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EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL Volume 1 Audit Report on Whole of Government Financial Statements and Annual Appropriation Statement 2014 EXCELLENCE IN PUBLIC SECTOR AUDITING REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI Volume 1 Report on Whole Audit Government Financial Statements and Annual Appropriation Statement 2014 of File: 102 02 October 2015 The Honorable Dr. Jiko Luveni Speaker of the Parliament of the Republic of Fiji Parliament Complex Gladstone Road Suva Dear Dr. Luveni Audit Report on the Whole of Government Financial Statements and Annual Appropriation Statement of the Republic of Fiji for the year ended 31 December 2014 In accordance with section 152 (13) of the Constitution of the Republic of Fiji, I am pleased to transmit to you my report on the audit of the Whole of Government financial Statements and the Annual Appropriation Statement of the Republic of Fiji for the year ended 31 December 2014.
Atunaisa Nadakuitavuki for AUDITOR-GENERAL Cc: Honorable Aiyaz Sayed-Khaiyum Attorney General and Minister for Finance, Public Enterprise, Public Services & Communications Ms. Susan Kiran Secretary to Cabinet CONTENTS Volume 1: Audit Report on the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: Part 2: Whole of Government Financial Statements and Annual Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2014 Report of the Whole of Government Financial Statements and Annual Appropriation Statement Volume 2: Audit Report on the General Administration Sector 1.
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Ministry of Education, National Heritage, Culture and Arts, and Higher Education Institution Ministry of Health.
Department of Housing Ministry of Local Government, Urban Development and Environment Ministry of Social Welfare, Women and Poverty Alleviation Ministry of Youth and Sports Ministry of Agriculture Ministry of Fisheries and Forest Ministry of Lands and Mineral Resources Ministry of Industry and Trade Ministry of Sugar Ministry of Public Enterprise and Tourism Ministry of Works and Transport Ministry of Public Utilities and Energy Government Shipping Services Fiji Roads Authority VOLUME 1 Volume 1: Audit Report on the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: Part 2: Whole of Government Financial Statements and Annual Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2014 Report of the Whole of Government Financial Statements and Annual Appropriation Statement Part 1: and Whole of Government Financial Annual Statements Appropriation Statement for the Republic of Fiji for the Year Ended 31 December 2014 Financial Statements Government of the Republic of Fiji For the Year Ended 31 December 2014 Part 2: on the Whole Report of Government Financial Statements and Appropriation Statement Annual REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table of Contents 1.0 FINANCIAL POSITION OF GOVERNMENT ................................................................................................... 2 1.1 Financial Performance 2014 ............................................................................................................................ 2 1.2 2014 Appropriation Decree 2013 ..................................................................................................................... 3 1.3 Operating Results ............................................................................................................................................ 3 1.4 Financing of Operating Expenditure
 ................................................................................................................. 4 1.5 Treasury Bills ................................................................................................................................................... 4 2.0 CASH AND CASH EQUIVALENTS ................................................................................................................ 5 2.1 Significant Increase in Un-presented Cheques ................................................................................................ 6 2.2 Anomalies in the Cash at Bank Account Balances .......................................................................................... 9 2.3 Net Impact of Error and Omission on Cash at Bank Balances ....................................................................... 11 3.0 INVESTMENTS ............................................................................................................................................. 12 3.1 Composition of Government Investments ...................................................................................................... 13 3.2 Return on Investments ................................................................................................................................... 13 3.3 Analysis of Dividends and Investments .......................................................................................................... 14 3.4 Dividends Remitted per Entity ........................................................................................................................ 15 Investment records not updated ..................................................................................................................... 17 3.5 4.0 TRUST FUND ACCOUNT ............................................................................................................................. 18 4.1 Main Trust Fund Account
 ............................................................................................................................... 18 4.2 Operating Trust Fund Account ....................................................................................................................... 18 5.0 REVENUE ..................................................................................................................................................... 18 5.1 Arrears of Revenue ..................................................................................................................................... 19 5.1.1 Aged Revenue for the year 2014 ................................................................................................................ 19 5.1.2 Significant Balances Owed to Government ................................................................................................. 20 6.0 EXPENDITURE ............................................................................................................................................. 21 6.1 Overview of 2014 Government’s Budgeted and Actual Expenditures ............................................................ 21 6.2 Overall 2014 Budget Utilisation by Standard Expenditure Groups ................................................................. 22 6.3 Government Expenditures in the Last 5 years ............................................................................................... 23 6.4 Allotment of Charges between the Operating Fund Account (Fund 1) and Trading and Manufacturing Account (Fund 4)............................................................................................................................................ 24 7.0 BORROWING FUND ACCOUNT .................................................................................................................. 25 7.1 Trends in Government Borrowing by Category
 .............................................................................................. 25 7.2 Borrowings over the 15 Year Period .............................................................................................................. 27 7.3 Loan Repayments .......................................................................................................................................... 28 7.4 Domestic Bonds ............................................................................................................................................. 29 7.5 Borrowings & Interest Payments .................................................................................................................... 30 7.6 Overseas Borrowings ..................................................................................................................................... 31 7.6.1 Yearly Overseas Borrowings ....................................................................................................................... 31 7.6.2 Overseas Borrowings Outstanding & Interest Paid ..................................................................................... 32 7.6.3 Revaluation of Overseas Borrowings .......................................................................................................... 33 7.7 Treasury Bills ................................................................................................................................................. 34 7.7.1 Treasury Bills Over a 15-year Period .......................................................................................................... 35 7.7.2 Treasury Bills Management ......................................................................................................................... 36 7.8 Ways and Means ........................................................................................................................................... 37 7.9
37 7.9 Flexibility ....................................................................................................................................................... 37 7.10 Vulnerability ................................................................................................................................................... 38 7.11 Sustainability .................................................................................................................................................. 43 8.0 LENDING FUND ACCOUNT ......................................................................................................................... 44 8.1 Term Loans Receivable ................................................................................................................................. 44 9.0 REVOLVING FUND ACCOUNT .................................................................................................................... 45 9.1 Accounts Receivable & Prepayment and Accrued income ............................................................................ 45 10.0 CONTINGENT LIABILITIES .......................................................................................................................... 47 Whole of Government Financial Statements and Annual Appropriation Statement 1 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 10.1 Contingent Liabilities for Government ............................................................................................................ 47 11.0 FINANCIAL MANAGEMENT INFORMATION SYSTEM (FMIS) UNIT ......................................................... 48 11.1 Unsubstantiated Inter Fund Transfer of Equity Charges - Operating Fund (Fund 1) and Trading and Manufacturing Accounts (Fund 4) .................................................................................................................. 48 11.2 Involvement of Internal Audit
 .......................................................................................................................... 49 12.0 RECURRING AUDIT ISSUES ....................................................................................................................... 50 Appendix 1: Appropriation Statement 2014 ........................................................................................................... 53 Appendix 2: Variance in the Cash at Bank Account – Expected Balances Vs General Ledger ............................. 55 Appendix 3: Analysis of Arrears of Revenue as at 31 December 2014 ................................................................. 57 Appendix 4:Examples of Journals Postings between the Operating Fund Account (OFA) and Trading and Manufacturing Account (TMA) ............................................................................................................ 58 Appendix 5: Unsubstantiated Accounts Receivables Balances ............................................................................. 59 Appendix 6: Accountable Advances Owed to Ministry / Department ..................................................................... 60 1.0 FINANCIAL POSITION OF GOVERNMENT The Whole of Government financial statements have been drawn up in accordance with the provisions of the Financial Management Act 2004.
As the Government uses the cash basis system of accounting, the underlying format is cash based with direct reference to the budget estimates.

