Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697784741771.pdf (Fiji)
EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audit Report on Government Commercial Companies, Commercial Statutory Authorities, Majority Owned Entities, Off-Budget State Entities – December 2014 EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Audit Report on Government Commercial Companies, Commercial Statutory Authorities, Majority Owned Entities, Off-Budget State Entities December 2014 Government Commercial Companies, Commercial Statutory Authorities, Majority Owned Entities, Off-Budget State Entities 1.
2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.
Housing Authority Fiji Hardwood Corporation Limited Fiji Ports Corporation Limited Fiji Ships & Heavy Industries Limited Fiji Development Bank Fiji Public Trustee Corporation Limited Pacific Fishing Company Limited Fiji Broadcasting Corporation Limited Fiji Electricity Authority Post Fiji Limited Unit Trust of Fiji (Management) Limited Fiji Meat Industry Board Public Rental Board Rewa Rice Limited Airport Fiji Limited REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 SECTION 1: HOUSING AUTHORITY OF FIJI Programme Statement The Housing Authority was established by an Act of Parliament in 1955.
The Authority became an operating entity in 1958.

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

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

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

With the initial vision to provide affordable housing for low income earners in urban centres who would otherwise be unable to secure a permanent residence for themselves, the Authority has in recent years expanded its services to include mortgage financing for middle to high income earners.
Table of Contents SECTION 1: HOUSING AUTHORITY OF FIJI .......................................................................................................................... 1 FINANCIAL INFORMATION ................................................................................................................................ 1 PART A: Audit Opinion ......................................................................................................................................................... 1 1.1 Abridged Statement of Financial Performance ..................................................................................................... 1 1.2 Abridged Statement of Financial Position ............................................................................................................. 2 1.3 PART B – CONTROL ISSUES ............................................................................................................................................... 3 Methodology of Calculating Impairment of Loans and Advances ......................................................................... 3 Suspension of Interest Income on Accounts in Arrears ........................................................................................ 4 Slow Movement in Inventory ................................................................................................................................. 4 1.4 1.5 1.6 PART A: FINANCIAL INFORMATION 1.1 Audit Opinion The audit of the financial statements of the Housing Authority of Fiji for the year ended 31 December 2013 resulted in issue of an unqualified audit report.
1.2 Abridged Statement of Financial Performance Year Ended 31 December Income Interest Income Interest Expense Net Interest Income Other Operating Income Total Income 2013 ($)’000 2012 ($)’000 9,684 (5,409) 4,275 9,940 14,215 10,363 (5,778) 4,585 6,580 11,165 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 Year Ended 31 December Recurrent Expenditure Staff Costs Bad & Doubtful Debts Depreciation of Property, Plant and Equipment Amortisation of Intangible Asset Cost of Sales Other Operating Expenses Total Expenditure Total Comprehensive Income for the year after Tax 2013 ($)’000 2012 ($)’000 5,096 260 686 486 3,355 3,909 13,792 423 4,703 967 590 391 721 3,270 10,642 523 The Authority recorded a total comprehensive income after tax of $423,000 in 2013 compared to $523,000 in 2012.
The decline in comprehensive income after tax $100,000 or 19.1% was due to the increase in total expenses by $3,150,000 or 29.6% in 2013 compared to 2012.

The increase in total expenditure was mainly due to increase in cost of sales for the housing lots developed by the Authority.
1.3 Abridged Statement of Financial Position As at 31 December Assets Cash & Cash Equivalents Loans and Advances Inventories Land held for future development Property, Plant & Equipment Investment Property Other Assets Held to maturity investments Intangible Assets Total Assets Liabilities Borrowings Trade and other Payables Employee Benefit Liability Provisions Total Liabilities Net Assets Accumulated Funds Capital Government Grant Asset Revaluation Reserve Accumulated Losses Total Accumulated Funds 2013 ($)’000 2012 ($)’000 2,810 89,381 41,320 2,269 9,042 1,041 4,009 31,000 764 181,636 113,385 14,460 298 67 128,210 53,426 41,772 15,958 2,249 (6,553) 53,426 3,010 98,510 32,277 2,498 9,163 540 4,504 22,000 496 172,998 105,685 13,867 390 53 119,995 53,003 41,772 15,958 2,249 (6,976) 53,003 The Authority’s net asset increased by $423,000 or 1% in 2013 compared to 2012.
This was largely attributed by the increases in investment held to maturity and inventories.
Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 PART B – CONTROL ISSUES 1.4 Methodology of Calculating Impairment of Loans and Advances The Authority has made provisions for doubtful debts in accordance with its policies which are in line with guidelines provided in the Reserve Bank of Fiji (‘RBF’) Banking Supervision Policy Statement No.

3.
3.

The Authority has made specific and collective provision for doubtful debts taking into account the risk of non-recovery of each category of accounts.

The provision is calculated based on the shortfall between the security value for an account in arrears and the loan balance after deducting any suspended interest.

The age of arrears determine the level of provisioning against the shortfall in security value and the carrying amount after adjusting for suspended interest.
While the method is in accordance with RBF guidelines, the method is inconsistent with International Financial Reporting Standards (‘IFRS’) which is the framework the financial statements is prepared under.
Under IFRS, International Accounting Standard 39 (IAS 39), Financial Instruments: Recognition and Measurement, paragraph 63, the amount of impairment loss is calculated as the difference between the carrying amount of financial assets and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets’ original effective interest rate.
In its current calculation, the Authority is understating its receivables as it is netting off the impact of any suspended interest before calculating the provision for doubtful debts.

Furthermore, the Authority uses the security value to assess impairment instead of considering future cash flows.

The current practice of the Authority in calculating provision for doubtful debts is not in accordance with IFRS.
Recommendation The Authority should review its policy of calculating impairment and work towards complying with IFRS.

Authority’s Comment Recommendations are noted.

HA considers its customers as secured loans and not pure financial assets.

Impairment is recognized by calculating provision based on variance between security value for an account in arrears and loan balance after deducting suspended interest.

This is in accordance with RBF Banking Supervision Policy Statement No.3.
This is being further reviewed to adequately provide for doubtful debts.

This would be reviewed with the outcome for the revision of IAS 39 currently undertaken by IASB.
Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 1.5 Suspension of Interest Income on Accounts in Arrears The Authority’s current practice is to suspend interest charge and other charges accrued on impaired loan accounts which go into arrears over 90 days.
This means that interest and other charges on impaired assets are recorded as a liability until the customer makes subsequent repayments and the arrears age is reduced to less than 90 days, or when the account is restructured or when the security for the account is realized.

The Authority’s current treatment of interest and other charges on impaired assets is not in accordance with IAS 39.
IAS 39 requires interest income to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

In accordance with IAS 39, interest and fees suspended should be recorded in the income statement.

Any probability of non-recovery of interest income and other charges are to be assessed separately in the determination of the provision for doubtful debt on the account.
The current practice of the Authority in suspending the recognition of interest income and other charges on accounts in arrears is not in accordance with IFRS.

Recommendation The Authority should review its policy and work towards complying with IFRS.

Authority’s Comment Recommendations are noted.


While we continue to apply the guidelines provided in the Reserve Bank of Fiji (‘RBF’) Banking Supervision Policy Statement No.3, and further understand that IAS 39 and IAS 18 is being revised by IASB to provide consistency in reporting the outcome of this would be applied accordingly.
1.6 Slow Movement in Inventory The audit noted that for some properties, foreclosure commenced long time ago however have not been completed to date due to various reasons such as illegal tenants residing on the property.

The audit reviewed the properties individually to determine the sale-ability of the properties taking into consideration house condition.

However, the audit estimates that the impairment balance is fairly stated for unsold properties and for developed lots.
The slow process in foreclosing or settling an account increase the risk of damage or significant deterioration in properties repossessed.

Recommendation The Authority should review its procedures for foreclosure and settlement with a view of completing this process much earlier and reduce the risk of financial loss to the Authority.

Authority’s Comment The concerns of the Auditors are noted.
The status of the foreclosed properties and mortgagee sale properties are as follows: Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 1.

Foreclosed Properties As at 31/12/2013, 15 foreclosed properties were held in stock nationwide.

The Authority has put in concerted effort to sell the properties.

One property has already been sold.


Also, in the list are 6 properties where some problems exist and sale cannot be undertaken until the existing problems are resolved.

This is being attended to and necessary action will be taken on resolution of the problem.

The Authority will put in efforts to sell the balance of 8 properties.

2.

Mortgagee Sale Properties Properties sold on mortgagee sale are also being processed for settlement.
Currently, there are 15 cases which have been sold vide mortgagee sale out of which 7 cases are being attended to by our Litigation team to obtain vacant possession of the properties.

There are 8 cases with our Conveyancing team for completion of the legal documentation and settlement.

Going forward, we have placed measures that would reduce the turnaround time to complete the sale of properties and settlement of properties sold under mortgagee sale.
Report of GCC & CSA – December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 SECTION 2: FIJI HARDWOOD CORPORATION LTD Programme Statement The Fiji Hardwood Corporation Ltd (FHCL) was established to administer the Government’s hardwood plantations, located on Viti Levu and Vanua Levu, on commercial basis.
The principal activities of the company during the year ended 31 December 2008 were the business management of forest plantations, timber growers and the sale of trees and timber.

During 2008 financial year the company was also engaged in processing of logs into sawn timber.

Apart from the above there were no significant changes in the nature of activities of the company during the year.
Table of Content 2.1 2.2 2.3 SECTION 2: FIJI HARDWOOD CORPORATION LTD ............................................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Statement of Comprehensive Income ...................................................................................................... 2 Abridged Statement of Financial Position ................................................................................................................ 2 PART B - CONTROL ISSUES ................................................................................................................................................... 3 Inventory .................................................................................................................................................................. 3 Qualification over Inventory ................................................................................................................................ 3 Change in inventory provision method ............................................................................................................... 3 Lack of Supporting Documents ............................................................................................................................... 4 Breach of Debt Covenants ...................................................................................................................................... 5 Segregation of Duties .............................................................................................................................................. 6 Statutory Returns ..................................................................................................................................................... 7 2.5 2.6 2.7 2.8 2.4.1 2.4.2 2.4 PART A – FINANCIAL INFORMATION This report is for the audit conducted for the year ended 31 December 2008.
Fiji Hardwood Corporation Limited (FHCL) has not provided for audit accounts for the years ended 31 December 2009 to 2013.

2.1 Audit Opinion The audit of the financial statements of the FHCL for the year ended 31 December 2008 resulted in the issue of a qualified audit report.
The issues qualified are as follows: The audit was not able to observe the counting of physical inventories as at 31 December 2008 and also unable to ascertain the existence of inventories of $6,957,728 by other audit procedures due to the unavailability of underlying records.

As a result, sufficient appropriate audit evidence with regards to the accuracy and valuation of inventories as at 31 December 2008 was unable to be obtained.
Since the audit was not able to be satisfied by alternate means as to the accuracy, existence and valuation of inventories as at 31 December 2008 in the determination of financial performance, it was not able to determine whether any adjustments may be necessary in respects of the loss for the year ended 31 December 2008 as reported in the statement of comprehensive income.
Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 2.2 Abridged Statement of Comprehensive Income Year Ended 31 December 2008 ($) 2007 ($) Revenue Sales Cost of sales Gross Profit Other Income Total Revenue Expenditure Distribution Expense Administration & Operating Expenses Change in fair value of forest trees Total Expenditure Profit/(Loss) from operations Finance Income Finance cost Loss before tax Income tax expense Total comprehensive loss for the year 19,697,800 8,380,713 11,317,087 538,675 11,855,762 979,174 6,141,359 4,577,062 11,697,595 158,167 19,337 2,102,276 (1,924,772) - (1,924,772) 13,095,600 5,923,100 7,172,500 317,415 7,489,915 520,449 4,627,476 26,435,955 31,583,880 (24,093,965) 19,806 1,786,004 (25,860,163) - (25,860,163) Net loss recorded by the Corporation resulted mainly from the changes in the fair value of forest assets.
This led to the substantial decrease in total comprehensive loss recorded in 2008 by 93%.

The changes in the value of the forest were the result of the revaluation exercise carried out in 2008.
2.3 Abridged Statement of Financial Position As at 31 December Assets Cash and cash equivalents Inventories Other current assets Forest Assets Property, plant and equipment Total Assets Liabilities Interest bearing borrowings Other liabilities Total Liabilities Net Assets Shareholders’ Equity Share Capital Accumulated Profits Total Shareholders’ Equity 2008 ($) 2007 ($) 450,366 6,957,728 950,461 128,592,938 6,717,147 143,668,640 18,513,988 3,796,448 22,310,436 121,358,204 100,000,000 21,358,204 121,358,204 468,386 3,170,884 1,599,400 133,170,000 6,837,589 145,246,259 18,249,724 3,713,559 21,963,283 123,282,976 100,000,000 23,282,976 123,282,976 The Corporation’s net assets declined by $1.9 million in 2008 compared to 2007.
This was due to the decrease in the value of forest assets by $4.5 million.

The revaluation of forest assets was carried out in 2008.

Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 PART B - CONTROL ISSUES 2.4 Inventory Inventory recorded in the 2008 financial statement amounted to $6.9 million.
2.4.1 Qualification over Inventory The inventory count for the year ended 31 December 2008 was not attended by the auditors.

Additionally, the audit noted that the year-end inventory costing was not updated to correctly reflect the year to date data.

This resulted in a misstatement of $221,000 on the sample tested during the audit.

As the inventory count was not attended by the auditors, the existence of year-end inventory balance could not be verified.
The misstatement noted in inventory costing on the sample tested indicated that the remaining inventory balance costing was materially misstated.

Therefore, the accuracy and valuation of year-end inventory balance could not be ascertained.

2.4.2 Change in inventory provision method The processes of inventory provisioning of sawn timber take two months, on average.

A sawn timber arriving at the Lautoka Office goes through three compulsory processes, which is treatment, air drying and sorting.
A review of the inventory provision method indicated that sawn timber between 90 to 180 days is provided for based on a percentage while sawn timber over 180 days is provided for based on $150 per cubic meter.

The method was adopted in 2006 when inventory provision was first introduced in the company.

Following the introduction, the same method has been consistently applied to date.
Until 2012 when the Lautoka Office was operating, all sawn timber is provided for irrespective of the stage the sawn timber is in.

However, the audit is of the view that only sawn timber ready for sale should be provided for.

Hence, the provisioning for sawn timber has been over stated.

