Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697779114134.pdf (Fiji)
EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities and Majority Owned Entities - June 2012 EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audits of Government Commercial Companies, Commercial Statutory Authorities, Off Budget State Entities and Majority Owned Entities - June 2012 File: 102 31 July 2012 Commodore Josaia V. Bainimarama Prime Minister and Minister for Finance Office of the Prime Minister Government Buildings SUVA Dear Sir REPORT OF THE AUDITOR GENERAL AUDIT OF GOVERNMENT COMMERCIAL COMPANIES, COMMERCIAL STATUTORY AUTHORITIES, OFF BUDGET STATE ENTITIES, AND MAJORITY OWNED ENTITIES JUNE 2012 In accordance with section 7(7) of the State Services Decree 2009, I am pleased to transmit to you my report on the audits of accounts of the above mentioned entities that were completed during the 1st half of 2012.
The report should be presented to Cabinet within 30 days of receipt as required under section 7 (8) of the State Services Decree 2009.

Tevita Bolanavanua Auditor - General Government Commercial Companies and Commercial Statutory Authorities 1.

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Airports Fiji Limited Unit Trust of Fiji (Management) Limited Fiji Ports Corporation Limited Fiji Electricity Authority Fiji Ships & Heavy Industries Limited Food Processor Fiji Limited Ports Terminal Limited Post Fiji Limited Public Rental Board Fiji Public Trustee Corporation Limited Viti Corporation Limited _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS SECTION 1: AIRPORTS FIJI LIMITED Airports Fiji Limited (AFL) is a wholly government owned government commercial company.
It was established on 12 April 1999 as a result of the re-organisation of Civil Aviation Authority of Fiji (CAAF) into separate commercial and regulatory authorities under the Public Enterprises Act, 1996.

AFL operates 15 public airports in the Fiji Islands.

These include two international airports – Nadi and Nausori, and 13 outer island airstrips.

AFL also provides air traffic management (ATM) in the Nadi Flight Information Region (FIR).
The Nadi FIR includes the air spaces of Fiji, Tuvalu, New Caledonia, Kiribati, and Vanuatu covering an area of 6.1 million square kilometres.
The ATM operation is currently contracted to a private company, Strategic Air Services Limited (SASL) Table of Contents SECTION 1: AIRPORTS FIJI LIMITED ..................................................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................... 1 1.1 1.2 1.3 Audit Opinion ............................................................................................................................................................ 1 Abridged Income Statement ..................................................................................................................................... 1 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES .................................................................................................................................................. 3 1.4 1.5 1.5.1 1.5.2 1.5.3 1.6 1.6.1 1.6.2 Executives Remuneration ........................................................................................................................................ 3 Rotuma Airport upgrade ........................................................................................................................................... 5 Diversion of Funds ................................................................................................................................................... 5 Progress of Rotuma Airport Upgrade ....................................................................................................................... 6 Charter of Navy Ship ................................................................................................................................................ 6 Savusavu Airport upgrade ........................................................................................................................................ 7 Incomplete Project ................................................................................................................................................... 7 Short Supply of Materials ......................................................................................................................................... 8 PART A – FINANCIAL INFORMATION 1.1 Audit Opinion The audit of the financial statements of the Airports Fiji Limited for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
1.2 Abridged Income Statement Year Ended 31 December Revenue Navigation Charges Airport Security/Development Fee Report of GCC & CSA – July 2012 2011 ($) 2010 ($) 13,667,461 6,936,256 13,338,411 6,621,164 1 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS Year Ended 31 December Concessions Landing And Parking Fees International Passenger Service Charge Rental- Offices And Warehouses Other Operating Income Total Revenue Expenditure Contract Costs Depreciation Salaries & Wages Utilities Other Operating Expenses Total Expenditure Profit Before Tax Income (Tax)/ benefit for the Year Net Profit for the Year 2011 ($) 12,277,078 11,504,894 4,563,412 4,784,206 6,489,846 60,223,153 3,237,358 11,712,656 13,608,577 5,927,208 13,495,659 47,981,458 12,241,695 236,431 12,478,126 2010 ($) 11,100,777 12,092,685 2,803,780 3,813,205 5,840,842 55,610,864 2,692,618 11,896,898 12,545,386 3,930,030 12,921,483 43,986,415 11,624,449 2,865,343 8,759,106 AFL recorded an after tax profit of $12,478,126 in 2011 compared to $8,759,106 in 2010 as a result of increase in total revenue by 8.3%.Significant increases were noted for:  Concessions increased by $1,176,301 or 10.6% due to higher sales by concessionaires as fees is based on gross revenue for all shops located in the AFL premises;  Rental charges increased by $971,001 or 25.5% due to increases in housing state rental, land lease rental and commercial lease rental which was transferred from CAAF in June 2010.
In 2010, the estate rental was only for 6 months while in 2011 it includes the full 12 months revenue; and  Passenger service charge increased by $1,759,632 or 62.8% due to the increase in the number of passengers departing the country.
1.3 Abridged Statement of Financial Position As at 31 December Current assets Cash and cash equivalents Receivables Other current assets Total current assets Non current assets Deferred tax asset Property, plant and equipment Total non current assets Total assets Current liabilities Accounts payable Borrowings Other current liabilities Total current liabilities Non current liabilities Borrowings 2011 ($) 2010 ($) 20,715,916 11,516,044 2,327,453 34,559,413 24,736,759 7,512,841 1,599,155 33,848,755 564,732 158,218,367 158,783,099 193,342,512 672,287 160,457,724 161,130,011 194,978,766 5,784,041 6,879,457 5,586,248 18,249,746 10,483,531 6,223,494 4,643,640 21,350,665 7,085,558 10,961,684 Report of GCC & CSA – July 2012 2 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS As at 31 December Deferred tax liability Other non current liabilities Total non current liabilities Total liabilities Net assets Shareholders’ equity Share capital Retained earnings Total shareholders’ equity 2011 ($) 8,735,765 17,681,114 33,502,437 51,752,183 141,590,329 2010 ($) 13,153,168 19,401,046 43,515,898 64,866,563 130,112,203 92,300,180 49,290,149 141,590,329 92,300,180 37,812,023 130,112,203 The Company’s net assets increased by $11,478,126 or 8.8% in 2011 compared to 2010 as the result of the following:  Significant decrease in trade and other payables due by $4,699,490 or 44.8% since Fiji Revenue Customs Authority is collecting departure tax from January 2011 which AFL used to collect previously on behalf of Civil Aviation Authority of Fiji and Government.
 Decrease in loans and borrowings by $3,220,163 or 18.7% due to repayment of a bank loan;  Decrease in deferred tax liability by $4,417,403 or 33.6% due to the effect of changes in tax rate from 28% to 20%.
PART B – CONTROL ISSUES 1.4 Executives Remuneration On 9 June 2010, the Higher Salaries Commission after deliberation on the proposal by Airports Fiji Limited (AFL) on the remuneration of expatriate General Managers, advised the AFL Chairman to:   fully disclose to the Commission justification why local expertise is no longer relevant and the merits behind the threefold increase in packages that was last approved by the Commission, given that the roles were satisfactorily performed by locals.
carry out a fresh job evaluation for all executive positions in AFL and a report to be submitted to the Commission as this is the only tool that can capture the changes in roles overtime and measure the current value of a position in order to determine the current market remuneration.

However, there was no evidence that the above requirements were carried out as AFL went ahead and appointed four executives with remuneration package not approved by the Higher Salaries Commission.
The only exception was the Chief Executive Officer whose remuneration package was approved by the Minister for Public Enterprise.

Refer to Table 1.1 below for details of remuneration for executives.
Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ Table 1.1 Executive's Remuneration Residency Position Expatriate CEO Expatriate GM Engineering & Infrastructure Base Salary ($) 440,000 230,000 Expatriate GM Airports Local Local GM Finance & IT A/GM Air Traffic 180,000 140,000 97,000 Vehicle Benefit      Housing Benefit ($)  30,000 Medical Insurance ($)  2,850 Term Life Policy ($)  3,638 30,000 30,000 30,000 2,850 2,850  3,638 3,638  The contract terms for the above executives are as follows: Contract Date 14/11/2011 19/10/2010 14/09/2010 03/02/2011 Acting appointment Contract Terms 3years 3 years 3 years 3 years Furthermore, the Higher Salaries Commission (Revocation) Decree 2011 came into effect on 17 June 2011.
The Decree revoked the functions performed by the Commission with respect to considering and determining salaries of any person employed in any corporation, body or office specified in the schedules specified to the Act.
The salaries of executives are now determined by the board of directors following the approval of the Minister for Public Enterprise and the Prime Minister.1The board of directors shall ensure that before seeking any salary approval, an independent assessment of the review of salary is conducted.
The independent assessment must be approved and carried out in a manner determined, and by a person or body authorised by the Minister for Public Enterprise.2 As at the date of audit, no independent assessment was carried out for the review of salary for executives at AFL.

Without the approval of the higher salaries commission and the absence of an independent assessment of the review of salaries, the salaries of executive officers of AFL cannot be justified.
Recommendation A job evaluation exercise should be carried out for all executive positions to determine the correct market remuneration.

Management Comments A job evaluation exercise commenced in 2010 and a report was presented by a consultant company to Board in June 2011.

All new executives’ remuneration is based on the consulting company recommendation and taking into consideration the qualification and experience of the individual.
1 Higher Salaries Commission (Revocation) Decree 2011 3 (1) (a) 2 Higher Salaries Commission (Revocation) Decree 2011 3 (2) & 3 (3) Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ 1.5 Rotuma Airport upgrade On 03/07/07, Cabinet approved the upgrading of Rotuma Airstrip to improve flight schedules to the island3.
Subsequently on 08/03/08, Cabinet declared Rotuma as an international ports of entry thus endorsing Airport Fiji Limited (AFL) to upgrade the airport to meet the International Civil Aviation Organisation and the Minimum Requirement Document Standards4.

The estimated cost for the Rotuma Airport project was $19.5m.

Audit investigations into the project revealed a number of anomalies.
1.5.1 Diversion of Funds In 2009, the government through the Department of Civil Aviation released a total of $2.2m to AFL for the upgrading of the airport in Rotuma.

Audit noted that the funds were diverted to other projects without proper authority.

Refer to Table 1.2 for the details of diversion of funds.
Table 1.2: Details of diversion of funds Date Details 21/10/09 Gau Airport Drainage 31/08/09 Labasa & other airports repairs TOTAL Amount ($) 7,680 102,220 109,900 Diversion of funds without approval could be a catalyst for abuse of office.

Recommendation AFL should sought proper approval before diverting funds to other projects.

Management Comments Initially in 2007, Government has provided $415,000 for the first phase of Rotuma reinstatement project.
On completion of the project, the full acquittal was send to government showing an expenditure of $679,184.58.

Government then further allocated $500,000 in addition to the $415k for Rotuma.

Since there was a remaining balance of $235,815.42, and there were no immediate woks at Rotuma, $199,551.26 was diverted to Labasa and Gau to carry out urgent compliance issues.

The $2.2 million was given later.

As per the records gathered there is some correspondence from AFL informing government of the diversion.
Unfortunately, person liaising with the government on the outer station project is no longer with the company and if there had been any e-mail correspondence regarding approval for diversion this cannot be located.

AFL has taken heed of the issues raised and in future will ensure that proper approvals are obtained.

AFL has also started submitting reports on quarterly basis from 2012.

This will further ensure that the funds are utilised as per the government directives.

3 Cabinet Decision No.


294 of 03/03/2007 4 Cabinet Decision No.

135 of 08/03/2008 Report of GCC & CSA – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ 1.5.2 Progress of Rotuma Airport Upgrade As a result of Cabinet’s decision in 2008, significant government funds were released to AFL for the upgrade of the airport in Rotuma to international standard.
Review of the Government Grant reconciliation revealed that of the $3.1m that was disbursed to AFL from 2008 for the upgrade of the airport in Rotuma, a total of $1.2m has been utilised, leaving a balance of $1.9m.

Majority of the expenses were incurred in consultancy fees, compensation to landowners, and charter of airplanes and vessels all relating to the commitment made by government.
However, as to date no progress of work has been done to the upgrade of airport in Rotuma, and there have been discussions that the project may not continue due to its non viability.

It was also revealed that the balance of $1.9m may be transferred to the upgrade of Nausori Airport.

Considering the significant commitment that has been made into the project, to discontinue will result in wastage of funds, thus questioning the real motive of making such an investment.
Recommendation AFL should explore options on how best to continue with the project considering the commitment already been made.

Management Comments As per the reconciliation of $3.1m, $679,184 was utilised for the first phase of Rotuma runway reinstatement project.

The acquittal was provided to the government after the completion of the first phase of the project.

Thereafter, there was a balance of $235,815.42 of which $199,551.26 was used for Labasa and Gau as explained in item 4.8.1.
Due to the Cabinet directive to make Rotuma a port of call, a team comprising of AFL officials and Government was formed and tenders were called out for project proper to start.

For any projects for the preliminary costs to be incurred before the Project proper can begin as this was to be a major project.

The letter is self explanatory.


1.5.3 Charter of Navy Ship For transactions of value of above $25,000, board approval needs to be obtained.5 On 2nd July 2009, a payment of $68,555.28 was made out to Commander Fiji Navy for the charter of patrol boat to and from Rotuma.

The purpose of the charter was to ferry 14 officials from government, AFL, and consultants to physically inspect the Rotuma Airport, and collate information that would assist in planning the developments earmarked by government.
Audit noted that the payment was made without the Board approval.

Payments without proper approval are an indication of abuse of office.
5 Section 2.1 of AFL’s Financial Policy & Procedure Manual Report of GCC & CSA – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ Recommendation Officers responsible in the above payment should be held accountable and face appropriate disciplinary actions.

Management Comments The approval limit for the CEO for the period concerned was $50,000 as per the Finance Policy.
It is noted from the project performance report provided by the Ministry of Foreign Cooperation & Civil Aviation, the Cabinet had approved Rotuma to be a port of call by air and the design aircraft for Rotuma to be ATR42.

One of the major problems faced in terms of getting the Rotuma Project started was the logistics due to non availability of air services.
By reviewing the project updates Board papers provided to the Board between April to June 2009, AFL was trying to charter an aircraft so that the team could visit the site and evaluation works could begin.