Few disclosures and presentations are in accordance with International Public Sector Accounting Standards (IPSAS).

1.1 Financial Performance 2014 The performance of the Fiji Government for the year 2014 is provided in Table 1.1.
Table 1.1: Government Performance in 2014 Item Original Budget 2014 Revised Budget 2014 Actual Results 2014 Variance1 2014 Variance ($’000) ($’000) ($’000) ($’000) (%) REVENUE Operating Receipts Direct Taxes Indirect Taxes Others Total Operating Receipts Total Investing Receipts TOTAL REVENUE EXPENDITURE Operating Capital Value Added Tax TOTAL EXPENDITURE Net (Deficit) 417,896.7 1,621,797.6 204,249.5 2,243,943.8 477,834.2 2,721,778.0 417,896.7 1,621,797.6 168,127.7 2,207,822.0 513,956.0 2,721,778.0 523,741.4 1,594,001.1 172,539.3 2,290,281.8 80,723.9 2,371,005.7 105,844.7 (27,796.5) 4,411.6 82,459.8 (433,232.1) (350,772.3) 1,800,993.9 1,013,492.9 68,774.3 2,883,261.1 (161,483.1) 1,805,039.4 1,011,586.4 66,635.5 2,883,261.3 (161,483.3) 1,735,584.6 930,115.8 57,395.4 2,723,095.8 (352,090.1) 69,454.8 81,470.6 9,240.1 160,165.5 190,606.8 1Variance = Actual Results less Revised Budget Whole of Government Financial Statements and Annual Appropriation Statement 25.3 (1.7) 2.6 3.7 (84.3) (12.9) 3.8 8.1 13.9 5.6 118.0 2 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Item Original Budget 2014 Revised Budget 2014 Actual Results 2014 Variance1 2014 Variance ($’000) ($’000) ($’000) ($’000) (%) Debt Repayment Gross Surplus/(Deficit) Net Deficit/(Surplus) As A Percent of GDP Nominal GDP 223,952.0 (385,435.1) (1.9%) 8,283,429 223,952.0 (385,435.3) (1.9%) 8,283,429 202,166.7 (554,256.8) (4.1%) +8,552,900 (21,785.30) 168,821.5 2.2 269,471 (9.7) Original Budget 2014 is sourced from the 2014 Budget Book.- + Nominal GDP Figure [Source: Fiji Bureau of Statistics] The actual gross deficit for the year totalled $554.26 million compared to that budgeted of $385.43 million.
The increased budget deficit was due to the shortfall in collection of revenue totalling $350.77 million.

The loans raised in 2014 to finance the budget deficit (Table 1.3) totalled $353.6 million.

In addition, treasury bills were also raised in 2014 to meet short term financing shortfalls.

These are discussed in Section 1.5 and Table 1.4.

1.2 2014 Appropriation Decree 2013 There were thirty nine appropriation heads in the 2014 budget2.
The expenditure under the various heads and their variances are detailed in Appendix 1.

Against a revised budget of $3,107,213,300, the government spent $2,925,262,550 resulting in a budget saving of $181,950,750 or 6%.
Two agencies, namely Fiji Roads Authority ($11.5million) and Ministry of Education, National Heritage, Culture and Arts($7.1 million) exceeded their budget appropriated totalling $18.6 million as outlined in Table 1.2 below: Table 1.2 Overspent Budget Heads Heads Appropriation of Original Budget Redeployment ($) 474,057,981 370,034,038 ($) 35,000,000 --- Fiji Roads Authority Ministry of Education, National Heritage, Culture and Arts Revised Estimate ($) Actual Expenditure 2014 ($) 509,057,981 370,034,038 520,590,365 377,127,140 Over- Expenditure % Over - spent ($) (11,532,384) (7,093,102) 2 2 2 Total 844,092,019 35,000,000 879,092,019 897,717,505 (18,625,486) An appropriation of $64.6 million for the year 2014 was provided under the Lending Fund Account.
1.3 Operating Results A net deficit totalling $352.1 million was recorded in 2014 as shown in Table 1.1 compared to the forecasted net deficit of $161.5 million; an increase by $190.6 million (118%).

The increased net deficit was due to lower collection of revenue ($350.8 million) than that forecasted.
2 Schedule 1 of the 2014 Appropriation Decree 2013 Whole of Government Financial Statements and Annual Appropriation Statement 3 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The net deficit for 2014 as a percentage of GDP was 4.1%, an increase by 2.2% from the budgeted net deficit of 1.9%.

1.4 Financing of Operating Expenditure It is generally accepted that capital works should be funded by loans.
The funding of operating expenditure by loan would be a concern if effort was not taken to reduce operating expenditure.

Figure 1.1 and Table 1.3 shows the percentage of loan that was used in meeting government’s operating expenditure over the last 10 years.
Figure 1.1 Operating Expenditure Financed from Loans 60% 50% 40% 30% e g a t n e c r e P 20% 10% 0% 2005 2006 2007 2008 2009 2010 Year 2011 2012 2013 2014 Table 1.3: Capital Expenditures vs. Loans Raised Details 2005 ($’000) 2006 ($’000) 2007 ($’000) 2008 ($’000) 2009 ($’000) 2010 (‘000) 2011 (‘000) 2012 ($000) 2013 ($000) 2014 ($000) & Capital Total Loans (Domestic Overseas) Less Expenditures Balance Operating Expenditures % Loans Utilized for Operating Expenditures for 328,608 417,810 334,937 345,649 405,390 462,965 693,707 329,655 272,745 353,647 213,509 212,642 206,933 212,748 335,014 339,654 503,910 534,842 586,349 930,115 115,099 205,168 128,004 132,901 70,376 123,311 189,797 --- 35% 49% 38% 38% 17% 27% 27% --- --- --- --- --- For the years 2012 – 2014, loans funds were used for capital expenditures.
1.5 Treasury Bills As government had raised domestic loans in accordance with the approved budgets over the years, the excess borrowing has been in the form of Treasury Bills.

Whole of Government Financial Statements and Annual Appropriation Statement 4 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The outstanding Treasury bill at the beginning of the year was $102.3 miliion.
Treasury Bills raised during the year totalled $306.9 million while $128.6 million was outstanding as at 31/12/14.

Table 1.4 details the loans raised by government to finance its budget deficits over the last 10 years.
Table 1.4: Original Budget Deficit vs. Loans Raised Details Gross Deficit Domestic Loans Overseas Loans Treasury Bills Loans Deficit % Excessive Borrowin gs % 2005 ($) 2006 ($) 2007 ($) 2008 ($) 2009 ($) 2010 ($) 2011 ($) 2012 ($) 2013 ($) 2014 ($) (79%) (196%) (118%) (234%) (37%) (231%) (251%) (88%) (3%) (71%) The 2014 budget funding programme3 appropriated $385.4 million (equal to the forecasted gross deficit) in loan funds to finance the gross deficit.
However, the year 2014 noted a total of $660.5 million raised in loan funds, an excess borrowing of $275.1 million than that budgeted for.