Furthermore, the basis for inventory provisioning method could not be ascertained and this may result in a material misstatement of inventory balance.
Recommendation The Management of FHCL should ensure that:    Year-end inventory counts are attended by the auditors; Year-end inventory costing are reviewed and updated; and Inventory provision process method is reviewed.

Management Comments We acknowledge the issues raised in the audit memorandum.

Please be advised that FHCL is currently undergoing restructure and is recruiting a new executive management team upon completion of the restructure.
In 2013, FHCL terminated the employment of former Chief Financial Officer and appointed Shobna Lata as Acting Accounts Lead Supervisor.

Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 Furthermore, we wish to highlight progress made by FHCL in implementing strict internal controls, improving accounting process, minimising costs and increasing revenue.
These are detailed as follows:  Reduction of petty cash float balance  Removal of FHCL’s access telephone lines and mobile phones  Daily monitoring of FHCL’s cash flow balance  Review of three (3) quotations from suppliers before purchase of goods  Executing new agreements with harvesting contractors  Reduction of loan balance by $3.5 million in 2013  Vehicle mileage tracking  Monitoring of telephone calls  Removal of medical insurance cover 2.5 Lack of Supporting Documents The audit of the accounts for the year ended 31 December 2008 was conducted in 2012/2013.
Due to the significant lapse of time and staff turnover since 2008, the lack of supporting documents was noted over the following areas:  inventory costing;  expenses vouching;  supplier invoices;  other assets vouching;  other liabilities vouching; and  other receivables vouching.

The lack of appropriate supporting documents increases the risk of fraud in the company.
Recommendations  Management should ensure that all documents are properly filed and maintained in line with the company’s file retention policy.

 Management should have a proper succession process in place to ensure that any new employee understands the processes and procedures of the company.

Management Comments We acknowledge the issues raised in the audit memorandum.
Please be advised that FHCL is currently undergoing restructure and is recruiting a new executive management team upon completion of the restructure.

In 2013, FHCL terminated the employment of former Chief Financial Officer and appointed Shobna Lata as Acting Accounts Lead Supervisor.

Furthermore, we wish to highlight progress made by FHCL in implementing strict internal controls, improving accounting process, minimising costs and increasing revenue.
These are detailed as follows:  Reduction of petty cash float balance  Removal of FHCL’s access telephone lines and mobile phones  Daily monitoring of FHCL’s cash flow balance  Review of three (3) quotations from suppliers before purchase of goods Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014  Executing new agreements with harvesting contractors  Reduction of loan balance by $3.5 million in 2013  Vehicle mileage tracking  Monitoring of telephone calls  Removal of medical insurance cover 2.6 Breach of Debt Covenants The total interest bearing borrowings by the Fiji Hardwood Corporation Limited amounted to $18.5 million as at 31 December 2008.
The audit noted that the company was unable to meet the loans and interest repayments in a timely manner as determined in the loan agreement during the year.

Furthermore, the audit noted that the Fiji Investment Corporation Limited and Fiji Development Bank loan agreement requested audited financial statements to be presented within 90 days after the end of the financial year.

However, no action was taken against the company regarding the above apart from penalty interest charges on late/non repayment.
The above may be attributed to the poor cash flow faced by the company.

As a result, the company incurred significant penalty interest due to late and non-repayment of loans.

In addition, the company was also vulnerable if lenders called for the loan repayment on demand following the breaches of the conditions of the loan agreements.
Recommendations Management should ensure that loan and interest repayments are done in a timely manner to reduce additional financial loss to the company in terms of penalty interest and to ensure that the loan repayment is not called on demand.

Management Comments We acknowledge the issues raised in the audit memorandum.

Please be advised that FHCL is currently undergoing restructure and is recruiting a new executive management team upon completion of the restructure.
In 2013, FHCL terminated the employment of former Chief Financial Officer and appointed Shobna Lata as Acting Accounts Lead Supervisor.

Furthermore, we wish to highlight progress made by FHCL in implementing strict internal controls, improving accounting process, minimising costs and increasing revenue.
These are detailed as follows:  Reduction of petty cash float balance  Removal of FHCL’s access telephone lines and mobile phones  Daily monitoring of FHCL’s cash flow balance  Review of three (3) quotations from suppliers before purchase of goods  Executing new agreements with harvesting contractors  Reduction of loan balance by $3.5 million in 2013  Vehicle mileage tracking  Monitoring of telephone calls  Removal of medical insurance cover Report of GCC & CSA – December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 2.7 Segregation of Duties Segregation of duties and responsibilities require that no one person handle transactions completely from beginning to end.
It is a sound practices which should provide the means of assuring the integrity of each organisation, recordings and custody.

The audit noted the following issues relating to segregation of duties: Cash handling The same officers maintain receipt books, receive monies, update deposit books and banking of receipts for each segment.
Segregation of duty is lacking in cash handling as the same staff are involved in receipting, reconciling cash receipts at the end of the day, depositing money and also preparation of bank reconciliations.

Journal posting Any staff from the Finance Section with MYOB access can post journals into the system, that is, there is no IT control on restricting certain staff to post journals.

In addition, there is no IT control to limit the general ledgers used by a particular staff for posting journals.
The lack of segregation of duties over cash handling increases the risk of misappropriation of cash to the company.

Furthermore, the lack of segregation of duties over system access depending on job description increases the risk of fraud and manipulation of accounts.

Recommendations Management should review the cash handling process and system access privileges and implement appropriate controls.

Management Comments We acknowledge the issues raised in the audit memorandum.
Please be advised that FHCL is currently undergoing restructure and is recruiting a new executive management team upon completion of the restructure.

In 2013, FHCL terminated the employment of former Chief Financial Officer and appointed Shobna Lata as Acting Accounts Lead Supervisor.

Furthermore, we wish to highlight progress made by FHCL in implementing strict internal controls, improving accounting process, minimising costs and increasing revenue.
These are detailed as follows:  Reduction of petty cash float balance  Removal of FHCL’s access telephone lines and mobile phones  Daily monitoring of FHCL’s cash flow balance  Review of three (3) quotations from suppliers before purchase of goods  Executing new agreements with harvesting contractors  Reduction of loan balance by $3.5 million in 2013  Vehicle mileage tracking  Monitoring of telephone calls  Removal of medical insurance cover Report of GCC & CSA – December 2014 Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 2.8 Statutory Returns The company is in default of timely annual return lodgement, statutory accounts and income tax return.
The last annual return was filed on 25 April 2008 for the period ended 31 December 2007.

Annual returns have not been done subsequently as financials statements have not been signed for 2009 to 2013.

The last income tax return was filed for 31 December 2006.

However, the audit also noted that no action has been taken against the company.

Failing to lodge statutory returns may result penalty against the company.
Recommendation Management should ensure that all statutory returns are filed with the respective authority in a timely manner.

Management Comments We acknowledge the issues raised in the audit memorandum.

Please be advised that FHCL is currently undergoing restructure and is recruiting a new executive management team upon completion of the restructure.

In 2013, FHCL terminated the employment of former Chief Financial Officer and appointed Shobna Lata as Acting Accounts Lead Supervisor.
Report of GCC & CSA – December 2014 Page 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________ 2014 SECTION 3: FIJI PORTS CORPORATION LIMITED Programme Statement The Fiji Ports Corporations Limited was incorporated in 2004 to take over the operations of the Maritime Ports Authority of Fiji.

The principal activities of the Corporation are 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 and lost control of Ports Terminal Ltd on August 2013 due to the sales of fifty one per cent (51%) of its shares in Ports Terminal Ltd to Aitken Spence PLC of Sri Lanka.
Table of Content 3.1 3.2 3.3 SECTION 3: FIJI PORTS CORPORATION LIMITED ............................................................................................................. 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 Audit Opinion ........................................................................................................................................................ 1 Statement of Financial Performance .................................................................................................................... 1 Statement of Financial Position ............................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................ 3 Manual Sales System ........................................................................................................................................... 3 Reimbursement cost to Fiji Military Forces ........................................................................................................... 3 Employee Awareness ........................................................................................................................................... 4 Unaccounted Investment ...................................................................................................................................... 4 3.4 3.5 3.6 3.7 PART A – FINANCIAL INFORMATION 3.1 Audit Opinion The audit of the financial statements of the Fiji Ports Corporation Limited and its subsidiaries for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
3.2 Statement of Financial Performance As at 31 December Income Marine Services Dockage Wharfage Storage Other Operating Revenue Other Revenue Total Income Expenditure Group 2013 ($) 2012 ($) Company 2013 ($) 2012 ($) 10,732,061 7,392,747 6,446,803 2,797,257 18,108,557 9,284,335 54,761,760 8,759,574 5,992,933 5,822,217 4,418,896 22,506,941 2,724,362 50,224,923 10,732,061 7,392,747 6,446,803 2,797,257 4,472,353 19,408,063 51,249,284 8,759,574 5,992,933 5,822,217 4,418,896 4,241,296 4,253,822 33,488,738 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________ 2014 As at 31 December Group Company Operating Expenses Salaries and Benefits Property Expenses Depreciation Marine Service Charge Finance Expenses Total Expenditure Operating (loss)/profit before income tax Income tax (expense)/ credit Share of profit in associate Net (loss)/ Profit for the year after Income Tax 2013 ($) 9,384,507 9,402,161 3,474,776 9,784,887 6,960,056 917,165 39,923,552 14,838,208 (1,779,038) 675,564 13,734,734 2012 ($) 9,317,767 10,032,549 3,994,708 10,462,869 5,846,926 1,437,206 41,092,025 9,132,898 (1,823,144) - 7,309,754 2013 ($) 4,757,892 4,689,138 3,474,776 8,339,410 6,960,056 892,023 29,113,295 22,135,989 (1,094,707) - 21,041,282 2012 ($) 2,935,885 4,419,717 3,994,708 8,312,746 5,846,926 1,400,726 26,910,708 6,578,030 (1,179,166) - 5,398,864 The company and subsidiaries recorded net profit after tax of $13,734,734 an increase of $6,424,980 (88%) compared to 2012.
The increase was mainly attributed to the improvement in other revenue collection by $6,559,973 (240%).

The company paid a dividend of $12,939,691 in 2013 compared to $2,821,101 in 2012.
3.3 Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Trade and other receivables Investments Inventories Other current assets Loan to Subsidiaries Loan to associate company Income Tax Asset Total Current Assets Non – Current Assets Property, plant and equipment Financial Assets Intangible asset Investment property Loan to subsidiaries Loan to associate company Investment in FSHIL Investment in associate company Deferred tax assets Total Non–Current Assets Total Assets Current Liabilities Trade Payables and Accruals Interest Bearing Borrowings Provisions Employee Benefit liability Group 2013 ($) 2012 ($) Company 2013 ($) 2012 ($) 14,260,317 1,747,623 750,000 175,276 966,629 --- 345,988 751,155 18,996,988 97,191,447 --- 153,430 4,282,660 --- 2,695,842 ---- 9,625,794 3,484,803 117,433,976 136,430,964 18,260,838 3,302,980 3,000,000 294,931 1,362,782 --- --- 198,743 26,420,274 112,649,864 58,330 226,143 4,311,660 --- --- --- --- 1,547,418 118,793,415 145,213,690 10,577,766 1,183,746 750,000 86,554 834,934 102,440 345,988 695,295 14,576,723 91,488,617 --- 145,997 4,282,660 1,552,868 2,695,842 6,660,000 8,950,230 3,425,647 119,201,861 133,778,584 9,087,108 1,924,941 2,750,000 75,883 775,059 430,865 --- 211,227 15,255,083 99,005,019 --- 217,373 4,311,660 4,697,141 --- 9,744,300 --- 2,157,217 120,132,710 135,387,793 5,055,584 3,775,597 100,000 497,912 4,699,508 3,493,086 251,459 706,322 4,041,550 3,601,855 100,000 455,917 4,160,501 3,319,344 251,459 495,738 Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________ 2014 As at 31 December Total Current Liabilities Non-Current Liabilities Interest bearing borrowings Employee Benefit liability Total Non-Current Liabilities Total Liabilities Net Assets Shareholder’s Equity Share Capital Accumulated Profits Total Shareholder’s Equity Group Company 2013 ($) 9,429,093 2012 ($) 2013 ($) 2012 ($) 9,150,375 8,199,322 8,227,042 26,523,633 104,990 26,628,623 36,057,716
 100,373,248 73,154,852 27,218,396 100,373,248 36,485,110 --- 36,485,110 45,635,485 99,578,205 73,154,852 26,423,353 99,578,205 26,404,067 104,990 26,509,057 34,708,379 99,070,205 73,154,852 25,915,353 99,070,205 36,192,137 --- 36,192,137 44,419,179 90,968,614 73,154,852 17,813,762 90,968,614 The net assets of the company and its subsidiaries improved by $795,043 (1%) in 2013 compared to 2012.
This was due to the decreases in liabilities by $9,577,768 (21%) in 2013.

PART B – CONTROL ISSUES 3.4 Manual Sales System The audit noted that manual invoices were issued for sales and each Port was given different set of sales invoices.

Large companies should have automated receipting to avoid fraud and error.

Recommendation The Management should perform a cost-benefit analysis for the Company to purchase and install a fully automated Ports Management System.

Company’s Comments Comments are noted.


Management is currently working on automating the invoice function via fully integrated operations software and is expected to be implemented in the third quarter of 2014.

3.5 Reimbursement cost to Fiji Military Forces The Company owes $195,841 reimbursement costs to Fiji Military Forces for the security services provided in year 2007.

In the absence of supporting documents for payments, the company has not been able to process the payment.
The lack of information increases the risk that the amount due may be incorrectly stated.

Recommendation The Management should liaise with the Fiji Military Forces to resolve the issue to ensure that the reimbursement cost is settled.

Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________ 2014 Company’s Comments Comments are noted.
Management has taken up this matter with RFMF and correspondences have been made accordingly and a deadline of 31st March 2014 was given.

RFMF has not been able to produce any documentation to support payment of this.

Management will therefore now seek board endorsement for write- back of these amounts.

3.6 Employee Awareness The audit noted that fraud awareness on whistleblowing policy has not been conducted by the management staff.
Lacked awareness on fraud may not encourage employees to come forward to report any suspicious activities in the Company.

Recommendation The Human Resource Department should ensure that regular fraud awareness workshops are undertaken.

Company’s Comments We note the comments.

Managements will ensure that the above recommendations will be adhered and undertaken in the current year.
3.7 Unaccounted Investment The audit noted unaccounted investment of $1,002,228 between the Fiji Ports Corporation Limited and Fiji Ships and Heavy Industries Limited records.

