.51 but system had nil opening balance.

38,030.03 The receipt of $74,090.07 cheque from FNPF was not entered in trust soft.
This account still has a credit two balance of $40,937.44 to be distributed to 4 Fiji Public Trustee Corporation Limited – Finance Manual – Section 10.1 5 Fiji Public Trustee Corporation Limited – Finance Manual – Section 10.6.2 6 Fiji Public Trustee Corporation Limited – Finance Manual – Section 10.6.3 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Account No: Account Type Account Initial Debit Balance as per statement of account ($) Reason for the Debit Balance 24638 FNPF 13035 FNPF 2713 Estate 9064 Estate MC NR WN AR beneficiaries who are under 21 years of age but this accounts file was closed by the corporation.
16,553.53 The receipt of $16,554.62 cheque from FNPF was not 19,787.24 entered in trust soft.

Incorrect opening balance entered in trustsoft on 02/04/06.

The correct balance on 02/04/06 was $20,374.44 but system had nil opening balance.

42,838.96 The cane proceeds received from this estate are not sufficient to cover up the fees charged by FPTCL.

52,187.83 There is no source of income from this estate.

The property doesn’t meet OHS requirement therefore cannot be given out for rent.
Discussion with the Officer responsible of Trust and Estate accounts revealed that a huge number of files were not correctly vetted in 2006 by Accounting Firm KPMG.

Consequently, when payments were made subsequently relating to these accounts, it resulted in overdrawn balances of these accounts.

Debit balances exposes risk of incorrect payments to beneficiaries.

Recommendations  All Trust accounts with debit balances should be reconciled and adjusted accordingly.
 The Corporation should make every effort to ensure that trust files not vetted, are identified, reconciled and adjusted immediately.

Corporation’s Comments Majority of these accounts were part of those trust and estate accounts that were in the process of verification and update in the new TrustSoft system.

The debits were payments made for the respective beneficiaries with the credits placed in the deceased accounts or in the provision for monies held in trust.
The matching exercise in these cases is at its final stages and all of the Trust accounts now rectified.

The last two accounts, AC/No’s.

(2713 & 9064) are Estate accounts inherited from the old Public Trustee Office (PTO), which are still being administered by the FPTCL to-date.

The amounts are included as bad debts but are still to be recovered from the estates.

The FPTCL is mandated under the FPTC Act.2006 to continue to work towards recovering old PTO debts.
All debts recovered are added back to government reserves in the Corporation accounts.

7.10 Discrepancies in the Closed Trust Account Files Fiji Public Trustee Corporation Limited is required to maintain a file for each beneficiary.

Individual beneficiary’s file is created when court appoints FPTCL to administer any Trust or Estate.

Beneficiary’s file is close when full and final settlement is completed.
Verification of sample beneficiary’s files selected for audit revealed that some files are closed but its information in Trustsoft account was still active.

Furthermore, audit noted that statement of account for those beneficiaries had balance in it.

Refer to Table 7.3 for examples.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 7.3: Closed Files with Active Accounts Account No: Year file closed 18835 5283 2008 2004 Account Balance ($) 1,528.71 13,453.91 Discussion with the Officer in charge of Trust and Estate accounts revealed the following causes of the active balances:   the Corporation failed to debit distribution fees of $43.50 for account 18835 when it was closed in 2008.
As a result, interest is still being credited in this account.

account 5283 was closed in 2004, but its account was incorrectly created when Trustsoft was launched in 2006.

There is a risk that there may be other closed files with active accounts and there is likelihood that Trust Creditors control account may be overstated.

Recommendation Trust account files, which have been closed, should be looked at again ensuring that it is properly reconciled.
Any variance arising thereon should be reconciled accordingly.

Corporation’s Comments Trust & Estates Accounts are classified as “closed” when all issues pertaining to the management and administration of the Estate or Trust are finalised together will the full reconciliation of the Accounts, which should be with nil balance signed-off by the Manager Finance & Admin.
In the process a manual reconciliation is carried on the Accounts to be closed with all interest due and payable rectified and paid out accordingly.

This process has not been carried out on the two referred accounts and therefore not closed to date.

Furthermore, leading up to end of the financial year-end close all creditors subsidiary accounts will be reviewed to ensure that they continue to reflect a true status of the same.
7.11 Discrepancies in the Interest due for Distribution Reconciliation Certain accounts in the subsidiary and general ledger require monthly reconciliations.

All such reconciliations must be performed by the company accountant and evidenced as reviewed by MFA on the reconciliations.

7 The reconciliation done for interest due for distribution did not reconcile with the interest due for distribution as per general ledger.

Refer to Table 7.4 for details.
7 Fiji Public Trustee Corporation Limited – Finance Manual – Section 11.1 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 8 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 7.4: Variance in Interest due for Distribution Particulars Balance as per Interest due for distribution reconciliation Balance as per General Ledger Variance Amount ($) 1,644,058.30 1,800,499.71 (156,441.41) There is a possibility that interest due for distribution may be overstated in the financial statements for Trust and Estate Account.
Recommendation The variance should be investigated and the actual balance for interest due for distribution should be determined before the interest is distributed to the beneficiary’s accounts.

Corporation’s Comments The variances as discussed during the audit relates to the interest on interest amounts for the years prior to 2010 when we finally updated the prior year’s accounts since incorporation in 2006.
The interests distributed were based on the balances on the individual accounts excluding the interests, which were finalised in 2010.

The Corporation will be recalculating interest for the prior years and redistribute the variance amount to the beneficiaries.

7.12 Discrepancies in Interest Distribution Interest rate will be determined by the Board of Directors and is subject to change from time to time.
Interest will be calculated and recorded monthly based on the minimum daily balance at the forecast interest rate.

The interest is to be paid on yearly basis.8 The following anomalies were noted during the review of interest calculation and distribution:    the interests for 2007, 2008 and 2009 were distributed to the beneficiary’s account in 2010.
Audit noted that while calculating the interest for 2008, the Corporation failed to take into account the 2007 interest that should have been distributed in 2008.

Similarly, 2009 interest calculation did not take into account 2007 and 2008 interest that should have been distributed in 2009. variances were noted in the interest calculation and distribution by Trustsoft system and the interest calculated manually.
audit was unable to test the accuracy of the interest calculated by the Trustsoft system because the Officer in charge of the Trustsoft was unable to explain how the system calculates interest and what data needs to be entered for the system to process interest.

The Software Factory personnel who is managing the Trustsoft system runs the program for interest calculation.
Discussion with the Officer in charge of Trust and Estate Account revealed that the Corporation is required to prepare manual reconciliation for Estate Trust on a regular basis and the manual reconciliations for all other trust is only prepared when the full and final payment is discharged.

Trustsoft system is adjusted when variance is noted during the time of the payment.
8 Fiji Public Trustee Corporation Limited – Finance Manual – Section 15 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 9 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The findings suggest that Trustsoft subsidiary ledgers are understated in 2008 & 2009 as interest were not calculated using the correct formula.
There is a risk that the errors in the Trustsoft interest calculation may not be detected as Corporation’s personnel do not have the required expertise to fully understand how the system operates.

Recommendation The Corporation should adjust the interest distribution to beneficiaries after recalculating the actual interest that should have been paid to the beneficiaries for the year 2008 and 2009.

The difference should be incorporated in the 2010 interest distribution to beneficiaries.
Corporation’s Comments Interest calculations were based on the account balances on pro-rata basis for the respective years prior to 2010.

Since the prior year’s accounts audits were finally all cleared in 2010, the calculations were based on the account balances at the time excluding the interest on the interest amounts showing as variance indicated above.

The differences will be incorporated in the 2010 interest distribution to beneficiaries in 2011.
7.13 Discrepancies in Fee & Other Payables to Corporation from Trust Account The subsidiary ledger must be reconciled each month to the general ledger control account.

Any variances between the two records should be reconciled promptly.

The reconciliation must be reviewed by MFA to ensure that items appearing in the reconciliation are bona fide and are not carried forward unnecessarily from prior months.
9 The following discrepancies in the Fee & Other Payable to Corporation from Trust Account were noted:    there was a variance of $28,065.17 between Fee and Other Payables to Corporation reconciliation and general ledger.

there was a variance of $6,037 between the general ledger balance and the reconciliation of Fee payable to FPTCL.

inter-company adjustment of $25,748.89 could not be substantiated.

In absence of regular reconciliations, variances will not be detected and resolved in a timely manner.
Recommendation The Corporation’s Trust Accountant should reconcile the inter party balances, Fee & Other Payable to Corporation from the Trust Account on a regular basis to avoid year end balancing adjustments.
9 Fiji Public Trustee Corporation Limited – Finance Manual – Section 10.6.11 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 10 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Corporation’s Comments The above adjustments are being investigated and will be corrected to reconcile the G/L’s accordingly.
7.14 Over Provision for Impairment against Investments It is appropriate to create a provision for impairment for investments when there is possible risk of reduction in value or the principal amount invested.

The audit noted that the Corporation has created a provision for impairment for investments amounting to $5,034,075 against the Trust’s funds investments in Pool Funds.

Refer to Table 7.5 for details.


Table 7.5: Investment In Pooled Funds Investments Reserve Bank of Fiji (Bonds) Bank Term Deposits Less: Provision for impairment Net Investments in Pool funds Amount ($) 17,110,000 19,000,000 (5,034,075) 31,075,925 Investments in Bonds and Bank Deposits are unlikely to be impaired due to its nature.

There is a possibility that the investment amount may be significantly understated.
Recommendation The Corporation’s Management should review its policy on provisions and where appropriate write back provisions to report correct value of investments.

Corporation’s Comments A number of government bonds are due to mature in the next ten years with the latest in 2020.
Whilst Bond’s may be considered low risk or without any risk at all, the corporation is of the view that trust funds held for minor beneficiaries that due to mature at different time intervals with the current volatile and unpredictable economic situations might be imposed to some risks.

The said provision was allocated for any possible losses or impairment in the redemption of any such investments.

However, management notes the recommendation for the review of the Corporation’s policy on provisions.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 11 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 8: YAQARA PASTORAL COMPANY LIMITED The Yaqara Pastoral Company Limited (YPCL) is a 100% Government owned commercial company.

YPCL is the major producer and supplier of quality beef.

The company also produces quality breeding bulls to be distributed to small holder beef farmers around Fiji.
YPCL’s business activity has primarily two divisions:  Livestock Division  Crops Division Table of Content 8.1 8.2 8.3 SECTION 8: YAQARA PASTORAL COMPANY LIMITED ....................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Statement of Comprehensive Income ...................................................................................................... 1 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Operation of Yaqara Pastoral Company Limited ..................................................................................................... 3 Disposal of Property, Plant and Equipment ............................................................................................................. 3 Lodgement of Company Annual Returns and Annual Tax Returns ......................................................................... 4 Stocktake ................................................................................................................................................................. 4 8.4 8.5 8.6 8.7 PART A – FINANCIAL INFORMATION 8.1 Audit Opinion The audit of the financial statements of the Yaqara Pastoral Company Limited for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
8.2 Abridged Statement of Comprehensive Income Year Ended 31 December Income Revenue Cost of sales Gross profit on trading Other operating income Total Income Expenditure Administrative expenses Selling and distribution Other operating expenses Total Operating Expenditure Operating profit from operations Finance costs 2010 ($) 2009 ($) 694,368 133,662 828,030 2,218,776 3,046,806 850,583 2,545 180,873 1,034,001 2,012,805 1,885 664,612 (121,584) 543,028 1,819,820 2,362,848 1,456,637 3,870 166,030 1,626,537 736,311 3,460 Report of GCC, CSA & Off Budget State Entities – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Year Ended 31 December Operating profit before income tax Income tax expense Profit after income tax 2010 ($) 2,010,920 784,796 1,226,124 2009 ($) 732,851 453,564 279,287 Total profit after tax increased by $964,837 or 339% in 2010 compared to 2009.
This was a result of the increase in other operating income particularly royalty income from the Natural Waters of Viti Limited.

Royalty is paid to the company at a rate of 1.5% on the monthly turnover of Natural Waters of Viti Limited.

The decline in operating expenditure also contributed to the substantial profit recorded in 2010.

The decrease in administrative expenses by 41.6% in 2010 was due to an impairment loss of $616,986 recognised in 2009 as a result of the decrease in land valuation.
8.3 Abridged Statement of Financial Position As at 31 December Current assets Cash on hand and at bank Trade receivables Held-to-maturity investments Biological assets Other current assets Total current assets Non-current assets Property, plant and equipment Other non-current assets Total non-current assets Total assets Current liabilities Creditors and accruals Other current liabilities Total current liabilities Non-current liabilities Total liabilities Net assets Equity Share Capital Retained Earnings Total equity 2010 ($) 2009 ($) Net assets declined by $260,020 or 2.1% in 2010 compared to 2009 as a result of the increase in liabilities, specifically, creditors and accruals, and deferred tax liabilities.
The reduction in current assets also contributed to the decreased net assets recorded in 2010.

Report of GCC, CSA & Off Budget State Entities – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji PART B – CONTROL ISSUES 8.4 Operation of Yaqara Pastoral Company Limited The principal activities of Yaqara Pastoral Company Limited include cattle ranching, sheep and goat farming and bee keeping.
The company had reduced the operation of cash cropping and sugar cane farming from prior years.

A four year analysis of the financial performance of the company revealed that it has only been generating profits as a result of Other Income, which comprises mainly of the royalty income received from Natural Waters of Viti Limited.
Details of the analysis are shown in the Table below: Particulars Profit before Income Tax Other Income Royalty Income Interest on Term Deposit Bad Debts recovered Sundry Income Total Other Income Operating Profit/(Loss) Less Other Income 2010 ($) 2,010,920 2,001,873 173,327 - 43,576 2,218,776 2009 ($) 732,851 1,699,780 99,868 - 20,172 1,819,820 2008 ($) 1,891,042 2,168,204 40,008 - 867 2,209,079 2007 ($) 2,508,129 2,608,491 36,504 610 1,363 2,646,968 (207,856) (1,086,969) (318,037) (138,839) The company has not generated profit from its principal activities and relies heavily on the royalty income to operate.
The company would continue to be operating at a loss should there be no royalty income received from Natural Water Viti Limited.

Recommendation The company should draw up strategies to improve the efficiency of operations of its core activities without depending heavily on royalty income.

Management Comments No comments provided.

8.5 Disposal of Property, Plant and Equipment A physical verification of all fixed assets of the company was carried out by a consultant in December 2010.
As a result of the verification, adjustments were made to the Fixed Assets Register (FAR) to dispose off assets which physically do not exist.

Similarly, adjustments were processed in the General Ledger to align the balances to the FAR.

Audit noted that accumulated adjustments were made to the FAR for which the breakdown could not be provided by the company and the consultant.

Property, plant and equipment of $6.1 million as reflected in the financial statements may be misstated at balance date.
Report of GCC, CSA & Off Budget State Entities – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The breakdown of accumulated adjustments made to the FAR should be identified and correctly disposed off from the register and the General Ledger.

Management Comments No comments provided.


8.6 Lodgement of Company Annual Returns and Annual Tax Returns An annual return for the company shall be lodged with the Registrar of Companies each year.1 All companies should lodge income tax returns within three (3) months of the end of their fiscal year.2 Based on company search at the Register of Companies, audit noted that the company has not lodged its annual returns for the year ended 31 December 2010.
In addition, audit also noted that the company has not lodged its tax returns for the previous year, 2009.

Non-compliance with the Companies Act 1983 and the Income Tax Act exposes the company to penalties for non-lodgements of annual company returns and tax returns.

Recommendations  The company should ensure that its annual returns are lodged with the Registrar of Companies annually.
 The company should ensure that its tax returns are lodged with the Fiji Customs and Revenue Authority on a timely basis.

Management Comments No comments provided.

8.7 Stocktake Stocktake is important to ensure the accuracy of the value of biological assets reflected in the financial statements.