Furthermore, the budgeted gross deficit was $385.4 million while the actual gross deficit of $554.3 was noted, an increase by $168.9 million (44%) for the year 2014.
2.0 CASH AND CASH EQUIVALENTS A bank account for public money, other money or trust money must only be established with the approval of the Chief Accountant, who must inform the bank of the agency officers authorised to operate on it.

All agency bank accounts must be kept in the name of the agency or the official title of a unit within the agency.4 The cash at bank balance decreased significantly from $206,744,709 in 2013 to $42,552,310 in 2014, a decrease by $164,192,399 or 79%.
The decrease was mainly due to the decline in overseas bank balance (90%), domestic bank balance (44%) and an increase in un-presented cheques in the drawings account (83%), a drawdown from the domestic bank balance.

The decline in overseas bank balances was due to the payment of interest on the global bonds totalling $42,198,122 (US$22.5million) and the drawdown of an additional $39,471,087 (US $20 million) from the JP Morgan Liquidity Fund Account during the year.
Furthermore, a net off of the domestic cash balance ($71,312,510) against the drawings account un- presented cheques ($137,976,858) resulted in an overdraft of the domestic cash balance ($66,664,348) for the year ended 31/12/2014.

Refer to Table 2.1 for details of movement in cash at bank balances for the year 2013 and 2014.

3 2014 Budget Estimate - Page 8.
4 Finance Instructions 2010 – Part 6: Assets – Division 1 – Cash Management – 32(1) & (4) Whole of Government Financial Statements and Annual Appropriation Statement 5 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 2.1: Cash at Bank Balance as at 31 December 2014 Account Domestic Bank Drawings Account (Unpresented cheques) Overseas Bank Trading & Manufacturing Account Trust Fund Account Net Cash 2013 Balance ($) 126,382,089 (75,572,051) 2014 Balance ($) 71,312,510 (137,976,858) Variance ($) Increase/ Decrease (55,069,579) Decrease Increase (62,404,807) % Change (44) 83 84,147,140 7,782,209 64,005,322 206,744,709 8,753,880 9,909,833 90,552,945 42,552,310 (75,393,260) Decrease Increase Increase 2,127,624 26,547,623 (164,192,399) Decrease (90) 27 41 (79) A graphical presentation of the account balances for the past twelve years is provided in Figure 2.1.
Figure 2.1: Bank Account Balances (2003 to 2014) ) m $ ( t n u o m A 300 250 200 150 100 50 0 Domestic Banks Overseas Bank TMA Bank Trust 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year Cash balances in trust fund accounts make up majority of the government’s cash holdings at year end.
2.1 Significant Increase in Un-presented Cheques The drawings account will be operated for all payments except for those payable from petty cash bank accounts, TMA bank accounts and trust bank accounts.5 It is the responsibility of the Chief Accountant (Treasury) of the Ministry of Finance to closely monitor the Electronic Fund Transfer (EFT) to ensure that proper process and procedures are being followed according to the Financial Regulations.6 It is the responsibility of the EFT agency to conduct monthly reconciliation in order to review the monthly account statement against all original receipts and payments.7 Government incurred expenditures totalling $2.9billion (VEP) in 2014.
On average, this amounted to a monthly expenditure of $239 million compared to a monthly revenue collection of $227million, a shortfall of $12 million per month.

Refer to Table 2.2 below for details of monthly expenditure incurred and revenue collected.
5 Proforma Finance Manual 2011 – Section 7.4.3 6 Electronic Fund Transfer Policy – Section 6.1 7 Electronic Fund Transfer Policy – Section 7.5 Whole of Government Financial Statements and Annual Appropriation Statement 6 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 2.2: Monthly Expenditures vs.
Monthly Revenue Month Total Monthly Expenditure Total Monthly Revenue (VEP) January February March April May June July August September October November December Total Average Monthly Figures (VEP) ($ ) 134,501,983 165,163,419 265,701,107 188,292,679 217,717,670 257,769,841 253,673,561 180,090,828 331,052,036 205,284,870 187,886,159 480,732,988 2,867,867,141 238,988,928 ($) 179,977,352 129,739,812 248,818,236 228,943,915 242,661,225 235,921,613 215,670,067 277,089,507 303,113,299 169,616,255 201,447,932 291,484,270 2,724,483,483 227,040,290 Net Surplus / (Deficit) (VEP) ($) 45,475,369 (35,423,607) (16,882,871) 40,651,236 24,943,555 (21,848,228) (38,003,494) 96,998,679 (27,938,736) (35,668,615) 13,561,773 (189,248,719) (175,686,946) Furthermore, the following anomalies were noted:  Total expenditure for the month of December 2014 ($480.7million) exceeded the monthly average expenditure ($239 million) by $241.7 million or 101%.
 On the contrary, monthly revenue collected for the month of December 2014 ($291.5 million) only exceeded the average monthly revenue ($227.0 million) by $64.4 million or by 28%.

 Un-presented cheques totalled $137.98 million (30% of the payments made in December) as at 31/12/2014 compared to $75.57 million as at 31/12/2013 and increase by $62.41 million or 83 percent.

Refer to Table 2.3 for details of unpresented cheques and cash analysis over the past 10 years.
Table 2.3: Cash at Bank Trend Analysis (2005 – 2014) Year Unpresented Cheques Cash at Bank % of Unpresented Cheques against Cash at Bank Domestic Cash Holding 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ($) 51,889,269 60,501,189 73,586,193 59,570,322 97,864,276 48,770,140 50,271,112 107,360,277 75,572,051 137,976,858 ($) 56,633,778 330,250,882 115,893,879 197,464,771 169,398,195 202,968,247 263,763,634 203,957,283 218,311,438 89,976,223 92 18 63 30 58 21 19 53 35 153 ($) 50,071,389 70,524,396 56,774,511 65,865,376 50,840,687 82,425,719 84,998,728 106,660,817 126,382,089 71,312,510 % of Unpresented Cheques against Domestic 104 86 130 90 192 59 59 101 60 193  Of the cash at bank balance of $89.98 million, only $71.31 million was domestic bank balance held for facilitating operating expenditures (52% of un-presented cheques).
Whole of Government Financial Statements and Annual Appropriation Statement 7 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________  Of the un-presented cheques of $137.98 million:  $88.1 million (65%) was disbursed on 30th and 31st December 2014 in capital grant for Fiji Roads Authority.

The reason for the late disbursement was not provided.

 $8.98 million or 6.5% related to Electronic Fund Transfers (EFT) not cleared by the banks as at 31/12/14.
 Stale cheques totalled $2.9 million or 2% of the un-presented cheques.

 Variance totalling $1.2 million was noted between the drawings account reconciliation of respective Ministry/Department and the FMIS general ledger.
 The variances were attributed to:  Unidentified direct deposits;  Unidentified cheques and EFT payments that were presented in bank but not recorded in the system cashbook;  Bulked details of EFT payments from the banks resulting in the inability to identify individual amounts that was directed to be paid by the bank;  EFT payments presented to the incorrect drawing account;  Differences arising from EFT same cheque number but of different amounts; and  Authorised officers are not sending the EFT bank files to the banks on time.
Furthermore, contrary to the EFT policy, the Ministry of Finance prepared the drawings account reconciliation of respective Ministry / Department without involving the respective Ministry / Department that execute and maintain relevant payment documents.