Unfortunately this was not possible due to issues faced with the Pacific Sun aircraft even after confirmations of the travel was done.

Eventually AFL managed to hire the Navy Boat and due to the urgent requirement from Government, CEO authorised this expenditure.
In the July Projects Update Board paper the Board was informed of the hire of the navy vessel to take the team down to Rotuma to do a site evaluation.

Since the CEO is no longer here any further correspondence he may have had on this is not available but through Project updates Board was duly informed of the hire of navy boat.

Refer attached letter appended as Appendix 5 “Project Performance Report Jan – June 2009”.
1.6 Savusavu Airport upgrade Board paper 152/09, the board approved the award of the contract for design and build of Savusavu Airport Terminal to a Construction Company at a total cost of $751,967.50.

The project was to be funded from government grant.

Audit investigations into the project revealed a number of anomalies.
1.6.1 Incomplete Project The design and build of the Savusavu Terminal shall be eight (8) months comprising one (1) month for mobilisation, one (1) month for earthworks and foundation and six (6) months for construction.

As at date of audit6, a total of $212,338.02 has been paid, however, no work has been carried out at the Savusavu Terminal and AFL has gone further to terminate the contract due to non performance of the contractor.

Refer to Table 1.3 for details of payment.


Table 1.2: Payments made to Construction Company Date Cert No.

Invoice No.
Amount ($) Remarks 10/03/10 11/05/10 07/06/10 01/09/10 1 2 3 Total 19485 19496 19524 19565 112,691.25 15% advanced payment as per agreement 9,150.00 Payment for materials – 1500 Blocks 75,094.09 15,402.69 Reimbursement of duty & Vat cost for phizon panel 212,338.02 6 Date of audit – 22/03/12 Report of GCC & CSA – July 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ The termination of the contract at the initial stages of the project and considering the amount of funds already been committed shows the lack of monitoring by AFL and also questions the integrity of the selection of the contractor.
Recommendation Officers responsible in the above payment should be held accountable and face appropriate disciplinary actions.

Management Comments The contractor has instigated a legal action against AFL for wrongful termination of contract.

However, AFL has counter claiming over $300,000 for all the payments made and short supply of materials and not completing the project as per the contract.
1.6.2 Short Supply of Materials The Senior Supplies Controllers responsibility is checking, recording, and storage of goods.7 On 07/06/2010, a payment of $75,094.09 was made out to Supplier A for materials purchased from overseas supplier in China.

Refer to Table 1.4 for details of the materials, quoted in US currency.
Table 1.4 Details of materials Description Qty Unit 2.8 x 600mm x 50mm sandwich external panel 2.4 x 600mm x 50mm sandwich internal panel Meshing Meshing roll Screw Screw with waterproof Roof panel Cost of freight FOB fee TOTAL (USD) 550 676 1000 3000 5000 2000 0 24 sqm Sqm Sqm M Piece Piece Piece Price (USD) 19.56 19.56 .74 .74 .05 .08 0 Extn (USD) 10,758.00 13,222.56 735 132 258 1,600 0 2,910 915 30,531.56 Our inspection at the stores revealed that only 107 panels were in stock.
Audit could not substantiate the movement of the above items as there were neither delivery dockets nor ledger cards maintained.

The General Manager Engineering and Infrastructure confirmed that the materials were short supplied, and surprised in the manner the payment was made.

The above anomaly indicates that procurement procedures have been breached, and laxity of responsible officers in ensuring proper controls.
7 Section 19.5.5 of AFL’s Financial Policy and Procedure Manual Report of GCC & CSA – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ Recommendation  Officers responsible in the above payment should be held accountable and face appropriate disciplinary actions.

 Further investigation to be carried out and follow up should be made with the amount of materials short supplied.
Management Comments The above items were purchased by the contractor for the Savusavu terminal building project.

Due to the problem of transportation to the project site, these items were temporarily kept in stores for safe keeping.

The goods were received and checked by the project manager to confirm the items to be as per the contract.

The Senior Supplies Officer did not play any role in ordering this good and receiving the same.
Action has been taken against the project manager by not renewing his contract of employment and AFL is proceeding with legal action against the supplier.
Report of GCC & CSA – July 2012 9 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS __________________________________________________________________________________ SECTION 2: UNIT TRUST OF FIJI (MANAGEMENT) LIMITED The Unit Trust of Fiji (Management) Limited is a wholly Government owned entity that manages the Unit Trust of Fiji (UTOF) – a fund management company established and governed under the Unit Trust Act.
The Unit Trust of Fiji (Management) Ltd is a Government Commercial Company and operates under the umbrella of the Ministry of Public Enterprises & Public Sector Reforms and the Ministry of Finance.

The main responsibility of the Unit Trust of Fiji (Management) is to manage the Trust in a proper and efficient manner.

In doing so, it must comply with all of its obligations set out in the Trust Deed and the relevant laws of Fiji.
The management company buys and sells units to and from the public and decides where to invest the UTOFs assets for the benefit of the unit holders.

The Minister responsible for the Ministry of Public Enterprises & Public Sector Reform appoints the Directors of the company for a three (3) year term.
Table of Content SECTION 2: UNIT TRUST OF FIJI (MANAGEMENT) LIMITED ............................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion - 2011 ................................................................................................................................................. 1 2.1 Abridged Statement of Financial Performance ........................................................................................................ .1 2.2 Abridged Statement of Financial Position ............................................................................................................ …..2 2.3 PART A – FINANCIAL INFORMATION 2.1 Audit Opinion - 2011 The audit of the financial statements of Unit Trust of Fiji (Management) Limited (UTOF) for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
2.2 Abridged Statement of Financial Performance Year Ended 31 December Revenue Operating Revenue Other Operating Income Total Operating Revenue Expenditures Personnel Expenses Other Operating Expenses Report of GCC & CSA – July 2012 2011 ($) 2010 ($) 1,158,281 93,047 1,251,328 418,285 598,779 1,508,084 130,138 1,638,222 517,275 932,317 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS __________________________________________________________________________________ Year Ended 31 December 2011 ($) 2010 ($) Depreciation Total Operating Expenditure Profit before Income Tax Income tax benefit Net profit (loss)for the year 86,484 1,103,548 147,780 772 148,552 84,530 1,534,122 104,100 11,020 115,120 UTOF recorded a net profit of $148,552 in 2011, an increase of $33,432 or 29.0% compared to year 2010.
This was a result of tight control placed over expenditure during 2011.
2.3 Abridged Statement of Financial Position As at 31 December Current assets Cash at bank and on hand Investment – held to maturity Receivables Income tax refundable Total current assets Non current assets Plant and equipment Total non-current assets Total assets Current liabilities Creditors and accruals Total current liabilities Non-current liabilities Deferred income tax liability Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Retained earnings Total shareholders’ equity 2011 ($) 2010 ($) Net assets increased by $206,113 or 31% in 2011 compared to 2010 as the result of increases in cash at bank by $243,310 (90%) and plant and equipment by $89,011 (28%).
This resulted in the increase in Shareholders’ equity to $871,669 during 2011 compared to $665,556 in year 2010.

Report of GCC & CSA – July 2012 2 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS 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 SECTION 3: FIJI PORTS CORPORATION LIMITED ................................................................................................................ 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ............................................................................................................................................................... 1 3.1 Abridged Statement of Financial Performance ........................................................................................................... 1 3.2 3.3 Abridged Statement of Financial Position ................................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Work In Progress (WIP) .............................................................................................................................................. 3 3.4 Fiji Military Forces Long Outstanding Reimbursement Cost ....................................................................................... 4 3.5 Hedges ........................................................................................................................................................................ 4 3.6 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 2011 resulted in the issue of an unqualified audit report.
3.2 Abridged Statement of Financial Performance As at 31 December Income Marine Services Dockage Wharfage Storage Other Operating Revenue Other Revenue Total Income Expenditure Operating Expenses Group 2011 ($) 2010 ($) Company 2011 ($) 2010 ($) Report of GCC & CSA – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS ______________________________________________________________________________ As at 31 December Company Group Salaries and Benefits Property Depreciation Marine Service Charge Finance Expenses Total Expenditure Operating (loss)/profit before income tax Income tax (expense)/ credit Net (loss)/ Profit for the year after Income Tax 2011 ($) 9,387,339 3,958,207 10,453,034 6,212,202 1,792,069 40,259,781 7,946,888 (2,304,685) 5,642,203 2010 ($) 7,755,718 3,207,669 9,726,372 5,784,744 2,219,474 38,086,995 6,983,021 (1,699,736) 5,283,285 2011 ($) 4,370,514 3,958,207 8,145,309 6,212,202 1,726,366 27,326,596 5,887,912 (2,143,017) 3,744,895 2010 ($) 4,268,572 3,207,669 7,674,436 5,784,744 2,135,230 26,365,933 7,145,293 (1,644,248) 5,501,045 The company and subsidiaries recorded net profit after tax of $5,642,203, compared to a profit of $5,283,285 in 2010.
The increase was due to increase in revenue collection from $45,070,016 in 2010 to $48,206,669 in 2011.
3.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Trade and other receivables Investments Inventories Other current assets Loan to Subsidiaries Total Current Assets Non – Current Assets Property, plant and equipment Financial Assets Intangible asset Investment property Loan to subsidiaries Investment in FSHIL Deferred tax assets Total Non–Current Assets Total Assets Current Liabilities Trade Payables and Accruals Interest Bearing Borrowings Provisions Income tax liability Total Current Liabilities Non-Current Liabilities Interest bearing borrowings Deferred tax liability Group 2011 ($) 2010 ($) Company 2011 ($) 2010 ($) 20,085,938 3,501,779 6,000,000 349,132 935,140 - 30,871,989 122,721,554 1,058,330 161,133 3,337,283 - - 923,468 128,201,768 159,073,757 4,979,776 2,647,045 905,154 2,615,565 11,147,540 7,833,856 2,883,759 5,000,000 376,987 1,583,035 - 17,677,637 131,188,195 3,000,000 176,460 3,366,122 - - - 55,419,227 412,674 52,356,601 - 54,805,794 - Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS ______________________________________________________________________________ As at 31 December Company Group Total Non-Current Liabilities Total Liabilities Net Assets Shareholder’s Equity Share Capital Accumulated Profits Total Shareholder’s Equity 2011 ($) 52,836,665 63,984,205 95,089,552 73,154,852 21,934,700 95,089,552 2010 ($) 55,831,901 63,382,591 92,088,992 73,154,852 18,934,140 92,088,992 2011 ($) 52,356,601 61,260,902 86,747,750
 73,154,852 13,592,898 86,747,750 2010 ($) 54,805,794 60,720,595 85,644,498 73,154,852 12,489,646 85,644,498 The net asset positions of the company and subsidiaries improve by $3,000,560 (3%) in 2011 compared to 2010.
This resulted mainly from the increase in cash and cash equivalents by $12,252,082 and reduction in interest bearing borrowings by $2,582,562.

PART B – CONTROL ISSUES 3.4 Work In Progress (WIP) An agency is responsible for the safekeeping and proper maintenance of all accounting records or documents.

Our audit noted that significant proportion of work in progress balances have been carried forward from previous years and have not been capitalized.
In addition, it was noted that some of the work in progress projects are on hold.

Refer to Table 3.1 below for details: Table 3.1: WIP Projects on Hold Year 2005/2006 2009 2009 Total Project Particulars WIP007 - FPCL headquarters the purchase of the project the Neptune Since building, the FPCL headquarters was stopped, part of the land for this project has been used for vendor stalls.
for WIP023 - Lautoka industrial subdivision For WIP0023 as per discussions with management the land for the industrial subdivision has been leased to Amex Resources, and there are no longer plans for the Lautoka industrial subdivision.

WIP029 - Lautoka Wharf Slab Thickening WIP029 is on hold.

Amount ($) 1,112,277 858,389 102,350 2,073,016 Periodic review of the work in progress status is vital to ensure prompt capitalisation of the cost.
Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS ______________________________________________________________________________ Recommendation The Management should consider reviewing the balances in work in progress and consider either capitalising appropriate costs such as land reclamation costs and writing off amounts which does not add any value to fixed assets for projects that will not be continued.

Company’s Comments Management acknowledges the comments.
WIP023 – Lautoka Industrial Subdivision has already been capitalised.

WIP007 – FPCL Headquarters is now proposed for another project whilst WIP029-Lautoka Wharf Slab Thickening is currently on hold.

Management will ensure that in future delays in capitalization of WIP items are avoided.
3.5 Fiji Military Forces Long Outstanding Reimbursement Cost Agencies must ensure that all commitments and invoices are promptly and accurately recorded in the accounting system to meet management and external reporting needs.

The general ledger includes an outstanding reimbursement cost of $195,941 to the Fiji Military Forces for the provision of security services 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.
In case RFMF is not in a position to substantiate its claims and if agreed the amount should be written off.

Company’s Comments Management whilst being aware of this issue and its implications has done all it could to clear off this long outstanding item.

Various correspondences have been made with Fiji Military Forces but the issue remains unsolved.

This has also been escalated to the Fiji Ports Board to follow up with the Fiji Military Forces.
3.6 Hedges Cash flow hedges are normally used to hedge exposures relating to the company’s borrowings and ongoing business activities, where the company has highly probable purchase or settlement commitments in foreign currencies.

The Company has significant exposure to foreign currency risk due to its loan of USD $14,224,590 from a bank.
Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS ______________________________________________________________________________ To reduce the impact of foreign currency risk, the Company should consider entering into forward foreign currency contracts with their banks to hedge its foreign currency risks arising from spot rate changes.

The practice of not hedging could result in a financial loss attributing to the fluctuations in a global exchange rate.
Recommendation The Management should consider cash flow hedging to reduce its exposure to foreign currency fluctuations.

Company’s Comments Management notes the comments that the US Dollar ABD Loan exposes the company to foreign currency risk.

However, hedging has not been used as use of hedging entails risks of its own that management is not comfortable with.

Management’s strategy of dealing with the foreign currency risk was to consider refinance of the ABD onshore.
Tenders for these were called and the Board will now determine whether to refinance based on a Cost versus Benefit analysis.
Report of GCC & CSA – July 2012 5 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI SECTION 4: FIJI ELECTRICITY AUTHORITY The Fiji Electricity Authority (FEA) is established, incorporated and constituted under the provisions of the Electricity Act of 1966 and began operations from 1 August that year.