While observing physical count of biological assets, audit noted that tags on some cattle were missing.
Refer to the Table below for examples: Classes Cow Cow Date of Birth (Year) 2009 2007 1 Companies Act Section 127 2 Income Tax Act Section 44 Tag No.
Breed Color FO0947 7665 LX SG Red Red Report of GCC, CSA & Off Budget State Entities – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Classes Cow Hyper Steer Cow Hyper Hyper Hyper Cow Cow Date of Birth (Year) 2007 2009 2009 2000 2009 2008 2008 2008 2005 Tag No.
Breed Color 8001 91029 91004 01001 CF0765 8826 8663 8966 CB0435 LX SG SG SG LX LX SG LX SG Apricot/White Red Red Red Apricot Apricot Red Apricot Red Missing tags on cattle increases the risk of incorrect recording and valuation of livestock.

Recommendation The company should ensure that livestock are properly and correctly tagged for valuation purposes.

Management Comments No comments provided.


Report of GCC, CSA & Off Budget State Entities – December 2011 Page 5 Provincial Council 1 Tailevu Provincial Council ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 1: TAILEVU PROVINCIAL COUNCIL Tailevu Provincial Council was established under section 7 of the i-Taukei Affairs Act and regulation 3 of the i- Taukei Affairs (Provincial Council) Regulations 1996.
The functions of the Council are to:    To formulate and implement policies for promoting the health, peace, order, welfare and good government of i-Taukei residents in the province; To formulate and implement policies for promoting the economic, cultural and social development of the province; and To carry out such other duties and functions which the Minister or the Board may see fit to delegate to the Council.
The Council shall have to make by-laws to any function entrusted to or vested in it under the provisions of the Act or these regulations for the purpose of enabling it to carry out the duties conferred upon it and with respect to all or any of the following matters: Roads, paths, tracks, jetties and landing places;   Medical relief, public health and child welfare; Recreation and sports grounds;  Village planning;   Water supplies;     Market and pounds;  Provincial transport and cartage of mails.
Education and libraries; Cemeteries; The promotion of agriculture, fisheries, animal husbandry, and tourism; Table of Content SECTION 1: TAILEVU PROVINCIAL COUNCIL ....................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 2 1.1 Audit Opinion ............................................................................................................................................................... 2 1.2 Abridged Income Statement ........................................................................................................................................ 3 1.3 Abridged Balance Sheet ............................................................................................................................................. 3 PART B – CONTROL ISSUES ................................................................................................................................................... 4 1.4 Books of Accounts and Accounting Function .............................................................................................................. 4 1.5 Going Concern ............................................................................................................................................................ 5 1.6 Accounting System and Procedures ........................................................................................................................... 5 1.7 Delays in Providing Information and Explanation ........................................................................................................ 6 1.8 Cash Flow Statement .................................................................................................................................................. 7 1.9 Prior Year Adjustments
 ............................................................................................................................................... 7 Changes in Accounting System ............................................................................................................................. 8 1.10 Inadequate Insurance Cover.................................................................................................................................. 8 1.11 Sundry Creditors and Undisbursed Subvention ..................................................................................................... 9 1.12 Accruals ................................................................................................................................................................. 9 1.13 Deposits from Public ............................................................................................................................................ 10 1.14 Provincial Rates ................................................................................................................................................... 10 1.15 Land and Buildings .............................................................................................................................................. 11 1.16 Investment in Fijian Holdings Limited and Yasana Holdings Limited................................................................... 11 1.17 Term Deposits...................................................................................................................................................... 12 1.18 Investment in Tailevu Provincial Holdings Limited ............................................................................................... 13 1.19 Special Funds ...................................................................................................................................................... 13 1.20 Deferred
13 1.20 Deferred Revenue................................................................................................................................................ 13 1.21 Page 1 Report of Provincial Council – December 2011 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.22 1.23 1.24 1.25 1.26 1.27 1.28 1.29 1.30 1.31 Asset Revaluation Reserve.................................................................................................................................. 14 Bank Reconciliations............................................................................................................................................ 14 Interest Bearing Borrowings................................................................................................................................. 15 Advances to Staff ................................................................................................................................................. 15 Sundry Debtors .................................................................................................................................................... 16 Investment in Tailevu Dairy Farmers Co-operative Association Limited.............................................................. 17 Government Subvention ...................................................................................................................................... 17 Receipts ............................................................................................................................................................... 18 Journal Entries ..................................................................................................................................................... 19 Operational Audit for the year 2009 ..................................................................................................................... 19 1.31.1 Under-collection of
 Provincial Council Rates .................................................................................................. 19 Overspent in Budgeted Meal Allowance ......................................................................................................... 21 1.31.2 1.31.3 Missing/Incomplete Accounting Records ........................................................................................................ 22 Council Quarters ............................................................................................................................................. 23 1.31.4 Anomalies with Motor Vehicle Records .......................................................................................................... 24 1.31.5 Development Assistance Scheme (DAS) ....................................................................................................... 25 1.31.6 Occupational Health & Safety (OHS) ............................................................................................................. 26 1.31.7 Submission of Financial Statements .............................................................................................................. 26 1.31.8 Appendix 1.1: Meal Claims Details ...................................................................................................................... 28 Appendix 1.2: Details of Payments Anomalies .............................................................................................. 30 Appendix 1.3: Development Assistance Scheme Details ......................................................................... 32 PART A – FINANCIAL INFORMATION 1.1 Audit Opinion The audit of the financial statements for the year ended 31 December 2001 resulted in the issue of qualified audit report due to the following: 1.
Proper books of account and complete set of accounting records and reconciliation for the year ended 31 December 2001 were not maintained by the Council.

The various notes to the financial statements, full information, details and supporting documentation in support of various balances were not been provided for audit.

There is uncertainty that all income, expenditure, assets and liabilities have been brought to account or have been disclosed accurately.
Journal entries processed in the general ledger with adequate details and explanations were not made available and/or were not supported by the necessary supporting documents.

2.

3.

Provincial rates were recognized on a cash basis which was not in line with the generally accepted accounting principles.

The impact of this cannot be ascertained reliably due to unavailability of adequate details and documents.

4.
4.

The council has not disclosed cash flow statement for the year ended 31 December 2001 as required under the Fiji Accounting Standards 7- Cash Flow Statements.

5.

The Council meeting minutes dated 1 June 2001 recorded that the total Government funding received for 2001 was $443,359.

However, only $273,938 has been taken up as income for the year.

No details were provided for the difference between the two balances.
Furthermore, VAT component of Government Subvention cannot be ascertained due to unavailability of relevant supporting details.

6.

The loss on transfer of land and Ratu Cakobau House to Tailevu Provincial Holdings Limited and investment in Yasana Holdings Limited together with certain other adjustments relating to depreciation, loan repayment and interest expense have not been accounted properly.
Report of Provincial Council – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 7.

The prior year impact of $315,850 was adjusted in the current financial year in the income statement as Prior Year Adjustments.

No further information or supporting documents have been provided for audit review in respect to these adjustments.

8.
8.

Full information, details and documents in respect to various balances in respect to cash at bank have not been provided for my audit.

Therefore, I am unable to verify the reconciling balances and certain other balances in respect to bank balances.

9.

Various exceptions and discrepancies have been noted in respect to various investments.

Furthermore, full information, details and documentations have not been provided in respect to investments.

10.
10.

Various exceptions and discrepancies have been noted in respect to certain property, plant and equipment balances.

Furthermore, full information, details and documentations have not been provided in respect to certain balances.

11.

Subsidiary ledgers were not maintained for creditors and accruals and un-disbursed government subvention together with adequate records for the year.

12.

The Council has booked loan liability of $210,994.


However, the loan was granted to Tailevu Provincial Holdings Limited in 1998 and documentary evidence for assignment of loan from Tailevu Provincial Holdings Limited to the Council was not provided for audit.

13.

Complete records with regards to special funds of $208,586 invested in Tailevu Provincial Holdings Limited on behalf of various Tikina were not provided for audit.
1.2 Abridged Income Statement Year ended 31 December Revenue Income from Provincial Rates Government Subvention Other Income Total Revenue Expenses Operating expenses covered by government subvention Operating expenses not covered by government subvention Total Expenditure Result for the Year from Ordinary Activity 2001 $ 42,108 273,938 21,691 337,737 277,555 289,272 566,827 (229,090) 2000 $ 25,162 247,794 915 273,871 247,796 57,708 305,504 (31,633) The Council recorded an operating deficit of $229,090 in 2001 compared to an operating deficit of $31,663 in 2000.
This was due to increase in expenditure by $261,323 or 86%.
1.3 Abridged Balance Sheet As at 31 December Assets Cash at Bank Other Current Assets Property, Plant & Equipment Financial Assets Total Assets Liabilities 2001 $ 2000 $ 187,172 6,081 256,152 1,171,024 1,620,429 193,697 159,614 1,205,730 49,167 1,608,208 Report of Provincial Council – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji As at 31 December Other Current Liabilities Borrowings Special Funds Deferred Revenue Total Liabilities Net Assets Accumulated Funds Asset Revaluation Reserve Accumulated Fund Total Accumulated Funds 2001 $ 365,317 280,047 208,586 11,307 865,257 755,172 710,574 44,598 755,172 2000 $ 303,610 - - 16,387 319,997 1,288,211 698,673 589,538 1,288,211 Net Assets declined by $533,039 or 41% compared to 41% as a result of increases in expenditure by total expenditure by $545,260 or 170%.
There were increases in borrowings by $280,047 (100%) and special funds by $208,586 (100%).

PART B – CONTROL ISSUES 1.4 Books of Accounts and Accounting Function Reconciliations are a key control and should be used to identify and correct anomalies or mispostings.

For this control to work effectively there must be an effective monitoring and review function of the reconciliations.
It was agreed during our planning meeting that the management account together with all reconciliations and supporting documents would be made available to us a week before the commencement date of the audit for the preliminary review.

From the preliminary review of audit files, we noted various exceptions which were highlighted through our emails between 10 March 2005 and 14 September 2007.
Audit is of the view that the books of account were not accurately updated on a timely basis and reconciliations were not performed accurately on a timely basis.
As a result, during the course of our audit and finalisation of accounts, the following adjustments were processed: Table 1:1 Adjustments Processed During Audit and the Finalization of Accounts Description Operating loss as per draft management accounts Adjustments: To create additional provision for doubtful debts To book interest payable on SBAU loan To rectify interest expense incorrectly recorded by the Council To book audit fees To record interest expense understated by the Council To realise depreciation charged on assets obtained under government grant To rectify prepayment of insurance incorrectly expensed To record adjustments relating to prior year Operating profit before tax as per draft audited accounts Report of Provincial Council – December 2011 Amount ($) (349,599) (162,771) (39,610) (5,249) (5,000) (950) 562 1,109 16,568 (544,940) Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Accordingly, accounting functions and procedures need significant improvement.
We consider this to be very important in view of the problems faced during the year’s audit and considering the size and nature of the Council’s operations.

Recommendations   Management should review its procedures for preparation of monthly reconciliations and more emphasis should be placed on in-depth review of reconciliations and reconciling items.

The Council should take urgent action to improve its book keeping and accounting function.

Management Comment No comments provided.


1.5 Going Concern The financial statements have been prepared on a going concern basis, which contemplates the realisation of assets and satisfaction of liabilities on the normal course of the Council’s operations.

As disclosed in the financial statements, as at 31 December 2001, the Council’s current liabilities exceeded the current assets by $229,090.

Furthermore, the Council has not been able to settle its liabilities on a timely basis.
The Council’s continuation on a going concern is dependent upon its ability to maintain profitable operations, generate sufficient cash flows and raise adequate finance to meet its obligations as and when they fall due, and the continued financial support from the Government and Tikina.

Recommendation The Council should continue to closely monitor its operations to reduce its operating costs and continue to achieve profitable operations.
It must be appreciated that the going concern basis of preparing accounts may become invalid as a result of which a provision would have to be made for any possible loss on realisation of the Council’s assets.

Management Comments No comments provided.

1.6 Accounting System and Procedures Our review of the books of account of the Council revealed accounting shortcomings including inaccurate, incomplete and untimely records being kept of general ledger account balances.
During the course of our audit, we noted that general ledger reconciliations were not accurately prepared and there was no evidence to suggest that reconciliations had been reviewed and approved by a senior independent accounting personnel.
Report of Provincial Council – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Furthermore, progressive updates especially for balances relating to receivables, fixed assets, investment, interest bearing borrowings, fixed assets, creditors and accruals were not made.
Our review of those details of transactions further indicated a high incidence of misposting involving interest expense, interest payable, depreciation and insurance prepayment.

The above resulted in a significant number of audit adjustments and led to delays in finalising the financial statements.

Accordingly, we are of the opinion that accounting functions and procedures require significant improvements.
We consider this to be very important in view of the current status of the Council, the problems faced during the audit, and also considering the nature of its operations.

Recommendations  The Council should review and improve its accounting systems and procedures to ensure that the books of account are updated on a timely basis with all relevant supporting documents, reconciliations and records.

 Additional emphasis should be placed on in-depth review of the reconciliations and reconciling items.
It is recommended that a checklist be maintained to set out each item, schedule that is required, to enable timely and accurate reporting.

This checklist will also be an excellent management tool which can be used to monitor the timing and completeness of the information to be supplied / prepared.
 To reduce the risk of misposting, more emphasis should be placed on reviewing and checking of input and batch entry controls to ensure that all the transactions are correctly posted in the general ledger to the correct account heads.

Management Comments No comments provided.


1.7 Delays in Providing Information and Explanation During our audit, there were delays in receiving reconciliations and supporting schedules such as loan repayment schedule and related agreement, details of accrued interest, other payables.
The following delays were encountered which are as follows: (a) A checklist for our requirements for audit was provided on 10 September 2004 and subsequent follow ups were made for the required schedules, reconciliations and details.

(b) We received the initial trial balance, fixed assets schedule and certain reconciliations on 9 March 2005.
However, based on our preliminary review of the above, we noted that a number of schedules, reconciliations and details were not provided for us to effectively commence the audit.

All outstanding matters were communicated on the same date; however, little progress was made in relation to the requested outstanding information.

(c) (d) We later received certain outstanding information on 30 March 2005 and then on 3 August 2005.

However, majority of the schedules and reconciliations were still outstanding.
Report of Provincial Council – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji (e) (f) (g) After subsequent meetings and follow ups, we were provided with an updated version of the draft financial statements and certain reconciliations on 19 July 2006 and we were advised that the remaining outstanding information would be provided to us during the audit fieldwork.
Upon commencement of our audit on 31 July 2006, we were provided with certain additional information.

However, most of the schedules and details required earlier were not provided and with non-provision of any additional information and no further progress on the outstanding matters, the audit was suspended.

Thereafter, several follow ups were made and the revised management accounts and majority of the reconciliations were received on 16 August 2007.
However, we still noted that adequate records and supporting details had not been maintained by the Council.

This has resulted in significant delay in finalisation of audit of the financial statements for the year ended 31 December 2001.
Recommendation The Council should ensure that all reconciliations and supporting documents together with final trial balance and management accounts should be made available on the first day of our audit commencement, thus enabling us to proceed effectively with our audit of the financial statements.

Management Comments No comments provided.


1.8 Cash Flow Statement We note that the Council has not prepared and presented cash flow statement for the year ended 31 December 2001 as required under the Fiji Accounting Standards 7 – Cash Flow Statements.

Recommendation The Council should include in the financial reports a cash flow statement detailing major sources and application of cash within each functional activities of the Council.

Management Comments No comments provided.