The Company records reflected $6,660,000 investment in Fiji Ships and Heavy Industries Limited while the Fiji Ships and Heavy Industries Limited recorded $7,662,228.

Failure to reconcile the variance and record the correct information in the account will result in the misstatement of the financial statement.
Hence the accounts would not be fairly stated and correctly reflects the financial position of the company.

Recommendation The Company should ensure that variances identified above are rectified and adjusted accordingly in the 2014 financial year.

Company’s Comments Whilst management notes the comments, it must be stated that the original investment entry for this was processed in FPCL books in 2009 and to date no comments has been raised in any audit.
The variance is acknowledged; however a mock eliminations entry during consolidations ensures that Group accounts are not misstated in any way.

Attempts to rectify the anomaly in the past were hindered by lack of documentations available supporting the basis for the original entry.

Nevertheless management notes the above and will endeavour to resolve in 2014 financial year.
Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 SECTION 4: FIJI SHIPS & HEAVY INDUSTRIES LIMITED Programme Statement 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 Content 4.1 4.2 4.3 SECTION 4: FIJI SHIPS & HEAVY INDUSTRIES LIMITED ...................................................................................................... 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ........................................................................................................................................................... 1 Abridged Statement of Financial Performance ........................................................................................................ 1 Abridged Statement of Financial Position ................................................................................................................ 2 PART B – CONTROL ISSUES ................................................................................................................................................... 3 Deferred tax asset ................................................................................................................................................... 3 Inventory costing ..................................................................................................................................................... 3 Fixed assets ............................................................................................................................................................ 4 4.4 4.5 4.6 PART A – FINANCIAL INFORMATION 4.1 Audit Opinion The audit of the financial statements of the Fiji Ships and Heavy Industries Limited for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
4.2 Abridged Statement of Financial Performance Year Ended 31 December Income Operating Income Other Operating Income Total Income 2013 ($) 2012 ($) 5,660,561 203,008 5,863,569 4,905,788 169,161 5,074,949 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 Year Ended 31 December Expenditure Direct Costs 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 2013 ($) 2012 ($) 1,522,066 1,391,978 502,792 93,500 918,740 4,429,076 1,434,493 (344,910) 1,089,583 1,224,787 1,408,081 367,522 108,691 917,342 4,026,423 1,048,526 (82,528) 965,998 Slipway and shipyard revenue increased by $754,773 (15%) in 2013.
This mainly contributed to the increased net profit of $1,089,583 in 2013 compared to $956,998 in 2012.

The Company declared and paid a dividend of $482,999 in 2013 compared to $375,310 in 2012.
4.3 Abridged Statement of Financial Position As at 31 December Current Assets Cash and Cash Equivalent Trade Receivables Inventories Prepayments and other assets Tax Receivable Total Current Assets Non - Current Assets Property, Plant and Equipment Deferred Tax Assets Intangible Assets Held to Maturity Financial Assets Total Non –Current Assets Total Assets Current Liabilities Trade Payables and Accruals Interest Bearing Debt Provisions Total Current Liabilities Non-Current Liabilities Interest Bearing Debt Total Non-Current Liabilities Total Liabilities Net Assets Equity Share Capital Accumulated Losses Total Equity 2013 ($) 2012 ($) 3,682,551 563,877 88,722 131,695 55,860 4,522,705 5,702,830 59,156 7,433 0 5,769,419 10,292,124 1,014,034 276,182 41,995 1,332,211 1,672,434 1,672,434 3,004,645 7,287,479 7,662,228 (374,749) 7,287,479 2,802,458 469,882 79,481 98,009 27,362 3,477,192 6,007,848 32,119 8,770 58,330 6,107,067 9,584,259 616,118 272,172 66,796 955,086 1,948,278 1,948,278 2,903,364 6,680,895 7,662,228 (981,333) 6,680,895 Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 Net assets increased by $606,584 (9%) in 2013 compared to 2012.
This was mainly due to the increase in cash and cash equivalents by $880,093 (31%).

PART B – CONTROL ISSUES 4.4 Deferred tax asset The audit noted that the Tax Fixed Asset Register (FAR) cost of property, plant and equipment does not agree to the Accounts FAR.

There has been a recurring variance of $124,642.

Tax FAR is overstated.

Accounting FAR Asset cost 11,848,526 TAX FAR 11,973,168 Difference 124,642 There is increased risk that deferred tax asset balance is misstated at balance date.
Recommendation Management should update and reconcile the tax fixed asset register before it lodges its company income tax return with Fiji Revenue Customs Authority for the financial year ended December 2013.

Management comment Management will carry out a reconciliation to rectify the difference in tax FAR before the annual tax returns are lodged for 2013.
However, it should be noted that these differences are being carried forward from previous years to 2006 and lack of supporting documentation are hindering the reconciliations and rectification process.

4.5 Inventory costing Variances were noted in inventory costing for items AS033 and AS035 (Metal sheets).

One of the primary errors, common with most metal sheets, is due to the company receiving metal sheet items in "square meters" while disbursements are made in "sheets".
This distorted the unit costs recorded for the items.

The lack of regular review of inventory costing could result in significant misstatements in inventory balances.

Recommendation Management should frequently review its inventory costing to ensure units cost of inventory items are properly stated.

Management comment The management takes note of the comments in the report.

The company has been procuring steel plates (metal sheets) in sheets and charging to jobs in square meters.
However, as of February 2014, the company has rectified the variance in cost per unit and has adopted purchasing and issuing of metal sheets in square meters.

Hence unit prices won’t change as there will be no conversion from sheets to square meters.

Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 4.6 Fixed assets A board of survey was conducted in 2013.
However, audit noted that items that were not physically present were not rectified in the Fixed Asset Register (FAR).

The FAR continued to have items that did not physically exist.

Furthermore, the description in the FAR is very vague as it does not give any descriptive statement on the type of building and the cost associated with the building.
It was noted that when the initial merger of FSHIL incurred, there was no proper procedure put in place for setting up the FAR and only the cost of the building through source documents were included.

Not being able to reconcile physical items to the FAR could result in inability to ascertain correct FAR balance at balance date.

Items in FAR with carrying amount may not be physically present hence overstating fixed asset written down value at year end.
Recommendation Management should put forward a proposal to the board to carry out a proper and thorough physical verification of property, plant and equipment and have assets not physically verified to be written off from the FAR reconciling with the physical assets.

Management comment Management has already undertaken the extensive Board of Survey in 2013 and identified anomalies.
In order the cushion the financial impact of writing off all assets that were not physically present, management applied accelerated depreciation to ensure all items get fully written down by December 2013.

The fundamental problem emanates from the days of acquisition of FSHIL when the FAR was not properly established.

Now that these items have no financial impact of the books due to zero written down value, management will seek Board endorsement for disposal of these items from FAR in 2014.
Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 SECTION 5: FIJI DEVELOPMENT BANK Programme Statement The Fiji Development Bank is an autonomous statutory body that was established on 1st July 1967 to provide finance for projects that contribute to the development of Fiji’s economy as well as improving the quality of life of its people.
The Bank’s operations are controlled by a Board of Directors appointed by the Minister of Finance.

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

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

The Bank has now diversified its portfolio to include commercial products and services which also assist in sustaining the Bank’s core business of financing higher risk development projects.
The Fiji Development Bank’s function is to facilitate and stimulate the promotion and development of natural resources, transportation, and other industries and enterprises in Fiji, and in the discharge of these functions the Bank gives special consideration and priority to the economic development of the rural and agricultural sectors of the economy of Fiji.
Table of Content SECTION 5: FIJI DEVELOPMENT BANK ................................................................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion 2014 .................................................................................................................................................. 1 Abridged Statement of Comprehensive Income ...................................................................................................... 1 Abridged Statement of Financial Position ................................................................................................................ 2 5.1 5.2 5.3 PART A – FINANCIAL INFORMATION 5.1 Audit Opinion 2014 The audit of the consolidated financial statements of the Fiji Development Bank and its subsidiary for the year ended 30 June 2014 resulted in the issue of an unqualified audit report.
5.2 Abridged Statement of Comprehensive Income For the year ended 30 June Income Interest from Loans Fees Other Income Total Income Consolidated The Bank 2014 ($) 2013 ($) 2014 ($) 2013 ($) 25,539,281 3,871,188 2,941,798 32,352,267 27,325,366 5,228,266 4,109,262 36,662,894 25,538,182 3,871,188 2,941,798 32,351,168 27,324,273 5,228,266 3,959,263 36,511,802 Expenses Interest and other borrowings expenses Operating expenses 6,329,915 3,817,267 8,673,545 3,537,516 6,329,915 3,730,717 8,673,545 3,459,889 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 For the year ended 30 June Employee costs Total Expenses Consolidated The Bank 2014 ($) 2013 ($) 2014 ($) 2013 ($) 6,816,824 16,964,006 6,370,719 18,581,780 6,816,824 16,877,456 6,370,719 18,504.53 Operating profit before allowances 15,388,261 18,081,114 15,473,712 18,007,650 Allowances for credit impairment Impairment for Land Held for resale Allowance for interest and Fees Operating profit before income tax expense Income tax expense Other comprehensive income Operating profit after income tax 8,381,870 42,581 2,162,067 4,801,743 --- --- 4,801,743 9,386,015 --- 4,487,010 4,208,089 (14,693) 1,347,729 5,541,125 8,381,870 42,581 2,162,067 4,887,194 --- --- 4,887,194 9,386,015 --- 4,487,010 4,134,625 --- 1,347,729 5,482,354 The Bank’s consolidated operating profit after tax for the year ended 30 June 2014 was $4,801,743 compared to $5,541,125 in 2013.
This was attributed to the decline in income received from interest from loan by $1,786,085 (7%), reduction in fees by $1,357,078 (26%) and other income by $1,167,464 or 28% compared to the year 2013.

Interest and other borrowing expenses decreased by $2,343,630 (27%).

Operating expenses increased by $279,751 (8%) while employee cost increased by $446,105 or 7%.
The increase in employee cost resulted from a job evaluation exercise conducted in 2012 which was paid out in two phases in July and August 2013 with bonus payment paid out in the same period.
5.3 Abridged Statement of Financial Position For the year ended 30 June Assets Cash and Cash Equivalents Loans and advances Investments Investment Held to Maturity Land held for resale Property, plant and equipment Intangibles Other debtors Receivable due from subsidiary Total Assets Liabilities Bonds - Held-to-maturity Short term borrowings Employee entitlements Deferred income Accounts payable and accruals Other liabilities Total Liabilities Net Assets Consolidated The Bank 2014 ($) 2013 ($) 2014 ($) 2013 ($) 50,056,907 265,204,855 15,001 2,028,472 --- 15,812,483 63,890 1,935,609 --- 335,117,217 125,451,099 72,559,476 1,065,998 1,289,784 2,431,659 5,819,490 208,617,506 126,499,711 42,217,806 276,945,947 15,001 2,028,121 42,581 15,432,303 40,524 1,925,290 --- 338,647,573 140,509,882 64,450,752 1,579,182 1,638,445 2,933,829 5,837,515 216,949,605 121,697,968 50,039,552 265,204,855 35,001 2,000,000 --- Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI__________________________________________2014 For the year ended 30 June Equity Capital Reserves Accumulated Fund Total Equity Consolidated The Bank 2014 ($) 2013 ($) 2014 ($) 2013 ($) 56,050,636 12,535,291 57,913,784 126,499,711 56,050,636 12,535,291 53,112,041 121,697,968 56,050,636 12,535,291 57,868,656 126,454,583 56,050,636 12,535,291 52,981,462 121,567,389 Total consolidated assets decreased by $3,530,356 or 1% compared to 2013 as a result of a decrease in loans and advances by $11,741,092 or 4%.
There were increases recorded for cash and cash equivalents by $7,839,101 or 19%, property, plant and equipment increased by $380,180 or 2%, and intangibles increased by $23,366 or 58%.

Total consolidated liabilities decreased by $8,332,099 or 4% being attributed to decrease in Bonds held to maturity by $15,058,783 or 11%, employee entitlement by $513,184 or 32%, deferred income by $348,661 or 21%, accounts payable and accruals by $502,170 or 17%.
Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 6: FIJI PUBLIC TRUSTEE CORPORATION LIMITED Programme Statement The Corporation was established through the Fiji Public Trustee Corporation Act 2006.
The principal activity of the Corporation is to act as a custodian and provide administrative services to estates of those persons who are deceased, of unsound mind or persons incapable of conducting their own affairs.
Table of Content SECTION 6: FIJI PUBLIC TRUSTEE CORPORATION LIMITED ............................................................................................. 1 PART A – FINANCIAL INFORMATION ..................................................................................................................................... 1 Audit Opinion ............................................................................................................................................................ 1 Abridged Statement of Financial Performance ........................................................................................................ 1 Abridged Statement of Financial Position ................................................................................................................ 2 6.1 6.2 6.3 PART A – FINANCIAL INFORMATION 6.1 Audit Opinion The audit of the financial statements of the Fiji Public Trustee Corporation Limited for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
6.2 Abridged Statement of Financial Performance Year ended 31 December Income Fees Interest Income Aid Other Revenue TOTAL INCOME Expenditure General and Administration Expenses Selling Expenses Staff and Employee Costs TOTAL EXPENDITURE OPERATING PROFIT BEFORE INCOME TAX Income Tax Expense NET OPERATING PROFIT AFTER TAX 2013 ($) 2012 ($) 655,664 408,498 2,915 126,500 1,193,577 263,884 5,633 472,945 742,462 451,115 97,327 353,788 683,897 435,657 33,075 127,088 1,279,717 281,027 12,340 380,287 673,654 606,063 132,761 473,302 The Corporation recorded a net operating profit after tax of $353,788 in 2013 compared to $473,302 in 2012; a decrease of $119,514 or 25%.
This was mainly attributed to an increase in staff and employee cost by $92,658.

There were increases in allowances and accrued bonus for the staffs of the Corporation which contributed to the decline in profit.
Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 6.3 Abridged Statement of Financial Position As at 31 December Assets Cash and Cash Equivalents Trade and Other Receivables Other Current Assets Deferred Tax Asset Financial Assets Property, Plant and Equipment TOTAL ASSETS Liabilities Deferred Revenue Trade and Other Payables Provisions TOTAL LIABILITIES NET ASSETS Shareholders’ Equity Share Capital Share Premium Reserve Capital Reserve Retained Earnings TOTAL SHAREHOLDERS’ EQUITY 2013 ($) 2012 ($) 2,015,587 692,215 287,108 1,856 4,864,630 1,133,717 8,995,113 - 127,554 51,892 179,446 8,815,667 2 99,998 5,690,897 3,024,770 8,815,667 2,141,302 349,372 311,826 3,313 4,864,630 931,709 8,602,152 2,915 97,424 41,236 141,575 8,460,577 2 99,998 5,689,595 2,670,982 8,460,577 The corporation’s net asset increased by $355,090 or 4.2% in 2013 compared to 2012.
This was mainly attributed to the increases in trade debtors and other receivables by $342,843 (98%) and property, plant and equipment which increased by $202,008 or 22%.

Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 7: PACIFIC FISHING COMPANY LIMITED Programme Statement Pacific Fishing Company Limited (PAFCO) has been trading since 1987 and is owned principally by the Government of Fiji.
The company is 98% owned by the Government of Fiji with local investors owning the remaining 2%.

The company is controlled by a non-executive board of directors appointed by the Government.

The principal activity of the company is processing and canning fish for local and overseas markets.
Table of Content 7.1 7.2 7.3 SECTION 7: PACIFIC FISHING COMPANY LIMITED ........................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 Audit Opinion ......................................................................................................................................................... 1 Abridged Statement of Financial Performance ..................................................................................................... 1 Abridged Statement of Financial Position ............................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................ 2 Deferred income .................................................................................................................................................... 2 Overspending during the 50th anniversary celebration ......................................................................................... 3 Financial manual ................................................................................................................................................... 4 7.4 7.5 7.6 PART A – FINANCIAL INFORMATION 7.1 Audit Opinion The audit of the financial statements of the Pacific Fishing Company Limited for the year ended 31 December 2013 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 Raw materials and consumables used Changes in inventories of raw materials and finished goods Distribution costs Staff and employee benefits Depreciation and amortization expense Finance costs Other operating expense 2013 ($) 2012 ($) 30,495,018 1,805,588 32,300,606 24,249,891 681,527 24,931,418 9,149,700 (376,022) 505,535 7,682,689 1,712,999 320,477 10,648,463 7,279,495 200,177 362,463 6,249,315 2,015,766 340,435 10,161,973 Report of GCC & CSA- December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Year ended 31 December TOTAL EXPENDITURE OPERATING PROFIT/(LOSS) BEFORE INCOME TAX Income tax (expense)/credit NET PROFIT/(LOSS) AFTER INCOME TAX 2013 ($) 29,643,841 2,656,765 (508,263) 2,148,502 2012 ($) 26,609,624 (1,678,206) 1,128,470 (549,736) The company recorded a net profit of $2,148,502 in 2013 compared to a net loss of $549,736 in 2012.
This was due to the increases in sales and other income by 26% and 165% respectively.
7.3 Abridged Statement of Financial Position As at 31 December Assets Cash at bank and on hand Trade receivables Inventories Prepayments and other receivables Property, plant and equipment Deferred tax asset TOTAL ASSETS Liabilities Interest bearing borrowings Trade and other payables Provisions Deferred income TOTAL LIABILITIES NET ASSETS Accumulated Fund Share Capital Retained Profits NET ACCUMULATED FUND 2013 ($) 2012 ($) There was an improvement in PAFCO’s net assets in 2013.
Net assets increased by $2,148,501 or 14% in 2013 compared to 2012.

This was mainly attributed to the decrease in the total liabilities by $1,769,191 or 13% which resulted from the Directors resolving to write back long outstanding dividend payable of $445,000.

PART B – CONTROL ISSUES 7.4 Deferred income It is imperative that amount in the balance sheet is supported with a listing and a reconciliation.
Audit noted a variance of $162,070 between the costs of the AIDAB grant assets as per fixed assets schedule and general ledger and the balance as per Financial Statements.

Audit also noted variances in the accumulated provision of the grant assets.

Refer to Table 7.1 for details.


Report of GCC & CSA- December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Table 7.1 provision between the fixed assets schedule/general ledger and financial statements Details of variance of the cost of AIDAB granted assets and accumulated FAR No.
Cost of AIDAB granted assets Accumulated Provision - amortisation for grant assets Balance as per fixed assets schedule and general ledger Balance as per Financial Statements Variance ($) 13,374,380 8,492,014 13,536,450 8,654,086 (162,070) (162,072) Discussion with the Financial Controller revealed that no supporting documents are available to substantiate the correct balance of the cost of AIDAB granted assets.
The above variance increases the risk of incorrect financial reporting of deferred revenue grant in the financial statements.

Recommendation The Company should ensure that disclosures made in the financial statements are adequately supported with documents and listings.

Management’s Comments Requesting OAG to assist PAFCO in getting the correct figure.

This grant was given to PAFCO in 1992.

Further OAG Comments The above figure cannot be provided by OAG.
7.5 Overspending during the 50th anniversary celebration Effective budget planning starts with supplying sufficient and correct information for creating detailed and accurate budgets and cash flow forecasts, as well as understanding the wider impact of those forecasts.

Review of the Board Minutes1 revealed that the Board approved a budget of $17,500 for the 50th Anniversary Celebration.

Audit noted that the Company had spent $11,447.05 more than the approved amount of $17,500.
Refer to Table 7.2 for details Table 7.2: 50th Celebration expenditure approved against actual spending Details of Expenditure Breakdown Approved by the Board Expenditure incurred by the Company Food Employees Paid for 100 Pieces of Sulu PA Approval Hire of Roofing Iron 8,500.00 5,000.00 100.00 225.00 Total Amount ($) 17,500.00 1 Minutes of Board Meeting on 4 October 2013 Report of GCC & CSA- December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Details of Expenditure Breakdown Total Amount ($) Hire of caterers Koromakawa Food Bamboo String for the Band Transport of Goods from Suva Grog Transporting of Marquee – Return Duty for Fish Vasiti's Ticket Ingredient for curry Band Tin Boys taking chairs Hire of Table Decoration Hire of Mat Ratus ticket Chair Hire of MH Truck Red Cross Total Amount Spent Overspent 1,750.00 5,530.80 300.00 75.00 200.00 100.00 5,161.00 171.90 70.00 19.35 700.00 70.00 100.00 120.00 150.00 50.00 55.00 279.00 180.00 40.00 28,947.05 11,447.05 No evidence exists to indicate that the overspending was authorised.
The anomaly indicates lack of controls in the use of monies to finance the celebration.

Recommendation The Company should ensure that prior approval is obtained from the Board before incurring additional expenditures.

Management Comments The company will obtain prior approval from the Board before incurring such expenditures.

In this case, the Board only approved for Sulu and meals for workers.

Other cost such as set up, caterers, bands, meal for Guest, etc.

were missed out.
were missed out.

7.6 Financial manual A Finance Manual sets out policies and procedures needed for the efficient and effective management of the company and effective internal controls.

It is also a function of good corporate governance.

The Finance Manual should be drafted in accordance with the Public Enterprise Act and any other regulations relating to the company’s operation.

It should also include the delegations of authority to senior management including the Board.
Audit noted that the company does not have a Finance Manual.

Report of GCC & CSA- December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 In absence of the Finance Manual, audit was not able to ensure if relevant internal controls in financial operations of the company are practised.

Additionally, risk of abuse and mismanagement of company’s cash and other assets is high.
Recommendation PAFCO should ensure that immediate actions are taken to ensure that a Finance Manual is drafted, approved and implemented immediately.

Management’s Comment FC with the help of CEO will draft a Finance Manual and submit it to the Board before the end of year 2014.

Further OAG Comments This issue is on-going from previous years and needs immediate attention of the Management to address it.
Report of GCC & CSA- December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 8: FIJI BROADCASTING CORPORATION LIMITED Programme Statement The Fiji Broadcasting Corporation Ltd (FBCL) is a government commercial company corporatized in 1998 under the government’s public sector reform programme.
The FBCL is responsible for providing commercial and public broadcasting services nationwide and operates six radio stations in the three major languages of Fijian, Hindustani and English.
Table of Content 8.1 8.2 8.3 8.4 8.5 8.6 SECTION 8: FIJI BROADCASTING CORPORATION LIMITED ......................................................................................... 1 PART A – FINANCIAL INFORMATION ............................................................................................................................... 1 Audit Opinion 2012 .............................................................................................................................................. 1 Abridged Statement of Financial Performance ................................................................................................... 2 Abridged Statement of Financial Position – Balance Sheet ................................................................................ 2 Audit Opinion 2013 .............................................................................................................................................. 3 Abridged Statement of Financial Performance ................................................................................................... 3 Abridged Statement of Financial Position – Balance Sheet ................................................................................ 4 PART B – CONTROL ISSUES ............................................................................................................................................. 4 8.7 Government grant accounting not in accordance with IAS 20 ............................................................................ 4 8.8 Business efficiency and viability .......................................................................................................................... 5 PART A – FINANCIAL INFORMATION 8.1 Audit Opinion 2012 The audit of the financial statements of the Fiji Broadcasting Corporation Limited for the year ended 31 December 2012 resulted in the issue of a qualified audit report.
The qualification is as follow:  As explained in note 3(p) to the financial statements, the company accounts for all government grants received after 1 January 2010 are treated as capital contribution.
This is a departure from International Accounting Standard (IAS) 20 Accounting for Government Grants and Disclosure of Government Assistance which requires government grants provided to compensate the Company for expenses incurred to be recognized in profit or loss as other income on a systematic basis in the same period that the expenses are recognized.
The Company’s records indicate that had the Company complied with IAS 20 the impact would be to reduce loss before tax and capital contribution by (2011: $2,530,434 and 2012: $2,566,810) and increase other income by (2011: $2,530,434 and 2012: $2,566,810).
Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 8.2 Abridged Statement of Financial Performance Items Income Income from Advertising, Programs and Special Events Other Income Total Income Expenditure Administration and Other Operating Expenses Marketing Expenses Finance Costs Total Expenditure Operating loss before income tax Income tax expense Net loss for the year after income tax 2012 ($) 2011 ($) 6,428,631 3,663,514 153,494 6,687,342 3,817,008 258,711 10,588,302 4,402,945 447,238 1,078,872 2,012,950 30,690 13,680,124 4,880,873 6,992,782 1,063,865 73,724 7,103,051 1,137,589 110,269 The Company recorded a net loss after income tax of $7,103,051 in 2012 compared to a net loss after income tax of $1,137,589 in 2011.
The increase in net loss was mainly attributed to the increase in depreciation expenses from the upgrading works relating to the launching of the company’s television services which were still work in progress in 2011.

There were also increases in program expenses, motor vehicle expenses, salaries and wages and finance costs.
8.3 Abridged Statement of Financial Position – Balance Sheet As at 31 December Current Assets Cash and Cash Equivalent Restricted Cash Trade and Other Receivables Other Current Assets Total Current Assets Non-Current Assets Property, Plant & Equipment Deferred Tax Asset Total Non-Current Assets Total Assets Current Liabilities Trade & Other Payable Interest Bearing Borrowings Other Current Liabilities Total Current Liabilities Non-Current Liabilities Interest Bearing Borrowings Deferred Income Total Non-Current Liabilities Total Liabilities Net Assets Shareholder’s Equity 2012 ($) 2011 ($) Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 As at 31 December Share Capital Share Premium Reserve Capital Contribution Accumulated Losses Total Shareholder’s Equity 2012 ($) 200,002 3,913,355 7,683,911 (9,447,381) 2,349,887 2011 ($) 200,002 3,913,355 5,117,101 (2,344,330) 6,886,128 Net assets decreased by $4,536,241 or 65.8% in 2012 compared to 2011 mainly due to the decrease in Property, Plant and Equipment (PPE) as a result of increase in depreciation of those PPE which were still Work in Progress in 2011.
There is also an increase in interest bearing borrowings by $728,470 in 2012.

8.4 Audit Opinion 2013 The audit of the financial statements of the Fiji Broadcasting Corporation Limited for the year ended 31 December 2013 resulted in the issue of a qualified audit report.

The qualification is as follow:  As explained in note 3(p) to the financial statements, the company accounts for all government grants received after 1 January 2010 as capital contribution.
This is a departure from IAS 20 Accounting for Government Grants and Disclosure of Government Assistance which requires government grants provided to compensate the Company for expenses incurred to be recognized in profit or loss as other income on a systematic basis in the same period that the expenses are recognized.
The Company’s records indicate that had the Company complied with IAS 20 the impact would be to reduce loss before tax and capital contribution by (2012: $2,566,810 and 2013: $2,910,000) and increase other income by (2012: $2,566,810 and 2013: $2,910,000).
8.5 Abridged Statement of Financial Performance Items Income Income from Advertising, Programs and Special Events Other Income Total Income Expenditure Administration and Other Operating Expenses Marketing Expenses Finance Costs Total Expenditure Operating loss before income tax Income tax expense Net loss for the year after income tax 2013 ($) 2012 ($) 8,042,530 408,238 8,450,768 6,428,631 258,711 6,687,342 11,270,219 1,351,553 1,431,770 14,053,542 (5,602,774) 0 (5,602,774) 10,588,302 1,078,872 2,012,950 13,680,124 (6,992,782) 110,269 (7,103,051) Total income increased by $1,763,426 or 26% due to increases in income from advertising, programs and special events.
This contributed to the decline in net loss by $1,500,277 or 21%.
Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 8.6 Abridged Statement of Financial Position – Balance Sheet As at 31 December Current Assets Cash and Cash Equivalent Trade and Other Receivables Held to maturity term deposit Other Current Assets Total Current Assets Non-Current Assets Property, Plant & Equipment Total Non-Current Assets Total Assets Current Liabilities Trade & Other Payable Interest Bearing Borrowings Other Current Liabilities Total Current Liabilities Non-Current Liabilities Interest Bearing Borrowings Deferred Income Total Non-Current Liabilities Total Liabilities Net Assets Shareholder’s Equity Share Capital Share Premium Reserve Capital Contribution Accumulated Losses Total Shareholder’s Equity 2013 ($) 2012 ($) 276,075 1,919,421 1,336,773 615,984 4,148,253 161,181 1,377,429 336,773 905,455 2,780,838 18,226,196 18,226,196 22,374,449 21,517,376 21,517,376 24,298,214 1,569,998 1,418,757 133,572 3,122,327 19,449,421 145,588 19,595,009 22,717,336 (342,887) 200,002 3,913,355 10,593,911 (15,050,155) (342,887) 979,437 1,435,601 125,385 2,540,423 19,190,672 217,232 19,407,904 21,948,327 2,349,887 200,002 3,913,355 7,683,911 (9,447,381) 2,349,887 Net assets decreased by $2,692,774 or 114.6% in 2013 compared to 2012 mainly due to the decrease in Property, Plant and Equipment by $3,291,180 as a result of depreciation.
Interest bearing borrowings increased by $728,470 in 2013.