The Authority is governed under the Public Enterprise Act 1996.
The principal activity of the FEA is to provide and maintain a power supply that is viable, economically sound and consistent with the required standards of safety, security and quality of power supply.

The Authority aims to provide clean and affordable energy solutions to Fiji and the Pacific and to provide all energy through renewable resources.
The FEA is entrusted with enforcing the Electricity Act and regulations, setting standards, examining and registering electricians, and is empowered to approve and license suppliers to serve certain areas.
Table of Contents PART A – FINANCIAL INFORMATION .................................................................................................................................... 1 4.1 4.2 4.3 Audit Opinion .......................................................................................................................................................... 1 Abridged Income Statement ................................................................................................................................... 1 Abridged Balance Sheet ......................................................................................................................................... 2 PART B – CONTROL ISSUES .................................................................................................................................................. 3 4.4 4.5 4.6 Deficiency in Working Capital ................................................................................................................................. 3 Capital contribution – long outstanding accounts ................................................................................................... 4 Deferred income ..................................................................................................................................................... 5 PART A – FINANCIAL INFORMATION 4.1 Audit Opinion The audit of the financial statements of the Fiji Electricity Authority for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
4.2 Abridged Income Statement Year Ended 31 December 2011 ($000) 2010 ($000) Revenue Operating revenue Other operating income Total Revenue Expenditure Personnel expenses Fuel costs Lease and Rent expenses 288,778 16,766 305,544 17,941 137,881 1,830 226,945 4,654 231,599 17,447 126,756 1,688 Report of GCC & CSA – July 2012 1 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI Year Ended 31 December 2011 ($000) 2010 ($000) Electricity purchases Depreciation Amortisation of Intangible assets Cyclone Mick – Restoration costs Other operating expenses Total Expenditure Profit from operations Finance costs Share of profit of joint venture Operating profit/loss before income tax Income tax expense Net profit for the year after income tax 14,401 29,914 524 - 39,584 242,075 63,469 11,042 - 52,427 517 51,910 12,611 29,655 528 1,445 24,652 214,782 16,817 12,998 192 13,190 (4,786) 8,404 The Authority recorded an increase in net profit after tax of $43,506,000 or 518% in 2011 compared to 2010.
The increase in profit was due to a significant increase in electricity sales as a result of increase in demand, increase in consumption and increase in tariffs for electricity.
4.3 Abridged Balance Sheet As at 31 December 2011 ($000) 2010 ($000) Current Assets Cash and cash equivalents Held to maturity financial assets Receivables and prepayments 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 Interest bearing borrowings Other current liabilities Total Current Liabilities Non-Current Liabilities Interest bearing borrowings Deferred tax liabilities Other non current liabilities Total Non Current Liabilities Total Liabilities Net Assets Total Capital and Reserves 3,640 23,409 42,888 18,072 88,009 892,984 2,016 895,000 983,009 36,661 54,526 91,187 322,624 36,762 60,385 419,771 510,958 472,052 472,052 - 55,837 32,617 16,470 104,924 811,583 9,067 820,650 925,574 71,628 51,612 123,240 280,181 51,173 56,280 387,634 510,874 414,700 414,700 Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI _________________________________________________________________________________________________ Net assets increased by $57,352,000 or 14% in 2011 compared to 2010 mainly due to an increase in property, plant and equipment in 2011.
There was an increase in Work in Progress which includes the Network Augmentation Project, Nadarivatu Hydro Project and commissioning of various sub stations.

PART B – CONTROL ISSUES 4.4 Deficiency in Working Capital The audit noted that the authority recorded a deficiency in working capital of $3.2 million in 2011 compared to $18.3 million in 2010.
Furthermore, a loan with a commercial bank is due to be repaid in 2012 and there are ongoing capital expenditure commitments with the Nadarivatu Hydro Project apart from other capital expenditure projects for which the Authority would require further capital to finance the projects.
Recommendation The Authority should continue monitoring its borrowing, interest costs and repayment commitments, and its impact on the Authority’s activities, and ensure that adequate funding is available to meet all its commitments as and when they fall due.

Management comments Comment is noted.

The working capital of negative $3.2 million is a significant reduction compared to the negative $18.3 million recorded in 2010.
The current liabilities for 2011 of $91.19 million includes the Retirement Benefit and Long Service Leave of $4.48 million which has been reclassified to current liabilities from non-current liabilities after FEA implemented the Essential National Employment Industries Decree from 7th November 2011.

If this Decree was not implemented in 2011, then the working capital for 2011 would have been a positive $1.28 million.
In addition to this, FEA has an overdraft facility of FJD$10 million with ANZ which it did not utilize in 2011 and indicates that there is no real threat of a working capital deficiency.

If the FJD$10 million is included as part of the working capital calculation than this will result in a positive $11.28 million.

FEA has obtained the necessary funding essential to ensure the completion of the Nadarivatu Hydro Power Project in 2012.
As at 31 December 2011 the balance of the Sinohydro offshore contract is USD$10.07 million including the project retention of USD$6.6 million and FEA’s USD account balance with ANZ Bank as at 31 December 2011 was USD$12.85 million.

Furthermore, FEA had prepared a funding plan Board Paper (Board Paper 5987 dated 26 January 2012) and this was submitted to the OAG’s office showing the plans in terms of matured bonds and loan it has prioritized that will be repaid in 2012.
This is tabulated below: Months Financial Institution Amount Due in 2012 $ Amount Paid to date January - April 2012 ANZ 20th March 2012 CDB 20th September 2012 CDB 20th September 2012 BSP Bank 5th October 2012 Bonds 1st December 2012 Bonds 4.9 million Paid $970,000 in March 2012 5.3 million Paid $5.3 million in March 2012 6.3 million Due on 20 September 2012 4 million Due on 20 September 2012 17 million Due before 15 October 2012 5 million Due before 1 December 2012 Total 42.5 million Report of GCC & CSA – July 2012 3 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI FEA has repaid $5.3 million of the CDB Loan and around $1 million of the ANZ loan from its own cash flows in March 2012 and shows that there is no working capital deficiency.
The above plan has taken into account the current FEA business model with an average tariff of 39.4 cents/unit, Nadarivatu Hydro Power Project coming on line in July 2012 (which will result in substantial diesel saving to repay matured bonds and loan when they fall due) and FEA taking advantage of the 2x6MW diesel sets being converted into cheaper heavy fuel oil at Vuda Power Station which is expected to result in further fuel savings to FEA.

This project will also be commissioned in June 2012.
It is envisaged that the above business model will enable FEA to repay some $42.5 million of the matured bonds and loans that are due in 2012 in addition to funding FEA’s capex programme for 2012 and meeting its day to day operations.

As part of the above plan, the 2 x $20 million ANZ loan that will expire in2012 will be refinancing by FEA either through issue of bonds or raising of new loan from Commercial Banks at competitive biding process.
Therefore, FEA is confident that it will continue to meet future financial obligations using the above business model and also for the financial sustainability of the organisations.
4.5 Capital contribution – long outstanding accounts Refundable capital contributions are held for 8 years (previously 5 years) before an assessment is made as to whether customers are consuming electricity at the rate agreed with the authority at the time of installation and connection to the electricity grid (when the refundable contributions were made).

The audit noted that some refundable deposits have been outstanding for more than 5 years (various accounts amounting to $3,068,082).
No evidence of a review by the authority has been noted.

Recommendation The Authority should review the status of these accounts on a regular manner and appropriate action taken on accounts which have not reached the promised consumption rate by the due date.

Any extension on the contribution agreed with the customers should be documented.

Management comments Recommendation is noted.


Management will continue reviewing all schemes that are more than 5 years old and assessment of electricity consumption will be carried out to determine whether any refunds are due to the customer.

Furthermore, the net balance of $3,068.082 outstanding for more than 5 years up to end of 2005 has further reduced to $2,733,069.84 as at end of December 2010 and to $2,367,157.50 as at end of December 2011.
Therefore FEA has made a total refund of $700,924.60 out of which $365,912.34 were refunds processed in 2011.
The full reconciliation of the movement of the net balance from $3,068,082 as at 2005 to $2,367,157.50 as at 31 December 2011 is given below: CAPITAL CONTRIBUTION REFUNDABLE DEPOSITS Particulars Total Refundable Deposits received for the year Total deposits received in 2004 Report of GCC & CSA – July 2012 2003 and prior years 2,647,491.74 2004 2005 459,662.13 Running balance $ 2,647,491.74 459,662.13 4 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI Particulars Refunds processed in 2004 Net Refundable Deposits Balance as at 31/12/04 Total deposits received in 2005 Refunds processed in 2005 Net Refundable Deposits Balance as at 31/12/05 Refunds processed from 2006 – 2010 Net Refundable Deposits Balance as at 31/12/10 Refunds processed from 2011 Net Refundable Deposits Balance as at 31/12/11 2003 and prior years (390,680.09) 2,256,811.65 2004 459,662.13 2,208,986.65 (204,694.02) 2,004,292.63 (287,913.00) 1,716,379.63 435,790.12 (32,748.00) 403,042.12 (42,110.00) 360,932.12 2005 Running balance $ (390,680.09) 2,716,473.78 450,207.33 450,207.33 (26,902.00) (98,599.01) 423,305.33 3,068,082.10 (97,570.24) (335,012.26) 325,735.09 2,733,069.84 (35,889.34) (365,912.34) 289,845.75 2,367,157.50 4.6 Deferred income The authority has not maintained any reconciliation for the Deferred Income received a number of years ago from the European Economic Community and the Fiji Government for rural electrification.
Due to the lack of a proper reconciliation, the authority has amortized a consistent amount each year.

The lack of a proper reconciliation increases the risk that the amounts reported may be incorrect.

Recommendation The Authority needs to ensure a proper reconciliation is maintained for any future grant or aid that is to be accounted for over more than one accounting period.

Management comment Recommendation is noted.


The deferred income relates to capital grants received from EEC and Fiji Government foe certain rural electrifications projects.

These projects have been commissioned some years now and cannot be individually identified.

However, the accounting treatment to amortize these grants as income is in accordance with the accounting standards.

The $856,453 amortized annually is equivalent to 4% depreciation charge for the reticulation assets.
FEA will ensure that future grants received will have proper reconciliation and are traceable to the Fixed Asset Register.

Report of GCC & CSA – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 5: FIJI SHIPS & HEAVY INDUSTRIES LIMITED FSHIL was registered under the 1983 Companies Act as a Private Company Limited by Shares.

The company commenced operation in May 2001 under the name of Fiji Shipbuilding Corporation Limited.
Its incorporation was the result of the government’s acquisition of the assets of the former company, Shipbuilding (Fiji) Limited, which has been in receivership since December 1999.

With effect from January 2003 the company name has been changed to Fiji Ships and Heavy Industries Limited.
The mandate as stipulated in the Memorandum of Association states the following objectives:     to develop the shipyard and slipway that was acquired by Government; to carry on the business of slipway operators including ship repair and maintenance, heavy and civil engineering construction and the building of new vessels for the local and international markets; to provide a viable commercial facility to achieve a minimum 10% annual return on the shareholders’ investments over the planning period to provide maximum employment opportunities in the ship repair/ship building industry and the civil and heavy engineering construction industry.
Table of Contents SECTION 5: FIJI SHIPS & HEAVY INDUSTRIES LIMITED ............................................................................................................ 1 PART A – FINANCIAL INFORMATION ........................................................................................................................................... 1 Audit Opinion ................................................................................................................................................................. 1 5.1 Abridged Statement of Financial Performance .............................................................................................................. 1 5.2 5.3 Abridged Statement of Financial Position ...................................................................................................................... 2 PART B – CONTROL ISSUES ......................................................................................................................................................... 3 Stock Write Off Policy .................................................................................................................................................... 3 5.4 Annual Return ................................................................................................................................................................ 3 5.5 PART A – FINANCIAL INFORMATION 5.1 Audit Opinion The audit of the financial statements of the Fiji Ships and Heavy Industries Limited for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
5.2 Abridged Statement of Financial Performance Year Ended 31 December Income Operating Income Other Operating Income Total Income Expenditure Direct Costs 2011 ($) 2010 ($) 4,388,866 231,755 4,620,621 3,064,294 180,797 3,245,091 1,128,801 810,841 Report of GCC & CSA – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Year Ended 31 December Employee Benefits Expenses Depreciation and Amortization Expense Finance Costs Other operating expense Total Expenditure Operating (loss)/profit before income tax Income tax (expense)/ credit Net (loss)/ Profit for the year after Income Tax 2011 ($) 1,174,632 425,868 112,998 995,607 3,837,906 782,715 (32,096) 750,619 2010 ($) 900,520 400,912 104,506 699,918 2,916,697 328,394 (69,968) 258,426 The company recorded a net profit of $750,619 in 2011 compared to a net profit of $258,426 in 2010.
The increase in net profit was largely due to increases in income received from slipway and shipyard by $1,324,572 (43%) compared to income received from the same in 2010.
5.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash and Cash Equivalent Trade Receivables Inventories Prepayments and other assets Total Current Assets Non - Current Assets Property, Plant and Equipment Deferred Tax Assets Intangible Assets Held to Maturity Financial Assets Total Non –Current Assets Total Assets Current Liabilities Trade Payables and Accruals Interest Bearing Debt Provisions Total Current Liabilities Non-Current Liabilities Interest Bearing Debt Total Non-Current Liabilities Total Liabilities Net Assets Equity Share Capital Accumulated Losses Total Equity 2011 ($) 2010 ($) (1,572,021) 6,090,207 7,662,228 (2,193,427) 5,468,801 Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Net assets increased by $621,406 (11%) in 2011 compared to 2010.
This was due to increase in cash and cash equivalents by $960,411 (70%) compared to 2010.

PART B – CONTROL ISSUES 5.4 Stock Write Off Policy Agency is responsible for the safekeeping and proper maintenance of all accounting records or documents.

The audit noted that the FSHIL failed to prepare its stock aging report and also made no provision for obsolete stock in its books.
In addition, a stock take conducted by the Management in August 2010 determined that some of the stock purchased in the 1990’s for the construction of the “Reef Endeavour” was slow moving and could be impaired.

The total value of these items ascertained by the Management at balance date was $65,349.

This has been adjusted in the financial statements as provision for stock obsolescence.