1.9 Prior Year Adjustments Paragraph 34 of Fiji Accounting Standard 8 - Net profit or loss for the period, fundamental errors and changes in accounting policies, “the amount of the correction of a fundamental error that relates to prior periods should be reported by adjusting the opening balance of retained earnings.
Comparative information should be restated, unless it is impracticable to do so” We note that during prior years, the loss on transfer of land and Ratu Cakobau House to Tailevu Provincial Holdings Limited and investment in Yasana Holdings Limited together with certain other Report of Provincial Council – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji adjustments relating to depreciation, loan repayment and interest expense had not been accounted for properly.
The prior year impact of $315,850 has been adjusted in the current financial year in the income statement as Prior Year Adjustments contrary to Fiji Accounting Standard 8.

Moreover, no further information or supporting documents were provided in respect of these adjustments.
Recommendations The Council to take adequate care and ensure that all transactions are recorded accurately and in accordance with the Fiji Accounting Standards and that all supporting documents should be maintained by the Council for proper audit trail.

Management Comments No comments provided.

1.10 Changes in Accounting System We noted that during the year, the Council changed its accounting package from IDL to Winbiz.
We also noted that in certain instances accounting records from the IDL system were not in agreement with the opening balance in the Winbiz system.

We further noted that proper documents or trace of closing balances of accounts from the previous system to the opening balances of these accounts in Winbiz were not made available for our review.

Recommendation The Council should exercise due care when transferring accounting records and data to ensure accuracy of account balances.
Management Comments No comments provided.

1.11 Inadequate Insurance Cover From our review of insurance policies, we noted that only vehicle with registration number DL 064 has been covered by insurance.

All other property, plant and equipment are not covered by insurance.

Recommendation The Council should immediately obtain adequate coverage for all properties, plant and equipment to fully secure all assets against fire, cyclone and other associated perils.
Report of Provincial Council – December 2011 Page 8 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments No comments provided.

1.12 Sundry Creditors and Undisbursed Subvention From our review of sundry creditors amounting to $205,913, we noted that an aged creditors listing is not maintained.

We also noted that no reconciliation was made available for undisbursed subvention amounting to $22,745.
We further noted that payment vouchers for the months of January and February 2002 were not made available for our review to verify the subsequent payments of the above liabilities.

Recommendations  To ensure effective monitoring and management over creditors and cash flows, subsidiary ledgers for creditors should be maintained which may also be directly interfaced with the general ledger system.
 The Council should ensure that all payment voucher files are maintained properly and made available for audit.

Management Comments No comments provided.
1.13 Accruals From our review of accruals, we note that no details or supporting documents were furnished to us for the following significant amounts included in the accruals listing: Table 1.2: Non- Provision of the Details for Balances Relating To Accruals Description Nausori Tikina Dravo Tikina Namara Tikina Bureitu Tikina Nuku Tikina Verata Tikina Namalata Tikina Vugalei Tikina Tai Tikina Sawakasa Tikina Namena Tikina Wailotua Tikina Amount ($) 6,574 5,103 2,385 4,618 2,649 8,052 3,515 7,063 3,143 2,143 2,930 4,615 Report of Provincial Council – December 2011 Page 9 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Description Nasautoka Tikina Office 2000 Amount ($) 2,648 2,500 Recommendations More emphasis should be given towards filing of documents in a systematic way.
Invoices are the prime source to suggest the validity of the transactions and these should be kept in order to maintain proper audit trail.

Management Comments No comments provided.

1.14 Deposits from Public From our review of the reconciliation for deposits from public, we noted a difference of $5,501 between the balance as per the reconciliation and the balance as per the general ledger.
Refer to table 3.3 for details: Table 1.3: Variance between the Reconciliation and the Ledger Description Balance as per reconciliation Balance as per subsidiary ledger Difference Recommendation Amount ($) 15,361 9,860 5,501 The Council should ensure that monthly reconciliations are performed for all the balance sheet items and reviewed by independent senior personnel.
Differences, if any, on such reconciliations should be adjusted in the books of account only after review and approval from the senior personnel.

Management Comments No comments provided.

1.15 Provincial Rates From our review of provincial rates, we noted that these were recognized on a cash basis which is not in accordance with the generally accepted accounting principles.
Report of Provincial Council – December 2011 Page 10 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji This is also a departure from paragraph 25 of Fiji Accounting Standard 1 -Presentation of Financial Statements, which states that “an enterprise should prepare its financial statements, except for cash flow information, under the accrual basis of accounting.” Recommendation The Council should ensure that provincial rates are accounted for on an accrual basis for proper measurement and reporting of the financial result for the year and to ensure compliance with the Fiji Accounting Standards.
Management Comments No comments provided.

1.16 Land and Buildings From our review of land and buildings, we noted that land and building relating to Cakobau House were transferred to Tailevu Provincial Holdings Limited in 2000.

However, no further details in relation to the transfer of land and building and consideration were made available for our review and verification.
We further noted that during the year, the Council changed its depreciation calculation method from diminishing value to straight line for office equipment, plant and machinery, furniture and fittings and motor vehicles.

However, no details of the adjustment made to the plant and equipment balances were provided for our review.

Moreover, land title for the Korovou leasehold land was not made available for our review.
Recommendations The Council should ensure that:  Proper records should be maintained by the Council to ensure that any transfer or sale of the Council’s property is accounted for accurately.

 Adequate data and information be maintained in support of changes in depreciation method and adjustments made to the plant and equipment balances.

 All land owned by the Council either freehold or leasehold should be supported by land title under the name of the Council.

Management Comments No comments provided.


1.17 Investment in Fijian Holdings Limited and Yasana Holdings Limited From our review of investments, we noted that:  As at 31 December 2001, the Council held a total of 19,951 Fijian Holdings Limited (FHL) shares.
However, we noted that the Council’s shareholding in FHL was 272,152 until 27 April 2000, at Report of Provincial Council – December 2011 Page 11 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji which time the shareholding of the Council was reduced to 19,951 of $1 each.

The initial shareholding was never accounted for in the books of the Council.
 The Council held a total of 352,234 Yasana Holdings Limited (YHL) shares out of which 351,867 shares were acquired in 2000.

However, this was also not accounted for in the books of the Council in 2000.

 A significant portion of the dividends earned on the FHL shares between 1998 and 2000 were used to repay loans obtained from the Fiji Development Bank.
However, these were never recorded in the books of the Council and we could not ascertain the actual amount of dividends receipted by the Council due to incomplete investment and loan records.

 Shares in FHL are held in trust and resulting dividends must be reallocated to the various Tikinas.

The receipt of dividend from FHL creates an obligation for the Council and is accounted for as “Sundry Creditors”.
From the Shareholder’s Dividend Statement of the Council made up till 30 April 2001, we note that the total dividends paid to the Council between 1998 and mid-2001 was $114,846.

Furthermore, according to the investment confirmation received from FHL, total dividends paid to the Council in 2001 amounted to $3,990.

However, records of the Council only showed an amount of $7,971 under “Sundry Creditors” as total dividends earned on the FHL shares during that period.
Recommendations The Council should ensure that:  Complete set of books of accounts and accounting records are maintained for all investments and the respective liabilities.

 Full reconciliations should be performed for the differences between the investment and liability balances on a monthly basis, which should be reviewed by independent senior personnel and adjusted in the books progressively.

Management Comments No comments provided.


1.18 Term Deposits From our review of investments, we noted that the Council has term deposits with ANZ Bank amounting to $30,253.

However, no investment certificate or bank confirmation was provided for our review.

Recommendation The Council should maintain investment certificates for all term deposits and obtain confirmations for proper audit trail.

Management Comments No comments provided.


Report of Provincial Council – December 2011 Page 12 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.19 Investment in Tailevu Provincial Holdings Limited In the year 2000, the Council acquired shares in Tailevu Provincial Holdings Limited (TPHL).

However, the investment was never accounted for in the books of the Council in the year of the acquisition.
Subsequently, in 2001, $786,586 was recorded as the value of the Council’s investment in TPHL.

However, the Council was only issued a share certificate for 731,986 shares of $1 each by TPHL.

No explanations or further documents were provided for the difference of $36,600.

Investment confirmation from TPHL for the year ended 31 December 2001 was outstanding at the time of this report.
We also note that as per the annual return filed with the Registrar of Companies by Tailevu Provincial Holding Company Limited as at 31 December 2001, the Council owned 817,986 shares of the company.

However, no further details were made available for the difference.
Recommendation The Council should maintain an investment register and regularly update for all equity and other investments, showing for each investment; the cost, date of acquisition, additional costs incurred, par value, number of shares, share certificate numbers, dividend received, market value and other relevant details.

Management Comments No comments provided.


1.20 Special Funds From our review, we noted that the Council has invested $208,586 in Tailevu Provincial Holdings Limited on behalf of the various Tikinas.

However, no further details or supporting documents were made available for our review.

Recommendation The Council should maintain proper schedules and supporting documents for all funds provided by the Tikinas for investment purposes.

Management Comments No comments provided.


1.21 Deferred Revenue From our review of deferred revenue amounting to $11,307, we note that complete set of records were not made available for our review and verification.
Report of Provincial Council – December 2011 Page 13 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation The Council should maintain proper records and reconciliations in relation to deferred revenue to ensure that it is accounted for accurately.

Management Comments No comments provided.

1.22 Asset Revaluation Reserve We note that there was a movement of $11,900 in the asset revaluation reserve of the Council.
We also noted that no revaluation was carried out during the year and the movement is due to incorrect transfer of asset revaluation reserve balances from IDL to Winbiz.

However, no detailed breakdown of the asset revaluation reserve or proper details of the movement were made available for our review and we were unable to determine the accuracy of the balance in the asset revaluation reserve.
We further noted that realization of the asset revaluation reserve upon transfer of the land and buildings relating to Cakobau House to Tailevu Provincial Holdings Limited could not be ascertained due to unavailability of adequate details.

Recommendation The council should maintain proper supporting documents for all movements in the asset revaluation reserve which should be made available for audit review and ensure that the asset revaluation reserve is accurately realized upon transfer of property.
Management Comments No comments provided.

1.23 Bank Reconciliations From our review of the bank reconciliation for ANZ current account number 105548 for the month of December 2001, we noted the following:  Outstanding lodgements amounting to $33,159 was being carried forward from 1997.

 Debits amounting to $8,949.68 and credits amounting to $9,940.51 in the bank statements had not been processed in the books and were shown as reconciling items in the bank reconciliation.
No audit adjustment could be processed as details were not provided for our review.

We also noted that the Council has a savings account with Colonial National Bank (account number 433057) amounting to $5,708.81 for which no details were made available for our review.

Furthermore, bank audit certificates for all bank accounts were not received.
Report of Provincial Council – December 2011 Page 14 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation  Bank reconciliation to be an important part of the internal control system and strongly recommend that the bank reconciliations should be prepared on a monthly basis and reviewed by independent senior personnel.
 The person reviewing these reconciliations must ensure that all reconciling items are cleared regularly, that stale cheques are written off, that all receipts are banked intact on a daily basis and outstanding lodgements are banked intact on the next banking day and that the control balances agree to the relevant records.

Management Comments No comments provided.


1.24 Interest Bearing Borrowings From our review of interest bearing borrowings, we noted that the Tailevu Provincial Holdings Limited (TPHL) had obtained a loan for a principal sum of $230,000 from Fijian Affairs Board – Small Business Advisory Unit in June 1998, which was assigned to the Council in exchange for 230,000 shares of $1 each in TPHL in 2000.
However, we were not provided with any documentary evidence for the assignment of loan from TPHL to the Council.

However, the acquisition of shares and loan liability were never accounted for in the books of the Council in 2000.

Moreover, loan confirmation from Fijian Affairs Board – Small Business Advisory Unit was not provided for our review and we were unable to verify the security details disclosed in the financial statements.
Recommendations The Council should formalize the assignment of loan liability by way of an agreement and ensure that loan confirmations are obtained and provided to audit.

Management Comments No comments provided.

1.25 Advances to Staff From our review of staff advances, we noted that the reconciliation provided for our review suggested that there were excess recoveries made from certain staffs.
However, no details or explanations were provided to indicate how these balances were recorded in the books of the Council.
Refer to table below for details: Table 1.4: Credit Balance Indicating Excess Recoveries Folio Staff Initial 1 12 RTL JR Amount ($) (60.00) (30.00) Report of Provincial Council – December 2011 Page 15 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Folio Staff Initial 13 50 AD RTL Amount ($) (38.88) (309.46) We also noted the following differences in certain balances as per the reconciliation and the subsidiary ledger: Table 1.5: Variance Between Reconciliation and the Ledger Folio Staff Initia 15 & 17 20 LL NS Balance as per Reconciliation ($) 1,362.05 500.00 Balance as per Subsidiary Ledger ($) Difference ($) 1,262.05 600.00 100.00 (100.00) We further noted that no systematic recovery procedures appeared to be in place to recover the advances within a reasonable time.
Recommendations The Council should ensure that:  All reconciliations are reviewed by an independent senior personnel and necessary adjustment entries be processed, if required.

 Proper supporting documents are maintained by the Council for effective audit trail.

 The Council should review its policy on advances to staffs and action should be taken to recover outstanding advances.
In particular, definite repayment plans per staff should be set for repayment terms and these should be strictly implemented and actively monitored.

Management Comments No comments provided.

1.26 Sundry Debtors From our review of sundry debtors, we noted that certain differences in balances with the reconciliations provided for our review and the subsidiary balances.
Refer to the table below for the details: Table 1.6: Variance Between Reconciliation and the Ledger Debtors Debtor 1 Debtor 2 Debtor 3 Debtor 4 Debtor 5 Debtor 6 Balance as per Reconciliation ($) Balance as per Subsidiary ($) Difference ($) - 40.89 - 1,766.00 276.50 1,351.14 (65.19) 736.26 10.00 1,566.00 476.60 972.19 65.19 (695.37) (10.00) 200.00 (200.01) 378.95 Report of Provincial Council – December 2011 Page 16 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The following anomalies were also noted:  All balances included in “Loans to Public” had also been accounted as “Sundry Debtors”.
 A receivable balance of $136,887 was noted under sundry debtors representing various Tikinas’ share contribution towards the River House.

However, no supporting documents or explanation were provided to demonstrate how these balances were established.

 A difference of $1,712 was also noted between the balance as per the “Tikina Shares River House” listing and the sundry debtors’ reconciliation.
 Advances to public noted a difference of $1,727 between the balance as per reconciliation and trial balance.

A difference of $1,321 was noted between the reconciliation for advances to public and its subsidiary ledger in respect of Naigani Village.

Recommendation The Council should take adequate care and ensure that all reconciliations are prepared accurately and that all supporting documents are maintained by the Council for proper audit trail.

Management Comment No comments provided.


1.27 Investment in Tailevu Dairy Farmers Co-operative Association Limited Our review of the minutes of the meetings of the Council members dated 1 June 2001 noted that the Council acquired 809,411 shares in Tailevu Dairy Farmers Co-operative Association Limited.

However, no share certificates or other documentary evidence was provided to substantiate the investment.

Also, this investment is not reflected in the Council’s books of account.
Recommendation The Council should accurately record all investments in its books and ensure that all share acquisitions are formalised in writing and share certificates obtained.

Management Comments No comments provided.

1.28 Government Subvention From our review, we noted that the Council received $271,948 from Fijian Affairs Board during the year.

However, no agreement or written confirmation was provided to us in respect of the Government subvention granted to the Council in 2001.
Report of Provincial Council – December 2011 Page 17 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji We also noted that as per council minutes, the total Government funding received for 2001 was $443,359.

However, only $273,938 has been taken up as income for the year.

No details were provided for the difference.


Furthermore, VAT component of the Government subvention could not be ascertained due to unavailability of relevant supporting documents.

Recommendation All agreements and written confirmations in relation to the receipt of Government subvention should be maintained properly and made available for review.

Management Comments No comments provided.


1.29 Receipts From our review of a sample of 24 receipts, we noted the following exceptions:   There are no adequate controls in regards to the receipting system to ensure that all receipts are posted and also to avoid double posting.

Receipts were not banked on a daily basis.