PART B – CONTROL ISSUES 8.7 Government grant accounting not in accordance with IAS 20 Fiji Broadcasting Corporations Limited (FBCL) accounts for all government grants received post 2010 as capital contribution based on a circular issued by the government.
IAS 20.3 defines government grants as assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

Grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets.
The government grants received by FBCL meet the definition of a grant in that they constitute government assistance provided to enable FBCL to broadcast in the outer stations and local programmes.
Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 IAS 20.12 specifically requires that government grants are recognised as income over the periods in which the related costs which they are intended to compensate are recognised, on a systematic basis.
Government grants related to assets, are required to be presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset and released to profit or loss as the underlying asset is depreciated or amortised (IAS 20.24-27).
The Government is providing this funding to enable Fiji Broadcasting Corporation of Fiji to provide public service broadcasting and to promote local programs on both radio and television.

The Government is providing grants in its capacity as the Government (to provide public service broadcasting in Fiji) and not as the shareholder of FBCL.

An uncorrected misstatement was included to show the impact of this.
By following the Government’s circular requiring FBCL to treat the government grant received as a capital contribution, FBCL is not in compliance with IAS 20.

Recommendation Management should liaise with the Ministry concerned and correct the accounting treatment of government grants so that it is in compliance with IAS 20.
Management Comment During the final stages of the audit of 2012 & 2013 Financial Statements, meeting was held between representatives of Office of Auditor General and the auditors’ KPMG at FBC to discuss the above matter.

OAG had also provided FBC with a letter requesting that government grant be treated in compliance with the IFRS standards which was also agreed by KPMG.
FBC provided copies of memo that was sent by Ministry of Public Enterprises together with copies of the cabinet decision which directs all State owned Enterprises to comply with the decision that government grant is to be treated as additional capital injection into the entity instead of revenue.

However, upon receipt of the letter from OAG, FBC wrote to the MPE seeking further clarifications on the request made by the auditors.

No updates have been received from MPE.


8.8 Business efficiency and viability Audit noted the following going concern issues as raised by the Directors in their report to the financials and Note 3 (c) accompanying the accounts:  Shareholder’s funds had a deficit of $342,887 in 20131.

 The company has been incurring losses for the last four years (2010: $516,943, 2011: $1,137,589, 2012: $7,103,051, 2013: $5,602,774).
Notes 3 (c ) to the accounts has also explained the situation if for any reason the company is unable to continue as a going concern, it could have an impact on the company’s ability to realise assets at 1 the company’s negative cash flows from operating activities of $1,319,736 would be resolved if the IAS 20 is complied with to recognise Government contribution as (grant) revenue.
Report of GCC & CSA – December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 their recognized values to meet liabilities in the normal course of business at the amounts stated in the financial statements.
The deficit of $342,887 for the shareholder’s equity in the Statement of Financial position indicate that the company does not have enough assets ($22.4 million) to match all the company’s borrowing to external parties (liabilities) totalling $22.7 million.

The major component of the liability is Interest bearing borrowings of $19.4 million in 2013 is guaranteed by the Government of Fiji.
In addition, the losses reported for the past 4 years demonstrate high operating costs incurred especially as the result of the expansion of the company into television business and the company’s inability to generate adequate revenue in addition to the government contribution to finance its business costs.

The company may also need some expert review of its business operations to identify areas that may need to be streamlined to reduce its business costs.
Recommendation The Company should review its current business operations and adopt a strategy to improve on the issues highlighted above.

Management Comments It is to be noted that there exists a Public Service Broadcast Contract for Radio and for FBC TV.

The current contract expires in 2016.

The contract clearly states the amount of money that is to be paid by the government to FBC for supply of radio and free to air television service.
All the services to be performed shall be for all intents and purpose to entertain, inform and educate the public with the emphasis on income generation to return profit to the government on its investment and repayment of start-up moneys borrowed to ensure maintenance of high quality of programming, transmission and public service broadcast by the government-owned corporation.
There also exists a government guaranteed loan that was taken entirely to finance the upgrade of radio and TV project and has an unexpired term of approximately 10 years.

Since this project involved acquisition of radio and TV equipment, there also exists high depreciation and repairs and maintenance costs associated with it and it was forecasted that FBC will incur losses due to high costs associated with operating the TV and radio station at least for few years after completion of the upgrade project.
The emphasis has always been on the advertising arm of TV and Radio stations and since these associated costs will reduce year after year, FBC’s equity as well as profitability levels will gradually improve in years to come.

Shareholders’ Funds had a deficit of $342,887 in 2013 because of high depreciation costs which started after the completion of the upgrade project from financial year 2012.

The current ratio is positive and progress has been noted as compared to previous year (2012).
The deficit shareholders equity value will improve in years to come as the WDV of fixed assets will decrease and so does the depreciation expenses.

There also exists cabinet decision which directs all State owned Enterprises to comply with the decision that government grant is to be treated as additional capital injection into the entity instead of revenue.
The whole logistics behind the government guaranteed loan was that FBC will incur losses for certain years and with reducing loan commitment, depreciation and programming expenses; profits will be recorded in years to come.

Apart from this, the company has an operational/ capex budget with it clearly monitors on a timely manner.
Report of GCC & CSA – December 2014 Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 9: FIJI ELECTRICITY AUTHORITY Programme Statement 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 by 2011.
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 Content PART A – FINANCIAL INFORMATION ............................................................................................................................... 1 Audit Opinion ..................................................................................................................................................... 1 Statement of Comprehensive Income ............................................................................................................... 1 Abridged Statement of Financial Position .......................................................................................................... 2 9.1 9.2 9.3 PART A – FINANCIAL INFORMATION 9.1 Audit Opinion The audit of the financial statements of the Fiji Electricity Authority for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
9.2 Statement of Comprehensive Income Year Ended 31 December 2013 $’000 2012 $’000 Revenue Operating revenue – sale of electricity Other operating income Total Revenue Expenditure Personnel expenses Fuel costs Lease and rent expenses Electricity purchases Depreciation Amortisation of intangible assets Cyclone Evan – Restoration costs Losses due to flooding Other operating expenses Total Expenditure Profit before Finance Costs & Income Tax Report of GCC & CSA – December 2014 292,916 4,983 297,899 17,960 122,606 9,334 1,319 36,312 434 - - 48,776 236,741 61,158 290,451 5,852 296,303 17,377 105,136 1,375 10,045 34,522 522 5,013 1,314 42,788 218,092 78,211 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Year Ended 31 December Finance costs Operating profit before income tax Income tax (expense)/ benefit Net profit for the year after income tax 2013 $’000 2012 $’000 20,134 41,024 (8,443) 32,581 16,375 61,836 13,509 75,345 The Authority recorded a reduction in net profit after tax of $42.7 million or 57% in 2013 compared to 2012.
This was attributed mainly to the increase in operating expenditure, specifically, fuel costs.

The income tax expense charged in 2013 also contributed to the reduced net profit at year end.
9.3 Abridged Statement of Financial Position As at 31 December Assets Cash and cash equivalents Held to maturity financial assets Receivables and prepayments Property, plant and equipment Other current assets Other non- current assets Total Assets Liabilities Interest bearing borrowings Deferred tax liabilities Other current liabilities Other non-current liabilities Total Liabilities Net Assets Capital and Reserves Retained profits Capital contribution Total Capital and Reserves 2013 $’000 2012 $’ Net assets increased by $36 million or 7% in 2013 compared to 2012 mainly due to the increase in total assets, specifically cash and cash equivalent.
The reduction in interest bearing borrowings also contributed to the increased net assets.

Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 10: POST FIJI LIMITED Programme Statement Post Fiji Ltd commenced its operations on 1 July 1996 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 10: POST FIJI LIMITED ......................................................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 10.1 Audit Opinion 2013 ................................................................................................................................................. 1 10.2 Abridged Statement of Financial Performance ...................................................................................................... 1 10.3 Abridged Statement of Financial Position – Balance Sheet ................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................ 3 Improvement in International Receivable and Payable Reconciliations ................................................................. 3 10.4 10.5 Internal Audit function to be strengthened ............................................................................................................. 3 10.6 Anti-Fraud Program and Corporate Governance ................................................................................................... 4 UNRESOLVED PRIOR YEAR ISSUES .................................................................................................................................. 5 10.7 Journal entries with supporting documents ............................................................................................................ 5 10.8 Recognition of insurance claims.
........................................................................................................................... 5 10.9 Accounting for international mail, EMS and parcel receivables and payables to be improved .............................. 6 10.10 Corporate governance and finance manual to be updated .................................................................................... 7 10.11 Formalize doubtful debts provisioning policy ......................................................................................................... 7 PART A – FINANCIAL INFORMATION 10.1 Audit Opinion 2013 The audit of the financial statements of the Post Fiji Limited for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
10.2 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 Finance Income 2013 ($) 2012 ($) 8,169,478 5,316,823 1,869,646 13,570,290 1,337,057 50,194 8,351,043 4,257,855 2,260,395 8,131,706 1,510,981 68,915 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Items Total Income Expenditure Cost of Sales Depreciation and Amortisation Expenses Employee Benefits Expense Administration and Operating Expenses Selling, Marketing and Distribution Expenses Other Operating Expenses Finance Costs Total Expenditure Operating (loss)/profit before income tax Income tax benefit/(expense) Net (loss)/ Profit for the year after Income Tax 2013 ($) 30,313,488 2012 ($) 24,580,895 6,840,335 1,300,953 7,307,347 13,084,012 236,420 17,675 103811 28,890,553 1,422,935 (263,545) 1,159,390 6,988,931 1,442,090 6,548,413 8,930,652 235,417 20,781 39,793 24,206,077 374,818 (140,967) 233,851 The Company recorded a net profit after income tax of $1,159,390 in 2013.
The improvement in the company’s operation was mainly attributed to the increase in total revenue by $5,732,593.
10.3 Abridged Statement of Financial Position – Balance Sheet As at 31 December Current Assets Cash and Cash Equivalent Trade and Other Receivables Other Current Assets Total Current Assets Non-Current Assets Property, Plant & Equipment Other Non-Current Asset Total Non-Current Assets Total Assets Current Liabilities Trade & Other Payable Other Current Liabilities Total Current Liabilities Non-Current Liabilities Trade and Other Payables Other Non-Current Liabilities Total Non-Current Liabilities Total Liabilities Net Assets Shareholder’s Equity Share Capital Accumulated Profits Total Shareholder’s Equity 2013 ($) 2012 ($) Net assets increased by $1,042,465 or 9% in 2013 compared to 2012 due to the net profit realized in 2013.
Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 PART B – CONTROL ISSUES 10.4 Improvement in International Receivable and Payable Reconciliations The monthly balance sheet reconciliations are not reviewed by an independent reviewer.
The reconciliation is prepared using the values from the three quarters (actual/verified by the debtor) plus an estimation of the 4th quarter whereby CN 56 is prepared from letter bills received for the month end (because the books closed are at 31/12/2013).

The weights are converted to SDR (Universal Postal Union rate) then converted to FJD (using IMF rate/exchange rate).
Furthermore, the audit noted that the international mail receivable and payable reconciliation did not agree to the general ledger by $179,333 at 31 December 2013.

The absence of review may result in errors or irregularities not being detected and corrected on a timely basis.

Recommendation The Financial Controller should review all reconciliations for these balance sheet accounts and ensure that reconciling items and other anomalies are investigated and corrected on a timely basis.
Management Comment Management takes note of the DAM report and recommendations.

Management will ensure that all reconciliations are carried out diligently and verified correct by the Financial Controller.

We will also rectify the variance between the international mail receivable and payable reconciliation against the general ledger and pass corrective journals.
10.5 Internal Audit function to be strengthened The audit plan for the 2013 financial year included coverage of the 77 Post Offices, however upon inquiries with the Internal Audit Manager, audit noted the following: • The plan was not effective as it was not carried out in its entirety.

This resulted from internal audit having to conduct ‘special investigations’ at certain post offices.
• At some offline stations, internal audit staff would leave without finishing all of the planned audit procedures due to transportation issues.

Internal audits may not be conducted appropriately and internal control failures or areas of improvement may not have been fully identified.

Recommendations • The planned audits should be completed within the financial year.

Any exceptions should be agreed with the Board/ Audit Committee.
• Where audits are not fully conducted, additional time should be scheduled to complete these audits within a short timeframe.

• Management may also need to consider whether the internal audit department is adequately resourced.

Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Management Comment Management takes note of the DAM report and recommendations.
Management will liaise with Internal Audit Manager to ensure that the planned audits are completed during the financial year and any exceptions to be reported immediately.

However, it should also be noted that in the event of misappropriations and discrepancies, the internal audit departments gets informed of the incidents and are often requested to conduct investigations which could be quite time consuming.

Hence the planned audit schedules for the year may not get quite fulfilled.
Every effort shall be made to ensure that the planned audits are carried out as scheduled.

10.6 Anti-Fraud Program and Corporate Governance Review of the Corporate Governance and Anti-Fraud program and control revealed the following areas for improvement: • Currently there is no structured fraud risk assessment in place.

• Audit noted that the internal audit reports provided are general in nature.

• No training was held in the rural post offices where most losses/theft and fraud occur.
• CEO position has been vacant since 2011.

Currently the board chairman is performing the role of CEO.

• There is no policy stating the minimum numbers of directors as directors are chosen by Ministry of Public Enterprise.

The Board of the company is comprised of the minimum number of 2 directors and 2 Board reps i.e.

from the Ministry of Finance and Ministry of Public Enterprise.
• There should have been 6 board meetings during the year, however, audit noted there were only 5 board meetings held during the year.

The lack of programs/ controls/ policies increase the risk of errors and irregularities being undetected and being communicated to those charged with governance.

Additionally, appropriate mitigating controls may not be in place to address fraud risk areas.
Recommendation Management and those charged with governance should implement the controls/ programs/ policies to address the areas of improvement noted in our observations.

Management Comment Your comments are noted and some observations are made below.

The review of our controls and policies is on-going and more attention will be given in order to mitigate and reduce the risk of fraud from taking place.
Our internal audit will work towards improving the contents of their audit reports and to be more specific on their findings.

Our HR & Training shall conduct more training to help eradicate fraud particularly in the rural areas.