Furthermore, audit noted that FSHIL does not have a formal policy on inventory write-offs.
Failure to write-off the obsolete stock could result in inventory being overstated.

Recommendations  The Management should finalise a formal policy for inventory write-offs.

 The Management should liaise with programmers to upgrade the inventory system to allow it to generate on point stock aging report.

Company’s Comments Management takes note of the recommendation for a formal policy on inventory write-off.
Since our current finance and accounting policy is under review, we will consider the recommendations and incorporate a formal policy regarding inventory write off.

Management has included in the 2012 budget CAPEX for the purchase of new accounting software and will ensure that the new accounting package incorporates the stock aging report generation.
5.5 Annual Return Every company having a share capital, once at least in every year makes a return.1 Every company not having a share capital shall, once at least in every calendar year, make a return.2 The annual return shall be completed within 42 days after the annual general meeting for the year, whether or not that meeting is the first or only ordinary general meeting, or the first or only general meeting, of the company in the year, and the company shall, within such period, deliver to the registrar a copy signed 1 Companies Act [Cap 247] – Section 127 (1) 2 Companies Act [Cap 247] – Section 128 (1) Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI both by a director and by a secretary of the company.3 If a company fails to comply with this section, the company and every officer of the company who is in default shall be liable to a default fine.4 For registering any document out of time pursuant to subsection (2) of section 392 of the Act; for the first month or part thereof during which the default continues (exclusive of the periods mentioned in regulation 5) fees of $5.00 would be levied.
For each and every subsequent month (up to a maximum of $40) fees of $2.00 would be levied.5 The audit noted that the last annual return lodged by FSHIL was on 12 May 2005 for the period ending 2004.

Non-compliance with the statutory provisions of the Fiji Companies Act could result in unwarranted fines and penalties being imposed.

Recommendation The Management should ensure all outstanding annual returns are lodged at the earliest possible date.
In addition, all future annual returns are to be lodged annually.

Company’s Comments Management takes note of the DAM report comments.

However, as confirmed by the company secretary, FSHIL Annual Returns with the companies’ office has been lodged on a regular basis.
3 Companies Act [Cap 247] – Section 129 (1) 4 Companies Act [Cap 247] – Section 129 (2a) 5 Companies Act (Cap 247) Second Schedule – Part V Additional Fees Report of GCC & CSA – July 2012 4 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS SECTION 6: FOOD PROCESSOR FIJI LIMITED Food Processors is a wholly owned government commercial company which has been in operation for over 20 years.
Its’ main line of business is food manufacturing.

The company produces tomato sauce, chilli sauce, soy sauce, coconut oil, Worcestershire PMU sauce which is produced under licence for Goodman Fielders.

The company continues to develop food products using local indigenous vegetables, fruits and root crops for local and export markets.

The fine quality foods are manufactured under the brand name “Pacific Cown” which are sold locally and exported to Australia, New Zealand, Canada and the USA.
Table of Contents SECTION 6: FOOD PROCESSOR FIJI LIMITED ..................................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................... 1 6.1 6.2 6.3 Audit Opinion .......................................................................................................................................................... 1 Abridged Income Statement ................................................................................................................................... 2 Abridged Statement of Financial Position ............................................................................................................... 2 PART B – CONTROL ISSUES .................................................................................................................................................. 3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 Improving the Timeliness of Financial Reports ....................................................................................................... 3 Lodgement of Annual Return .................................................................................................................................. 3 Poor Cash Flow Management ................................................................................................................................ 4 VAT and Sales Reconciliation ................................................................................................................................ 4 Rental Income ........................................................................................................................................................ 5 Government Loan Not Recorded ............................................................................................................................ 5 Government Loan Agreement ................................................................................................................................ 6 Waiver of Interest on Government Loan ................................................................................................................. 6 Fixed Assets Register & Depreciation Schedule .................................................................................................... 6 Revaluation of Property, Plant and Equipment ....................................................................................................... 7 PART A – FINANCIAL INFORMATION 6.1 Audit Opinion The audit of the financial statements of the Food Processor Fiji Limited for the year ended 31 December 2007 resulted in the issue of a qualified audit report.
The qualifications are as follows:  The Property, Plant and Equipment (PPE) in the financial statements have not been revalued in accordance with Fiji Accounting Standard (FAS) 16 Property, Plant and Equipment.

The last revaluation was conducted in 1998.

 Government loan amounting to $960,000 has not been recorded in the annual financial statements as at 31 December 2007.
Report of GCC & CSA – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ 6.2 Abridged Income Statement Year Ended 31 December Revenue Operating Income Other Operating Income Total Revenue Expenditure Cost of Sales Administrative Expenses Bad and Doubtful Debts Operating Expenses Finance Cost Total Expenditure Profit Before Tax Income Tax for the Year Net Profit for the Year 2007 ($) 2006 ($) 2,221,037 257,818 2,478,855 1,697,720 85,593 0 484,455 93,411 2,361,179 117,676 33,404 84,272 2,557,410 340,564 2,897,974 2,089,236 108,460 34,281 562,600 61,939 2,856,516 41,458 13,354 28,104 Food Processor Fiji Limited recorded an after tax profit of $84,272 in 2007 compared to $28,104 in 2006 as a result of effective control excised over expenditure.
Significant decreases were noted for:  Cost of sales decreased by $391,516 or 18.7% as a result of the decrease in the volume of sales in 2007 due to competition from new products such as red top tomato sauce and general decline in consumer disposable income;  Administration expenses decreased mainly due to decline in bank charges, director’s fees and board meeting expenses.

 Other operating expenses decreased by $78,145 due to decline in advertising, marketing and promotion and related expenses.
6.3 Abridged Statement of Financial Position As at 31 December Current assets Cash and cash equivalents Receivables Inventories Other current assets Total current assets Non current assets Deferred tax asset Property, plant and equipment Total non current assets Total assets Current liabilities Trade and other payable Borrowings Other current liabilities Total current liabilities Non current liabilities 2007 ($) 2006 ($) 1,316 545,876 1,332,813 362,319 2,242,324 14,572 1,894,088 1,908,660 4,150,984 551,014 515,968 46,827 1,113,809 2,029 584,330 942,768 354,123 1,883,250 20,059 2,018,902 2,038,961 3,992,211 487,478 376,917 32,062 896,457 Report of GCC & CSA – July 2012 2 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS As at 31 December Borrowings Deferred tax liability Other non current liabilities Total non current liabilities Total liabilities Net assets Shareholders’ equity Share capital Share Deposits Retained earnings Total shareholders’ equity 2007 ($) 834,804 36,243 86,663 957,710 2,071,519 2,079,465 687,679 1,000,000 391,786 2,079,465 2006 ($) 861,450 58,032 111,077 1,030,559 1,927,016 1,995,195 687,679 1,000,000 307,516 1,995,195 The Company’s net assets increased by $84,270 or 4.2% in 2007 compared to 2006 mainly due to the significant increase in inventories by $390,046 or 41.4%.
PART B – CONTROL ISSUES 6.4 Improving the Timeliness of Financial Reports Financial reports are intended to meet the needs of decision makers and the Board of Directors.

To accomplish this objective, financial reports must be available on time to make informed decisions.

In accordance with this, the Fiji Accounting Standards [FAS 1(52)] states that “the usefulness of financial statements are impaired if they are not made available to users within a reasonable period after the balance date.
An enterprise should be in a position to issue its financial statements within six months of the balance sheet date.” The draft financial statements of Food Processors (Fiji) Limited for the year 2007 was submitted to the Office of the Auditor General on 08 July 2010.

The late preparation of the annual financial statements diminished its usefulness for decision making purposes.
Recommendation The annual Financial Statement of the Company should be prepared and submitted within six months of the balance date.

Management Comments No comment received from management.

6.5 Lodgement of Annual Return Section 127 of the Company’s Act, states that every company having share capital should lodge an annual return.

If the Company fails to comply with this section, the Company and every officer of the Company who is in default shall be liable for a fine.
The last annual return for the Company was filed in 2003 as such it is in breach of the Companies Act and may be liable for fines.

Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ Recommendation The Company needs to update its Company records that are maintained with the Registrar of Companies.

Management Comments No comments received from management.
6.6 Poor Cash Flow Management Food Processors (Fiji) Limited had a bank overdraft limit of $220,000 with a commercial bank in 2007, however we noted that as at 31 December 2007 the company had an overdraft balance of $316,295.

The bank statement reflected an overdraft balance of $276,615 as at 31 December 2007 and un-presented cheques amounted to $40,959 while lodgements not credited amounted to $1,280.

This resulted in the Bank overdraft limit being exceeded incurring daily excess fee.
Recommendation The company should prepare cash flow projections on a weekly basis to monitor its payments and receipts and to manage its cash flow effectively so as to ensure that it is within its overdraft limit.

This will avoid the incurrence of unnecessary bank charges and fees Management Comments No comment received from management.
6.7 VAT and Sales Reconciliation The following were noted from audit review of the VAT and sales reconciliations: Particulars Total sales as per VAT returns Total income as per financials (including rental income) Variance Amount ($) 1,903,644.53 2,395,850.00 $ 492,205.47 This implies that income has been understated/undeclared in the VAT Returns.

In doing so the company declared a lower VAT output resulting in less VAT payable.
Such discrepancies could lead to potential tax queries from the Inland Revenue Department.

Recommendation This discrepancy should be resolved by the Financial Controller with a valid explanation.

If necessary amended VAT returns need to be prepared and lodged.
Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ Management Comments No comment received from management.

6.8 Rental Income All income received by the Company needs to be disclosed in the VAT Returns.

This should be the case even if the income is zero rated.
Audit noted that rental income from properties amounting to $174,813 during 2007 was not disclosed in the VAT returns.

The Company has failed to disclose all income in its VAT returns as required by the VAT Decree.

Recommendation This matter is recurring from previous year and should be seriously taken on board by management and regularized.

Management Comments No comment received from management.
6.9 Government Loan Not Recorded National Trading Corporation Limited (NATCO) a parent company of Food Processors (Fiji) Limited borrowed $2.9million from Government.

Through a Cabinet decision in 2004, this loan was transferred from NATCO to Food Processors (Fiji) Limited.

FPFL was then required to service this loan.

Later on, out of this loan, $1M was further restructured as Government Equity (currently disclosed as Share Deposits).
A third party confirmation from Government revealed that loan outstanding from FPFL as at 31 December 2007 amounts to $1.9M.

However, FPFL has only recorded $940,000 as loan repayable to Government in its Statement of Financial Position as at 31 December 2007.

The remainder of the loan ($960,000) is not recorded in the books of FPFL.

Instead it is treated as a loan to Batiri Orchards Limited, which is a sister company of FPFL.
It is noted that FPFL is in discussions with Government to transfer $960,000 to Batiri Orchards Limited.

FPFL’s liability is understated by $960,000 as at 31 December 2007 due to the non recording of this loan from Government.

This issue has been disclosed as a qualification in the audit report.

Recommendation Audit strongly recommends that FPFL urgently discuss & regularize the above matter with Government and $960,000 should be recorded as FPFL’s loan until the decision is finalised.
Management Comments No comment received from government.

Report of GCC & CSA – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS _________________________________________________________________________________________________ 6.10 Government Loan Agreement A loan agreement between the Government of the Fiji Islands and Food Processors Fiji Limited was not finalised for the loan which was transferred from NATCO to FPFL.
This loan was transferred through a cabinet decision in 2004 as stated above.

In the absence of a loan agreement loan terms and conditions are not formally agreed to.

Recommendation The company should formalize the loan repayments to Government by way of a loan agreement between the two parties.

Management Comments No comment received from management.
6.11 Waiver of Interest on Government Loan In a cabinet decision in November 2009, Government approved the waiver of all accrued existing interest on the Government loan which was transferred from NATCO to FPFL in 2004.

Government also approved to freeze interest on this loan until underutilized properties of FPFL, namely the NATCO building and the Savusavu properties were disposed.

As at 31 December 2007, interest accrued on Government loan transferred from NATCO to FPFL in 2004 amounted to $201,475.
A retrospective adjustment was not incorporated into the annual accounts of FPFL for 2007 to take into account the subsequent event of the waiver of the interest on Government loan.

Recommendation Audit recommends that the annual accounts be amended to reflect the waiver of all accrued interest on the Government loan as approved by the Government.

Management Comments No comment received from management.
6.12 Fixed Assets Register & Depreciation Schedule A Fixed Assets Register is a subsidiary ledger which records asset codes, asset costs, descriptions, date of acquisition and location.

This information is necessary not only for periodic verification of the assets existence and condition, but will also assist in future when the asset is disposed off.

Adequate description of all buildings and other properties of the Company should be kept on the register.
References to title numbers, description of the structures and land location and area should be briefly but clearly stated.
The register should be provided with columns for the following information: (1) Date of acquisition Report of GCC & CSA – July 2012 6 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS (2) CT, Lease or Registration Number (3) Make, model, engine number (4) Initial cost (5) Cost of additions (6) Total cost (7) Provision for depreciation (accumulated) (8) Written down value (9) Proceeds of disposal (10)Profit or loss on disposal Whilst a depreciation schedule is maintained, audit noted that FPFL did not prepare a proper set of complete and accurate Fixed Asset Register (FAR) for the year ended 31 December 2007.
Furthermore the following irregularities in the land & buildings present in the depreciation schedule were noted: (1) (2) (3) (4) Freehold land and buildings are recorded and depreciated together at 2.5% in the depreciation schedule.

Freehold land does not attract depreciation therefore depreciation expense is overstated.
Leasehold land and buildings for the Millet Street, Vatuwaqa Property are recorded and depreciated together at 2.5% in the depreciation schedule whereas leasehold land should have been amortised over its lease life of 99 years.

By depreciating this at a rate of 2.5%, the Company is effectively giving the property a life of 40 years.

Therefore depreciation expense is over stated.


Leasehold land and buildings for the Savusavu Property are recorded and depreciated together at 1.25% whereas leasehold land should have been amortised over its lease life of 99 years.

By depreciating this at a rate of 1.25%, the Company is effectively giving the property a life of 80 years.

Therefore depreciation expense is over stated.


No land/lease titles were provided for the following properties recorded under land and buildings: a. Sigatoka Naveyago Shed b. Sigatoka c. Wayevo d. Nabouwalu e. Ginger Shed Recommendations The Company should take necessary corrective action to correctly state the value of land & buildings in the financial statements.