Spending more than the revenue collected creates a shortfall in cash flows of Government and results in unplanned short terms borrowings.
Also, the more than average spending in December shows spending concentrated towards the end of year to utilize savings and therefore could result in unnecessary spending and accumulating un- presented cheques at the end of the year.
Recommendations The Ministry:    Should ensure that revenue collections is in proportion to its spending are in proportion to avoid shortfall in cash flows for the day-to-day operations of Government; In co-ordination with the respective Ministry/Department should ensure that effective procurement plan is in place and implemented accordingly rather than sudden utilization of funds at the end of the year; Should place a ceiling on monthly cash flow based on the operations of the Ministry/ Department to ensure that unnecessary year end payments are curtailed; Whole of Government Financial Statements and Annual Appropriation Statement 8 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________     Should review the current Electronic Fund Transfer Policy, its management, recording and reconciliation in co-ordination with the respective Ministry/ Department and the banks that facilitate the payment; Should implement effective reconciliation of the Drawings account, general ledger and the EFT payments in consultation with the respective Ministry/Department; Adopt a check and review mechanism for all reconciliations to ensure that agencies appropriately address errors and discrepancies in their monthly reconciliations before the following month reconciliations are due; and Should ensure that proper supervision is carried out to ensure that balances reflected in the accounts are correctly and fairly stated.
Ministry’s Comments The Ministry agrees that each agency is to plan their expenditures to avoid accumulation of high un-presented cheques at year end.

In the third quarter of the year, the Ministry issued a finance circular outlining this issue and requested accounting heads to encourage the early presentation/clearance of cheques.

For 2014, the majority of the un-presented cheques were for capital grants.
The Ministry is now releasing the grants gradually throughout the year to avoid the late release of substantial amounts which will impact on the cash at bank balances In 2015 we are working closely with the ministries to correctly match these EFTs’ in order to remove them from the Un-presented Cheques Listing.

Furthermore, MoF is working with the Bank to break down the EFT payments in the Bank Statement.

2.2 Anomalies in the Cash at Bank Account Balances All bank accounts must be reconciled monthly.
The bank reconciliation shall list the outstanding cheques and other reconciling items and be signed and dated by the responsible officer.8 The audit noted the following anomalies in the cash at bank balances as at 31st December 2014:  Variances were noted between the cash at bank general ledger and the reconciliation performed by audit across the three cash at bank accounts:  True trust fund cash at bank account balance was understated by $6.23 million;  Trading & Manufacturing activities cash at bank account balance was overstated by $1.30 million; and  Overseas missions cash at bank account balance was overstated by $1.32million.
Refer to Appendix 2 for details.
 The variances were attributed to improper reconciliation which included the following factors::  Transactions were not recorded in the general ledger;  Bank reconciliations were not being performed regularly;  Non-rectification of errors in the general ledger; 8 Finance Instructions 2010 – Part 6: Assets – Division 1 – Cash Management – Bank Accounts 32 (6) Whole of Government Financial Statements and Annual Appropriation Statement 9 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________  Instances of receipts and payments not recorded in the general ledger;  Non-investigation of unsubstantiated balances or transactions recorded and  Inter fund payments and receipts from bank accounts.
 Bank reconciliation was not prepared totalling $24.5 million.

for true trust fund cash at bank account ($24.4 million) and trading & manufacturing cash at bank account ($65,947)  Two trust fund cash at bank general ledger balances, “TF HUD Litter Decree Publicity9” totalling $863,432 as at 31 December 2014 was not supported with the cash in the bank.

 These are issues that have been recurring over the years which the Ministry is yet to rectify.
As such balances recorded in the general ledger and the financial statements remained unsubstantiated.

Recommendations  The responsible Ministries/Departments should strictly comply with section 32(6) of Finance Instructions 2010 which requires that all bank accounts must be reconciled on a monthly basis.

 The responsible Ministry/Department should be instigated against accounts officers for failing to perform regular reconciliations.
Ministry’s Comments Trust Fund Account MoF can only assist the ministries with Trust Accounts if they are forthcoming with their records.

This is because whilst the Bank account must tally with the GL Cash, attention must also be given to the Liability component (natural account 89).
The following Ministries were assisted by MoF (through the FMIS Unit) in 2015: Ministry of Fisheries & Forestry Ministry of Agriculture Ministry of Labor Prime Minister’s Office National Planning Department of Immigration Regional Development Whilst the above ministries were assisted, it was noted that some ministries were capable of dealing with their own Trust Accounts.
These ministries were; Department of Public Prosecution, Ministry of Local Government, and Department of Energy (Rural Electrification Project.

As for the other Ministries, they did not make use of the MoF initiative to clear the books and they were not forthcoming.

MoF will be running the same initiative in 2015.

TMA The purpose of the variance between the GL Closing Balance and the Bank Statement ending balance is due to the Un-Posted Receipts and Un-Posted Payments in the GL (FMIS).
This is due to direct deposits conducted by customers without narrations in the Bank Statement.

9 General Ledger account numbers: 9-23401-230006-520401 and 9-23401-23006-520301 Whole of Government Financial Statements and Annual Appropriation Statement 10 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The Ministry of Finance is currently working with respective Ministries & Department to inform customers to provide narrations when making direct payments in the Bank.
Furthermore, the inter use of funds between TMA and Consolidated fund also contribute to the issue.

For Example: Revenues of Fund 4 have been receipted in Fund 1and vice versa and Expenses from Fund 1 have been paid by Fund 4 and vice versa.

Currently, the Asset Management & Monitoring Unit with the Financial Management Information System Unit is currently implementing separate profiling for TMAs and CFA users to restrict the inter- use of funds.

Ministry of Finance (MoF) was aware of this issue in 2014.
In an effort to curb the issue, the Ministry (through the FMIS Unit) provided presentations at various Ministry of Foreign Affairs (MFA) forums.

In addition numerous requests were sent to the Accounting Head; however, our efforts remained futile.

The approach MoF wanted to take was for MFA to submit the Bank Statement of all Missions to MoF.

We would then convert the Balance to Fiji Dollars.

The variance between the Bank Account (in Fiji Dollars) and the General Ledger would then be posted to equity.
MoF would then assist in the reconciliation of the accounts on a monthly basis till December 2014.

Unfortunately, since the team from MFA was not accommodating to our requests, we were unable to carry out our plans and the issue remains unresolved.

2.3 Net Impact of Error and Omission on Cash at Bank Balances Cash at Bank balance should be supported with adequate bank records and reconciled with the bank statements.
The following balances which are reflected in the whole of Government financial statement of assets and liabilities contained errors and omissions as shown in Table 2.4 below.
Table 2.4: Errors and Omissions in Statement of Cash at Bank Errors and Omissions of by bank respective reconciliations Non-preparation Ministry/Department Variance between Cash at Bank in the General ledger and the Audit Calculations for General Ledger amount (Overseas Cash) Variance between Cash at Bank in the General ledger and the Audit Calculations for General Ledger amount (Domestic Cash – TMA & Trust Fund ) Net impact of errors and unaccounted cash transactions in the Drawings general ledger Net Errors and Omissions Overstatement/ (Understatement) ($) 23,606,529* 1,319,743 (4,925,758) (1,214,355) 18,786,159 *excludes the TF HUD Litter Decree amounts (cash does not exist).
The net impact on cash at bank of the errors and omissions in the 2014 accounts is substantial and reflects the weaknesses in the implementation of internal controls systems as required under the Finance Instruction and Financial Manual of Ministry/Departments.