The Board has already brought this matter to the attention of our Ministry and we hope to have an update on this at the next Board meeting.
Although there were five board meetings held during the year, the Board was able to cover the activities of the financial year in these meetings.
Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 UNRESOLVED PRIOR YEAR ISSUES 10.7 Journal entries with supporting documents Audit noted the following discrepancies: • Instances of double posting of payments which arise from staff having insufficient accounting knowledge to authorize journal entries; In some instances, supporting documents to the manual journals passed were not attached.
• • A number of journal entries were not independently reviewed by appropriate personnel.

Refer to Table 10.1 below for details of a sample of manual journals passed that lacked review and supporting documents.
Table 10.1: Manual journals passed lacking review and supporting documents Journal Number PA002 Description Amount ($) Comments Mail, EMS, Parcels A/CC 2,999,889 PA448 Unrealised Exchange Gain 601,000 PJ053 Adjustment Wrong Allowance 100,000 No supporting documents attached No supporting documents attached No approval or review of this journal These discrepancies increase the risk of errors and anomalies not being on a timely basis.
Recommendations • Journal entries should be prepared by the Accountant and reviewed by the Financial Controller who had sufficient accounting knowledge.

• Supporting documents should be attached with the journal vouchers in order to provide reasonable evidence of journal entries passed and facilitate an easier review process for the reviewer.

Management Comment Management takes note of the DAM report and recommendations.
Management will ensure that all journals prepared are reviewed before they are recorded in the financial systems.

We will also ensure that all relevant supporting documents are provided and attached with the Journal vouchers as a reasonable evidence for the occurrence of those Journals.

10.8 Recognition of insurance claims.


At 31/12/13 Post Fiji has a total receivable of $559,313 (net of impairment provisions) relating to monies and inventories that have allegedly been stolen and are awaiting recovery from insurers.

$454,863 of this relates to 2012 and prior years.

Management explained that these cases are all subject to police investigation.
In some cases the police investigation has completed and the matter is awaiting (or in the process of) prosecution through the court while for others the investigation is in progress.

On this basis management expect the insurer to pay the claim and have therefore booked a receivable.
Report of GCC & CSA – December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 In our view these amounts should be disclosed as contingent assets under IAS37 and not recorded as receivables until the insurer has confirmed in writing that they will pay the amount of the claim, as without this the recovery is not considered virtually certain.

The recognition of insurance recoverable as receivables may overstate receivables balance.
Recommendation Audit have included this in the summary of unadjusted audit differences and recommended that management reassess their accounting for future claims.

Management Comment Management takes note of the DAM report and recommendations.

Management is in the process of reviewing all the insurance claims that have been lodged and recorded as receivables and further consideration will be given.
10.9 Accounting for international mail, EMS and parcel receivables and payables to be improved The accounting for international mail, EMS and parcel receivables and payables balances should be improved.

Audit noted the following: • Quarter four receivable and payable balances are confirmed by the respective countries by the seventh month of the subsequent financial year as is the universal postal union process worldwide.
Accordingly, an estimate is made by management to record the receivable and payable for the fourth quarter.

Audit noted Post Fiji did not maintain a system to monitor the estimate made by management against the actual quarterly balances subsequently confirmed by the respective countries.

Consequently, management may not fully ascertain the accuracy of the estimate.

Furthermore, the differences between the estimate and the actual are posted in the subsequent financial year.
• Audit noted that there are long outstanding balances for international mail, EMS and parcel receivables.

• Post Fiji has not made an assessment or raised a provision for international mail, EMS and parcel receivables.

There is a risk that international mail, EMS and parcel post receivables and payables balances may be misstated.
Fourth quarter variances posted in the following financial year may materially misstate the international mail, EMS and parcel post receivables and payables balances, revenue and expenses.

There is a risk that these balances would increase over the years and not get receipted or paid.
Recommendations • Post Fiji Limited should implement systems to monitor quarterly variances between the estimate and actual balances to determine the trends and include these results in calculating the estimate at the end of the financial year.

This will assist in assessing the impact of any under/over accrued on the financial statement.

• Specific actions should be taken to clear long outstanding receivable and payable balances before they escalate to an irrecoverable position.
• Post Fiji should make an assessment for provision against international mail, EMS and parcel receivables where amounts are not considered recoverable.

Report of GCC & CSA – December 2014 Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Management Comment Management takes note of the DAM report and recommendations.
Management is in the process of reviewing the international mail accounting procedures and will try improving on the estimation of fourth quarter receivables and payables.

However it should be noted that the nature of this business is such that we estimate based on the activity reports received.

The actual are only confirmed once the confirmations are received from the other postal administrations, which takes about 6 to 8 months.
In terms of long outstanding of the receivables and payables Post Fiji is making all the effort to have the balances reduced.

It should be noted that the collection or payable amounts work on an offset basis with other postal administrations.

Post Fiji Limited will also make provisions for long outstanding in 2014.
10.10 Corporate governance and finance manual to be updated The Company does not have an up to date documented policy relating to the corporate governance framework and accounting policies and procedures.

Audit noted that the Company currently implements the 2006 Corporate Governance and Finance manuals.

Changes to or new policies and procedures have not been updated in the formal document and subsequently approved by management.
Accordingly, what may occur in practice may not be consistent with the policy or procedure documented in the manual.

Documentation of corporate governance and accounting policies and procedures is important for operational efficiency in the company and accounting department and for an effective system of internal control.
Recommendations • Management should undertake a project to review the company’s corporate governance and finance manual to check if the policies and procedures included in the policy document are applicable and relevant to the Company’s current operations.

An updated policy and procedures manual should be formally approved by management and implemented.

• The policies and procedures should be comprehensive to ensure that all gaps and financial risks area appropriately addressed.
This should be updated on a regular basis for changes in the business and new accounting standards.

Management Comment Management takes note of the DAM report and recommendations Post Fiji Limited is in the process of changing its Post of Sales system, payroll and financial systems.

The reviewed and updated finance manual needs to incorporate all the process and procedures in aligned with the new systems and their requirements.
Once the systems are fully implemented in 2014, the new finance policy will be worked on and all changes incorporated with accounting standards.

10.11 Formalize doubtful debts provisioning policy Audit noted that Post Fiji Ltd does not currently have a formal doubtful debts provisioning policy.
Report of GCC & CSA – December 2014 Page 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Management does not utilize a systematic method for the review of accounts receivable to determine the adequacy of the related allowance for doubtful accounts.

Rather, a one-time review of the collectability of accounts receivable is performed at year-end based on judgment.
Lack of periodic, systematic reviews of the accounts for collectability may result in unexpected increases in the allowance and the expense.

Recommendations • Standard procedures for the periodic review of accounts receivable balance should be established and documented.

The procedures should include consideration of the aging of the balance, payment history and extent of lien coverage for each account.
• Establishing and implementing standard review procedures will result in a more accurate estimate of the allowance for doubtful accounts and improve periodic financial reporting by providing management with a consistent method of performing the review of accounts receivable.

Management Comment Management takes note of the DAM report and recommendations.

Post Fiji management will be reviewing the finance policy manual and will include the accounts receivable policy into the manual.
It will also include the policy on accounts receivable impairment.

This task has been planned to be carried out after the implementation of the new financial system.
Report of GCC & CSA – December 2014 Page 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 11: UNIT TRUST OF FIJI (MANAGEMENT) LIMITED Programme Statement 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.

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.
Table of Content SECTION 11: UNIT TRUST OF FIJI (MANAGEMENT) LIMITED .......................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 11.1 Audit Opinion - 2013 ............................................................................................................................................. 1 11.2 Abridged Statement of Financial Performance ..................................................................................................... 1 11.3 Abridged Statement of Financial Position ............................................................................................................. 2 PART A – FINANCIAL INFORMATION 11.1 Audit Opinion - 2013 The audit of the financial statement for the Unit Trust of Fiji (Management) Limited for the year ended 31 December, 2013 resulted in the issue of an unqualified audit report.
11.2 Abridged Statement of Financial Performance Year Ended 31 December Revenue Operating Revenue Other Operating Income Total Operating Revenue Expenditures Personnel Expenses Other Operating Expenses Depreciation Total Operating Expenditure Profit before Income Tax Income tax expenses Net profit for the year 2013 ($) 2012 ($) 1,461,212 26,521 1,487,733 494,089 580,890 112,780 1,187,759 299,974 60,922 239,052 1,291,356 66,366 1,357,722 476,951 491,284 109,868 1,078,103 279,619 52,471 227,148 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 UTOF recorded a net profit of $239,052 in 2013, an increase of $11,904 or 5.2% compared to 2012.
The increase in net profit was due to the increase in fee income from manager’s remuneration and preliminary charges received during the year.

The manager’s remuneration is a fee received from UTOF Trustee which is 1.5% on the total value of all Unit Trust of Fiji deposited property.

Preliminary charges are the entry fee at a rate of 2% received from unit holders of the Unit Trust of Fiji.
11.3 Abridged Statement of Financial Position As at 31 December Current assets Cash at bank and on hand Investment – held to maturity Receivables Total current assets Non-current assets Plant and equipment Intangible Assets Total non-current assets Total assets Current liabilities Creditors and accruals Provision for Income tax 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 2013 ($) 2012 ($) Total assets increased by $203,791 or 16.7% due to the increase in receivables by $475,557 relating to accruing of manager’s remuneration and reimbursement of repurchases of units.
Total liabilities also increased by $78,313 or 39.4% as the result of increases in creditors and accruals by $72,791 or 38.6%, provision for income tax by $2,355 or 103.9% and deferred income tax liability by $3,167 or 40.3%.

The increase in shareholders’ equity resulted from a net profit of $239,052 with $113,574 as dividend for the year 2012 being paid to shareholders at $2.27 per share.
Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 12: FIJI MEAT INDUSTRY BOARD Programme Statement The Fiji Meat Industry Board was established in 1976 through the Meat Industry Act 1970 to regulate and control the slaughtering of livestock.
The functions of the Board include the following:   to construct and operate public slaughtering facilities as approved by the Minister; to take all steps, with the approval of the Minister, deem desirable for purposes connected with the protection, preservation and expansion of the meat industry in Fiji;  with the approval of the Minister, to borrow such capital monies as may be required; and  when directed by the Minister, to purchase trade or deal in livestock or meat.
The Fiji Meat Industry Board became a restructured Commercial Statutory Authority from 2006.
Table of Contents SECTION 12: FIJI MEAT INDUSTRY BOARD ................................................................................................................. 1 PART A - FINANCIAL INFORMATION ............................................................................................................................. 1 Audit Opinion - 2013 ....................................................................................................................................... 1 12.1 Abridged Statement of Comprehensive Income ............................................................................................. 1 12.2 Abridged Statement of Financial Position ....................................................................................................... 2 12.3 PART A - FINANCIAL INFORMATION 12.1 Audit Opinion - 2013 The audit of the financial statements of the Fiji Meat Industry Board for the year ended 31 December 2013 resulted in an unqualified audit report.
Attention was however drawn to the following matter: Cash and cash equivalent of $215,650 is inclusive of $23,557 as lodgments not yet credited alleged to have been misappropriated in 2010.
12.2 Abridged Statement of Comprehensive Income 2013 ($) 2012 ($) 3,592,004 263,509 3,855,513 3,535,350 340,674 3,876,024 Year Ended 31 December Revenue Operating Income Other Revenue Total Revenue Expenditure Changes in inventories – finished goods Raw materials and consumables used Staff costs Depreciation expense Other operating expenses Profit from Operations Finance Cost Report of GCC & CSA – December 2014 (1,098,351) (158,851) (895,749) (254,501) (1,029,545) 418,516 (91,535) (1,129,269) (206,290) (825,119) (187,657) (1,051,598) 476,091 (100,730) Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Year Ended 31 December Total comprehensive income for the year 2013 ($) 326,981 2012 ($) 375,361 The decrease in total comprehensive income in 2013 by 13% compared to 2012 was due to the following:  other revenue declined as there was no gain on sale of plant & equipment recorded; and  slight increase in total operating costs as a result of increases in staff costs and depreciation expenses.
12.3 Abridged Statement of Financial Position As at 31 December Assets Cash and cash Equivalents Held to maturity investment Receivables Inventories Property, Plant & Equipment Total Assets Liabilities Payables Interest Bearing Borrowings Deferred Income Total Liabilities Net Assets Equity Retained Earnings Total Equity 2013 ($) 215,650 201,044 381,385 122,162 2,106,686 3,026,927 243,268 1,074,824 508,300 1,826,392 1,200,535 1,200,535 1,200,535 2012 ($) 132,717 195,681 343,892 121,425 1,771,314 2,565,029 281,014 1,088,461 322,000 1,691,475 873,554 873,554 873,554 The increase in net assets in 2013 compared to the previous year was largely due to the grant in kind from the Government in the form of two fully refrigerated trucks valued at $333,500 in 2013.
Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 13: PUBLIC RENTAL BOARD Programme Statement 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 Contents 13.1 13.2 13.3 SECTION 13: PUBLIC RENTAL BOARD ............................................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 Audit Opinion – 2013 .......................................................................................................................................... 1 Abridged Statement of Financial Performance .................................................................................................. 1 Abridged Statement of Financial Position .......................................................................................................... 2 PART B – CONTROL ISSUES ................................................................................................................................................ 2 Credit balances in accounts receivable .............................................................................................................. 2 Unallocated subsidy ........................................................................................................................................... 3 Long outstanding VAT liability ............................................................................................................................ 4 Deferred revenue balance .................................................................................................................................. 5 13.4 13.5 13.6 13.7 PART A – FINANCIAL INFORMATION 13.1 Audit Opinion – 2013 The audit of the financial statements of the Public Rental Board for the year ended 31 December 2013 resulted in the issue of an unqualified audit report.
13.2 Abridged Statement of Financial Performance Year ended 31 December Revenue Rental Revenue Operating Income Interest Revenue Total Operating Income Expenses 2013 ($) 2012 ($) 2,699,895 227,290 4,337 2,931,522 2,632,329 169,189 5,066 2,806,584 Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Year ended 31 December Depreciation Staff Costs Other Operating Expenses Finance Cost Total Expenses Net Profit for the Year 2013 ($) 339,511 1,108,978 1,042,085 121 2,490,695 440,827 2012 ($) 365,381 1,123,012 1,290,298 19,328 2,798,019 8,565 The Board’s net profit increased $440,827 in 2013 compared to $8,565 in 2012.
This was mainly attributed to the increase in rental revenue as a result of the increase in monthly rental charge for two housing estates, namely Votua and Natabua.