Management Comments Ni comment received from management.
6.13 Revaluation of Property, Plant and Equipment Paragraph 32 of Fiji Accounting Standards 16 (Property, Plant and Equipment) states that the Property plant and equipment should be valued every 3 to 5 years.

Audit noted that the revaluation adjustments relating to 2005 valuation for CL 4995 and CT 11266 were not adjusted in the books of account.
Report of GCC & CSA – July 2012 7 _________________________________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ISLANDS Further, the company reassessed the carrying value of its plant and equipment in 1998 based on director’s estimates.

Independent valuations were not obtained.

The above has been disclosed as a qualification in the audit report as well as notes to the financial statements.
The value of property, plant and equipment is understated in the balance sheet.

This matter has been recurring from last year.

Recommendations The company should process the revaluation adjustment relating to land and building in the book of accounts.

Management Comments No comment received from management.
Report of GCC & CSA – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 7: PORTS TERMINAL LIMITED The Ports Terminal Limited (PTL) started operating as a government commercial company in 1998 and was entrusted with the provision of the pilotage within ports and all coastal areas; stevedoring and cargo handling; warehousing and the operations of part of the local wharf in Suva and Lautoka.
The Fiji Government being a shareholder of the company endorsed the re – organization charter of the Maritime and Ports Authority of Fiji (MPAF) and PTL.

In 2004 the Fiji Ports Corporation Limited took over the operations of PTL and MPAF with key provisions for PTL to become 100% subsidiary of FPCL.

The company conducts its business within the legal framework of the Companies Act, VAT Decree, Income Tax Act, Sea Port Management Act 2005, Public Enterprise Act, Accounting Standards and FIMSA Act.
Table of Contents SECTION 7: PORTS TERMINAL LIMITED ............................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 7.1 7.2 7.3 Audit Opinion ........................................................................................................................................................... 1 Abridged Statement of Financial Performance ....................................................................................................... 1 Abridged Statement of Financial Position ............................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 7.4 7.5 7.6 7.7 VAT on Handling Activities (Zero Rated Supply) .................................................................................................... 3 2010 Bonus ............................................................................................................................................................. 3 Debtors .................................................................................................................................................................... 4 Inventory Overstatement ......................................................................................................................................... 5 PART A – FINANCIAL INFORMATION 7.1 Audit Opinion The audit of the financial statements of the Ports Terminal Limited for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
7.2 Abridged Statement of Financial Performance Year Ended 31 December Income Sales Other Income Total Income Expenditure Staff and employee benefits Depreciation and amortization expense Report of GCC & CSA – July 2012 2011 ($) 2010 ($) 13,081,250 7,232 13,088,482 3,842,193 1,881,858 11,317,964 22,218 11,340,182 3,931,206 1,649,812 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Year Ended 31 December Finance costs Equipment Hire Machine costs Management Fees Other operating expense Total Expenditure Operating (loss)/profit before income tax Income tax (expense)/ credit Net (loss)/ Profit for the year after Income Tax 2011 ($) 226,614 2,072,757 1,586,644 300,000 1,772,941 11,683,007 1,405,475 (129,572) 1,275,903 2010 ($) 253,335 2,141,331 1,478,329 300,000 1,627,064 11,381,077 (40,895) 14,480 (26,415) The company recorded a net profit of $1,275,903 in 2011 compared to a net loss of $26,415 in 2010.
This was mainly attributed to the increase in sales revenue by $1,763,286 (16%) compared to 2010.
7.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Trade and other receivables Inventories Financial Investments – held to maturity Prepayments and other assets Current Tax Benefit Total Current Assets Non Current Assets Property, plant and equipment Trade and other receivables Deferred tax asset Total Non Current Assets Total Assets Current Liabilities Interest bearing borrowings Trade and other payables Provisions Total Current Liabilities Non-Current Liabilities Interest bearing borrowings Deferred income tax liability Total Non Currents Liabilities Total Liabilities Net Assets Equity Share Capital Retained Earnings Total Equity 2011 ($) 2010 ($) --- 1,850,775 102,388 1,953,163 3,790,243 819,312 4,609,555 6,562,718 9,076,892 3,084,300 5,992,592 9,076,892 Net assets increased by $1,275,903 or 14% in 2011 compared to 2010.
This was the result of increase in cash and cash equivalents by $2,711,332.
Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI PART B – CONTROL ISSUES 7.4 VAT on Handling Activities (Zero Rated Supply) The supply to a person in that persons’ taxable activity capacity (and not in that person’s private capacity) who in that capacity belongs in a country other than Fiji of services comprising of – (a) the handling or storage of goods at or their transportation to or from a place at which they are to be exported or have been imported or the handling or storage of such goods in connection with such transport; or (b) ancillary transport activities in relation to any ship or aircraft in a port or airport; or (c) the making of the arrangements for the supply of any of the services referred to in this paragraph and paragraph 7 of this Schedule.
For the purposes of this paragraph, “ancillary transport activities” includes loading, unloading, handling, landing, berthing and stevedoring.1 The audit noted that VAT was incorrectly picked up by the system on stevedoring and TORS revenue.
As a result $223,305 was erroneously recorded as VAT on revenue: VAT charged on revenue due to system error in 2011 VAT charged on revenue due to system error in 2010 Total - - 209,197.61 14,107.42 223,305.03 Failure to regularise the above system error has resulted in excess VAT being paid to Fiji Revenue & Customs Authority.

Recommendation Management should liaise with Fiji Revenue & Customs Authority to resolve the above matter.

Company’s Comments We note the comments.


We have been liaising with Fiji Revenue & Customs Authority and they have advised that PTL will need to lodge the amended VAT returns in order for them to assess the same.

7.5 2010 Bonus The preparation of the financial statements requires the use of management judgment and accounting estimates.
Certain estimates are particularly sensitive because of their significance to the financial statements and the possibility that actual future events affecting them may differ significantly from management’s current expectations.

In 2010, the Ports Terminal Limited provided a provision for bonus amounting to $172,619.
1 VAT Decree Amendment – Zero Rated Supply Section 15 (1) (2); page 103 Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI However, there was no evidence made available during the audit to substantiate the above bonus payout provisions.

In addition, no bonus was paid in 2011 pertaining to 2010 financial period.

As a result, the provision for bonus is overstated in the financials.
Recommendations  Management should ensure that provisions are substantiated prior to it being reflected in the financials.

Necessary adjustments should be passed to rectify the above over provision.

 Company’s Comments We note the comments.

To date management has not received any advice from the Ministry of Public Enterprise stating that the 2010 bonus for PTL will not be paid.

The last correspondence received from the Ministry advised that PTL’s 2010 bonus was being considered.
It would be premature to write back the bonus provision before the Ministry confirms its position on the same.

7.6 Debtors Debts must be written-off after all practical and cost-effective efforts have been made to recover them.

The audit noted that the followings debtors amounting to $21,286 have been appearing in the PTL records since 1999.
The Management has created a provision for doubtful debts, however no considerations has been made on writing off the amounts as bad debts: Table 7.1: Details of Long Outstanding Debtors Account Code Name Debtor 1 Amount ($) 8,405 Year of Debt Comments 1999 – 2000 Audit noted that a Winding up notice was made to Shipping Company in 2003 but was withdrawn.

A legal firm have confirmed that the files for this case have been destroyed since it is more than 7 years old.
In view of the age of the debt it is recommended the debt be written off.

Debtor 2 4,674 2005 Debtor 3 2,676 2002 – 2004 Company no longer in operation.

No contact details available internally.

Investigations with Freight services companies and they had other major Shipping Companies revealed that no history of this company.

Registered trading with office of this company is now vacant (FEA).

Listed phone inactive and it is recommended that the debt be written off.
Findings reveal that account consists of various companies for container storage.

Debt dates back to 2002 and there is absolutely no information available from clients.

Therefore, we cannot ascertain the validity of the invoices as there are no attachments or order number listed.

Various attempt of recovery has been unsuccessful.

It is recommended that the debt be written off.

Debtor 4 865 2006-2008 Company has no record of these invoices and cannot trace it with their orders/jobs.
Various attempts to recovering debt over Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Account Code Name Amount ($) Year of Debt Comments Debtor 5 155 2008 Debtor 6 150 2008 the years have been unsuccessful.

It is recommended that the debt be written off.

Company has no record of these invoices and cannot trace it with their orders/jobs.

Company is no longer trading with Ports Terminal.

Attempts to collect outstanding amount would cost more than the debt.
It is recommended that the debt be written off.

Company has a winding up notice from a well known hardware retailer.

This company is no longer in operation.

Proof of Debt has been filed by FPCL and delivered to Office of the Official Review.

Chances of is very the sum outstanding $150 it is considered impractical to pursue this debt any further.

It is recommended that the debt be written off.


low and given recovery Debtor 7 36 2009 Debtor 8 4,674 2007 Debtor 9 1 2005 Company has changed its name and no longer trading with Ports Terminal Limited.

No trace of this order or job found.

Collection action considered impractical.

It is recommended that the debt be written off.

Vessel Deposit received by PTL and banked.

However these vessel deposits were not allocated against these outstanding invoices.
Recommend this be written off since customer has paid in full.

Collection action considered impractical.

It is recommended that the debt be written off.

Failure to take appropriate measures would result in overstatement of debtors balance in the books at year end.

Recommendation Management should assess and seek Board approval for the write off of unrecoverable accounts amounting to $21,286.

Company’s Comments Comments are noted.


Management will seek Board approval for write off of these unrecoverable amounts before 2012 accounts are finalised.

7.7 Inventory Overstatement Inventory purchasing, storage and recording should be efficiently managed to ensure that there is a sufficient level of inventories when needed, while minimizing the cost of holding inventory and the risk of stock becoming obsolete or damaged.
The audit noted the following anomalies in the management of stores items: Report of GCC & CSA – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI  Stolen tyres valued at $2,612 were still included in inventories value at year end.

 Short supply of 6 tyres which was taken up in inventories valued at $3,661.

 Double recording of inventory items (spare parts – Hydraulic Filter) noted during audit stock take, which has resulted in an overstatement in inventories of $7,393.
The double recording of inventories is reflecting conflicting cost which could not be ascertained given the available records.

 Variance of $3,969 was noted in the year end oil stock balance.

This has resulted after PTL changed its oil recording system.

PTL now accounts for each oil type separately when compared to previous years when it was accounted together.

 The Company's procedures manual does not contain a specific policy on inventory of spare parts and oil.
Parts are not recorded when it is purchased but directly received by the mechanical department.

It is only at the monthly stock take, that the inventory records are updated.

Thus there is no control on inventory movement during the month.

The above indicates poor store management and lack of monitoring system in place.

Failure to put adequate measures in place would allow room for further misappropriations and incorrect reflection of inventories in year-end financials.
Recommendations  Management should review/assess the recoverability of the stolen and short supplied stock and write off any unrecoverable amount.

 Management should formulate a policy on inventory purchases and management.

 Audit adjustment of $13,666 (2,612+3,661+7,393) should be made to write off the difference in tyres and spare parts.

Company’s Comments Management notes the comments.


Many of the issues highlighted was due to the fact that there was no storeman dedicated to looking after PTL stock (spare parts/oils /fuel) in the past.

Management has appointed a storeman in 2010 and the above issues were brought to light.

These items could not be written off during the year as management had not received police reports for stolen inventory; however, these have been adjusted in the 2011 accounts.
Management will seek board approval to write off fuel variance before finalising 2012 accounts.

Report of GCC & CSA – July 2012 6 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 8: 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 SECTION 8: POST FIJI LIMITED .............................................................................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion 2011 .................................................................................................................................................... 1 8.1 Abridged Statement of Financial Performance ......................................................................................................... 1 8.2 Abridged Statement of Financial Position – Balance Sheet ...................................................................................... 2 8.3 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Cash and Stock Shortages ....................................................................................................................................... 3 8.4 Creditors - Aged Payables Adjusted ......................................................................................................................... 4 8.5 Creditors – Variances in Balances ............................................................................................................................ 4 8.6 Cash .......................................................................................................................................................................... 5 8.7 Debtors Over 90 Days ............................................................................................................................................... 6 8.8 Cash Account Reconciliations Not Provided ............................................................................................................. 7 8.9 Outdated Corporate Governance Manual ................................................................................................................. 7 8.10 PART A – FINANCIAL INFORMATION 8.1 Audit Opinion 2011 The audit of the financial statements of the Post Fiji Limited for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
8.2 Abridged Statement of Financial Performance Items Income Sales Revenue Postage, stamp and other sales Rental – postal box and bag Agency commission and other services Other Operating Revenue Total Income Expenditure Report of GCC & CSA – July 2012 2011 ($) 2010 ($) 8,757,470 4,462,864 2,142,037 6,639,565 1,724,515 23,726,451 11,013,522 4,672,009 2,007,225 7,035,998 1,445,222 26,173,976 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ______________________________________________________________________________ 2011 Items ($) 7,043,175 1,287,079 7,114,676 7,961,167 285,266 25,212 572,343 24,288,918 (562,467) 86,834 (475,633) Cost of Sales Depreciation and Amortisation Expenses Employee Benefits Expense Administration and Operating Expenses Selling, Marketing and Distribution Expenses Other Operating Expenses Finance Costs Total Expenditure Operating (loss)/profit before income tax Income tax benefit/(expense) Net (loss)/ Profit for the year after Income Tax 2010 ($) 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) The Company recorded a net loss after income tax of $475,633 in 2011 compared to a net loss after income tax of $795,495 in 2010.
The improvement in company’s operation was mainly attributed to the decrease in total expenditure by $2,960,387 (11%).
8.3 Abridged Statement of Financial Position – Balance Sheet As at 31 December Current Assets Cash and Cash Equivalent Trade and Other Receivables Financial Assets – held to maturity Inventories Other Current Assets Total Current Assets Non-Current Assets Financial Assets – held to maturity Property, Plant & Equipment Deferred Tax Asset Intangible Assets Total Non-Current Assets Total Assets Current Liabilities Trade & Other Payable Interest Bearing Borrowings Employee Entitlements Provision for Income Tax Total Current Liabilities Non-Current Liabilities Trade and Other Payables Interest Bearing Borrowings Employee Entitlements Deferred Income Total Non-Current Liabilities Total Liabilities Net Assets 2011 ($) 2010 ($) 2,772,961 4,490,772 1,450,000 4,220,214 326,407 13,260,354 - 11,346,608 780,906 589,873 12,717,387 25,977,741 8,813,334 2,606,611 565,509 (355,478) 11,629,976 1,744,323 25,845 263,748 884,412 2,918,328 14,548,304 11,429,437 2,069,483 5,090,590 1,200,000 3,976,454 470,717 12,807,244 100,000 12,008,321 694,072 806,155 13,608,548 26,415,792 9,311,491 1,334,520 493,001 (347,232) 10,791,780 1,766,482 941,043 222,840 788,577 3,718,942 14,510,722 11,905,070 Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ______________________________________________________________________________ As at 31 December 2011 ($) 2010 ($) Shareholder’s Equity Share Capital Accumulated Profits Total Shareholder’s Equity 5,600,000 5,829,437 11,429,437 5,600,000 6,305,070 11,905,070 Net assets declined by $475,633 or 4% in 2011 compared to 2010.
This was mainly due to the decrease in Property, Plant and Equipment by $661,713 (6%) and the increase in current interest bearing borrowings by $1,272,091 (95%).