Refer to Table 8 for details: Table 1.7: Non-Lodgement of Receipts On A daily Basis Clients Receipt Number Amount ($) Receipt Date Deposit Date Client 1 Client 2 Client 3 Client 4 Client 5 40700 40711 40716 40746 40788 200.00 02/04/01 129.08 21/05/01 174.00 19/06/01 27,713.33 01/11/01 11,800.00 26/11/01 12/04/01 25/05/01 26/06/01 06/11/01 30/11/01  Instance where the amount receipted differed from the amount processed into the general ledger.
Refer to table 9 for the variance between the amount receipted and the general ledger.

Table 1.8: Variance Between Amount Receipted And The General Ledger Clients Client 1 Receipt Number 40850 Amount as per Receipt ($) 25,832.25 Amount as per General Ledger ($) 28,872.00 Variance ($) 3,039.75 No receipts were issued for the following amounts received by the Council in January and February 2001.

Refer to table 10 for details.


Report of Provincial Council – December 2011 Page 18 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 1.9: Non-Issuance Of Receipts Particulars Client 2 Client 2 Receipt Date 05/01/01 27/02/01 Amount ($) 492.98 299.08 Recommendations The Council should ensure that:  All processed receipts should be marked as “Processed” to ensure control over receipts and proper accounting of revenue.
receipts.

 All receipts should be banked intact on a daily basis thus maintaining control over   Due care should be taken when processing receipts into the system.

 Receipts should be issued to avoid misappropriation of funds.

Management Comments No comments provided.

1.30 Journal Entries During our review of the general ledger, we noted numerous journal entries for which adequate details and explanations were not made available and/or were not supported by the necessary supporting documents.
Recommendations The Council should ensure that:  All journal entries are substantiated by journal vouchers and supporting documents and  All journals vouchers are signed by the person who raises the journal vouchers and these be checked and approved by independent senior personnel thereby ensuring errors or omissions do not go undetected.

Management Comments No comments provided.


1.31 Operational Audit for the year 2009 1.31.1 Under-collection of Provincial Council Rates Provincial Council rates are mainly used to meet the Council’s expenditures not funded by the government subvention.
Report of Provincial Council – December 2011 Page 19 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Until such time as the land rate or the “soli vakavanua” have been applied, a Council may, by resolution, impose a rate (referred to as the provincial rate) upon every male i- Taukei of a province between the ages of twenty one and sixty years or other classes recommended by the Chairman of the Council and approved by the Minister.1 Where any person liable to pay a provincial rate makes default in payment, the Council may after expiry of 30 days from the date on which such rate became due and payable, recover any money due or such rate in the like manner in which a Council may recover moneys owing to it in respect of a land rate.2 Audit noted that the Council’s uncollected provincial rates were more than 50% of the budgeted amounts except for the year 2008.
Refer to the Table 11 for details.
Table 1.10: Budgeted Versus Actual Collection of Provincial Rates Year Budgeted Actual Variance Percentage uncollected 2005 ( $) 84,544 32,379 52,165 62% 2006 ($) 84,544 25,397 59,147 70% 2007 ($) 30,000 11,269 18,731 62% 2008 ($) 30,000 23,443 6,557 22% 2009 ($) 30,000 15,075 14,925 50% This indicates that those rates imposed by the Council under the i-Taukei (Provincial Councils) regulations were not fully complied and also the efforts of the Council to this collection were not enough.
The non-collection of the budgeted provincial rate in 2009 attributed to the following:  Non-collection from the various Tikinas; and  Endorsement by the “Bose ni yasana” on 30/06/09 for the cessation of the “soli ni yasana” from the year 2010, alternating that the operations of the council be funded from dividend received by the Council from investments held.
In addition, the non-subvention expenditure of the council in 2009 totalled $62,430 which was two times more than the estimated collection from rates.

Thus indicate that these expenditure were not being budgeted for and funded by government subvention.

Non-collection of provincial rates could hinder the councils operations in meeting its day-to-day non- subvention expenditure.
Recommendation The Council should carry out consultation and remind the various Tikina on a regular basis on the collection of rates as required under the regulations and the deliverance of the Council output are also dependent on the collection of provincial rates.
1 i- Taukei Affairs (Provincial Councils) Regulations, 1996 (Section 6) Regulation 47 (1) & 49 2 i- Taukei Affairs (Provincial Councils) Regulations, 1996 (Section 6) Regulation 50 (3)(a) &9 b) Report of Provincial Council – December 2011 Page 20 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments No comments provided.
1.31.2 Overspent in Budgeted Meal Allowance Officers shall be paid meal allowance under the following circumstances: (i) (ii) (iii) (iv) If required to work or undertake official travel two hours before or beyond normal working hours; If required to work or undertake official travel during the lunch meal period during normal working days; An additional meal allowance for each successive period of 5 hours continuous work performed immediately after the initial meal break at (i) above; Except for (ii) above, no additional meal allowance is payable for work carried out during normal working hours.3 The Council’s meal allowance budget has been overspent by 52% for the year 2009.
Refer to the table below for details: Table 1.11: Over-expenditure of Meal Allowances-2009 Allocation Subvention Non Subvention Total Budget ($) 4,333 2,500 6,833 Actual Expenses ($) Overspending ($) Overspent (%) 4,000 8,924 12,924 333 6,424 6,757 8 72 52 The non adherence to i Taukei Accounting manual and the lack of monitoring the approved budget resulted in the excessive meal expenditure.
In one instance where various meals claim were incurred for a travel to an exam by an Officer.4 Refer to the details below and Appendix 1 for illustrations for these: Incomplete meal claim forms;  Approved claim form Meal allowances were not used for some instances;5   Meal allowances paid for visits that form part of the Councils area of duty;  Mileage and visitation reports not attached to substantiate work done and the meals claimed;  Meals claimed for preparation for “Bose ni Yasana” by almost all staffs;  Meals paid to drivers for transporting the Council staff for field visits;  Number of Council staff attending to villages or sites visits claimed for the meal.
Hence, the expenditure has exceeded by 52% of the budgetary allocation that could have been applied to the Council’s development projects.
3 General Order 510 4 Refer to Voucher 420 of December 2009 for meal claim paid to Isimeli Nakalevu 5 I-Taukei Affairs Board Accounting Manual, Section 1, Page 31 Report of Provincial Council – December 2011 Page 21 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendations  The Council should ensure that meal claims expenditure are incurred within budgetary allocation  Clear guidelines on meal claims are to be developed to ensure that it is within the approved budget.
Management Comments No comments provided.
1.31.3 Missing/Incomplete Accounting Records The Auditor General shall satisfy himself that expenditure has been properly authorised and applied to the purposes and that the regulations and procedures applied are sufficient to secure an effective control over expenditure, and that it has been incurred with due regard to economy and avoidance of waste and extravagance.6 The Council should forward, within two working days after the end of the period the original copy of the checklist and the relevant documents/statements to the Accountant (PCA).7 The following anomalies as detailed in Appendix 2 were noted in respect of payment records: Inadequate supporting document – only request for payment were attached; Purchase of goods and services rendered without competitive quotes;  Missing payment vouchers and supporting documents;    Lack of verification of payments ;  Non-maintenance of accrual listing;  General ledger not updated for accruals recorded in the journal vouchers; and  Inadequate supporting document to journal vouchers.
These indicate weak internal controls within the Council as highlighted during the 2001 audits continues to exist and there is blatant disregard to the financial regulations and accounting manual.

Non-maintenance of accounting records and the non-adherence to internal controls questions the economy and effectiveness with which the Council has made payments and therefore a catalyst to unauthorised payments.
Recommendations The Council Treasurer should ensure that:  All payments are properly authorised and supported.

 All requests for payment are checked for completeness and accuracy before submitting to the Roko Tui to approve for payments.

 Three competitive quotes are obtained for all purchases.

  Records that are requested for audit purposes should be made readily available and Journal vouchers raised are authorised and attached with all supporting documents.

properly stored in a secured place.


6 Audit Act Cap.

70 Section 6 (2) (c) 7 Function 19 A(4) of Accounting Procedures for Provincial Councils Report of Provincial Council – December 2011 Page 22 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments No comments provided.
1.31.4 Council Quarters With the exception of those officers specified in General Order 601, all Officers occupying Government quarters of whatsoever grade or type or self contained flats, will be required to pay rent at the rate of eight percent (8%) of basic salary with maximum limits of rent for different grades of quarters.8 Occupants of Government quarters are responsible for the security of the premises and their contents, and for keeping the grounds in proper order.9 Audit noted that the Council is not receiving any rental income from the 6 quarters occupied by the officers of the council while one of the quarters is being rented out.
Total estimated revenue forgone totalled to $4,640 per annum at the rental rate being stipulated in the General Order.

Refer to Table 1.12 below for revenue forgone as a result of non-collection of rent for the quarters occupied by staff.
Table 1.12: Revenue Forgone From Quarters Quarters Occupant Quarters Grade Gross Salary 8% of Gross Salary Vunivivi Hill 1 2 3 4 Korovou 1 2 Total Rent Forgone Roko Tui Senior Assistant Roko Tui Assistant Roko Tui Treasurer Assistant Roko Tui Assistant Roko Tui ($) ($) Grade IV Grade IV Grade V Grade VI 33,154 2,652.31 20,335 1,626.79 17,071 1,365.69 12,051 964.08 Grade V Grade V 17,071 1,365.69 17,071 1,365.69 Maximum Limit as per General Order 607 ($) Un-deducted Annual Rental Income ($) 1,000 1,000 720 480 720 720 1,000 1,000 720 480 720 720 4,640 The above indicates loss of potential Council revenue and the incurrence of superfluous expenditure for maintaining quarter’s compound without any income.
In addition, the non collection of rent could financially restrain the budget allocated to the council denying taking up of development projects for the benefit of the Province.

Recommendations The Council should ensure that rent is deducted by Officers occupying these Council quarters.

Management Comments No comments provided.
8 General Order 607 9 General Order 613 Report of Provincial Council – December 2011 Page 23 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.31.5 Anomalies with Motor Vehicle Records Drivers are required to enter correctly the station, department, date mileage/kilometre age at the start of day, full details of trip and enter all fuel and oil purchased, any maintenance done and any damage sustained10.
Heads of department should ensure that accident reports are completed no later than 24 hours after the accident, or in case of the weekend, on the business day of the following week.

The driver of the Government vehicle must report every accident to the Police immediately.

The Public Works Department should undertake the accident repairs unless proper authority to effect repairs elsewhere has been obtained from the Ministry of Finance11.
The Council has two vehicles for which the motor vehicle records revealed the following discrepancies:  Running sheets were not completed by the drivers for the year 2009.

 Logbooks were not maintained for the Council vehicles.

 Neither the accident nor the police report was prepared for vehicle DU525 that was involved in an accident sometime in December 2008;  Non-preparation and non-submission of vehicle quarterly returns to i-taukei Affairs Board.
 Competitive quotations not sought for the purchase of vehicle – FN098 valued at $44,120.

 Vehicles fuelled consecutively but destination of travel could not be substantiated since vehicle running sheets were not maintained.

The above indicates gross violation of the transport rules and instructions and therefore attributed as mismanagement of the council vehicles that could result in the abuse of the council vehicles.
Recommendations The Council should ensure that:  The transport rules and instructions are adhered to at all times; and  Accident and Police reports are prepared for any accidents involving the Council’s vehicles.

 The Council should investigate the accident to vehicle DU 525 in December and ascertain whether proper action has been taken and responsible Office taken to task for not complying with Transport Rules and Instructions.

Management Comments No comments provided.
10 Transport Rules and Instructions, Section 13 (2) 11 Transport Rules & Instructions, Part IV: Accidents Report of Provincial Council – December 2011 Page 24 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.31.6 Development Assistance Scheme (DAS) Each agency must have in place a cost effective system of internal controls which safeguards money and property against loss.12 Development Assistance Scheme (DAS) is set up to put across developments and improvements in the availability of facilities in the villagers, tikinas within Tailevu province.
Every year the council is approved with $100,000 in their budget for DAS.

The assistance is granted for both community-based and individual projects for which no budgetary allocations are provided by other line Ministries.

Funding is based on a cost sharing basis of one-third contribution from community and the two-third from Government.

The following anomalies in the utilization of the DAS funds for the past three years are listed below and detailed in Appendix 3.
 Tender were not being called for the building of the “Roko Tui” quarters which was paid out to the Council in 2008 totalling $99,000.

In addition the comments from the Council that they were not informed to call for tender.
From audit point of view is a blatant disregard to the financial regulations;  There were no evidence of competitive quotations being sought for the building materials;  Invoices and delivery dockets not maintained for materials purchased;  Purchase orders not raised for materials bought;  The tender advertised in the Fiji Times on 27/9/09 or the construction of the 2x3 bedroom house noted that the building contractor did not bid for the tender but the company was still awarded the tender for $97,000;  DAS fund for the construction of the provincial quarters denies any capital development for the province; The above anomalies are a catalyst to abuse of the office position and therefore cannot be deduced to be an economical, efficient and effective utilisation of the DAS funds for the benefit of the community as a whole.
Recommendation  The Council should ensure that funds allocated for development assistance are not being diverted and surcharge action to be taken against the responsible officer.

 The Council should ensure that the proper value is obtained for all sum spent and that the evaluation of bidder’s submission such as the financial position and the capability to successfully carry out the projects before awarding tenders is taken.
 The i-taukei Affairs Board should investigate the awarding of the tender and whether procedures to screen each tender applicant to be able to complete any projects and whether due diligence were done.

12 Finance Instructions 2010 – Part 10: Internal Controls Section 59 (1) (a) Report of Provincial Council – December 2011 Page 25 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments No comments provided.
1.31.7 Occupational Health & Safety (OHS) Every employer shall ensure the health and safety at work of all his or her workers.13 Following anomalies were noted in respect to Council’s Office:  The Office and its amenities are in a deteriorating stage and are in urgent need of renovation and maintenance work.

 Rat droppings were noted due to the aged state of the building, luring pests.
 Absence of contract between the council and the landlord for the rental payment being made on a yearly basis of $10,000 as agreed during the October 2003 from the“Bose ni yasana” meeting.

 The councils documents, fixed assets and stationeries are placed in the conference room which is given on hire to patrons and therefore is susceptible to pilferage, loss/theft should the conference room be hired in the weekend.
Failure to address the above discrepancies could result in the Council facing legal action for non- compliance with the Occupational Health & Safety Act.

Also, in the absence of a rent agreement, the landlord is not legally bound to maintain the building; making it difficult to the Council to take legal action against the landlord should an incident arise.

Recommendations  The Council should ensure that a safe working environment is provided to its employees under the OHS Act.
 A rental agreement should be drawn up between the Council and the Tailevu Provincial Holding to justify the claim of $10,000 per annum and to allow the landlord take responsibility for the safe working condition of the building Management Comments No comments provided.

1.31.8 Submission of Financial Statements The accounts of every council shall be audited by the Auditor General.
By the first day of April in each year a Council shall prepare and transmit to the Auditor General a statement of account of the revenue and expenditure of the provincial fund in respect of the year ended 31st December immediately preceding together with a statement of the assets and liabilities of the fund as at that date together with such other statements as the Board may direct.14 13 Health & Safety at Work Act, Section 9(1) 14 ITaukei Affairs (Provincial Councils) Regulations – Clause 33 (2) & (3) Report of Provincial Council – December 2011 Page 26 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Audit noted that the Council has yet to submit the accounts from 2002 to 2009 to the Auditor General as required under the i-Taukei Affairs Regulation.
Failure of the Council to submit its accounts raises serious doubts on the actual performance of the Council and its financial positions.

Recommendations The Council should ensure that the iTaukei (Provincial Councils) Regulations – Clause 33 (2) & (3) are adhered to.