Therefore, the assertions of completeness, existence and valuation for the cash at bank balance for the government could not be ascertained.

This has been included in the audit report of the whole of Government financial statements.
Whole of Government Financial Statements and Annual Appropriation Statement 11 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Recommendation   The Ministry in consultation with Ministry/Department should ensure that bank balances are reconciled.

Omission and errors investigated and rectified immediately to ensure that cash at bank are fairly stated.

Ministry’s Comments MoF has taken steps to reconcile all the CFA’s and Drawings Account in 2014.
The Ministry also started on the Trust Accounts rectification.
Comments from the Auditors are welcomed and the ministry will be working with the various ministries to pass the necessary journals to bring the GL balances as close as possible to the Bank Statement balance in 2015 3.0 INVESTMENTS Section 55(1) (b) of the Financial Management Act 2004 empowers the Minister of Finance to invest public money (and other money within the meaning of the Act) on deposit with a bank; in securities issued by a statutory authority; by way of advances authorized by an Act or by resolution of the House of Representatives.
Government shares held in 24 separate entities were valued at $548,888,805 an increase by $52,913,764 or 11% compared to 2013.

The investment of the Government for the last 5 years is shown in Table 3.1 and Figure 3.1 below.
Table 3.1: Total Government Investments: 2010 – 2014 Year 2010 2011 2012 2013 2014 Total Investments ($) 438,862,903 438,907,122 426,197,586 495,975,041 548,888,805 ) $ ( s n o i l l i M 600 500 400 300 200 100 0 Figure 3.1: Total Investments 2010-2014 2010 2011 2012 Years 2013 2014 The increase in government investments is mainly due to the increase in the fair value of shares in Amalgamated Telecom Holdings (ATH), Unit Trust of Fiji (UTOF) Limited10 and the adjustment of errors for shares in the International Bank for Reconstruction and Development.
10 ATH at 95 cents per share (2013: 73 cents), UTOF at $1.42 per share (2013:$1.37) Whole of Government Financial Statements and Annual Appropriation Statement 12 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 3.1 Composition of Government Investments The composition of Government Investments for 2014 is shown in the Figure 3.2 below: Figure 3.2: Composition by Investment Type Fully Commercial Company (Non- Profitable), 17% Fully Commercial Company (Profitable), 79% Semi Commercial (Agro based), 3% Dormant Companies (in Liquidation), 1% The major component of Government investments as at 31 December 2014 consists of fully profitable commercial companies totalling $432,164,734 or 79% of total investments.
Fully commercial companies that were not profitable accounted for $96,427,528 or 17% with semi- commercial (agro-based) accounted for $15,814,933 or 3% whist the remaining 1% or $4,481,610 made up of government investments in companies in liquidation.

Governments Investments in the infrastructure sector entities comprises 56% of the total investments totalling $307,009,275.16.
Investments in the economic services sector entities makes up 43% or $234,573,480 whilst the remaining 1% or $7,306,050 comprises of governments investments in the entities in the social services sector.
Refer to Figure 3.3 below Figure 3.3: Composition of Investment by Sector Infrastructure Service Entities 56% Social Service Entities 1% Economic Service Entities 43% 3.2 Return on Investments Return on Investments provides information on performance to evaluate the efficiency of Governments investments and how well government has generated cash flow in relation to the funds being invested.
Whole of Government Financial Statements and Annual Appropriation Statement 13 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ As an initial measure, 10% after tax return on shareholders’ funds is the baseline and should be revised based on corporate plan targets.11 Our analysis of governments return on investments indicates that the overall average rate of return on investment is 5% in year 2014 compared to 2% in year 2013.
Over the 5 years period, an overall average rate of return on investments of 3% has been recorded with the highest overall average of 5% attained in 2014.

Collectively, the 10% baseline as required by the 2003 Corporate Governance Policy Framework has not been achieved.

Refer to Table 3.2 which outlines Governments return on capital over the past 5 years.
Table 3.2: Return on Investments 2010 – 2014 Year 2010 2011 2012 2013 2014 Total Government Shareholding ($) Dividends On Investment ($) 438,862,903 12,726,623 438,907,122 10,631,806 10,524,101 426,197,586 11,980,221 495,975,041 24,816,121 548,888,805 Return On Investments (%) 3 2 2 2 5 3.3 Analysis of Dividends and Investments Dividend remitted increase from $11.98 million in year 2013 to $24.82 million or 107%.