PART B – CONTROL ISSUES 8.4 Cash and Stock Shortages The Company must have in place a cost effective system of internal control which safeguards money and property against losses.

The audit noted that there were cash and stock shortages in certain Stations signifying weak controls in the areas of cash and stock.
The following cases were noted: Table 8.1: Cash And Stock Shortages Office/Agency Daku Postal Agency Totoya Post Office Lomaivuna Post Office Vunisea Post Office Cash/ Stock Cash Stock Stock Stock Shortage Amount ($) 63,997.48 43,700.00 1,356.44 3,010.76 Weak controls in the areas of cash and stock could result in misappropriations and fraud.

Recommendations  Management should investigate this matter and make an effort to recover the above amounts from the responsible officers.
 Appropriate action should be taken against the responsible Officers for the shortages noted.

Company’s Comments Dakau Postal Agency and Totoya Post Office cash shortages cases had been reported to Police and to our insurers.

Lomaivuna Post Office stock shortages were fully recovered in October 2011.

As for Vunisea Post Office, the stock shortage is currently being investigated.
Report of GCC & CSA – July 2012 3 ______________________________________________________________________________ 8.5 Creditors - Aged Payables Adjusted OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Post Fiji Limited failed to provide the aged payables listing as at 31/12/11.

However, audit received the year reconciliation which matched with the general ledger which had significant adjustments particularly reversals for January 2012.
Discussion with the management revealed that the Accounts Payable module in IMAS does not facilitate proper cut-off procedures for invoice and payments, thus resulting in manual reconciliations.

Refer Table 8.2 below for details.
Table 8.2: Aged Payables Particulars Total Aged Payables Less: Jan Invoice posted in Dec 2011 Add: Jan payment posted in Dec 2011 Add: Late Invoices Entry Dec 2011 Add: Stale Cheque PJ172 Add: Staff Advance P/Shop Balance as per general ledger Amount ($) 4,283,604.41 (2,242,530.52) 392,837.73 31,732.51 7,576.05 1,680.00 2,474,900.18 The above implies that there are deficiencies in the IMAS system’s payables module as it is unable to perform cut-offs in the payables module.
Also, there is a high risk that creditor reconciliations are not correctly performed thus leading to significant adjustments at year end.

Recommendation Management should look into the system and rectify the situation as to why the system is unable to extract aged payables when backdated and ensure proper reconciliations are done for the creditors.

Company’s Comments Your comment is noted.


We will ensure that all the invoices are inputted and the aged payables report is printed before any other month’s punching is done.

In addition, we will also liaise with our IMAS consultant on the possibility of performing cut-offs in the payables module in order to generate aged payables report.

8.6 Creditors – Variances in Balances The Company must reconcile the Creditors account monthly and any variances should be adjusted accordingly.
The audit noted variances in creditor’s balances when compared with supporting calculations, documentary evidence and direct confirmations.
The following variances were noted in creditor 4 when compared with general ledger and Subsidiary Ledger (Supporting Reconciliation): Report of GCC & CSA – July 2012 4 ______________________________________________________________________________ Table 8.3: Variance in Creditor Balance OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Fiji Directories Limited Amount as per AP subsidiary ledger Amount as per Reconciliation Balance as per general ledger Amount ($) 7,403.84 3,334.20 4,069.64 Furthermore, audit noted variances between the creditor’s balances as per Post Fiji Limited’s records and creditor confirmations.
Refer to Table 8.4 below for details: Table 8.4: Variance in Creditors Balances Creditor Creditor 1 Creditor 2 Creditor 3 Balance as per Aged Payables ($) Balance as per Creditor Confirmation ($) 48,187.45 3,674.13 72,926.50 80,405.38 0 116,124.03 Variance ($) 32,217.93 3,674.13 43,197.53 The above implies that proper creditor reconciliations are not carried out in a timely manner causing distortion in the payables amounts and this may not correctly reflect the payables position of Post Fiji Limited.
Recommendation The Management must ensure that accurate reconciliations are maintained for creditors to reflect actual payable position of the Company and this will also avoid disputes between the creditors.

Company’s Comments For the Creditor 1 and Creditor 3 invoices, these related to the transportation of PFL’s overseas and local mails.

The amount billed by Creditor 1 is first verified to the mail weights sent.

Once this is done, accruals are made accordingly.


In the instance above, the variance for Creditor 1 and Creditor 3 was booked as an accrual in December 2011.

According to our records, we owe Creditor 4 and Creditor 2.

Data entered into Accounts payable subsidiary ledger are from actual invoices received.

We believe that the creditor confirmation may not be correct in this instance.

We will take this up with the respective creditors.
8.7 Cash The Accounting Head shall, from time to time, arrange surprise inspections of the accounts of their Cash.

Post Fiji Limited’s business significantly comprises handling and management of cash.

The following weaknesses were noted for cash:  Cash book and cash on hand reports were not produced for audit verification.

This was due to Post Masters not sending them with the bank reconciliations.
Receipts and payments were verified to bank statements; Report of GCC & CSA – July 2012 5 ______________________________________________________________________________ OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI  There was low frequency of surprise cash counts at the post offices; Non compliance with cash and bank reconciliation in cash count procedures increases the risk of misappropriation of cash.
Recommendation Management must ensure that Postmasters send their cash accounts with relevant supporting documents and reports in a timely manner to achieve correct cash position of the respective stations.

Company’s Comments Postmasters do send their cash management report (summary generated from WRE system), bank statement, lodgment listing with their bank reconciliations.

These documents are sufficient for checking purposes at Finance and there is no need for the physical cashbook to be sent.
This manual cashbook is kept by the online post offices as a backup.

In 2011, there was only 3 audit staff who managed to cover 36 Post Offices.

However, with the increase in manpower from late 2011 to 6 personnel audit is on track to visit all stations in the current term.

An annual audit plan has been approved by the Board, which will ensure that audit objectives are met.
8.8 Debtors Over 90 Days Ensure source documents for debtors are checked and summarised for billing and payments received within a month.

Debtors were noted to be in over ninety-day (90 days) category in the aged listings.
Some of the categories of debtors having over 90 day’s receivables are as follows: Table 8.5: Debtors over 90 days Category Debtor 1 Debtor 2 Debtor 3 Debtor 4 Total Over 90 Days Debtor ($) 257,491.06 17,862.19 35,683.56 206,721.20 517,758.01 Total Outstanding Amount ($) 420,823.93 31,960.57 219,716.09 221,942.09 894,442.68 Percentage % 61 56 16 93 58 The implications are as follows:    Keeping debtors in over ninety-day category for a long time reflects a weak system of collection mechanism in place and this is likely to impact on the cash flow of the business and distorts the financial position of the company.
There is a significant sum of money held up in the debtors who are in the ninety-day category and this is impacting on the financial position of the company and this also distorts the working capital position.

There is risk that debtors would default in payment and this would possibly lead to writing off some debtors.

Report of GCC & CSA – July 2012 6 ______________________________________________________________________________  The above can also affect the cash-flow position of the company.
OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Recommendations  Management must ensure that collections department adheres to thirty days collection time to avoid the aging of debtors which mostly exceeds ninety days.

 Debtors should be regularly reminded for payments and credit assessments be done adequately prior to approving credits.

Company’s Comments We agree with the recommendation.

Debtors over 90 days were accumulated from 2010.


Out of $517,758.01, $420,550 was provided for and $26,747.28 was collected after negotiating with some debtors.

Reminder emails and customer visitations are in place and we are assessing them with the current repayment trend to assist us in the next term around.

8.9 Cash Account Reconciliations Not Provided The Company failed to provide the Cash account reconciliations for the following cash accounts.

It was further noted that these accounts were closed.
Refer to Table 8.6 below for details.

Table 8.6: Accounts for which Reconciliations not provided Station Batiki Levukaidaku Makadru Naroko2ywa Total Amount ($) 16,796.85 3,795.15 1,614.72 480.98 22,687.70 Due to non-availability of supporting documentation for the balance, reliance on the account balance cannot be fully placed upon.

Also since the accounts are closed now there is no avenue to determine whether the amounts were appropriately remitted back.
Recommendation Management must ensure that proper record keeping of all account balances are maintained to revert back to it for substantiation of the amounts and proper remittance be done for cash amounts for which the accounts are closed.

Company’s Comments Your comment is noted.


8.10 Outdated Corporate Governance Manual The Company must revise their policies and procedures in a timely manner to ensure all regulations have been incorporated Report of GCC & CSA – July 2012 7 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI ______________________________________________________________________________ The audit noted that the Corporate Governance Manual has not been revised since the first edition in January 2003.
This implies the company has not incorporated the current procedures and policies within the manual and this may pose a risk of not formalised policies and procedures of the company as far as the new business operations are concerned.

Recommendation The Management must ensure prompt review of the company’s corporate governance manual which should be amended to also incorporate the policies and procedures of the current operations.

Company’s Comments Your comment is noted.


Report of GCC & CSA – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 9: PUBLIC RENTAL BOARD The Public Rental Board (PRB) was established under the Housing (Amendment) Decree No 12 in 1989 to take-over and manages the rental section of the Housing Board on an economic basis.

The Housing (Amendment) Decree is the subsidiary legislation of the Housing Act of 1955.
Under section 34 of the Housing (Amendment) Decree No 12 of 1989, the Board is primarily to operate on a non-commercial basis by inviting Government to make good the shortfall by way of subsidy, where the assessed rental applicable to a tenancy represents a disproportionate percentage of earnings.
The main activities of the Board are as follows:  management of all rental estates inherited from the Housing Board including the repairs and maintenance of buildings, grounds and other common facilities; rental of units to low income earning families; assessment and collection of rent from its tenants; and extension of the rental estate via building projects.
   Table of Content SECTION 9: PUBLIC RENTAL BOARD .................................................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion - 2010 ................................................................................................................................................. 1 9.1 Abridged Statement of Financial Performance ......................................................................................................... 1 9.2 9.3 Abridged Statement of Financial Position ................................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................... 2 Prior Period Adjustments .......................................................................................................................................... 2 9.4 Accumulated Depreciation Variance between FAR and GL ..................................................................................... 3 9.5 Bonding for Managers and Others to Study .............................................................................................................. 4 9.6 Purchase of Motor Vehicle for General Manager ...................................................................................................... 5 9.7 Breach of Tender Procedures ................................................................................................................................... 6 9.8 PART A – FINANCIAL INFORMATION 9.1 Audit Opinion - 2010 The audit of the financial statements of the Public Rental Board for the year ended 31 December 2010 resulted in an issue of an unqualified audit report.
9.2 Abridged Statement of Financial Performance Year ended 31 December Income Rental Income Operating Income Total Operating Income Expenditure 2010 ($) 2009 ($) 2,390,500 1,774,164 4,164,664 2,316,585 2,271,218 4,587,803 Report of GCC & CSA – July 2012 1 Year ended 31 December Depreciation Staff Costs Other Operating Expenses Net Financing Costs Total Expenses Net Profit for the Year OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 2009 ($) 2010 ($) 372,857 915,077 1,436,082 127,660 2,851,676 1,312,988 391,074 1,003,703 1,627,961 269,958 3,292,696 1,295,107 The Boards net profit increased by $17,881 or 1.4% in 2010 compared to 2009 as a result of effective control excised over expenditure.
9.3 Abridged Statement of Financial Position As at 31 December Assets Cash Investments Other Assets Property, Plant & Equipment Total Assets Liabilities Creditors Deferred Revenue Borrowings Employee Entitlement Total Liabilities Net Assets Total Equity 2010 ($) 1,076,676 75,430 144,445 7,210,805 8,507,356 1,973,667 567,995 2,960,452 190,105 5,692,219 2,815,137 2,815,137 2009 ($) 435,722 1,571,000 181,173 7,288,806 9,476,701 1,745,138 630,792 5,377,981 220,641 7,974,552 1,502,149 1,502,149 There was a significant improvement in the Board’s financial position in 2010.
This was due to decline in term loan by $2,417,529 or 45% and decline in employee entitlement by $30,356 or 14% in 2010 compared to 2009.
PART B – CONTROL ISSUES 9.4 Prior Period Adjustments Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that: a) was available when financial statements for those periods were authorized for issue; and b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.
Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversight or misinterpretations of facts, and fraud.
An entity shall correct material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by: Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI (a) restating the comparative amounts for the period (s) presented in which the errors occurred.1 The financial statements submitted for audit by PRB for the year ending 31/12/10 had a variance of $63,554 in assets and liabilities amounts compared to its general ledger amounts.
Refer to table 9.1 below for details.
Table 9.1: Variance between Financial Statement Figures and the General Ledger Descriptions 2009 Lands & Buildings WDV 2008 Restated Rent Receivables 2008 Restated Trade Creditors & Accruals Total Amount As Per Audited Financial Statements ($) 14,968,996 (12,390) 66,072 Amount As Per General Ledger Variance ($) 14,979,160 - - ($) 10,164 (12,390) 66,072 63,554 The variance was due to adjustments which were made to the previous year’s accounts but the adjustments were not passed in the general ledger system.
To reconcile the variance between financial statements and the general ledger PRB passed a journal entry for $63,554 on 18/10/11 by debiting Building Repairs and Maintenance and crediting the Retained Earnings accounts in Equity.