Management Comments No comments provided.
Report of Provincial Council – December 2011 Page 27 08/01/09 09/01/09 23/01/09 – 26/ 01/09 15/01/09 24/01/09 MR 12/02/09 - 18/02/09 10/03/09 – 13/03/09 17/03/09 SN MB ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Appendix 1.1: Meal Claims Details Date Officer's Initial Designation Time Work Covered 06/01/09 AR Driver 10am – 3pm Driving Roko Tui Tailevu (RTT) with PA Tailevu – Project Visits 10am – 3pm Driving RTT Treasurer at FAB and 11am – 2pm Driving RTT to Suva (FAB) MR Driver 8am – 9.30pm Delivery of NLC and BNT letter to villages 6 meals No expense claim form attached.
TPC Staff Accounts Staff 4pm – 6pm Update of Accounts 8am – 5.30pm Photocopying of BNT papers Remarks No.

of Meals Claimed 2 meals Only 1 meal should have during claimed been lunch hour 2 meals Only 1 meal should have during claimed been lunch hour 2 meals Only 1 meal should have during claimed been lunch hour.

1 meal Meal is claimable after two hours of normal working hours which is at 6.30pm not at 6pm.

2 meals Meal is claimable after two hours of normal working hours which is at 6.30pm not at 5.30pm.
I meal to be paid if worked during lunch hour.
No meal claimable as no official work was done during lunch hours 1 meal 1 meal Meal is claimable after two hours of normal working hours which is at 6.30pm not at 6pm 2/02/09 MR Driver 09/01/09 KC 8am – 12.30pm 4.30pm – 6pm then Took RTT to FAB, USP and took ART Nakaiwalu to Naisogovau Waiting for electrician to the complete work at office Driver Youth Co- ordinator 8am – 2pm 10am – 6.30pm 8am – 8pm, 8am – 3pm Delivery of BNT letter 5 meals No expense claim form attached BNT Letters 6 meals No expense claim form attached MB Youth Co- ordinator 27/03/09 29/07/09 30/07/09 31/07/09 03/07/09 04/07/09 05/07/09 06/07/09 11am – 1pm Naqareta Meeting Dispute 1 meal 11am – 1pm Meeting with Roko Tui 1 meal NSR Village visit 8.30-5pm 8.00-7pm 8.00-7pm 8.00-10pm 8.00-7 pm 8.00-7 pm 8.00-7 pm 1 meal 2 meals 2 meals 2 meals 2 meals 2 meals 2 meals No meal claimable as no official work was done during lunch hours.
No meal claimable as no official work was done during lunch hours -Expense claim incompletely filled -Villages documented -No report of visitation attached to substantiate claim.
-Officer paid $117 visited form not Report of Provincial Council – December 2011 Page 28 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Date Officer's Initial Designation Time Work Covered 31/07/09 SR 03/08/09 JB AR 04/08/09 05/08/09 06/08/09 07/08/09 10/08/09 11/08/09 12/08/09 02/10/09 MT Assistant Roko 9.00-9.30pm 9.00-9.30pm 9.00-8.30pm 9.00-8.30pm 9.00-8.30pm 9.00-8.30pm 9.00-7.30pm 9.00-8.00pm 9.00-8.00pm Driver Assistant Roko Clerk- Korovou Naikawaga/Nakalawasa/ Tubalevu Nakorolevu/Naisausau/ Natila/Matamaivere Sote/Savu/Naimasimasi Naisaumua/Diavuni Visa-Logani/Nadavo Natobuniqio/Naiborebore Muanaira/Kwva/Bureta Vadarai/Nasilai/Munani Namata/Raralevu/Dravo Job done as authorised by Roko Tui No.
of Meals Claimed Remarks -the 3 staffs were paid $162 each on 13/08/09 for 18 meals claimed.

-the villages could have been distributed amongst the 2 officers.

5 meals Officer was paid $45.

-there were supporting for dates and actual work done except her letter to be paid meal allowance.
Report of Provincial Council – December 2011 Page 29 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Appendix 1.2: Details of Payments Anomalies Date 16/03/09 19/03/09 26/06/09 Payment Voucher No.

Amount ($) Payment Voucher Details Remarks 100 105 218 140 40 100  Sitting allowance - education sub-committee meeting on the 16/03/09 at the board room.

 Hiring of minivan for workshop at Kiuva & return for 2 days.
 Reguregu for officer Maika’s father – Council’s Driver.

Payment vouchers missing 16/06/09 204 300 Travelling expenses for village visit to Qoma and Naigani and return.

17/07/09 236 07/07/09 232 10/08/09 24/09/09 253 305 60 Payment to Sitima Naqaravatu for cleaning up of Council staff quarters at Maji Hill for the month of July.

30 Payment to Saimoni Bola for cleaning up of Council staff quarters at Vunivivi Hill for the month of June.
and No supporting attached – such as other tickets travelling expenses incurred.

Maintenance of staff quarters still met by the Council even though staffs are occupying the quarters free of charge.

Maintenance of staff quarters still met by the Council even though staffs are occupying the quarters free of charge.

150 Payment of TNK allowance for 2nd quarter 2009 No report attached.
59 Payment to Roko Tui Tailevu for 7 meals and reimbursement of $17 as out of pocket expenses for buying lunch for driver and ITAB IT officer.

 Receipts attached but audit is concerned on the reimbursement for cost of lunch.

This is seen as misuse of position as the Roko Tui approved the reimbursement himself.

 Driver also claimed his meal as per PV 306.


25/09/09 306 20 Payment to Maika Rasilisili (Driver) for 2 meal allowance and reimbursement of out of pocket allowance for parking ticket while parking in Suva ($1.50)  Receipts attached.

Details of purpose of trip to Suva were not documented.

 Purpose of parking in Suva city was unclear.

23/10/09 355 21 Payment to Josefa Toganivalu for meal and out  Details of meal claims were not of pocket allowance.
Meal - $9 Fuel - $5 Yaqona (sevusevu) - $7 *Fuel was for using private transport to pick up laptop.

08/07/09 233 210 Payment to Roko Tui Tailevu as reimbursement for out of pocket expense for the cost of towing of vehicle ED 966 from Naluwai to Dilkusha.

filled  Mileage details were accounts submitted claiming of fuel expenses to not for  Destination to pick up laptop was not provided.

 Details of this trip were not documented.

Naluwai is not in the Tailevu Province.


boundary of Report of Provincial Council – December 2011  Roko Tui to furnish explanation on the details of the trip, if for personal reasons, the total costs Page 30 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Date Payment Voucher No.

Amount ($) Payment Voucher Details Remarks should be reimbursed Council.
to the  Reimbursement approved by Roko Tui Tailevu  Bought 2 recharge cards and reimbursed by the Council.

 Claimed for bus fare when officer did not attach bus ticket with expense claim form.

paid  Driver for allowance “Bose ni Yasana“ delivering minutes and other driving duties.

 Driver was paid $142 when he should be paid $125 only.

ticket/receipt  Boat from Bau Island and return not attached.

 “Bose ni Yasana” preparations, cleaning up and other duties.
18/12/09 420 875 Paid to Council staff for “Bose ni Yasana” cleaning up and other duties: Joape Nalatu - $55 Simeli Nakalevu - $52 Alipate Rabitu - $142 Kaiava Cama - $51.00 Semesi Raicebe - $45.00 Taneila Sawana - $54.00 Saula Mole - $27.00 Kelera Radininakelo - $42.00 MerelitaTuinabewa - $27 Asenaca Fetatuki - $36.00 Maika Raisilisili - $36.00 Mereani Batirerega - $64.50 MakalesiTamoi - $36.00 Elenoa Cagimatailalai - $36.00 Rayawa Miliana - $27.00 Ratu Ravuama Naikawalu - $63.00 Josefa Toganivalu – $81.00 Report of Provincial Council – December 2011 Page 31 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Appendix 1.3: Development Assistance Scheme Details Year 2007 Date Released 15/07/08 Amount ($) Project Discrepancies 99,000  Construction of staff quarters – Roko Tui 1,000  Administration Cost  Grade IV quarters for the Roko Tui was built by Majesty Constructions for $99,000 as per the contract signed on 15/07/2008.
 No tender was called for the construction of the quarters as according to Roko Tui who said that notices were placed at the construction site as this was to avoid the risk of attracting companies outside Tailevu and the job was awarded to Majesty Construction for their reputation.15  i-Taukei Affairs released the DAS without assessing the Tender documents.
 Original Plan submitted to ITAB was amended from a 3 bedroom house to a 4 bedroom house inclusive of master bedroom incurring extra cost of $3,000 to re-draft the plan.

 Tender was called and published in the Fiji Times for the construction of the 2 Asst RT quarters.

This was awarded to Kays Building Woks.

 Kays Building Works successfully completed one quarters and is unable to complete the second quarters due to bankruptcy.
 The Council has not paid the final payment of $2,425 and is not collecting $50 per day from the contractor as liquidated damages for failing to complete the works within the agreed time as per the contract.

 Office furniture’s bought without obtaining competitive quotations.
2008 04/08/09 50,000 36,678 3,629 4,693 4,000 1,000 quarters Tui Roko Asst renovation Provincial Treasurers quarters Office Equipments Office Furniture’s Administration cost PC office Administration cost ITAB HQ 2009 99,000  Renovation to staff quarters at  Aawarded to Garuda Investments as they are from Nausori.

Maji Hill, Korovou.

 Office Equipments No tender called for this exercise.

 Bought Laptops and Computers for the Nausori and 1,000 Administration cost Korovou office.
 Purchase of Projector.

15 Correspondence on the release of DAS 2007 on the 11/07/08 Report of Provincial Council – December 2011 Page 32 SPECIAL PROJECTS 1.

2.

3.
2.

3.

Emergency Flood Recovery Project Fiji Road Upgrading Project (FRUP) III Sustainable Energy Financing Project (World Bank Funded) ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 1: EMERGENCY FLOOD RECOVERY PROJECT The Fiji Road Upgrading Project – Stage III is a government of Fiji project, estimated at appraisal in 1997 to cost $125 million [US$90m] excluding interest during construction.
The Project is being implemented with financial assistance from ADB Loan No.

1530-FIJ dated 26 August 1997 for US$50m and the Fiji Government to meet the remaining 44% of the Project cost.

The project aims to help the Government to (i) improve efficiency of road sector services and increase private sector participation and (ii) improve management of the road asset and sector resources.
It is also expected to reduce transport constraints on economic development, and thus improve returns on transport infrastructure.
Table of Content SECTION 1: EMERGENCY FLOOD RECOVERY PROJECT ................................................................................................... 1 PART A: FINANCIAL INFORMATION ...................................................................................................................................... 1 1.1 Audit Opinion ............................................................................................................................................................... 1 1.2 Abridged Statement of Financial Performance ........................................................................................................... 1 PART B: CONTROL ISSUES .................................................................................................................................................... 2 1.3 Position of Project Accountant .................................................................................................................................... 2 1.4 Appointment of Project Coordinator ............................................................................................................................ 3 1.5 Project Expenses not fully Reimbursed by ADB ......................................................................................................... 4 1.6 Double Reimbursement Claims .................................................................................................................................. 5 1.7 Variance between ACCPAC Report and FMIS ........................................................................................................... 6 1.8 Variance between ACCPAC Report and Project Progress Report ............................................................................. 6 PART A: FINANCIAL INFORMATION 1.1 Audit Opinion The audit of the Statements of Expenditure of the Flood Recovery Project for the year ending 31 December 2010 resulted in the issue of an unqualified audit report.
1.2 Abridged Statement of Financial Performance Year ended 31 December EXPENDITURE Civil Works Emergency Response Costs PMU Salary and Wages Operational Costs Consultancy Services Design Project Coordinator Financing Charges Interest and Commitment Charges VAT 2010 ($) ADB Funded (87%) ($) Government Funded (13%) ($) 2,933,037 33,575 35,308 2,566,407 0 0 168,203 10,714 57,764 383,027 147,177 9,375 57,764 320,801 366,630 33,575 35,308 21,026 1,339 0 62,226 Report of Special Project Audits – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Year ended 31 December TOTAL EXPENDITURE 2010 ($) 3,621,628 ADB Funded (87%) ($) 3,101,524 Government Funded (13%) ($) 520,104 A total expenditure of $3,621,628 (VIP) was incurred for flood related costs by Ministry of Works, Transport and Public Utilities and Land and Water Resource Management as at 31/12/2010.
This comprised of eligible expenditures of $3,101,524 (VIP) loan funded and the balance of $520,104 remained government funded expenditure and was ineligible for reimbursement from loan funds.

Significant portion of expenses incurred in 2010 was used on emergency response cost which comprised $2,933,037 or 81% of the total expenditure.

Emergency Response Cost relate to the rehabilitation of damaged roads, agricultural drainage schemes and water supplies and sewerage systems.
PART B: CONTROL ISSUES 1.3 Position of Project Accountant Employment decisions in the public service are made without patronage, favouritism or political influence, and appointments and promotions are made on the basis of merit after an open, competitive selection process.1 On 15/5/10, an appointment was made to contract a Senior Accounts Officer to perform the duties of Project Accountant for Flood Recovery Project.
The officer’s substantive post was Clerical Officer with salary scale of $8,092 - $15,001at the time of appointment.

The Officer skipped two posts of Assistant Accounts Officer and Accounts Officer and was appointed as Senior Accounts Officer with salary scale of AC02 $29,935 - $37,982 per annum.

The position for Project Accountant was not advertised and the officer was appointed based on the recommendations by her superiors only.
Audit further noted that in the Officer’s employment contract her position was incorrectly stated as Clerical Officer.

Recommendation The PMU must ensure that all vacant positions in public service are advertised and appointments made through proper recruitment and selection process.

Management Comment No Comments.
1 Part 2, Section 4(2) of the Public Service Act 1999 Report of Special Project Audits – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.4 Appointment of Project Coordinator Employment decisions in the public service are made without patronage, favouritism or political influence, and appointments and promotions are made on the basis of merit after an open, competitive selection process.2 Ministry of National Planning (MNP) shall be the Project Executing Agency which shall be responsible for the overall execution of the Project and coordination with each of Ministry of Works, Transport and Public Utilities and Land and Water Resource Management.
Ministry of National Planning shall be supported by a Project Coordinator who shall be recruited as a consultant.3 The audit noted that nine applications were received after the post for the Project Coordinator was re- advertised in the daily newspapers on 20/03/10 when the first advertisement on 26/09/09 did not receive much public interest.

The Ministry of National Planning short-listed two of applicants based on experience with ADB projects.
Refer to the Table 1.1 below for details of the short-listed applicants.

Table 1.1: Shortlisted Applicants EDP Number 44665 Applicants Salary Expectation per annum $65,000.00 17089 $125,000 Work Experience Qualification MNP - Remarks Senior a Currently Engineer with the Public Utilities holding the post of Director Department of Water & Sewerage.
He has work relevant experience in managing ADB funded project and was the Project Manager - Suva for Nausori Regional Water & Sewerage Project and has 12 years experience in the implementation of infrastructure projects.

Ministry of Works (27 years).

ADB Project Manager for sealing of Kings and Lodoni Roads.

the ADB 1) Bachelor Engineering (Australia) 2) Bachelor Science (USP) in in Has necessary qualification and experience with ADB projects.


1) Ordinary Technical Diploma (City & Guilds) 2) Bachelor of Science – Civil (Scotland) 3) Completed Core Knowledge of the Executive MBA with Mt Eliza International.
2 Part 2, Section 4(2) of the Public Service Act 1999 3 Part 2, Section A of Schedule 5 of the Loan Agreement Report of Special Project Audits – December 2011 Page 3 Office of the Auditor General – Republic of Fiji ______________________________________________________________________________ On 22/11/10, EDP Number 17089 was appointed on contract for 1 year as a consultant to perform the duties of Project Coordinator for Emergency Flood Recovery Project with effect from 22/11/2010 with annual salary of $100,000.
The audit noted that the shortlisted applicants for the position were not interviewed.

Instead he was appointed to the position of Project Coordinator based on the recommendation of the Ministry of National Planning and endorsement of the Prime Minister and the Asian Development Bank.