The Board’s expenses also declined by $307,324 in 2013 mainly due to less general maintenance undertaken for the housing estates during the year as compared to 2012.
13.3 Abridged Statement of Financial Position As at 31 December 2013 ($) 1,355,639 77,585 115,839 7,527,305 9,076,368 Assets Cash Investments Other Assets Property, Plant & Equipment Total Assets Liabilities 2,616,711 Creditors 879,318 Deferred Revenue 1,014,712 Borrowings Employee Entitlement 235,241 Total Liabilities 4,745,982 4,330,386 Net Assets 4,330,386 Total Equity 2012 ($) 1,336,820 77,745 138,074 7,193,381 8,746,020 2,938,085 709,169 1,014,712 194,495 4,856,461 3,889,559 3,889,559 Net assets increased by $440,827 or 11% in 2013 compared to 2012.
This was due to the increase in property, plant and equipment by $333,924 or 5% as the result of the completion of a community hall in the housing estate of Noadamu in Labasa and also the purchase of tools and equipment.

PART B – CONTROL ISSUES 13.4 Credit balances in accounts receivable Credit Balances in the Accounts Receivable comprises of overpayments of rentals by tenants and/or allocation of rental subsidies to tenants who were paying higher than the minimum required amount of rent.
The audit noted that the credit balances in rent receivable for the year 2013 was $417,736.

Refer to Table 13.1 for examples of credit balances.

Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Table 13.1: Credit Balances in Accounts Receivable Tenant Estate and Flat No.

Maria Kanito Naodamu.

Flat No.

504/06 Naodamu.
Flat No.504A/13 Total rent charge from weeks 1 to 52 in 2013 ($) 1,430.00 Total rent paid by tenants in 2013 ($) Total rent paid by subsidy in 2013 ($) Balance Opening Balance 2013 Balance as at 31 December 2013 1,500.00 1,047.00 (1,117.00) (6,501.95) (7,596.14) 1,430.00 (1,040.00) (1,272.00) (882.00) (8,441.50) (9,323.50 Further audit into the issue found that there was no evidence that the Board has advised the recipients of their subsidy eligibility resulting in their paying the full rental amount.
Recommendations The Board should:  carry out an extensive review and reconciliation of tenant accounst with credit balances and refund to the tenants excess payments made by them.

 ensure that tenants who receive rental subsidy are informed of the benefit and the actual amount of rent they are required to pay.

Management Comments Comments are noted.

These two cases identified by the auditors have credit balances due to subsidy and cannot be refunded.
Management will reconcile all credit balance accounts to reflect a true value in the tenant(s) account.

Tenants are informed of the rental subsidy and the tenant confirmation for estates where general maintenance has completed and rent charge is increased to the market rate.

13.5 Unallocated subsidy The government provides an annual grant to the Board to subsidise rental payments for tenants.
Any grants that are unutilised at year end are shown as a liability until such time as they are applied.1 Unutilized subsidy grant are used by the Board for capital works subject to the approval by the Minister for Local Government.

Our review of the grant subsidy balance recorded as a liability revealed that subsidy grant liability for the year 2010 has increased in 2013 by $34,993.91.

The balance in 2012 was $6,025.93.

The Board has not provided a valid explanation for the increase.
Increase in unallocated subsidy balance of 2010 without supporting documents increases risk of incorrect financial reporting of unallocated subsidy in the balance sheet.

Recommendation The Board should carry out a reconciliation of the 2010 unallocated subsidy and make appropriate adjustments to ensure 2010 unallocated subsidy balance is fairly reported.
1 Public Rental Board Accounting Policies, Note 1.3(m) Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Management Comments The reconciliation for the 2010 subsidy balance was provided to the auditors via email on 19.02.14.
Listed below is the reconciliation of the 2010 subsidy: 2010 Subsidy Grant Reconciliation: Balance left as at 2010 less Raiwaqa Rugby Club Construction 2012 less Raiwaqa Rugby Club Construction 2013 less Naodamu Community Hall Construction add Reimbursement by PM’s office for Raiwaqa Rugby Club Balance as at 31.12.13 $ 110,714.10 $ (104,688.17) $ (5,149.35) $ (4,196.74) $ 44,340.00 $ 41,019.84 Further OAG Comments As per the letter of approval from Minister for Local Government, Urban Development, Housing and Environment, approval was given for the construction of the Community Hall in Namaka and not Raiwaqa Rugby Club as stated in the reconciliation above.
13.6 Long outstanding VAT liability Any long outstanding liability increases doubts about its valuation and existence hence increasing risk of incorrect financial reporting.

It is imperative that long outstanding creditor’s balances are investigated and appropriate adjustments to write back those liability accounts are made to ensure creditors are fairly reported in the financial statements.
Scrutiny of the Board’s creditors and accrued charges account revealed long outstanding VAT liability from 2007 to 2012.

Refer to Table 13.2 for details.


Table 13.2: Long outstanding accruals Payee VAT exp 2007 VAT exp 2008 VAT exp 2009 VAT exp 2010 VAT exp 2011 VAT exp 2012 Total Amount ($) 86,769.49 80,814.51 50,663.38 62,723.72 60,580.04 81,235.29 422,786.43 Further audit into the issue found a string of correspondences between the Board and Fiji Revenue Customs Authority on the occurrence and actions taken for settlement of the VAT liability.
Refer to the following chronological of events for details:  On the 18th of January 2010, the Board’s General Manager wrote to the CEO of FRCA seeking clarification as to whether the Board is exempted from paying VAT on grants received from Government and ordinary procurements and consultancy works commissioned by PRB.

 On the 5th March 2010, FRCA responded stating that the Board is required to pay VAT as per the requirement of paragraph 3(5) and 3(6) of the VAT Decree.
 On the 24th of May 2010, FRCA informed the Board that they were undertaking a review of the company’s VAT returns for the period 2000 to April 2010.

FRCA also requested the Board to provide summary of grants received/output declared for the period.

Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014  On the 1st June 2010, the Board responded to the above request providing the relevant details from 2000 to April 2010.
 On the 4th of June 2010, the Board wrote to FRCA’s Chief Executive Officer requesting his Office to look into the matter further before a decision is made whether or not PRB is entitled to pay VAT on government grants.

On the 10th of June 2010, FRCA wrote to the Co-ordinator Finance at PRB advising him that the Board needs to comply with section 3(6) of the VAT decree and pay VAT on all government grants.
  On 2nd November 2010, FRCA wrote to the Finance Coordinator at PRB stating that the review of the VAT returns for the Board for the period January 2007 to September 2010 has been completed and that the total VAT outstanding amount was $268,698.37.

 On 24 November 2010, the Chairman of the Board wrote to the Minister of Finance requesting that the Ministry pays the VAT liability amount.
 On 2nd January 2014 a letter from the Board’s line Ministry to the Board indicated that payment of the amount was made to Public Rental Board via cheque no.

034803.

 On 7th January 2014, the Board took a cheque to FRCA for payment of the VAT liability amount.

However, audit gathered that FRCA did not accept payment citing the Board having a credit balance in its VAT account as the reason.

The audit found that the Board has also accrued VAT on 2011 and 2012 government grants.
However, audit was informed by the Manager Finance that no assessment has been lodged with FRCA for the period 2007 to 2013.

Additionally, audit noted that VAT was not accrued on government grants for year 2013.

Non-accounting of VAT for the year ended 31 December 2013 may result in incorrect financial reporting.

Also non-lodgement of VAT returns may expose the Board to penalties.
Recommendations The Board should:  meet personally with the National Manager or the CEO of FRCA, discuss the VAT queries and resolve outstanding matters.

 account for VAT and lodge VAT to FRCA irrespective of any delays from FRCA relating to any significant issues.

This will ensure that the Board is not charged with late lodgment penalties and at the same time is complying with the VAT decree.

Management Comments Comments are noted.


Management is currently taking steps to meet with FIRCA to resolve this outstanding issue from the past financial years.

13.7 Deferred revenue balance To be reliable, information must represent faithfully the transaction and other events it either purports to represent or could reasonably be expected to represent.

Our review of deferred income account revealed that it includes an amount of $120,656 which relates to IFRS entry/upgrading made in 2007.
The amount was initially recorded in the trade creditors’ account and was transferred to the deferred grant account during the financial year 2013.

The audit was not able to obtain supporting documents to substantiate the balance of $120,656.

There is a risk that the deferred income balance in the financial statements may not be fairly stated.
Report of GCC & CSA – December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Recommendation The Board should investigate the transaction giving rise to the amount and make the appropriate adjustments in the financial statements.

Adequate supporting documents should be made available for any adjustment made.

Management Comments Comments are noted.

Management will take appropriate steps to address the general ledger to reflect the true value.
Report of GCC & CSA – December 2014 Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 SECTION 14: REWA RICE LIMITED Programme Statement The Rewa Rice Limited (RRL) is a limited liability company incorporated on 8 March 1960.

It is 100% owned by the Government of the Fiji Islands.

The shareholders are the Permanent Secretaries for Finance and Public Enterprises.
RRL is a government commercial company with the principle objective of operating as a successful business and to be profitable and efficient as comparable businesses which are not owned by the state.

The company also has a community service obligation of helping promote the local rice industry by ensuring that there is a market for all paddy produced by farmers.

The principal activities of the company are purchases, milling and distribution of quality rice and associated products in Fiji.
RRL aims to be the leading provider of quantity nutritious rice at prices consumers can afford Table of Contents SECTION 14: REWA RICE LIMITED ...................................................................................................................................... 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 14.1 Audit Opinion – 2009 ............................................................................................................................................. 1 14.2 Statement of Financial Performance ..................................................................................................................... 2 14.3 Statement of Financial Position ............................................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................ 3 14.4 Going concern ....................................................................................................................................................... 3 14.5 Income tax not properly supported ........................................................................................................................ 4 14.6 Discrepancy in sales of milled grain ...................................................................................................................... 4 Insufficient supporting documents for payments ................................................................................................... 5 14.7 14.8 Variance in sales as per VAT lodgement and general ledger ............................................................................... 6 Lack of supporting documents .............................................................................................................................. 6 14.9 PART A – FINANCIAL INFORMATION 14.1 Audit Opinion – 2009 The audit of the financial statements of Rewa Rice Limited for the year ended 31 December 2009 resulted in the issue of an unqualified audit report.
Management attention was however drawn to the following matter: As at 31 December 2009 there is an overall excess of liabilities over assets of $4,951,870 (2008: $4,897,373).

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 company’s amounts advanced will not be demanded in due course.

The Financial Statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be necessary should the entity not be able to continue as a going concern.
Report of GCC & CSA- December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 14.2 Statement of Financial Performance As at 31 December Revenue Sales Cost of Sales Gross (Loss) /Profit Other Income Total Revenue Expenditure Depreciation and Amortization Personnel Expenses Other Operating and Administration Expenses Total Expenditure Profit/(Loss) after income Tax 2009 ($) 2008 ($) 318,605 (355,897) (37,292) 224,676 187,384 (28,929) (61,212) (151,740) (241,881) (54,497) 496,479 (469,528) 26,951 246,806 273,757 (27,536) (61,843) (176,174) (265,553) 8,204 Rewa Rice Limited recorded a loss of $54,497 in 2009 compared to a profit of $8,204 in 2008.
The loss is mainly attributed to the decrease in sales by $177,874 or 36% compared to 2008.
14.3 Statement of Financial Position As at 31 December Assets Cash on hand and at bank Other current assets Inventories Property Plant and Equipment Total Assets Liabilities Trade & Other Payables Provisions Borrowings Total Liabilities Net Deficiency In Assets Shareholders’ Equity Total Shareholders’ Equity 2009 ($) 2008 ($) 35,995 200,254 33,457 1,597,972 1,867,678 242,541 20,677 24,648 1,652,632 1,940,498 94,166 0 6,725,382 6,819,548 (4,951,870) 109,475 3,014 6,725,382 6,837,871 (4,897,373) (4,951,870) (4,897,373) The company’s net deficiency in assets increased by $54,497 or by 1% in 2009 compared to the amount reported in 2008.
The increase is attributed to the decrease in property, plant and equipment by $54,660 or 3% as compared to the amount reported in 2008.

The borrowings of $6,725,383 consist of advances and loans from the Government of Fiji.

Report of GCC & CSA- December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 PART B – CONTROL ISSUES 14.4 Going concern It is necessary that the company operates with positive net assets to be sustainable in the long run.
Audit noted that as at 31 December 2009 there is an overall excess of liabilities over assets of $4,951,870 (2008: $4,897,373).

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 Company’s amounts advanced will not be demanded in due course.

The Financial Statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be necessary should the entity not be able to continue as a going concern.

Failure of the company to improve its financial position may have an impact on its continuous operation in the long run.
Recommendation The company should to re-evaluate its operation to ensure that it operates profitability and continue operations in the future.

Management’s Comments The current management team was appointed in mid-2013 with the Board Directors being appointed in 2010, 2012 and 2013 respectably.

This audit reports highlights the financial performance of 2009.

We had a special audit done through PWC and also a special Audit was conducted by Ministry of Public Enterprises in 2013.
The recommendations highlight in these audits gave us a clear benchmark on the process & procedures.

(Attached both Audit Reports) Under the new management and Board the company has management to turn around the company.

Some of the major achievements include: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.


Repair & Maintenance of Dreketi Mill (Building plus Machines)form own cash flow New company vehicle from own cash flow New Generator from own cash flow Development of Policies (HR, Accounting, and OHS) Company restructure and cost cutting which reduced the cost of production from $1.46 per kg to $1.11 per kg Increase in sales which now include Viti Levu Markets.

RRL made profit from the month of March 2014 till to date.
The company has also written a submission to the Ministry of Public Enterprise to convert its debt to equity.

We are hopeful that we will achieve this.

The company is looking forward to expansion after the commissioning of new mill in Labasa early next year.
The company is also exploring the idea of planting rice to supplement the low supply of paddy to the mill The company is also recommending to the government to sell part of Nausori properties while the other properties to be rented out for additional income for the company.
Report of GCC & CSA- December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 14.5 Income tax not properly supported Calculation of income tax should always be supported with tax worksheet.
Deferred income tax is provided in full, using the balance sheet liability method, or temporary difference arising between the tax base of asset and liabilities and their carrying amount in the financial statement1 The review of income tax records of the company revealed that there was no supporting schedule or worksheet prepared as evidence to support the income tax amendment in the financial statement.
Additionally, necessary information such as Tax Fixed Asset Schedule was also not provided for audit to check deferred income tax.

Lack of supporting documents relating to calculation of Tax increases risk of incorrect financial reporting of income tax.