However, an actual dividends collected was less than the forecasted ($36.12 million12).
A graphical representation of budgeted and actual dividend revenue remitted by Government entities over the 5 year period is outlined in the Table 3.3 and Figure 3.4 below: Table 3.3: Budgeted vs. Actual Dividend Revenue Descriptions 2014 2013 2012 2011 2010 Actual Dividends ($) Budgeted Dividends ($) % of Budgeted Dividends collected 24,816,121 36,121,700 69% 11,980,221 38,281,000 31% 10,524,101 27,356,500 38% 10,631,806 30,149,700 35% 12,726,623 36,642,100 35% 11 Corporate Governance Policy Framework – December 2003, Part II, Section 22 12 2014 Budget Estimate Whole of Government Financial Statements and Annual Appropriation Statement 14 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Figure 3.4: Budgeted vs. Actual Dividend ) $ ( s n o i l l i M 45 40 35 30 25 20 15 10 5 - Actual Dividends Budgeted Dividends 2010 2011 2012 2013 2014 Years Over the past 5 years, an average of 7 entities paid dividends to Government.
Refer to Table 3.4 below for details of analysis: Table 3.4: Investments and dividends received 2010 – 2014 Year Total Government Shareholding Dividends on Investment % Change In Dividend Dividend Paying Entities 2010 2011 2012 2013 2014 ($) 438,862,903 438,907,122 426,197,586 495,975,041 548,888,805 ($) 12,726,623 10,631,806 10,524,101 11,980,221 24,816,121 (39) (16) (1) 14 107 8 8 6 6 6 Number of Entities Holding Government Investments 30 30 25 24 24 % of Dividend Paying Entities 27 27 24 25 25 Non-remittance of dividends indicates non-performing portfolios and thus warrants the immediate review of investments to realise maximum returns on Government investment.
3.4 Dividends Remitted per Entity An initial measure that corporatized entities are operating as successful businesses is 10% after tax return on shareholders’ funds.
Once the expectations of annual returns are established, the 10% baseline should be revised based on corporate plan targets.13 All Government Commercial Companies and Commercial Statutory Authorities pay at least 50% of the net earnings to the Government as dividends in consultation with the Minister for Public Enterprises, Minister of Finance, and relevant Minister.14 A total of $24.82 million was received by government as dividends in 2014 from the following entities; 13 Corporate Governance Policy Framework – December 2003, Part II, Section 22 14 Corporate Governance Policy Framework – December 2003, Part II, Section 26 Whole of Government Financial Statements and Annual Appropriation Statement 15 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Refer to Table 3.5 below for details of dividends remitted to government in the past five (5) years.
Table 3.5: Analysis for Entities that remitted Dividends: 2010 – 2014 Dividend for 2014 Dividend for 2013 Dividend for 2012 Dividend for 2011 Dividend for 2010 Value of Investments as at 31/12/2014 --- 50,000 765,000 1,191,846 73,154,852 --- ($) --- 119,526 401,006 3,300,000 3,698,979 --- 92,300,180 141,554,243 --- --- --- --- 10,000,000 7,296,610 --- --- --- --- Description Post Fiji Limited UTOF (Management) Limited Air Terminal Services Yaqara Pastoral Company Ltd Fiji Ports Corporation Limited Public Trustee Corporation Airports (Fiji) Limited ATH Limited FINTEL* Fiji Television Limited* Ports Terminal Limited Civil Aviation Authority of the Fiji Islands Pacific Forum Line(2006)* Dividends from Investments ($) ($) ($) ($) --- 113,574 235,530 1,226,124 3,654,877 --- --- 6,566,949 --- --- --- --- --- 74,276 496,117 --- 2,821,102 --- 434,820 --- 319,651 279,287 2,641,643 --- 1,020,640 4,377,966 1,734,000 --- --- --- 1,000,000 4,377,966 1,376,559 201,880 --- --- 184,126 2,250 514,248 --- --- 3,000,000 3,000,000 3,594,494 --- 173,040 1,758,465 500,000 --- 12,726,623 --- 309,016,121 --- 24,816,121 183,167 11,980,221 --- 10,524,101 --- 10,631,806 *government shares in these companies have been sold In 2014, 56% of government’s total investments of $548.9 million returned dividend to government.
Refer to Table 3.6 below for details of Government entities which paid dividend in year 2014.
Table 3.6: Government Entities which paid dividend in 2014 Entity UTOF (Management) Limited Air Terminal Services Yaqara Pastoral Company Limited Fiji Ports Corporation Limited Amalgamated Telecom Holding Limited Airports Fiji Limited Total *measured at fair value Value of Investments as at 31/12/14 ($) 50,000 765,000 1,191,846 73,154,852 *141,554,243 92,300,180 309,016,121 Dividend 2014 ($) 119,526 401,006 3,300,000 3,698,979 7,296,610 10,000,000 24,816,121 % of Dividend to total Investments value 239 52 277 5 5 11 8 The Fiji Ports Corporation Limited and Amalgamated Telecom Holdings failed to meet the 10% required dividend remittance in accordance with Public Enterprises Corporate Governance Policy Framework.
Whole of Government Financial Statements and Annual Appropriation Statement 16 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 3.5 Investment records not updated Cabinet Decision 357 of 2012 requires the treatment of government grants and/or special funding to state owned enterprises as capital contribution to be converted to equity.
International Accounting Standard 20 requires that government grant is recognised only when there is reasonable assurance that:- (a) the entity will comply with any conditions attached to the grant; and (b) the grant will be received.

The Accounting Head is responsible for maintaining ledgers and reconciling balances in such ledgers to ensure the accuracy of financial information and the timeliness of management reports.
15 The audit noted that Fiji Broadcasting Corporation Limited (FBCL) share capital of 200,002 at $1 have not been updated in Ministry of Finance records.

The Ministry of Finance records show a total share capital of $2 only for Fiji Broadcasting Corporation Limited as shown in Note 9 of whole of government financial statement.

In addition, Food Processor Limited has changed its share capital structure and the variance of 1,939,462 shares at $1 per share has not been recorded by Ministry of Finance.
However, audit noted that manual record maintained by Ministry of Finance are only amended by the Ministry, once share certificates are received and proper verifications undertaken to confirm the increase in shares.

In addition audit could not establish whether all state owned entities have complied with Cabinet Decisions and as such the impact on the correctness of total investment amounts recorded as at 31 December 2014 could not be determined.
Recommendations  The Ministry of Finance should liaise with the Fiji Broadcasting Corporation Ltd and Food Processor Limited and update the records of government investments accordingly.

 The Ministry should carry out a review of compliance of state owned entities as per Cabinet decisions no 357 & IAS 20.

Ministry’s Comments The Ministry has liaised with Fiji Broadcasting Corporation on the variance of $200,000.

The Ministry does not have the share certificate for $200,000.
The Ministry will only amend and update Government investment records once the share certificate of $200,000 is submitted by FBC.
15 Pro-forma Finance Manual 2011, Section 16 Whole of Government Financial Statements and Annual Appropriation Statement 17 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 4.0 TRUST FUND ACCOUNT 4.1 Main Trust Fund Account Section 25 of the Financial Management Act (2004) states that trust moneys should be accounted for separately from the public monies and kept in a separate bank account.
Main Trust refers to an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of another person (the beneficiary) or for the advancement of certain purposes.

Major accounts in the Main Trust Fund include tender deposits, bonds and aid monies from overseas agencies.
The main trust fund account balance totalled $86,990,711 in 2014 compared to a balance of $63,680,688, an increase by $23,310,023 or 37%.

The increase in the main trust fund account was a result of recording deposits in year 2014 that were not recorded previously.

In addition, a total of $2,733,369 in main trust fund liability account was not supported by the cash held.

The inadequate cash to support the trust fund account has been recurring previously; however, the Ministry has yet to rectify this.
4.2 Operating Trust Fund Account Operating Trust Fund Accounts facilitate transactions relating to the Ministry/Department’s administrative role as an employer.

These transactions include deductions from employees’ salaries/wages with regards to contributions to the Fiji National Provident Fund, housing loan repayments, insurance premiums and other deductions for onward payment to the respective payees.
The operating trust fund account had a balance of $15 million in year 2014 compared to a balance of $15.9 million in 2013, a decrease by $849,167 or 5.4%.

A total of $251,861 was a contra account entry made to the account as a result of the write-off of balances from other accounts Operating trust fund account balances are unpaid liabilities awaiting payments.
5.0 REVENUE total forecasted revenue by government The in 2014 was $2,721,777,950 comprising of $2,207,821,988 in operating revenue and $513,955,962 in investing revenue.

No forecast was provided for revenue generated from government trading and manufacturing operations.

The actual revenue collections by government from its normal operations in 2014 totalled $2,371,005,74816 thus recording a shortfall of $350,772,204 or 13% of the total estimated revenue collections.
Table 5.1 show the actual revenue collected over the last 7 years.
16 Excludes revenue from TMA operations Whole of Government Financial Statements and Annual Appropriation Statement 18 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 5.1: Budgeted Revenue vs Actual Revenue Year 2008 2009 2010 2011 2012 2013 2014 Investing Revenue - Actual ($) 42,524,393 60,548,839 52,470,629 29,699,034 86,043,083 59,894,427 80,723,993 Operating Revenue - Actual ($) 1,411,850,075 1,347,275,392 1,463,546,507 1,774,878,062 1,854,766,943 2,038,833,496 2,290,281,755 Total Actual (a) ($) 1,454,374,468 1,407,824,231 1,516,017,136 1,804,577,096 1,940,810,026 2,098,727,923 2,371,005,748 Investing Revenue – Budgeted ($) 27,216,200 37,255,900 38,506,700 79,675,200 35,819,200 75,744,230 513,955,960 – Operating Revenue Budgeted ($) 1,384,234,100 1,485,133,200 1,458,000,900 1,667,797,412 1,906,987,800 2,032,634,700 2,207,821,990 Total Budgeted (b) ($) 1,411,450,300 1,522,389,100 1,496,507,600 1,747,472,612 1,942,807,000 2,108,378,930 2,721,777,950 Variance (a-b) ($) (42,924,168) 114,564,869 (19,509,536) (57,104,484) 1,996,974 9,651,007 350,772,202 Non-collection of revenue as planned affects timely flow of cash for government activities and results in unplanned short-term borrowings.
5.1 Arrears of Revenue The importance of revenue in the budgetary process is significant since it determines the level of spending possible.