The audit also noted that EDP Number 44665 was not considered for the position even though he had relevant experience and qualification in the water and sewerage projects and his expected salary was $65,000 per annum.
In addition no justification was provided on EDP Number 17089 annual salary of $100,000.

Recommendation The PMU and MNP must ensure that all appointments to vacant positions in public service are made through proper recruitment and selection process.

Management Comment No Comments.


1.5 Project Expenses not fully Reimbursed by ADB Reimbursement of reasonable expenditures incurred under the Project shall only be approved for Works which have been procured in accordance with the procedures set out in Schedule 4 to the Loan Agreement.4 The audit noted instances where the ADB did not reimbursed the full amount applied for reimbursement by PMU.

Expenses totalling $77,221 were disallowed for reimbursement by the bank for the year ending 31/12/10.
Details of the amounts not reimbursed are shown in the Table below.

Table 1.2: Expenses Disallowed by ADB Application No.

1 5 Application Amount ($) 745,191.64 207,934.79 Actual Amount Reimbursed ($) 744,002.18 131,903.14 Total Variances Variances ($) 1,189.46 76,031.65 77,221.11 The above expenses were not reimbursed by the bank because adequate supporting documents for the expenses were not submitted to the bank.
As a result the project expenses totalling $77,221.11 was paid from the Ministry’s budget and not the from the loan proceeds.

4 Part 6, Schedule 3 of the Loan Agreement Report of Special Project Audits – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendations  The PMU must ensure that proper documentations are submitted for all claims to the Bank.
 The PMU should resubmit the claims with proper documentations.

Management Comment No Comments.
1.6 Double Reimbursement Claims Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the effective date for works, subject to a maximum amount equivalent to thirty percent (30%) of the Loan amount; provided that the expenditures have been incurred and paid for after 11 January 2009 but not earlier than twelve (12) months before the date of this Loan Agreement.5 It was noted that a total of $37,478.29 was claimed twice by PMU for reimbursement from ADB.
The PMU first submitted the reimbursement of $37,478.29 to ADB in claim number 2 dated 09/03/10.

The same expenses were again submitted for reimbursement in claim number 5 dated 30/09/10.

The amount was reimbursed by ADB in both claims which resulted in double payment by ADB.

Details of the amount double claimed are shown below.
Table 1.3: Project Expenses Claimed Twice by PMU Date of Reimbursement 06/11/2009 15/01/2010 25/01/2010 Total Cheque Number 10081 679 688 Payee Engineering Company 1 Engineering Company 1 Engineering Company 1 Amount ($) 9,786.49 4,362.17 23,329.63 37,478.29 The finding showed that claims submitted to ADB were not properly scrutinised by the PMU which resulted in double payment by ADB.
Recommendations  The PMU should properly review all claims submitted to ADB for reimbursement to ensure expenses are not claimed twice.

 The amount claimed twice from ADB should be adjusted against future claims from the bank.

 Management Comments No Comments.


5 Part 5, Schedule 3 of the Loan Agreement Report of Special Project Audits – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji 1.7 Variance between ACCPAC Report and FMIS The general ledgers from the Ministry of Finance shall be reconciled to the Department/Ministry’s general ledger.
Any errors, omission or misallocations must be immediately adjusted by way of journal vouchers.

The reconciliation statements shall be signed, certified, dated and forwarded to the Ministry of Finance.6 The projects operating costs record maintained by the PMU did not reconcile with the FMIS general ledger.

A variance of $38,924 was noted between the two records.

Refer to Table below for details.


Table 1.4: Variance in ACCPAC and FMIS Figures FMIS Amount (VEP) ($) ACCPAC (VEP) ($) Variance (VEP) ($) 147,884 108,960 38,924 The PMU did not provide details of the variance.

The finding shows lack of supervision and proper checks by senior officers before postings are done.

Recommendations   The PMU must ensure that project expenses are properly posted to the ledgers.
The PMU should ensure that the Accpac and FMIS records are reconciled on a monthly basis and any variance identified is investigated and adjusted after appropriate approval is obtained.

Management Comments No Comments.
1.8 Variance between ACCPAC Report and Project Progress Report Details of each invoice or other source document for a payment must be promptly and accurately entered into the fields provided, these includes: a) The correct voucher amount b) The invoice date c) The correct vendor identification of the supplier or the payee d) The invoice identification, the local purchase order number it relates to, and where applicable, payment terms e) The correct tax code f) The correct bank code if agencies have more than one bank account; and g) The ledger account it is charged to.7 6 Finance Manual – Works and Transport 2005 S16.3.3 – 16.3.7 7 Finance Instruction 2010 – S14 Report of Special Project Audits – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The projects operating costs records maintained by the PMU did not reconcile with the project progress report.
Variance of $116,121 was noted between the two records.

Refer to Table below for details.

Audit further noted that the variance was due to mispostings totalling $115,257, inclusion of VAT expenses totalling $657 and posting incorrect amount of $207.
Table 1.5: Mispostings Mispostings DECE (VR 47514) BSP (VR 47605) (VR 41191) (VR 47911) VAT ( VR 47779) VAT (VR 47944) VR 41234 (Batch 426239) VR 41195 (Batch 4266199) VAT (VR 49051) VAT (VR 49052) VAT (VR 47079) VAT (VR 47080) VAT ( VR 49053) VAT (47194) VR 41253 (Batch426257) Total Amounts ($) 75,000 6,604.63 60.00 147.00 166.56 20.33 30,591.00 41.67 187.02 66.67 28.17 10.55 100.00 36.16 3,061.08 116,120.84 The finding showed lack of supervision and proper checks by senior officers before postings are done to the ledger systems.
Recommendations   The PMU must ensure that project expenses are properly posted to the ledgers.

The PMU should ensure that the ACCPAC and project progress report is reconciled on a monthly basis and any variance identified is investigated and adjusted after appropriate approval is obtained.

Management Comments No Comments.


Report of Special Project Audits – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 2: FIJI ROAD UPGRADING PROJECT (FRUP) III The Fiji Road Upgrading Project – Stage III is a government of Fiji project, estimated at appraisal in 1997 to cost $125 million [US$90m] excluding interest during construction.
The Project is being implemented with financial assistance from Asian Development Bank (ADB) Loan No.

1530-FIJ dated 26 August 1997 for US$50m and the Fiji Government to meet the remaining 44% of the Project cost.

On 19 March 2010, the ADB refinanced the remaining works for $US26.8m under the Supplementary Loan No.

2514-FIJ.
2514-FIJ.

The project aims to help the Government to (i) improve efficiency of road sector services and increase private sector participation and (ii) improve management of the road asset and sector resources.

It is also expected to reduce transport constraints on economic development, and thus improve returns on transport infrastructure.
Table of Content SECTION 2: FIJI ROAD UPGRADING PROJECT (FRUP) III ................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 2.1 Audit opinion ............................................................................................................................................................... 1 2.2 Abridged Statement of Expenditure ............................................................................................................................ 1 PART B – CONTROL ISSUES ................................................................................................................................................... 2 2.3 Variances in Accpac and FMIS Records ..................................................................................................................... 2 2.4 Over Expenditure as at 31 December 2010 ................................................................................................................ 3 2.5 Maintenance of FRUP Records .................................................................................................................................. 4 2.6 Journal Vouchers Not Approved ................................................................................................................................. 5 2.7 Senior Consultant Engineer - Contract.......................................................................................................................... 6 2.8 Resident Engineer - Contract....................................................................................................................................... 7 2.9 Director of National Road - Contract ........................................................................................................................... 8 2.10 Engagement of Consultant Services
 to Recruit Expatriate Engineers ....................................................................... 11 2.11 Accommodation for Expatriates ................................................................................................................................ 12 2.12 COVEC Equipment ................................................................................................................................................... 13 APPENDIX 2.1 – DETAILS OF COVEC VEHICLES AND PLANTS GARAGED AT VIWA SITE OFFICE - TAILEVU .......... 15 APPENDIX 2.2 – PROJECT SITE AT VIWA TAILEVU - 16/06/11 .......................................................................................... 19 PART A – FINANCIAL INFORMATION 2.1 Audit opinion The audit of the accounts of the Fiji Road Upgrading Projects for the year ended 31 December 2010 resulted in the issue of an unqualified audit report.
2.2 Abridged Statement of Expenditure Sub Project Description ICB Contract WSC 13/06(B W Holding Ltd) Allocation ($) Total Expenditure As at 31/12/10 ($) % ADB Funded VEP 1,076,862 840,405 77.5% Report of Special Project Audits – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Sub Project Description WSC 14/06(Standard Concrete Industries Ltd) WSC 30/09 (China Railway 5th Group Ltd) WSC 38/09 (China Railway 1st Group Ltd) WSC 04/08 (Fairdeal Earthmoving Co) WSC23/08 (Naim Cenderra Sdn Bhd) Project Management Unit Technical Support ICB Supervision Asset Management Unit Land Acquisition VAT (Direct Payment by ADB) VAT SUMMARY - TOTAL (F$) Retention VAT VEP VAT VEP VAT VEP VAT % ADB Funded 77.5% 77.5% 77.5% 77.5% 77.5% 77.5% Allocation ($) Total Expenditure As at 31/12/10 ($) 804,776 105,051 3,007,424 375,928 796,360 100,516 459,548 57,444 8,048,503 14,637,077 1,173,831 434,970 298,571 129,372 46,380 638,939 3,120,817 33,632,197 2,510,000 910,000 1,009,549 8,223,880 14,567,450 1,150,000 405,000 280,000 130,000 30,262,741  The International Competitive Bidding (ICB) represented the cost of civil works treated as non- reimbursable expenditure and excluded land acquisition and crop compensation costs.
 The Project Management Unit (PMU) and Technical Support Services reflected expenditures incurred for payments of salary, local travel and subsistence, staff training and the administration costs of the PMU and expatriate staffs.

Assets Management and Engineering Consultants represented consultancy fees and pilot survey.

The PMU incurred a total cumulative expenditure of $33,632,197 for FRUP as at 31/12/10 which included $4,597,030 as ADB loan funding and $29,035,167 as the Fiji Government contribution.
PART B – CONTROL ISSUES 2.3 Variances in Accpac and FMIS Records The general ledgers from the Ministry of Finance shall be reconciled to the Department/Ministry’s general ledger.

Any errors or misallocations must be immediately adjusted by way of journal vouchers.

The reconciliation statements shall be signed, certified, dated and forwarded to the Ministry of Finance1.

Separate allocations shall be maintained for respective projects.
All transactions in relation to the projects shall be entered into their respective allocations.

1 Finance Manual - Works and Transport 2005 S16.3.3 – 16.3.7 Report of Special Project Audits – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The Department of National Roads including the Project Management Unit currently uses the ACCPAC accounting software.
The records on ACCPAC are then uploaded to the government’s Financials Management Information System (FMIS) at the end of each month.

Our audit noted variances in balances between the FMIS general ledger records, ACCPAC records and the Department’s control ledger.
Refer to Tables 2.1 and 2.2 for details: Table 2.1: Variances in Project Components between FMIS and ACCPAC Records Project Components FMIS Amount [VEP] ($) Project Management Unit Technical Support ICB Supervision Asset Management Unit Land Acquisition 1,450,500 194,694 298,169 96,342 48,420 ACCPAC [VEP] ($) 1,173,831 434,970 298,571 129,372 46,380 Variance [VEP] ($) 276,669 (240,276) (402) (33,030) 2,040 Table 2.2: Variances in Project Components between Control Ledger and ACCPAC Records Project Components ACCPAC Amount [VEP] ($) GL [VEP] ($) Variance [VEP] ($) Project Management Unit Technical Support Services ICB Supervision Asset Management 1,173,831 434,970 298,571 129,371 1,181,256 437,642 293,422 129,619 (7,425) (2,672) 5,149 (248) In addition, it was also noted that the expenditure records, when uploaded onto the FMIS, were recorded under one allocation only rather than under separate sub expenditure allocations.
As a result, audit was not able to reconcile the individual account balances as shown on the Accpac system with the FMIS records.

Failures of the project accounting officers to effectively carry out reconciliations of the above records have resulted in the above variances.

This could subsequently result in the misstatements of balances in the financial statements.
Recommendation The PMU must ensure that Accpac records are reconciled with the FMIS and Control Ledgers on a monthly basis and any variances identified are investigated and adjusted accordingly.

Management Comments This has been an ongoing issue in the past years.

We having a problem with FMIS which does not record the cost required to the sub project level whereas the Accpac does.
In August 2011, the FMIS has been strengthen with new software which we understand can accommodate our requirement and solve this problem completely.

2.4 Over Expenditure as at 31 December 2010 The Project Accountant shall ensure that as far as possible expenditure incurred during the year is within the approved budget.
Report of Special Project Audits – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The Project Management Unit (PMU) incurred over expenditure on the following projects undertaken in 2010.
Refer to Table 2.3 for details: Table 2.3: Analysis of Budget and Expenditure Description SCIL NCSB Project Management Unit Technical Support ICB Supervision Land Acquisition Overall Budgeted Expenditure ($) 2,510,000 14,567,450 1,150,000 405,000 280,000 - Overall Actual Expenditure ($) 3,007,424 14,637,077 1,173,831 434,970 298,571 46,380 Variance ($) (497,424) (69,627) (23,831) (29,970) (18,571) (46,380) Expenditures may not have been properly monitored to ensure that they are contained within their budgetary provisions.
Recommendations  The PMU must ensure that proper project costing and management is carried out to avoid cost over runs.

 The PMU must rigorously monitor expenses incurred to ensure that they are within the approved budget.

Management Comments The record shows the over-expenditure was at the sub-project level but the overall program was within the approved budget.
2.5 Maintenance of FRUP Records The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto.2 The presence of a reliable and easy to follow audit trail is an indicator of good internal controls instituted by an agency.
Our review of expenditure records revealed that payment vouchers relevant to the project were not properly arranged.

The records of the PMU were not maintained and filed separately from other payment vouchers for expenditures funded by Government at the Department of Roads.

The absence of an easy to follow audit trail hindered the progress of the audit as substantial audit hours were exhausted on trying to locate and identify the payments vouchers relevant to the PMU.

2 Loan (No.
2 Loan (No.

2514-FIJ) Agreement (3rd Road Upgrading Project Supplementary) – Section 4.05 Report of Special Project Audits – December 2011 Page 4 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendation It is recommended that payment vouchers and supporting records for the PMU are maintained separately for a reliable and easy to follow audit trail.
This will greatly contribute to ensuring that the audit is completed before the deadline specified in the loan agreement, moreover, it will also contribute to the reduction of time taken to carry out the FRUP audit.

Management Comments To have a separate record was initially recommended by ADB for ease of reference.

However this was done when the force account was still in progress.

Now we don’t have force account and our records are filed together with the DNR records.
The PMU will try to encourage the management if this system can be accommodated.

2.6 Journal Vouchers Not Approved The Accounting Head or Accounts Supervisor must check that:    all relevant details are included on the voucher; balances are adequately supported; and the correct accounts have been debited or credited3.

Our review of journal vouchers processed during the financial year 2010 revealed that a number of journal vouchers were not approved by the Accounting Head before processing.
The journal vouchers were raised and processed by the Clerical Officer4.

This issue has been previously highlighted, however, no improvement has been made.
Refer to Table 2.4 below for examples: Table 2.4: Examples of Journal Vouchers not approved in 2010 Date 23/04/10 30/04/10 31/03/10 03/10 03/10 21/04/10 2/03/10 10/10 Journal Voucher No 426036 426042 426026 426028 426028 426035 426011 426149 Amount ($) 22,903.30 645.00 126.00 120,820.64 6,195.82 2,215.32 87.68 380,962.58 Journal vouchers were not verified and approved by a senior officer increasing the risk of incorrect entries in the accounting system.
Without proper approval, the journal vouchers processed were unauthorized.