The audit noted that crediting Retained Earnings Account to reconcile the variance was incorrect.

PRB was not able to identify the individual accounts for adjustments.
In addition audit could not substantiate the accuracy of adjusting amount of $63,554 as adequate details were not provided by the PRB.

Recommendations  The Board should ensure proper rollover of accounts is done after the auditing of the Board’s account every year.

 The Board must ensure that all audit adjustments are made to the general ledger system before the accounts are closed and rolled over.

Management Comments 1.

Comments are noted.

2.


Management will ensure in future that general ledger is matched properly with the final accounts before roll over is made.

9.5 Accumulated Depreciation Variance between FAR and GL The Navision system used by PRB does not facilitate correct rolling-forward procedures for property, plant, and equipment opening cost and accumulated depreciation balances.
The following variances were noted after rectifying the Fixed Asset Register accumulated depreciation balances against the Navision general ledger accumulated depreciation balances.

Refer to table 9.2 below for details.
1 International Accounting Standards 8, sections 5 and 42 Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Table 9.2: Variance in Depreciation between FAR and the General Ledger Asset Category Land and Building Furniture & fittings Total Variance Depreciation 1/1/2010 ($) 8,583,101 452,911 Fixed Assets Register Depreciation for the year 2010 ($) 287,662 26,524 Depreciation 31/12/10 ($) 8,870,763 General Ledger Depreciation 31/12/10 ($) 8,856,410 479,435 476,068 Variance 31/12/10 ($) 14,353 3,367 17,720 Property, plant and equipment balance in the financial statements do not agree to the balances in the general ledger for the year ended 31 December 2010.
As result the value of the property, plant and equipment in the fixed assets register was overstated by $17,720 as at 21/12/10.

Recommendation The Board should properly reconcile the variance in accumulated depreciation between the FAR and the general ledger.

Management Comments 1.

Comments are noted.

2.

The variance in FAR and GL were corrected during audit process and FAR reconciled with the GL.

3.

Management will ensure FAR are reconciled before accounts are submitted for auditing.
9.6 Bonding for Managers and Others to Study An employee selected for studies in Fiji or overseas and/or is granted study with salary shall be bonded to serve the Board upon successful completion of studies.2 Employees who are taking the formal courses for which prior approval of the Board has been obtained shall be reimbursed for expenses related to the courses for which prior approval of the Board has been obtained and will be on a 8:2 percentage ratio (80% of tuition cost reimbursed to employee upon successfully completing the unit).3 The Board paid tuition fees for part – time studies at the University of the South Pacific for three of its managers.
Refer to table 9.3 below for details.
Table 9.3: Details of programmes undertaken by Management Staff Staff Initial Programmes Undertaken MS PV AK Total Masters in Business Administration Masters in Business Administration Post Graduate Diploma in Accounting Amount Paid ($) 7,865.10 7,983.10 4,514.20 20,362.40 2 Public Rental Board Human Resource Policies 10.2 3 Public Rental Board Human Resource Policies 9.7.2 Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Audit noted that these Officers did not sign bond agreements for their studies which were funded by the Board.
The audit also noted that a Finance Coordinator for the Board who was pursuing his Australian CPA Program resigned and was reimbursed 80% of his tuition fees.

The Board could not hold him back as there was no bond agreement signed by the Officer for his studies which was funded by the Board.

In absence of bond agreements for Officers whose studies are funded by the Board, there is a high risk that these officers may leave the organisation after completing their studies.
Recommendation The Board should consider that Officers studying at Boards cost sign bond agreement at the commencement of their studies.

Management Comments 1.

Comments are noted and appropriate improvements would be made in the HR policy.

2.

Management staffs have completed their studies and now serving their bond period with the Board.
9.7 Purchase of Motor Vehicle for General Manager If the State Owned Entity (SOE) is employing more than 100 staff, the Chief Executive Officer (CEO) is entitled to a 4 wheel drive vehicle otherwise a sedan car is the entitlement.

Any variation would be subject to approval by the Board and Higher Salaries Commission (HSC).4 PRB purchased a 4 wheel drive vehicle at a cost of $64,500 for the General Manager after trading in of the old vehicle.
The purchase of the 4 wheel drive vehicle was approved by the Board in its meeting held on 24/11/2010.

The Board purchased a vehicle for the General Manager even though he was not entitled to a vehicle as part of his salary package.

The finding shows that the Board did not comply with Ministry of Public Enterprise’s guideline on purchase of vehicle.

Recommendations  The Board should inform and seek advice from the Ministry of Public Enterprise on this matter.
 The Board should comply with the Ministry of Public Enterprise’s guideline of purchase of vehicles in future.

Management Comments 1.

The Board of Directors’ were informed of the guideline set by Ministry of Public Enterprises at the Board meeting of 24/11/2010.

2.

PRB motor vehicle policy entitles the General Manager and other Managers to have vehicles for use in office and private use after hours.
4 Ministry of Public Enterprises letter dated 6 August 2007, Annexure II Report of GCC & CSA – July 2012 5 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI 3.

Ministry of Public Enterprises guidelines would not be practical to follow given the nature of operation of PRB.

Further OAG Comments PRB must ensure that their vehicle policy is in line with the Ministry of Public Enterprise’s guideline on vehicles use.
9.8 Breach of Tender Procedures An advertisement calling for expressions of interest from reputable car dealers for sale of Board’s one executive vehicle and two twin cabs was placed in the local newspapers.

All submissions were to be received before 3.00pm, Friday the 12/11/2010 and late submissions were not to be accepted.5 At the close of the tender on 12/11/2010, tenders were received from four interested parties for purchase of Board’s vehicles.
Refer to table 9.4 below for details Table 9.4: Details of Vehicles Tendered for Sales Bidder Date Tenders Received Vehicle Registration Bidder 1 Bidder 2 Bidder 3 Bidder 4 12/11/10 12/11/10 12/11/10 12/11/10 12/11/10 12/11/10 12/11/10 16/11/10 16/11/10 ET145 ET159 ET160 ET160 ET159 ET159 ET160 ET159 ET160 Tendered Amount ($) 25,000 18,000 12,700 10,000 7,000 7,550 8,120 17,000 17,000 The Board sold the vehicle registrations ET159 and ET160 to Bidder 4 for $17,000 each on 25/11/10 despite that Bidder 4 tenders were received four days after the tender closing date.
Audit further noted that Bidder 1 tendered a higher price for ET159 at $18,000 which was submitted before the tender closing date.

However, the Board did not sell vehicle ET159 to him.

The finding shows that the Board did not comply with the tender process and favoured the 4th Bidder.

Recommendation Ministry of Public Enterprise should investigate the matter and take appropriate action.

Management Comments 1.


Bidder 1 was only interested in purchasing ONLY one vehicle and required 14 days to arrange finance before settlement could take place.

2.

Bidder 4 on the other hand purchased both pickup vehicles at a higher price and settle immediately.

3.

The Board of Directors at their meeting on 24th November 2010 agreed with the justifications provided and approved the sale accordingly.
5 Expression of Interest – 19/10 Report of GCC & CSA – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI SECTION 10: FIJI PUBLIC TRUSTEE CORPORATION LIMITED 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 SECTION 10: FIJI PUBLIC TRUSTEE CORPORATION LIMITED ........................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 10.1 Abridged Statement of Financial Performance ........................................................................................................ 1 10.2 10.3 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Reconciling Adjustments ......................................................................................................................................... 3 10.4 Value Added Tax ..................................................................................................................................................... 3 10.5 Discrepancies in the Interest Due For Distribution Reconciliation ........................................................................... 4 10.6 Debit balances in the Trust Account ........................................................................................................................ 5 10.7 Discrepancies in Interest Distribution ...................................................................................................................... 7 10.8 Legal Fees Charge Rates ........................................................................................................................................ 8 10.9 PART A – FINANCIAL INFORMATION 10.1 Audit Opinion The audit of the financial statements of the Fiji Public Trustee Corporation Limited for the year ended 31 December 2011 resulted in the issue of an unqualified audit report.
10.2 Abridged Statement of Financial Performance Year ended 31 December Income Fees Interest income Aid Other revenue Total Income Expenditure General and administration expenses Selling expenses Staff and employee costs Total Expenditure Operating profit before income tax Income tax expense Net operating profit after income tax 2011 ($) 2010 ($) 639,832 605,633 33,075 28,528 1,307,068 265,750 9,748 434,017 709,515 597,553 176,926 420,627 815,807 1,032,584 70,607 24,697 1,943,695 275,859 10,715 446,178 732,752 1,210,943 340,343 870,600 Report of GCC & CSA – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI The Corporation recorded a net operating profit after tax of $420,627 in 2011 compared to a net profit after tax of $870,600 in 2010, a decrease of $449,973 (52%).
This was due to a decrease in interest income by $426,951 (41%) as a result of withdrawal of investments and decline in market interest rates.

The Fees also decreased by $175,975 (22%) due to new Trusts from Invalid Nominees no longer administered by FPTCL as per High Court Directives.
10.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Deferred tax asset Financial assets Property, plant and equipment Intangible assets Total Non-Current Assets Total Assets Current Liabilities Deferred revenue Trade and other payables Provisions Total Current Liabilities Non Current Liabilities Deferred tax liability Total Non-Current Liabilities Total Liabilities Net Assets Shareholders’ Equity Share Capital Share Premium Reserve Capital Reserve Retained Earnings Total Shareholders’ Equity 2011 ($) 2010 ($) The company’s net asset increased by $411,618 (5%) in 2011 compared to 2010.
This was attributed to the increase in cash at bank balance by $3,339,950 due to Liquidated Investment held in term deposit at the end of the year which was proposed for the purchase of a building.

Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI PART B – CONTROL ISSUES 10.4 Reconciling Adjustments It is essential that all reconciling items in a reconciliation statement are appropriately supported.
An adjustment of $50,592.65 was noted following review of the Fees and VAT reconciliation for the year 2011.

No supporting documents were provided to support this adjustment entry.

Accordingly, audit was not able to verify the accuracy of this adjustment due to lack of supporting documents.

Such adjustment undertaken to balance general ledger with its reconciliation may result in overstatement of Accounts receivable in Corporation’s Balance sheet.
Recommendation The Management should ensure that reconciliations are properly reviewed and all reconciling items has the basis and supporting documentations to support its existence in the reconciliation.

Corporation’s Comments The Corporation notes the above adjustment which relates to prior year adjustment figures and we are working to verify the adjustments in the accounts receivable from trust and estate.
Sometimes mismatching in allocation through processing of payments, receipting and systems GL interface transactions usually arise when large volumes of transactions are involved.

The above relates to VAT receivable from Trust and payable to Corporation for the prior years incorrectly allocated from prior years.

10.5 Value Added Tax 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.1 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 would allow the 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 in such costs.

In particular in these circumstances VAT on fixed assets should be added to the purchase cost of the fixed assets concerned.2 they supply.
VAT should therefore be included Our review of the VAT records revealed the following anomalies:  A variance of $61,304 was noted between the General Ledger and the independent reconciliation carried out during audit with the Statement of VAT account received from FRCA.
Refer to Table 10.1 below for details; 1 Fiji Accounting Standard 103 – Section 7 2 Fiji Accounting Standard 103 – Section 8 Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Table 10.1: Variance in VAT Particulars VAT Payable as per VAT Reconciliation VAT Receivable as per Financial Statements Variance Amount ($) 30,482 30,822 61,304  Monthly VAT reconciliations were not prepared by the Corporation for the year 2011.
 VAT was not booked on Accruals and Creditors at year end for some of the creditors.

Accordingly, the Corporation has reported these Accruals and Creditors exclusive of VAT.
Refer to Table 10.2 below for examples; Table 10.2: Creditors not inclusive of VAT Creditor Creditor 1 Creditor 2 Creditor 2 Total Amount as per creditors ledger ($) Amount as per supplier invoice ($) 6,825.00 695.65 1,130.43 8,651.08 7,848.75 800.00 1,300.00 9,948.75 VAT not booked ($) 1,023.75 104.35 169.57 1,297.67 There is a possibility that the Corporation is understating its VAT liability by not accruing VAT on creditors.
Recommendations  Monthly VAT reconciliations should be prepared between the Corporations records and FRCA’s statement of VAT account and any variance arising thereon should be properly investigated and resolved.

 VAT should be recorded on all accrual and creditor accounts.

Corporation’s Comments Management notes the points highlighted above on monthly reconciliations.
However, In 2011 all the 12 Vat Returns lodged by the Corporation and the assessment carried by FRCA were always in agreement and therefore no items of dispute.

The above issue of unreconciled VAT relates to the same issue highlighted in ‘3.0’ as items un-reconciled from prior year.

Management is working to rectify the above.

The amendments were reflected in accounts and future Vat recorded in accruals will be Vat inclusive as above and immateriality of the amount is also noted.
10.6 Discrepancies in the Interest Due For Distribution Reconciliation Sound internal control requires the maintenance of reconciliation which ensures the accuracy and validity of financial information and ensures that unauthorized changes have not occurred to transactions during processing.
All such reconciliations must be performed by the company Report of GCC & CSA – July 2012 4 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI accountant, and evidenced as reviewed by Management Finance & Admin (MFA) on the reconciliations.

3 Our audit noted that reconciliation for interest due for distribution did not reconcile with the interest due for distribution as per general ledger.

Refer to Table 10.3 below for details.


Table 10.3: Variance in Interest due for distribution Particulars Balance as per interest due for distribution reconciliation Balance as per general ledger Variance Amount ($) 1,527,543.33 1,317,933.06 209,610.27 Differences in the reconciliation for interest due for distribution with the general ledger increase the risk that the interest due for distribution may not be accurately and fairly stated in the financial statements.
Also there is a risk that incorrect interest may be distributed to the beneficiaries due to un- reconciled interest distribution amount.

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 beneficiaries’ account.
Corporation’s comments The variance refers to interest on interest figures not accounted in the reconciliation, which will be redistributed to beneficiaries with the 2011 interest.

10.7 Debit balances in the Trust Account The Accountant will be responsible for reporting on trust account balances to the MFA on a regular basis.
4 The Company should not allow any trust/estate account to be overdrawn.5 Trust accounts shall be subject to independent systematic reconciliation and audit procedures by the Internal Auditor with priority given to accounts with debit balances.