Thus, it is essential that the revenue collection process is monitored, including debt collection and the existing credit policies.

Arrears of revenue for the government comprise of unpaid taxes by individuals and businesses, as well as revenue owed to Ministries and Departments in the form of fees, fines, licenses and charges.
5.1.1 Aged Revenue for the year 2014 Arrears of revenue totaled $150,840,876 for the year ended 31 December 2014.

Audit noted that of the total revenue in arrears, $41.01 million or 27% of debt owed are more than 5 years old.

Refer to Appendix 3 for details.

Recommendations  The Ministry should review the revenue in arrears for more than 5 years and assess its collectability.

 The credit policy of respective Ministry / department is reviewed to ensure its collectability on a timely basis.
Management Comments The Ministry of Finance has taken a very proactive action to ensure that respective ministries introduce robust and efficient revenue recovery mechanisms and processes.

Agencies are invited to update the Revenue Arrears Taskforce Committee every quarter to update on their revenue arrears position and highlight the measures that it has undertaken to remedy its revenue arrears position.
More importantly, revenue generating agencies revenue arrears targets are discussed at the Taskforce meeting and explanation is sought if any agency is not able to meet its set target.

In hindsight, it has been noted that for some agencies such as Judicial Department bulk of the revenue arrears are old-aged (owing more than 5 years) and high degree of commitment, coordination with its stakeholders namely Land Transport Authority and Fiji Police Force is required to recover the debt.
On a positive note, it has been noted it has already forged partnerships with these agencies to assist in debt recovery.
Whole of Government Financial Statements and Annual Appropriation Statement 19 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 5.1.2 Significant Balances Owed to Government The arrears of revenue totaling $150,840,876 as at 31 December 2014 increased by $3,764,963 or 2.6% as from previous year The audit review of the arrears of revenue for Ministries and Departments revealed the proportion of debt in relation to: (i) Income Tax, Value Added Tax (VAT) and Customs duty arrears for Fiji Revenue & Customs Authority totaling $65,535,110 or 43%; (ii) Water Authority of Fiji (WAF) of $32,348,574 or 21%; (iii) Lands Department of $25,250,168 or 17%; (iv) Judicial Department of $13,345,569 or 9%; and (v) Various ministries and departments making up the balance of $14,361,455 or 10%.
Refer to Table 5.1 depicting the significant arrears of revenue balances for Ministries and Departments which are due to Government: Table 5.1:- /Department Significant Arrears of Revenue Balances over the 6 years by the Ministry Year FRCA - Customs ($) 4,170,038 11,530,304 8,331,984 3,292,502 6,047,820 15,032,658 2009 2010 2011 2012 2013 2014 FRCA - Inland Revenue Services ($) Water Authority of Fiji ($) 84,509,589 132,520,763 136,069,034 107,887,503 60,923,881 50,502,452 36,755,411 34,843,653 --- 38,127,154 32,019,392 32,348,574 Lands Judicial ($) 17,486,274 17,970,765 19,561,844 22,729,013 25,228,161 25,250,168 ($) 10,828,342 10,970,177 11,397,061 11,341,730 11,968,031 13,345,569 As a result of the large arrears held by the entities, government continues to lose potential revenues and funds thus increasing the risk of amounts written off or being deemed irrecoverable over time.
Recommendation Ministry of Finance through its Task Force Team should review its strategies and impose more stringent measures and recovery policies on Ministries/Departments to monitor their debt recovery procedures to reduce potential irrecoverable debts.

Management Comments The Ministry of Finance is currently in transition phase to adopt accrual based accounting.
It is already working on the parameters to recognize provision of doubtful debts based on the degree of uncertainty in respect to Accounts Receivable and will be swiftly rolled out once fully-fledged accrual accounting system is adopted.
Whole of Government Financial Statements and Annual Appropriation Statement 20 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 6.0 EXPENDITURE 6.1 Overview of 2014 Government’s Budgeted and Actual Expenditures A total of $3,107,213,300 was approved in the 2014 budget to be utilised for the financial year 2014.
Under the 2014 Appropriation Decree 2013, $2,576,056,79017 was approved to be issued from the consolidated fund to be applied to the ordinary services of the government for the year ended 31 December 2014.

Included in this, is a sum of $64,608,342 for recurrent and non-recurrent loans under the Lending Fund Account.18 The actual expenditure applied to the ordinary services of government as approved under the 2014 Appropriation Decree 2013 totalled $2,422,001,334.
In addition, $503,261,216 was incurred by government in the payments of pensions and debt servicing bringing the actual total expenditure for government to $2,925,262,550 as at 31 December 2014.
Detail of government expenditure is tabulated below: Table 6.1: Overview of 2014 Budget and Actual Expenditure Revised Budget Amount ($) Expenditure Actual Expenditure 2014 Actual Expenditure 2013 ($) ($) 1,434,490,110 1,212,492,363 586,349,201 930,115,814 41,682,412 57,395,410 Increase in Actual Expenditure ($) 221,997,747 343,766,613 15,712,998 Original Budget Redeployment/ Virement ($) 1,481,681,200 1,013,493,000 68,774,400 ($) (4,045,514) 1,906,576 2,138,938 2,563,948,600 --- 39,747,400 --- 279,565,300 604,463 223,952,000 (604,463) 2,563,948,600 1,477,635,686 Operating19 Capital 20 1,015,399,576 VAT 70,913,338 Payments 21 Total Heads of Appropriation Expenditure Pension Payments22 Interest on Loans 23 Principal on Loans 24 280,169,763 223,347,537 39,747,400 543,264,700 3,107,213,300 --- --- 543,264,700 3,107,213,300 Totals Government Expenditure 2,422,001,334 1,840,523,976 581,477,358 36,785,353 35,340,641 1,444,712 264,309,159 260,450,670 3,858,489 202,166,704 179,320,246 22,846,458 503,261,216 475,111,557 2,925,262,550 2,315,635,533 28,149,659 609,627,017 % Increase 18 59 38 32 4 1 13 6 26 17 For all Heads of Appropriation listed in the Schedule 1 & 2 of the Appropriation Decree except Head 51 & Head 52 18 Decree No.
30 - 2014 Appropriation Decree 2013 19 SEG 1,2,3,4,5,6 & 7 20 SEG 8,9 & 10 21 SEG 13 22 SEG 11 23 SEG 14 & 15 24 SEG 14 & 15 Whole of Government Financial Statements and Annual Appropriation Statement 21 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ In 2014, total expenditure increased by $609,627,017 or 26% compared to the total expenditure of $2,315,635,533 incurred in 2013.
Major increase was noted in capital expenditure by $343,766,613 or 59% while operating expenditures increased by $221,997,747 or 18%.