Recommendation The PMU must ensure that all journal vouchers are independently verified and approved by the Project Management Accountant before they are processed.
3 Finance Manual - Works and Transport 2005 S16.1.4 4 Mr. Mosese Qiovou Report of Special Project Audits – December 2011 Page 5 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments Your recommendation is accepted.

Our account officers are notified accordingly.


2.7 Senior Consultant Engineer - Contract The Client shall pay to the Consultant the following remuneration6:    Salary - - Housing Allowance Cost of Living Allowance - FJ$81,000 per annum $12,000 per annum $10,000 per annum Except as otherwise agreed, total payment for remuneration under this contract shall not exceed FJ$103,000.
The Government will pay the Officer in respect of the period of service an annual basic salary of $103,000 per annum.7 Provision for housing will be in line with the existing policy of Government.
The Officer shall pay by way of rent for such quarters a sum calculated in accordance with the new rent formula.8 EDP Number 58703 was engaged as the Senior Construction Engineer with the Ministry of Works, Transport & Public Utilities in 2005 for twelve months renewable subject to mutual agreement between the Officer and the Ministry.
Our audit noted the following anomalies with regards to the employment of EDP Number 58703:  Renewal of his employment contract was delayed for 2 years after it expired on 07/02/09.

His employment contract was only formally renewed on 15/03/11 when he was re-engaged on his previous terms and conditions backdating to the period 08/02/09 to 08/02/11.

The Officer’s contract expired again on 09/02/11, however, as at the date of audit9, the Officer was still engaged but without a valid employment contract.
 In accordance with his employment contract for period 08/02/09 to 08/02/11, he was entitled to an annual basic salary of $103,000.

However, the audit noted that he was paid more than his entitlement as stated in the employment contract.

The overpayments resulted from the continuation of payments of housing allowance from his previous contract.
Refer to Table 2.5 for details: Table 2.5: Salary payments for Senior Construction Engineer Year Total Paid ($) Contract Amount ($) Overpayment ($) 2010 2009 2008 2007 2006 115,730 115,518 108,919 112,566 117,090 103,000 103,000 103,000 103,000 103,000 12,730 12,518 5,919 9,566 14,090 5 EDP No.
58703 6 Contract Agreement between the Government of Fiji and EDP Number 58703 - 2005 7 Employment Contract – 08/02/09 – 08/02/11 Section 3(a) 8 Employment Contract – 08/02/09 to 08/02/11 Section 6 9 17/06/2011 Report of Special Project Audits – December 2011 Page 6 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji The absence of supervisory checks, proper reconciliation of payroll, and delay in the renewal of employment contract have contributed to the overpayments of salaries.
Recommendations  The PMU should rectify the above overpayments and initiate necessary recovery action with immediate effect.

 The Ministry should ensure the prompt renewal of expatriates’ work contracts once they are expired and also ensure consistency in the terms of all contracts.

 Payments of remuneration to expatriates should be limited to provisions of their employment contract.

Any change to the conditions of the employment contract should be approved by the appropriate authority.
Management Comments The officer has been overpaid with his Housing allowance.

Housing allowance is fed under Code 03 which is reflected under Tax Allowance column in the payroll.

The allowance of $461.54 is than added to the normal gross of $3989.62 which gives the fortnightly gross of $4451.16.This fortnightly gross multiplied by the 26 f/n’s gives an annual salary of $115,730.16, yet the payroll continued to show the annual salary of $103,730.00.
We will arrange for the overpayment to be recovered with immediate effect.

2.8 Resident Engineer - Contract The Government will pay the Officer in respect of the period of service an annual basic salary of $103,000 per annum.11 Provision for housing will be in line with the existing policy of Government.
The Officer shall pay by way of rent for such quarters a sum calculated in accordance with the new rent formula.12 EDP Number 60159 was engaged on contract as the Resident Engineer for the FRUP III with an annual salary of $103,730.

The audit noted that the Officer was overpaid salary totalling $45,511.20 since 2005.

Refer to Table 2.6 below for details: 10 EDP No.
60159 11 Employment Contract – 26/01/09 – 26/01/11 Section 3(a) 12 Employment Contract – 26/01/09 to 26/01/11 Section 6 Report of Special Project Audits – December 2011 Page 7 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 2.6: Payment of unauthorized salary increase - Mr. Sivaguru Thillainathan Year Contracted Amount ($) Remuneration Paid as per Government Payroll System ($) Overpayment ($) 2005 2006 2007 2008 2009 2010 Total Salary 103,730.00 103,730.00 103,730.00 103,730.00 103,730.00 103,730.00 622,380.00 106,465.30 115,223.81 113,461.40 108,048.13 113,692.58 110,999.98 667,891.20 2,735.30 11,493.81 9,731.40 4,318.13 9,962.58 7,269.98 45,511.20 In addition, the Ministry did not renew his employment contract when it expired on 26/01/11.
The Officer continued working without a valid contract.

Lack of proper salary reconciliation is evident as the PMU failed to identify and justify the above increases in salaries.

Recommendations  The Department should ensure that contract officers are paid in accordance to their terms of contract and any variances to the contract should be properly authorized and documented.

 The overpaid salary should be recovered from EDP Number 60159.
 The Department must ensure that all Officers engaged for the project have a valid  employment contract.

Salary reconciliation should be carried out on a monthly basis and any variances to be investigated and rectified accordingly.

Management Comments The officer has been overpaid with his Housing allowance.

Housing allowance is fed under Code 03 which is reflected under Tax Allowance column in the payroll.
The allowance of $461.54 is than added to the normal gross of $3989.62 which gives the fortnightly gross of $4451.16.

This fortnightly gross multiplied by the 26 f/n’s gives an annual salary of $115,730.16, yet the payroll continued to show the annual salary of $103,730.00.

We will arrange for the overpayment to be recovered with immediate effect.

.
.

2.9 Director of National Road - Contract Approval is granted for the upgrading of salary for EDP Number 63814, Engineer, from his current EP04 grade to the maximum salary scale of EP01 grade.

This is to be effective from the date 13 EDP No.
63814 Report of Special Project Audits – December 2011 Page 8 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji he assumed the duties of the Post of Director National Roads.14 With effect from 01/06/11, a new set of contract to be issued on the line position he is appointed on (Director National Roads).15 Where children of the officer are educated in Fiji or abroad up to the age of 18 years or is over 18 years and under 27 years of age and is receiving fulltime instruction at any University, College or School or other educational establishment, actual school fees not exceeding $5,000 per child will be paid on production of necessary documents.16 Upon completion by the Officer of the period of service or upon termination of this agreement by the government under the terms of paragraph 7 hereof, but not otherwise, provide the officer with a free passage class to Sri Lanka according to paragraph 4(a) above.17Provided that no passage will be provided under this sub- paragraph if the officer does not leave Fiji within one (1) month of the date of such completion or termination, or such lesser period as government may specify.18 Our review of the Project Management Engineer's personal file revealed that the Officer’s contract expired on 16/01/09 but he continued working without a valid contract.
As at the date of audit19, the Officer’s contract was still not renewed.

The following anomalies were also noted:  The Officer’s salary was increased to maximum scale of EP01 $72,154 with effect from 07/05/10 and was backdated to 25/02/08, although there was no evidence that the Officer was formally appointed as Acting Director of Roads from 25/02/08.

The backdating of the increase in salary was contrary to the approval given by the PSC.
Refer to the Table below for details of overpayments: Period Amount $ Remarks 25/02/08 - 31/12/08 26,388.73 Back date payment was made to the Officer on 13/12/10 via Cheque 01/01/09 - 06/05/10 Pay 10 – Pay 13 2010 72,154 - 41,068 = 31,086/26 * 29 No.

858096.

41,846.54 The payment voucher was prepared, however, audit advised that this be temporarily put on hold, awaiting clarification on the issue of backdating the increase in his salary.

34,672.85 The salary scale has been increased to EP01 level.
The Accounts Section has been instructed to seek a clarification from the PSC Total Overpaid 61,061.58  The Officer and his family (wife and two children) travelled to Sri Lanka on two occasions in route 2010.The Nadi/Melbourne/Sydney/Singapore/Colombo/Hong Kong/Nadi) instead of the shorter and cheaper route (Nadi/Hong Kong/Colombo/Hong Kong/Nadi).
The details of the cost of air passage were as follows: Officer longer opted the for Date Chq No Payee Amount $ Remark 29/03/10 856242 Discount Flight Center 19,268.00  No valid contract to substantiate this travel.
14 PSC Correspondence dated 18/03/10 15 PSC Correspondence dated 26/04/11 16 Officers work contract signed copy for period 16/01/06 to 15/01/09 Section 17 Officers work contract unsigned copy for the period 16/01/09 to 15/01/10 Section 4 (2) (c) 18 Officers work contract unsigned copy for the period 16/01/10 to 15/01/10 Section 4(2)(c) 19 13/07/11 Report of Special Project Audits – December 2011 Page 9 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Date Chq No Payee Amount $ Remark  Even if the contract was valid the trip should not be accommodated by the FRUP III as it was made after the One month from the start of the new contract.
02/12/10 858953 Discount Flight Center 23,644.00   No valid contract to substantiate this travel.

Even if the contract was valid the trip was not specified in the contract agreement.

 The Officer claimed reimbursement for additional expenses incurred by him while travelling to and from Sri Lanka which appeared to be extravagant in nature.

In addition, the validity of his entitlements regarding his travels is questionable as he did not have any valid employment contract during the period.
Refer to the Table below for details: Particulars of Expenditure Claimed Accommodation (Hotel Singapore) Reschedule Air Ticket Unaccompanied Luggage Amount $ 656.38 3,612.60 4,117.54  The Officer claimed education allowance amounting to $15,000 in 2010 for his child’s educational expense while attending Swinburne University of Technology in Melbourne, Australia.
In accordance to his initial contract, the Officer is only entitled to $5,000 per annum per child as education allowance on production of necessary documents.

 The Officer was paid 25% gratuity claim on two occasions without any valid employment contract.
Refer to the Table below for details: Date Salary Scale Rate 25/03/10 19/05/11 41,068 72,154 Amount $ 13,449.77 18,038.50 is lack of coordination and consultation between There the legitimate remunerations and entitlements for Project Management Engineer , which resulted in the substantial overpayment of salaries and allowances and reimbursements of expenditures.
the Ministry and PSC on Recommendations  The Department should immediately consider the renewal of EDP Number 63814 employment contract if he will continue to be employed by the Department and the PMU.

 Any reimbursement of expenses outside his initial contract entitlement should be properly approved and any unauthorized reimbursement should be recovered from the officer.

 Payment of education allowance in excess of $5,000 should be recovered from the officer.
 The gratuity allowance payment should be either regularized or to be recovered from the officer.

 The Department should comply with the approval and directives given by the PSC.

 The issue regarding the upgrading and backdating of salaries should be resolved with PSC before any payment is made to EDP Number 63814.
Report of Special Project Audits – December 2011 Page 10 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Management Comments  After his contract expired, the officer signed the new Contract with then PS of the Ministry.

Unfortunately this contract was not formalised due to change of PS.

All eligible expenses were paid as usual as per the contract.
  On officer’s request PS approved that if one or more of the children not used the eligible amount the remainder be transferred to the others as required.

This was also approved by PSC.

 Gratuity payment made according to Contract has been regularized.

 The effective date is the date he was appointed as PME.

PME post is paid EP01 salary scale.

In this regard please see our PS letter to PS, PSC.
2.10 Engagement of Consultant Services to Recruit Expatriate Engineers Consultancy Services for Recruitment of Expatriate Engineers for Department of National Roads and Works Portfolio was awarded to an Engineering Company at a Basic Contract Sum of $137,868 (VIP).20The duration of the Contract shall be 30 days from the date of commencement of the contract.

The offshore recruitment will involve a total of 37 recruits in 22 unique roles covering at least 5 countries.
The roles will include 32 engineers and 5 architects.

Our review of the relevant records revealed the following anomalies:  The total payments made to the Engineering Company in relation to above contract amounted to$243,885 surpassing the initial contracted sum by 77%, which was not approved by the Public Works Tender Board.

Refer to Table 2.7 below for details of payments:  Table 2.7: Details of Payment Date Chq No.
Amount ($) Particulars 25/09/09 10/05/10 853865 856695 31/12/10 16/12/09 21/07/10 859861 855083 857492 68,934.27 Upfront payment 50 % of the consultation fee.

68,934.48 Payment of outstanding amount for recruitment of expatriates for PWD (VAT Inclusive) 75,719.36 Final consultation payment.
9,187.61 Advertising reimbursed at cost plus 15% 21,109.00 Reimbursement of upfront payment of interview additional and accommodation Bangladesh (At cost plus 10%) travel, room Total 243,884.72  Out of the 37 positions, only 23 suitable applicants were shortlisted and 8 were successfully recruited.

Refer to the Table 2.8 for the details of the 37 positions: 20 Tender No.
CSC 07/2009 Report of Special Project Audits – December 2011 Page 11 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Table 2.8: Details of Positions to be Recruited Department Post Works General Administration (Mech) Design and Costing Services Engineers Design and Costing Services Architects Construction Services Electrical Services Administration Total National Roads Policy and Administration Total FRUP Total Project Management Technical Support Services(Road and Bridge) No.
Staff Required 5 5 5 4 5 24 7 7 4 2 6 The success of the recruitment drive may be questionable due to the substantial sum of money utilized compared to the outcome..

Recommendation As explanations provided during the audit were unsatisfactory, the Department should justify the payments made to the Engineering Company in excess of the amount specified in the contract.

Management Comments This contract was personally handled by Permanent Secretary.

Contract was prepared and signed.


We were directed to make payment from FRUP allocation.

In this regards please refer to emails on this subject.

Following emails explain the details Email dated: 17/6/2010, 9/7/2010, 7/10/2010, 7/16/2010, 7/16/2010, 7/18/2010, 7/18/2010 The company was varied to include additional works.

In the contract there is a clause to state that Reimbursable Expenses will be paid separately.

This was approved by PWTB.

Such clauses are common in all Consultancy services contracts.
2.11 Accommodation for Expatriates Provision for housing will be in line with the existing policy of Government.

The Officer shall pay by way of rent for such quarters a sum calculated in accordance with the new rent formula.21Our audit noted that the Department paid a sum of $45,230 to Tropic Towers Hotel for the accommodation of four expatriate officers from August to December 2010.

This was due to the unavailability of government quarters to accommodate the Officers.
Refer to Table 2.9 for details of payments made to Tropic Towers: 21 Section 6 Signed Contract Agreement Report of Special Project Audits – December 2011 Page 12 Office of the Auditor General – Republic of Fiji ______________________________________________________________________________ Table 2.9: Payments made to Tropic Towers Date Cheque No.
17/09/10 23/12/10 23/12/10 30/12/10 07/03/11 12/04/11 Total 858093 859232 859242 859330 859872 860238 Amount $ 4,258.00 10,109.70 9,588.00 8,509.35 9,640.80 3,124.80 45,230.65 The above officers continued to be accommodated at Tropic Towers in 2011 and there is no evidence of consultation by the Departments with the Public Service Commission (PSC) on the provision of government quarters to these expatriate engineers.
The average monthly accommodation charges for the four expatriate officers if continued to be accommodated at Tropic Towers are as follows:  Expatriate 1  Expatriate 2  Expatriate 3  Expatriate 4 - - - - $4,230.00 ($141.00 per day, $50,760 per annum) $2,326.50 ($77.50 per day, $27,918 per annum) $2,326.50 ($77.50 per day, $27,918 per annum) $3,807.00 ($126.90 per day, $45,684 per annum) The costs of accommodating the officers at Tropic Towers for such a long period of time appeared excessive.
Lack of proper planning, consultation and decision making is also evident as the Department failed to arrange for suitable alternative such as government/rented quarters at reasonable costs.