6 Audit of trust/estate balances in the Trustsoft system, statement of accounts and file records noted that the following accounts had debit balances as at 31 December 2011.
Refer to Table 8.4 below for details; 3 Fiji Public Trustee Corporation Limited, Finance Manual – Section 11.1 4 Fiji Public Trustee Corporation Limited, Finance Manual 2009 – Section 10.6.1 5 Fiji Public Trustee Corporation Limited, Finance Manual 2009 – Section 10.6.2 6 Fiji Public Trustee Corporation Limited, Finance Manual 2009 – Section 10.6.3 Report of GCC & CSA – July 2012 5 Table 10.4: Accounts with Debit Balance OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI File No.

A/C No.
A/C No.

Account Type Remarks Debit Balance as per statement of Account ($) Estate FNPF 03/06 24381 √ 5,268.66 A/c shows debit balance due acceptance fees charged in 2006. to 30/72 2713 √ 42,649.41 A/c shows debit balance even though cane proceeds are received.

464/06 25069 √ 6,009.39 A/c shows debit balance due to fees charged by FPTCL to the account.

435/85 9064 √ 52,187.83 A/c in debit balance since 2008 and FPTCL continue to charge fees for reimbursable expenses & other legal fees.
269/01 20357 √ 906.33 A/c in debit balance.

Beneficiary are 508/06 27407 √ 368/94 14438 √ 263/95 15177 √ 501/04 23667 √ 508/06 27406 √ minors 3,932.18 A/c in debit balance since 2008 & opening balance 2.4.06 not adjusted.

The opening bal in Trustsoft was $0, while actual PTO balance was $3929.98 credit.

2,179.93 A/c in debit balance since 2006 & opening balance 2.4.06 not adjusted.

The opening bal in Trustsoft was $0, while actual PTO balance was $1380.24 credit.
1,818.43 A/c in debit balance since 2006 & opening balance 2.4.06 not adjusted.

in Trustsoft was The opening bal $89.53 credit, while actual PTO balance was $206.22 credit.

6,216.97 A/c in debit balance since 2006 & is not opening balance of 2.4.06 adjusted.

The opening balance in Trustsoft was $236.14 credit, while actual PTO balance was $6199.41 credit.

3,932.18 A/c in debit balance since 2007 & is not opening balance of 2.4.06 in adjusted.
The opening balance Trustsoft was $0, while actual PTO balance was $3929.98 credit.

Report of GCC & CSA – July 2012 6 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Discussion with the Officer responsible for Trust and Estate accounts revealed that a large number of files were not correctly vetted in 2006 by the Accounting Firm, KPMG.

Consequently, when payments relating to these accounts were made, it resulted in overdrawn balances.
Debit balances exposes risk of incorrect payments made to beneficiaries.

Additionally, there may be a possibility that withdrawals from these accounts were unauthorized resulting in a debit balance.

Recommendations  All Trust accounts with debit balances should be reconciled and adjusted accordingly.

 Corporation should make every effort to ensure that all Trust files which are not vetted are immediately identified and adjusted.
Corporation’s Comments The above debit balances refer to the old Public Trustee Office debts that the current FPTCL is still trying to recover from those clients.

Any such amounts recovered would be reflected as an increase in the capital reserves account (CSA) for the corporation and any payments as a reduction to the CSA.

Corporation is continuously working on files not vetted to be adjusted.
10.8 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.7 The following anomalies were noted during the review of interest calculation and distribution:   Variances were noted in the interest calculation from 02/04/06 to 2010 and distribution between Trustsoft system and the interest calculated manually.

The manual reconciliation for the balance of 2010 interest has not been done by the FPTCL hence the adjustments are not passed accordingly to the individual beneficiaries account in the Trustsoft system.
Refer to Table 10.5 below for samples tested.

Table 10.5: Details of Accounts for which no Manual Interest Calculation Done File No.

A/C No.

272/82 7191 Trustsoft System interest 2010 Manual Interest Adjustment: to Trustsoft File Type Remarks 2010 Not done 25.14 2010 Not done FNPF Estate √ 341/05 24278 Not done 494.31 Not done √ reconciliation in Trust done Manual for 2010 Interest is not done & soft.

adjusted Settlement on 16.3.2011 for Manual 2010 Interest is not done & adjusted soft.
Settlement done on 8.3.2011 reconciliation in Trust 7 Fiji Public Trustee Corporation Limited, Finance Manual 2009 – Section 15 Report of GCC & CSA – July 2012 7 File No.

A/C No.

476/93 13756 Trustsoft System interest 2010 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI Remarks File Type Manual Interest Adjustment: to Trustsoft 2010 Not done - 2010 Not done FNPF Estate √ KMPG opening balance 0.

PTO Correct balance credit.

Manual $2554.70 for reconciliation 2010 is not done & Interest adjusted soft.
Settlement done on 10.6.11 Manual for 2010 Interest is not done & soft.

adjusted Settlement done on 21.12.11 reconciliation in Trust in Trust 127/74 3291 Not done 662.66 Not done √ Discussion with the Accounts officer revealed that the manual reconciliation for 2010 interest will full settlement/school only be conducted once beneficiaries expenses/maintenance and medical.
lodge an application for Furthermore, the audit was unable to test the accuracy of the interest calculated by the Trust soft system as the Officer in charge of the Trust soft 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 are managing the Trustsoft system run the program for interest calculation.
There is a risk that the errors in the Trustsoft interest calculation may not be detected as Corporation’s personnel do not have the expertise to fully understand how the system operates.

Recommendations Management should:  adjust the individual Trustsoft balance to determine the correct interest paid to the  beneficiaries account each year.

carry out manual reconciliation of interest for 2010 and compare with Trustsoft interest and any difference should be adjusted accordingly.
Corporation’s Comments Manual adjustments are made to accounts to reflect its correct status and the correct interest, fees charged etc, when ever identified during the reconstruction of the accounts.

The current system calculation is based on pro-rata balances in each trust account over the given period, calculated at a variable % on each account.

The Interest due for distribution is then allocated to each individual account based on the variable %.
Checks are carried on a sample before final interest is distributed.

So far this has been the most accurate method of calculation of interest to over 12,000 trust accounts.

10.9 Legal Fees Charge Rates Where the Corporation provides any services other than those to which fees are set in accordance with this section8, the Board of Directors may set the fee to be charged by the Corporation9.
8 Fiji Public Trustee Corporation Act 2006 – Section 29-(1) a-i 9 Fiji Public Trustee Corporation Act 2006 – Section 29 (3) Report of GCC & CSA – July 2012 8 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF FIJI The fees set by Regulation or by the Board of Directors in accordance with this section shall be subject to review by the Commerce Commission10 The Corporation is charging $150 and $75 per hour to clients for the legal services provided to them by the Legal Officer and the Legal Assistant respectively who are employed by the Corporation.
The audit noted that these rates were not approved as per the Corporation Act.

Additionally, the audit failed to sight Board approval authorising that the above rates be charged to the clients.

The Corporation has earned $10,685 in legal fees from clients.

The above indicate that the Corporation has not complied with the Fiji Public Trustee Corporation Act 2006.
Recommendation The Management should obtain the approval of the Board of Directors for the rates to be charged to the clients and the services that will be rendered by the Corporation.

Corporation’s Comments Above comments noted.

The above rates have been the rates charged by previous Legal Officers on legal services carried out by the corporation for all clients.

The said rate is said to be below the market rates charged by solicitors in private practice.
10 Fiji public Trustee Corporation Act 2006 – Section 29 (5) Report of GCC & CSA – July 2012 9 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ______________________________________________________________________ SECTION 11: VITI CORPORATION COMPANY LIMITED Viti Corporation Company Limited is an agro based government owned company and was reclassified as a Government Commercial Company in March 2000.
The company business activity includes beef (cattle) and piggery farming, aquaculture and cassava farming.

In 2005, the government decided to lease the property in Navua to a private investor (Dairy Farmers Fiji Limited) for development of dairy capital.
Table of Contents SECTION 11: VITI CORPORATION COMPANY LIMITED .................................................................................................... 1 PART A – FINANCIAL INFORMATION ................................................................................................................................... 1 11.1 11.2 11.3 Audit Opinion .......................................................................................................................................................... 1 Income Statement .................................................................................................................................................. 1 Balance Sheet ........................................................................................................................................................ 2 PART B - CONTROL ISSUES ................................................................................................................................................. 2 11.4 11.5 Loan Balance Variances between the Company and Ministry of Finance ............................................................. 2 Going Concern ....................................................................................................................................................... 3 PART A – FINANCIAL INFORMATION 11.1 Audit Opinion The audit of the financial statements of the Company for the year ended 31 December 2006 resulted in the issue of an unqualified Audit Report however the attention of the Board was drawn to the following matter: At 31 December 2006, the company has accumulated losses of $5,678,134 (2005: $5,727,934) and there is an overall excess of current liabilities over current assets of $360,941 (2005: $403,097).
Accordingly there is significant uncertainty as to whether the company will be able to continue as a going concern and whether it will be able to pay its debts as they become due and payable and realize its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements.
The financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amount nor to the amount or classification of liabilities that might be necessary should the entity not be able to continue as a going concern.
11.2 Income Statement Year ended 31 December Revenue Rental of Property Other Operating Revenue Total Revenue Expenditure 2006 ($) 2005 ($) 129,000 - 129,000 119,659 146,673 266,332 Report of GCC & CSA – July 2012 1 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ______________________________________________________________________ Year ended 31 December Operating and Administration Expense Total Expenditure Gain from operations Finance Costs Operating profit/(loss) before income tax Income Tax (Expenses)/Benefit Net Profit/(Loss) for the year 2006 ($) (73,533) (73,533) 55,467 (5,667) 49,800 - 49,800 2005 ($) (261,880) (261,880) 4,452 121,603 (117,151) - (117,151) The Company recorded a net profit of $49,800 in 2006 compared to a net loss of $117,151 in 2005.
This was a largely attributed to the decrease in operating and administration expenses.
11.3 Balance Sheet As at 31 December Current Assets Cash on hand and at bank Trade & Other Receivables Total Current Assets Non-Current Assets Total Assets Current Liabilities Long term Liabilities Total Liabilities Net Assets Shareholders’ Equity Issued Capital Share Deposits Accumulated Losses Total Equity 2006 ($) 2005 ($) 145,320 46,362 191,682 4,595,681 4,787,363 552,623 3,512,874 4,065,497 721,866 75,826 46,362 122,188 4,651,830 4,774,018 525,285 3,576,667 4,101,952 672,066 6,000,000 400,000 (5,678,134) 721,866 6,000,000 400,000 (5,727,934) 672,066 Net assets of the company increased by $49,800 or 7.4% compared to 2005 as a result of increase in cash on hand and at bank.
PART B - CONTROL ISSUES 11.4 Loan Balance Variances between the Company and Ministry of Finance The Government agreed to lend Viti Corporation Company Limited sums not exceeding three million seven hundred thousand dollars ($3,700,000) towards refinancing the Company’s depts and other development costs at an interest rate of five percent per annum over a period of ten years.1 The loan was interest free for the first 3 years until 31 December 2002.
Thereafter, the loan was subject to interest at the rate of 5% per annum payable on 30 June and 31 December.

The audit noted that the company had defaulted its repayment commitments due poor financial performance.
1 Loan Agreement Clause B Report of GCC & CSA – July 2012 2 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ______________________________________________________________________ On 18 January 2005, Cabinet agreed that the above terms relating to loan from government be reviewed to suit the company’s financial position and that the matter be referred again to the Cabinet after discussions between the Ministry of Finance and the Ministry of Public Enterprises.
On 22 November 2005, the board of the company agreed to the proposed amended loan schedule for a 30 year repayment term at 0.0765% interest which would be calculated against the $3.7million principal loan.

Audit confirmation2 received from the Ministry of Finance showed an outstanding loan balance of $3,458,500 while the company’s financial record reflected a loan balance of $3,956,341 as at 31 December 2006.
There is a variance of $497,841 noted between the records of the Ministry of Finance and the company.

Furthermore, in a letter date 03 October 2011, the Ministry of Finance clarified that the interest accrued since 2003 has been waived.

However, the relevant Cabinet decision for the waiver of accrued interest was not produced for audit verification.
Recommendations  The Company should liaise with Ministry of Finance and reconcile the variance to ensure  that correct loan balance is reflected in the financial statements.

If the decision to waive the accrued interest is supported by a Cabinet decision, then the company should make necessary adjustments in its books of account.

Management Comments We are in the process of reconciling the variance in the loan balance between the company and Ministry of Finance.
11.5 Going Concern When preparing financial statements, management should make an assessment of an enterprise’s ability to continue as a going concern.

Financial statements should be prepared on a going concern basis unless management either intends to liquidate the enterprise or to cease trading, or has no realistic alternative but to do so.
When management is aware, in making its assessment, of material uncertainties related to events or conditions which may cast significant doubts upon the enterprise’s ability to continue as a going concern, those uncertainties should be disclosed.
When the financial statements are not prepared on a going concern basis, that fact should be disclosed, together with the basis on which the financial statements are prepared and the reason why the enterprise is not considered to be a going concern.3 At 31 December 2006, the company has accumulated losses of $5,678,134 and there is an overall excess of current liabilities over current assets of $360,941.
As disclosed in the financial statements, there is significant uncertainty as to whether the company will be able to continue as a going concern and whether will it be able to pay its debts as they become due and payable and realize its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements.
This contradicted the Statement by Directors in the 2 Confirmation dated 12 November 2009 3 Fiji Accounting Standard 1 (23) Report of GCC & CSA – July 2012 3 OFFICE OF THE AUDITOR GENERAL – REPUBLIC OF THE FIJI ______________________________________________________________________ financial statements, in which it states that the the company will be able to pay its debts as and when they fall due.
Recommendations  The company should develop appropriate strategies to generate sufficient revenue to continue operating as a going concern and be able to pay its debt.

 The Ministry of Public Enterprises should seriously consider and find solutions to the Going Concern issues affecting the company.

Management Comments We are pursuing additional revenue opportunities which will be finalized in the second half of 2012.
Going forward, VCCL will continue to explore similar opportunities that would strengthen the cash flow situation.

Report of GCC & CSA – July 2012 4