Additionally, the company may lodge incorrect income tax return to Fiji Revenue and Customs Authority Recommendation The company should ensure that the income tax worksheet is prepared to support disclosure of income tax in the financial statement.
Management Comments There has been a change in Management from mid-2013 and the accounts are in order now (proper filing and documentations are kept accordingly) 14.6 Discrepancy in sales of milled grain Total sales as per dollar value should always be equal to total sales multiplied by the selling price.

Total sales in volume will equate to a reduction in the inventory.

The review of the sales and inventory revealed discrepancy in actual sales recorded by the company.
Refer to Table 14.1 for the details of the discrepancy.

Table 14.1: Discrepancy in actual sales Particulars Opening milled grain Total rice produced in 20092 Less closing milled grain Total grain of rice (kg) sold as per audit calculation Actual rice sold in 2009 Variance in (kg) Average selling price Variance in dollars Volume (kg)/amount ($) 9,470 221,583 6,341 224,712 197,331 27,381 $1.80 $49,286 The variance indicates that theft of inventories may have occurred.
1 Note 2(k), Notes to and forming part of the financial statement, Income Tax, paragraph 2 2 65% of $340,897 (total paddy used in production) Report of GCC & CSA- December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 Recommendations  The company should investigate the variance and take appropriate actions on the officers responsible.
 The company should ensure that stringent internal controls should be put in place to safeguard misappropriation of inventories.

Management Comments We will further investigate as to how these variances were missed out by the previous management.

The company now has a verification process where Finance team makes approval and final approval from the Mill Manager.

Monthly detailed account is presented to the Audit sub-committee and then to the Board.
14.7 Insufficient supporting documents for payments All payments should be supported by appropriate sufficient supporting documents.

Audit noted from review of sample payments that there was lack of supporting documents to substantiate some payments made through cash cheques.

These payments mostly relates to reimbursements of expenses incurred by the Chairman.
Refer to Table 14.2 for details: Table 14.2: Payment with Insufficient Supporting documents Date Cheque # Payee 27.02.09 6561 Cash 30.04.09 06.05.09 15.09.09 5299 5377 7278 Cash Cash Cash 06.11.09 7419 Cash 04.12.09 7053 Cash 24.12.09 29.10.09 7092 7401 Cash Cash Amount ($) 848.31 648.30 1033.30 1,183.30 733.30 683.30 512.00 500.00 Nature of payment Board fees, sitting allowance and Chairman’s Home away allowance for 2 days.
Unknown Unknown Reimbursement for Chairman in Suva for July, August and September 2009.

Reimbursement for Board fees and miscellaneous of $200.

Chairman’s allowance and board fees for December 2009.

Reimbursements for Chairman Travel and accommodation for Chairman for attending business meeting with FSC and travelling cost for attending 3 day food summit conference in Nadi.
Lack of appropriate supporting documents for payments made indicates that payments may not have been incurred for official purposes.

Recommendation The company should ensure that prior to making payment all supporting documents are made available, sighted and accepted by the officer approving the payments.

Additionally, all the supporting documents should be properly kept for future references.

Management Comments This is now in practice under new management.
Report of GCC & CSA- December 2014 Page 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI_____________________________________2014 14.8 Variance in sales as per VAT lodgement and general ledger It is important that VAT exclusive sales after VAT output adjustment as per VAT lodgement should agree with VAT exclusive revenue as per general ledger.

This will ensure that VAT liability is not misstated.
Audit noted from the review of VAT that the company reported lower sales after VAT in the VAT lodgement form which is lodged with Fiji Revenue Custom Authority (FRCA) compared to what is reported in the general ledger.

Refer to Table 14.3 for details: Table 14.3: Variance in sales as per VAT lodgement and general ledger VEP sales as per VAT lodgement form lodged with FRCA 485,713 VEP revenue reported general ledger 543,281 in the Variance 57,568 The above variance indicates that VAT was incorrectly lodged.
Additionally, it exposes risk of incorrect financial reporting of revenue and VAT in the financial statements.

The Company can be severely penalized by FRCA for not disclosing all revenue in the VAT lodgement.

Recommendation The company should investigate the above variance and make necessary adjustments to VAT account.

Management Comments We accept the recommendation and we will investigate on the above issue.

We will wait for the audited accounts and resolve the matter with FRCA.
14.9 Lack of supporting documents It is an important internal control that supporting documents are available for all receivables recorded in the financial statements.

Audit noted that there were no supporting documents for sundry debtors amounting to $198,336 and lodgments not credited amounting to $146,123.

These were shown under other debtors and prepayments and also as a provision for doubtful debts.

The company has not taken any actions to recover these debts.
Lack of supporting documents increases risk of overstatement of receivables in the financial statements.

Recommendation The company should ensure that necessary reconciliations are carried out and supporting documents made available for the receivables amount Management Comments This is now in practice under new management.
Report of GCC & CSA- December 2014 Page 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI________________________________________2014 SECTION 15: AIRPORTS FIJI LIMITED Programme Statement Airports Fiji Limited (AFL) is a wholly government owned 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 Fiji.

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).
Table of Content 15.1 15.2 15.3 SECTION 15: AIRPORTS FIJI LIMITED ................................................................................................................................. 1 PART A – FINANCIAL INFORMATION .................................................................................................................................. 1 Audit Opinion ........................................................................................................................................................ 1 Abridged Statement of Comprehensive Income ................................................................................................... 2 Abridged Statement of Financial Position ............................................................................................................. 2 PART B – CONTROL ISSUES ................................................................................................................................................ 3 Amortisation of government grants received prior to 1 January 2010 .................................................................. 3 Capitalisation of training costs .............................................................................................................................. 3 Zero written down value assets ............................................................................................................................ 4 Contracts not finalised .......................................................................................................................................... 5 15.4 15.5 15.6 15.7 PART A – FINANCIAL INFORMATION 15.1 Audit Opinion The audit of the financial statements of the Airports Fiji Limited for the year ended 31 December 2013 resulted in the issue of a qualified Audit Report.
The issue qualified is as follow:  As explained in Note 2(a) to the financial statements, the company accounts for all government grants received after 1 January 2010 as a capital contribution.
This is a departure from the International Financial Reporting Standard IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” which requires government grants provided for the purchase or construction of assets to be recognized initially as deferred income and then recognized in profit or loss as other income on a systematic basis over the useful life of the related asset.
Government grants that compensate the company for expenses incurred are required to be recognized in profit or loss as other income on a systematic basis in the same period that the expenses are recognized.
Airports Fiji Limited’s records indicated that had the company complied with IAS 20, the impact would be to increase other income and retained earnings by $198,888 and $544,498 respectively, increase both government grants and total liabilities by $3,655,123 and reduce capital contribution by $4,199,621.
Report of GCC & CSA – December 2014 Page 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI________________________________________2014 15.2 Abridged Statement of Comprehensive Income Year Ended 31 December Revenue Navigation charges Concessions Landing and parking fees Airport security/development fee Departure tax share Rental Domestic passenger service charge Other income Total Revenue Expenditure Administrative expenses Operating expenses Personnel expenses Finance expenses (net) Total Expenditure Profit Before Tax Income tax expense Net Profit for the Year 2013 ($) 2012 ($) 14,292,454 12,387,536 12,128,367 7,559,891 5,820,465 4,019,118 1,178,711 6,402,598 63,789,140 20,587,209 12,900,429 14,277,589 - 47,765,227 16,023,913 3,112,097 12,911,816 13,533,437 12,698,810 11,862,517 7,322,203 6,196,238 4,253,125 845,093 5,973,435 62,684,858 20,299,306 13,996,780 14,082,001 177,565 48,555,652 14,129,206 2,851,846 11,277,360 The net profit recorded in 2013 increased by $1.6 million or 14.5% compared to the previous year.
This resulted mainly from increase in total revenue by $1.1 million and reduction in operating and finance expenses for the year.
15.3 Abridged Statement of Financial Position As at 31 December Cash and cash equivalents Term deposits Trade receivables Other current assets Property, plant and equipment Investment property Total Assets Trade and other payables Other current liabilities Borrowings Deferred tax liability Other non-current liabilities Total Liabilities Net Assets Equity Share capital Retained earnings Capital contribution Total Equity 2013 ($) 27,208,062 7,000,000 10,257,220 2,797,841 140,649,494 9,483,082 197,395,699 6,075,348 2,082,629 1,514,910 6,409,711 13,680,608 29,763,206 167,632,493 92,300,180 71,132,692 4,199,621 167,632,493 2012 ($) 17,611,274 7,000,000 12,886,289 1,977,827 156,260,952 - 195,736,342 8,447,457 2,871,238 7,571,346 7,454,361 14,864,725 41,209,127 154,527,215 92,300,180 58,220,876 4,006,159 154,527,215 Report of GCC & CSA – December 2014 Page 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI________________________________________2014 The significant decrease in liabilities has resulted in the increased net assets by $13.1 million or 8.5% in 2013 compared to 2012.
The reduction in liabilities was mainly due to decreased loans and borrowings by $6,056,436 or 80% due to the full repayment of a bank loan during the year.

Housing estate, with a total cost of $10.4 million, that is leased to third parties were reclassified as investment property, thus the reduction in property, plant and equipment.
PART B – CONTROL ISSUES 15.4 Amortisation of government grants received prior to 1 January 2010 International Accounting Standard (IAS) 20.121 states that government grants shall be recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis.

Further, IAS 20.17 states that grants that relate to the acquisition of an asset are recognised in profit or loss as the asset is depreciated or amortised.
The audit noted that the company amortises all government grants received in 2009 and prior, whether or not the grants have been utilised.

Unutilised grants should not be amortized until the related costs are incurred or related asset has been acquired.

The funding provided by the Government relates to infrastructure items which audit understands are depreciated at over 12.99 years however the grants are being amortised over a period of 8 years.
Non-compliance with the International Accounting Standards has resulted in understatement of deferred government grant liability by $1,107,946, overstatement of 2013 profit by $193,149 and overstatement of opening retained earnings by $914,797.

Recommendation The management should consider revisiting its accounting policy in respect of government grant accounting including assessing and correcting the amortisation of government grants received prior to 1 January 2010.
Management Comments The accounting of government grant was based on Cabinet decision dated 12 June 2013 that was retrospectively applied from 2010 onwards.

The circular states that government grants received after 2010 should be treated as capital contribution.

15.5 Capitalisation of training costs IAS 16.19(c)2, states that: “costs of conducting business in a new location or with a new class of customer (including costs of staff training) are not cost of an item of property plant and equipment”.
The audit noted from the review of the work in progress listing that staff training costs amounting to $534,485 were capitalized.

The cost of training a staff to use specialized equipment as the training does not create an asset; the employee is free to leave the company’s employment at any time by providing the contracted notice period.
1 IAS 20 – Accounting for Government Grant & Disclosure of Government Assistance 2 IAS 16 – Property, Plant and Equipment Report of GCC & CSA – December 2014 Page 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI________________________________________2014 Capitalisation of training cost could result in overstatement of property, plant and equipment and understatement of expenses.
Recommendation All training costs incurred in connection with an item of property plant and equipment should be expensed as incurred.

Management Comments The training cost is only capitalized where appropriate.

In the subject case AFL’s Air Traffic Management Department procured Automatic Dependent Surveillance Broadcast system which cost approximately $8 million.
As per IAS 16.16 (b), states that: “any costs directly attributable to bringing the asset to the location and condition for it to be capable of operating in the manner intended by management” are to be capitalized.

A professional cost is paid to the supplier to train the staff to efficiently operate the system as intended by the management.

The training comes with the new equipment in this specialized field.

In many other instances training cost is expensed.


15.6 Zero written down value assets Included in the fixed asset register are assets with original cost amounting to $25million with a zero written down value (WDV).

The majority of these assets relate to plant and equipment which audit understands is still being used in the company’s operating activities.
As the assets are still in use, the company’s initial estimate of the useful lives of these assets may not have been correct or had not been revised to take account of revision in the estimated useful lives.
Refer to the Table 15.1 below for examples: Table 15.1: Examples of zero written down value assets in use Asset ID PEQ-ADM-051 PEQ-ADM-052 PEQ-AFD-002 PEQ-AFD-128 PEQ-AFD-129 PEQ-AUA-022 PEQ-AUA-023 PEQ-AUA-027 PEQ-AUA-028 Asset Description Information Technology Upgrade New Finance System "Entech" Diesel Fired Incinerator with Personal Computer, P Runway Lighting and cable connections Airfield Lighting – upgrade ATM Technology – Turnkey Automatic Message Switching System (AMSS) "Eurocat" '2000X' Air Traffic Management System, "Redflex" "Global Weather Dynamics" Unified Message Switching System Cost ($) 570,529 502,702 1,104,000 671,000 503,732 4,111,232 3,475,844 2,840,000 1,387,000 Failure to revise the estimated useful life of the assets would have resulted in an overstatement of depreciation expense in prior periods and understatement of the written down value of plant and equipment.
Recommendation The management should regularly review the estimated useful lives of significant assets that have not yet been fully depreciated and ensure that the estimated useful life remains appropriate.

Any revisions should be accounted for prospectively.

Report of GCC & CSA – December 2014 Page 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI________________________________________2014 Management Comments Zero WDV is based on accounting allowable depreciation.
It does not necessarily mean that an asset with a zero WDV has a zero useful life left.

The quality of our repair and maintenance work usually results in extending life of assets.

However, we do not have a “certain” mechanism to determine what that life will be at the date of acquisition.

15.7 Contracts not finalised The audit noted that certain contracts had either expired or had not been finalized.

These included:  Tenancy (housing) - these relate to contracts between the tenants and AFL.
The contracts sighted during the audit had expired.

 Land lease - Land in Nadi is leased by the AFL from the government.

The land lease agreement for this has not been finalised since 2010 when the first draft of the lease was drawn up.

Since then the company has been accruing rent at $450,000 per annum.

 Meteorological Department - the company remits $50,000 per month to Fiji Meteorological Services for providing weather reports to AFL.
To date there is no formal contract to ascertain the exact portion of costs incurred by Fiji Meteorological that should be recharged to AFL.

The absence of contractual arrangements creates uncertainty and increases the risk to the company in the event of a dispute.

Recommendation The management should create an inventory of all contracts and work with relevant third parties to update its contractual arrangements.
Management Comments  Tenancy (housing) contracts are being renegotiated with respective tenants to get a better deal as it falls due.

The Commerce Commission rent freeze has led to this.

 Land Lease – this is being followed with Ministry of Lands.

 Meteorological Department – acknowledge there is no formal contract, however AFL has written to Metrological Department on many occasion asking them to come to the table to discuss and resolve the issue.

AFL is still waiting.


Report of GCC & CSA – December 2014 Page 5