Recommendations  The Department should immediately consult PSC regarding the allocation of government quarters/government rented quarters to the above mentioned expatriate engineers taking into account the excessive charges that is already being paid for accommodating them at Tropic Towers.
In the absence of suitable government quarters, the Ministry should consider paying the officers reasonable housing allowances instead.

 Management Comments The officers were accommodated in the hotel due to the non-availability of government quarters.

Despite our request, nothing has been finalized from PSC for availability of quarters.
2.12 COVEC Equipment The China National Overseas Engineering Corporation (COVEC) was awarded a contract to complete a substantial upgrading of the Kings Road (Korovou to Nayavu) and the Lodoni Road (Korovou to the Queen Victoria School) on Viti Levu.

The contract price was approximately $57 million.


The project Report of Special Project Audits – December 2011 Page 13 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji involved the construction and sealing of approximately 50 kilometer of roads, construction of 16 new bridges, a major realignment of the Kings Road, and approximately 2 million cubic meters of earthworks over a period of four years.
The works were scheduled to be completed by 17 July 2005.

However, by the end of August 2005, the works were still only 35% complete.

COVEC had already been paid approximately $29 million at this date.

On 4 October 2005, the engineer (Roughton International Ltd) certified that COVEC was in breach of its contract by failing to progress works in a timely manner.

The contract was eventually terminated on 6 March 2006.
The Ministry, through its legal representative Hazelton Law (New Zealand based legal firm), made a compensation claim against COVEC, seeking damages amounting to $51,959,000 and further $12,000,000 as interest component.

This is an estimated additional cost that would be incurred by the Government to complete the project.
Further verification of the documents made available to audit revealed that government in order to recoup the cost to complete the projects retained the retention sum amounting to $5,964,163 and also seized the vehicles/heavy machineries with an estimated market value of $4,572,50022 and plants, equipments, buildings, furniture and fittings amounting to $663,48023.

Refer to Appendix 1 for details.


Our visit to the project site in Viwa, Tailevu on 16/06/11 revealed that most vehicles, heavy machineries, plants, equipments and the building are not in use and have deteriorated to a great extent and some beyond economical repair while some vehicle parts were missing.

Refer to Appendix 2 for illustrations regarding the conditions of the assets.
The audit was informed24 that the above items were for the project use purpose and could not be sold since the legal ownership of the vehicles was still with COVEC.

No efforts were made to maintain the assets in suitable condition or safeguard them from vandals and from theft.

Recommendations  The Department should follow up on the compensation claim and seek legal opinion before disposing off plants and vehicles currently maintained at the project site.
 The Department should also consider maintaining the assets in suitable condition if it wishes to derive some monetary compensation from disposing off the assets.

Management Comments Recommendation is accepted.

22 Estimated market value as at 06/03/06.

23 Value for most items could not be ascertained.
24 Deputy Secretary Planning and Design – Mr Paula Balailevuka Report of Special Project Audits – December 2011 Page 14 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji APPENDIX 2.1 – DETAILS OF COVEC VEHICLES AND PLANTS GARAGED AT VIWA SITE OFFICE - TAILEVU Make Komatsu Komatsu Komatsu Shantui Shantui Caterpillar Caterpillar Shantui Shantui Komatsu Komatsu Komatsu Komatsu Sumitomo Sumitomo Sumitomo Sumitomo Sumitomo Sumitomo Sumitomo Komatsu Komatsu Komatsu Komatsu Komatsu Komatsu JCB Komatsu Komatsu Komatsu Komatsu Komatsu Komatsu Galion Komatsu Komatsu Bomag Bomag Bomag Bomag Bomag Chinese Bomag Bomag Bomag Ingersol Model Description D85E D85E D155A-3 TY220 D6R-XR D6R-XR TY220 TY220 PC 300-6 PC 300-6 PC 300-6 PW150 SH220LC-3 SH220LC-3 SH220LC-3 SH220LC-3 SH220LC-3 SH330LC-3 SH330LC-3 PC210-7 PC210-7 WA450-L WA380-3A WA380-3A WA380-3A WA380-3A WA380-3A WA380-3A WA380-3A WA450-L GD661-A-1 850-B GD661-A-1 GD623-1 BW216D-2 BW216D-2 BW216D-2 All rubber tyred BW216DH-3 BW216DH-3 BW216DH-3 ProPAC 150DPP Ser Bulldozer Bulldozer Bulldozer Bulldozer Bulldozer Bulldozer Bulldozer Bulldozer Bulldozer Excavator, tracked Excavator, tracked Excavator, tracked Excavator, wheeled Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Excavator, tracked Front end loader Front end loader Front end loader Front end loader Front end and digger Front end loader Front end loader Front end loader Front end loader Front end loader grader grader grader grader roller compactor roller compactor roller compactor roller compactor roller compactor roller compactor roller compactor roller compactor roller compactor loader roller compactor Reg No.
DU826 n/a DU811 n/a n/a DX376 DX377 DZ995 EK842 n/a n/a n/a n/a n/a n/a DX375 DX374 DZ996 n/a DZ997 EQ673 EQ674 DT975 DT976 DU309 DU310 DU819 EK843 EK844 EQ672 EQ675 DT975 DU308 DU307 DU305 DU306 n/a DU821 DU822 n/a DX371 DZ993 n/a EK841 Qty Market Value – 6/03/2006 10,000 13,000 80,000 25,000 - Report of Special Project Audits – December 2011 Page 15 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Make Ingersol Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Ingersol Model SD - 160DX FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR FV 415 JDCR EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG EQ3242YG crawlair CM348 Description roller
 compactor dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck dump truck rock driller with Reg No.
EN059 DU298 DU281 DU282 DU283 DU284 DU286 DU287 DU288 DU289 DU290 DU088 DU291 DU292 DU293 DT974 DU294 DU087 DU295 DU086 DU085 DT972 DU296 DT973 DU297 EB743 EB754 EB744 EB751 EB752 EB750 EB749 EB745 EB740 EB748 EB753 EB755 EB747 EB742 EQ648 EQ649 EQ650 EQ661 EQ662 EQ663 EQ664 EQ665 EQ667 EQ669 EQ670 EQ671 Qty Market Value – 6/03/ Report of Special Project Audits – December 2011 Page 16 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Model Description Reg No.
Qty Market Value – 6/03/2006 with 750 crawlair CM348 with 750 101F 101F 1101F Comet 12.13 MK7T NK300 E-V n/a Make Rand Ingersol Rand Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Dongfeng Leyland Phoenix Kato Chinese Hino N/a Toyota Hilux 2.8D Toyota Hilux 2.8D Toyota Hilux 2.8D Toyota Hilux 2.8D Toyota Toyota Toyota Toyota Hilux 2.8D Prado Prado Kijang LGX1.8EFI Mitsubishi L200 Mitsubishi B2500 Mazda ?

???
Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2500 Mazda B2501 driller with EF987 EF986 EF991 compressor rock compressor water truck water truck water truck fuel supply truck fuel supply truck fuel supply truck bitumen spray truck DU313 DU818 chippings spreader DU315 crane DU316 crane EQ832 & tractor with low bed DK006 trailer transporter trailer transporter DP366 utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, single cab suv - 4wd vehicle suv - 4wd vehicle EA418 EB696 DS735 DT864 DT484 DT750 DT483 passenger vehicle DS736 utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, double cab utility - 4wd vehicle, single cab DT332 DT586 DK499 DX009 DW898 DU793 DU391 DU390 DT839 ED155 EP834 DW897 160,000 3,500 3,500 3,500 - 3,500 5,000 50,000 60,000 150,000 35,000 25,000 7,500 14,000 14,000 10,000 4,000 4,000 28,000 30,000 16,000 3,500 10,000 3,000 16,000 16,000 16,000 10,000 11,000 12,000 27,500 32,500 16,000 Page 17 Report of Special Project Audits – December 2011 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Model Description Reg No.
Qty Market Value – 6/03/2006 Make Mazda Mazda T3500 Mazda T4600 Mazda T3500 Mazda T3500 / Ford Mazda Nissan Mitsubishi Toyota Total Patrol Fuso DI382 DZ975 - workers - workers mini bus - 12 seater DU397 - workers truck transporter truck transporter truck transporter truck transporter utility - 4wd vehicle, double cab suv - 4wd vehicle truck - flat deck truck - flat deck DS810 DW248 DZ509 - workers EP219 DL984 EL648 1 1 1 1 1 1 1 1 1 8,500 8,500 11,000 22,000 22,000 2,000 25,000 3,000 3,000 4,572,500 Report of Special Project Audits – December 2011 Page 18 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji APPENDIX 2.2 – PROJECT SITE AT VIWA TAILEVU - 16/06/11 Report of Special Project Audits – December 2011 Page 19 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Report of Special Project Audits – December 2011 Page 20 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji SECTION 3: SUSTAINABLE ENERGY FINANCING PROJECT (WORLD BANK FUNDED) The objective of the program is to increase significantly the adoption and use of renewable energy technologies and the more efficient use of energy in participating Pacific Island States through a package of incentives to encourage local financial institution to participate in sustainable energy finance.
The multi – party Sustainable Energy Financing Program which is funded by the World Bank and supervised by the Department of Energy aims to promote the financing of Sustainable Energy and energy efficiency investments in Fiji.

This program is quite new and apart from Fiji it has also been introduced to four (4) other participating island states: the Solomon Islands; the Independent State of Papua New Guinea; the Republic of the Marshall Islands and the Republic of Vanuatu.
Table of Content SECTION 3: SUSTAINABLE ENERGY FINANCING PROJECT (WORLD BANK FUNDED) .................................................. 1 PART A - FINANCIAL INFORMATION ...................................................................................................................................... 1 3.1 Audit Opinion ............................................................................................................................................................... 1 3.2 Abridged Statement of Financial Performance ........................................................................................................... 1 3.3 Abridged Statement of Financial Position ................................................................................................................... 2 PART B – CONTOL ISSUES ..................................................................................................................................................... 2 3.4 Cash at Bank Balance ................................................................................................................................................. 2 Low Number of Assistance Given Through the Project .............................................................................................. 3 3.5 PART A - FINANCIAL INFORMATION The Sustainable Energy Financing Project was enacted by an agreement between the Fiji Government and the World Bank in 2007 in accordance with the provisions of Standard Conditions in the Global Environment Facility Grant Agreement.
3.1 Audit Opinion The audit of the Statement of Expenditure and Revenue of the Sustainable Energy Financing Project (SEFP) for the year ended 31 December 2010 resulted in the issue of a qualified audit report as a balance of $30,269 was reflected in the SEFP financial statements as cash at bank.

The Ministry of Finance records revealed an unutilized balance of $106,034.
I was not able to obtain sufficient appropriate evidence to substantiate the accuracy of cash at bank of $30,269 as SEFP did not maintain a bank account and no reconciliation was prepared since 2008.
3.2 Abridged Statement of Financial Performance Year ended 31 December INCOME World Bank Grant 2010 $ 2009 $ 34,888 21,509 Report of Special Project Audits – December 2011 Page 1 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Year ended 31 December TOTAL INCOME EXPENDITURE Staff/Personnel Costs Other Operating and Administration Expenses TOTAL EXPENDITURE NET (DEFICIT)/SURPLUS FOR THE YEAR 2010 $ 34,888 52,739 108,880 161,619 (126,731) 2009 $ 21,509 - - - 21,509 A net deficit of $126,731 was recorded in 2010 compared to a surplus of $21,509 in 2009.
This was due to the Department of Energy’s failure to claim reimbursement of expenses incurred by SEFP in 2009 totalling $143,992 from Ministry of Finance.
3.3 Abridged Statement of Financial Position As at 31 December 2010 2009 $ Assets Cash at Bank TOTAL ASSETS 30,269 30,269 157,000 157,000 ACCUMULATED FUNDS 30,269 157,000 The currents assets (cash at bank) balance declined by 81% or $126,731 in 2010 because the expenses totalling $161,619 incurred by SEFP in 2010 were yet to be reimbursed by Ministry of Finance.
PART B – CONTOL ISSUES 3.4 Cash at Bank Balance The Executive Agency/Management Contractor will maintain a financial management system in a manner adequate to reflect the operations, resources and expenditures of the Project1 SEFP projects are funded by the World Bank.

Funds received from the World Bank are deposited into the Consolidated Fund account at Ministry of Finance.

SEFP received these funds from Ministry of Finance through the Department of Energy.
A balance of $30,269 was reflected in SEFP financial statements as cash at bank however, Ministry of Finance records revealed an unutilized balance of $106,034.

A variance of $75,765 was noted.

The audit could not substantiate the accuracy of cash at bank amount as SEFP did not have a bank account and no reconciliation was prepared since 2008.
1 Executive Agency Operations Manual- Part 4 Financial Management Report of Special Project Audits – December 2011 Page 2 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji Recommendations  SEFP should have a separate bank account and ensure that monthly bank reconciliations are prepared.

 SEFP should ensure that all funds received from World Bank are deposited into the bank account.
 SEFP should reconcile its cash at bank with Ministry of Finance records.

Department Comments No comments provided 3.5 Low Number of Assistance Given Through the Project The Sustainable Energy Financing Project (SEFP) seeks to exert its impact through Global Environment Facility (GEF) grant resources to facilitate the financing of quality investments by individuals and Micro and Small Enterprises (MSEs).
This financing will emanate from local Participating Financial Institutions (PFIs) in each country of operation.

The financing support, mainly in the form of partial loan guarantees, will be backed up by a Risk Sharing Fund (RSF) funded with GEF resources.
SEFP will focus its limited resources on development of a commercial market for three technologies: (1) Solar PV, (2) Pico- hydro and (3) switching diesel generators to be fuelled by coconut oil, with related appliances such as red light systems.2 The Manager for SEFP was appointed on contract for one year.
Specific deliverables expected of the Manager, SEFP during the year included:  Signing at least one additional participating financial institution within the first 6 months of the project;  At least 40 approved loans within the first 6 months of the project;  Approved loans for at least a minimum of 3 coconut oil fuel projects; and  Approved loans for at least a minimum of 3 pico – hydro projects.3 The audit noted that since the inception of SEEP in 2008, very small number of loans was approved by the only PFI, which is ANZ Bank.
The findings were as following.

 The Unit managed to sign with only 1 financial institution, ANZ Bank as a Participating Financial Institution (PFI);  A total of twenty two (22) applicants were received by the Project Unit which was referred to ANZ Bank.

Out of this only six (6) loans or 27 % were approved by ANZ.
These were for medium 2 Executive Agency Operations Manual 3 Contract Agreement – Management Contractor for SEFP, Annex A Terms of Reference and scope of services for Management Contractor Section 4 Report of Special Project Audits – December 2011 Page 3 ______________________________________________________________________________ Office of the Auditor General – Republic of Fiji and small enterprise category.
No loans were approved for individual and micro category under SEFP;  The unit was to have loans approved for at least 3 coconut oil fuel projects and at least 3 pico – hydro projects within one year.

However, since its inception in 2008 the Unit only managed to get 4 solar projects and 1 bio fuel projects.

No hydro projects were undertaken.

Refer to Table 3.1 below for details.


Table 3.1: Projects Approved Number Of Loan 3 1 1 1 Name Of Company Energy Type Energy Used On CBS Power Solution Clay Engineering CBS Power Solution EnergyPro Solar Solar Bio-fuel generators Energy Efficiency Electricity for homes, health centres and street lights Electricity for homes Electricity and street lights for villages Energy audit Most of the loans were not approved due to lack of collaterals or unavailability of financial records of applicants.
The finding shows that there is a need to review and amend the loan facility under the project to allow greater participation not only from medium small enterprise but also from individuals as well.

Such amendment will ensure that the World Bank’s loan subsidy granted under the scheme achieves its objectives.
Recommendation The Department of Energy as the Executing Agency should conduct a review and assessment on the effectiveness of the Sustainable Energy Financing Project and make recommendations to the World Bank to encourage greater participation from the public.

Department Comments No comments provided Report of Special Project Audits – December 2011 Page 4