Capital expenditures were incurred for capital constructions, capital purchases, and capital grants given to government entities, commercial companies, and other statutory bodies.
Figure 6.1: Total Expenditure Incurred in 2014 By Type Interest on Loans Repayment 9% Principal on Loans Repayments 7% Pension Payments 1% VAT Payments 2% Capital Expenditure 32% Operating Expenditure 49% In addition to the total expenditure, the Trading & Manufacturing Account as a trading arm of Government incurred a total expenditure of $18,131,509.
6.2 Overall 2014 Budget Utilisation by Standard Expenditure Groups A total of $3,107,213,300 was approved in the 2014 Budget to be utilised for the financial year 2014.

Government incurred a total of $2,925,262,550 or 94% of the approved budget allocation for the year 2014.

The budget for 2014 increased by $599,831,093 or 24% compared to the allocated budget of $2,507,382,207 in 2013.
Major increases in budget allocation were noted for capital expenditure as it increased by $287,845,356 or 40% from the 2013 allocation of $723,741,068.

Summarised in a table below is the approved budget allocation and its utilisation for the financial year 2014.
Table 6.2: Budget Utilisation for 2014 Revised Forecast Budget 2013 Budget 2014 Standard Expenditure Group Actual Expenditure Budget Savings 31/12/2013 31/12/2014 31/12/13 31/12/14 572,489,105 40,378,833 727,724,797 Established Staff 46,128,456 Government Wage Earners 26,644,743 30,691,410 Travel and Communications 581,796,373 719,735,059 (9,307,268) 40,873,910 45,253,662 (495,077) 25,501,187 28,713,649 1,143,556 7,989,738 874,794 1,977,761 92,331,920 95,465,906 Maintenance and 88,968,169 90,243,819 3,363,751 5,222,087 Whole of Government Financial Statements and Annual Appropriation Statement 22 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Revised Forecast Budget 2013 Budget 2014 Standard Expenditure Group Actual Expenditure Budget Savings 31/12/2013 31/12/2014 31/12/13 31/12/14 76,786,396 354,095,755 Operations 91,061,496 Purchases of Goods and Services 407,363,664 Operating Grants and Transfers 71,733,445 82,305,459 5,052,951 343,451,514 400,163,862 10,644,241 8,756,037 7,199,802 81,166,996 87,290,985 Special Expenditure 60,167,765 68,074,600 20,999,231 19,216,385 1,243,893,748 1,485,726,714 Total Departmental Operating Expenditure 39,747,400 Pensions, Gratuities and Compassionate Allowance 32,947,400 451,549,100 503,517,300 Finance Charges on 484,496,500 62,905,334 38,484,079 624,351,655 Public Debt 543,264,700 Total Un-allocable Operating Expenditure 110,715,392 Capital Construction 61,697,093 Capital Purchase 839,173,939 Capital Grants and Transfers 725,741,068 1,011,586,424 Total Capital 53,250,891 66,635,462 Value Added Tax 2,507,382,207 3,107,213,300 TOTAL Expenditures 1,212,492,363 1,434,490,110 31,401,385 35,340,641 36,785,353 (2,393,241) 439,770,916 466,475,863 11,778,184 475,111,557 503,261,216 9,384,943 54,783,794 36,367,494 83,464,462 45,199,392 6,121,540 2,116,585 495,197,913 801,451,960 129,153,742 586,349,201 930,115,814 139,391,867 51,236,604 2,962,047 37,041,437 40,003,484 27,250,930 16,497,701 37,721,979 81,470,610 41,682,412 9,240,052 2,315,635,533
 2,925,262,550 191,746,674 181,950,750 57,395,410 11,568,479 A total budget savings of $181.95 million or 6% was recorded by government in 2014 due to the savings made from all standard expenditure group allocations.
6.3 Government Expenditures in the Last 5 years Government’s expenditure for the last 5 years has been increasing even though a marked decrease in 2012.

The biggest increase was noted for the year 2011 and again in 2014.

The increase in expenditure in 2011 was due to the repayment of the global bond raised in 2006.

Total expenditure in 2014 increased by 26% or $609,627,017 compared to the increase of only 2% or $49,419,984 from 2012 to 2013.
Table 6.3: Government expenditure in the last five years Expenditures 2010 2011 2012 2013 2014 Totals Operating Capital VAT Pensions Interest on Loans Principal Repayments Total Increase/ (Decrease) % Change ($) 1,023,209,823 340,248,624 48,735,275 33,138,552 223,952,584 ($) 1,060,642,429 494,534,102 43,978,964 33,374,303 265,728,294 ($) 1,135,616,969 533,838,990 50,043,665 36,371,122 257,802,716 ($) 1,212,492,363 586,349,201 41,682,412 35,340,641 260,450,670 ($) 1,434,490,110 930,115,814 57,395,410 36,785,353 264,309,159 ($) 5,866,451,694 2,885,086,731 241,835,726 175,009,971 1,272,243,423 231,391,075 1,900,675,933 504,493,603 2,402,751,695 252,542,087 2,266,215,549 179,320,246 2,315,635,533 202,166,704 2,925,262,550 1,369,913,715 11,810,541,260 502,075,762 26% (136,536,146) (6%) 49,419,984 609,627,017 2% 26% Whole of Government Financial Statements and Annual Appropriation Statement 23 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The governments operating and capital expenditures have been increasing over the years as government continues to deliver its services to the general public.
6.4 Allotment of Charges between the Operating Fund Account (Fund 1) and Trading and Manufacturing Account (Fund 4) The profit and loss statement must include all expenses that relate to the activity, and where necessary, include estimates of overheads met by the department, depreciation of assets, services provided below costs by other agencies, provision for doubtful debts, and provision for inventory to be written off25.
In accrual accounting, the matching principle requires that expenses should be recorded during the period being incurred, regardless of involvement of any cash.

The audit review of financial statement of government noted that the following:  TMA fund expenditures (Fund 4) were being funded from operating expenditures (Fund 1) of the department.

For example, the Government Printing and Stationary Department (GPSD) utility bills for the TMA operation was paid from operating fund account totalling $111,185.
Refer to Appendix 4 for details.

 accounting policies/guidelines on the disclosure of funds or assets allocated for normal government operations but are used for the trading and manufacturing purposes have yet to be put in place.
Transfers of funds between TMA and operating funds is not allowed except for the purchases of goods and services, as confirmed by the FMIS unit of the Ministry of Finance.26 However, the audit review noted of possible misstatements in the TMA accounts as apportionment of payments between funds are not disclosed by all TMA accounts operators.
Therefore the true financial performance of the TMAs may not fully reflected in the various TMA financial statements and trading and manufacturing expenses may be understated.

Utilisation of operating fund for TMA operation and vice versa is unauthorised.

Recommendations  All TMA operators should ensure that all expenditures incurred for TMA related expenditures should not be charged to operating expenditures allocations.
 The Ministry of Finance Asset Management Unit should review the management TMA policy.

 Disciplinary action should be instigated on officers using operating fund to fund TMA operations.
25 Finance Instruction 2010 – Section 30 26 Email from Acting Director FMIS dated 21/02/15 Whole of Government Financial Statements and Annual Appropriation Statement 24 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Ministry’s Comments The AMMU is currently working on a new strategy to extract and substantiate the exact batches where inter-fund posting between Operating (Fund 1) and Trading and Manufacturing Account (Fund 4) has taken place.
This will ensure that transactions are posted correctly in their respective books.
Apart from the new report extracted by Q & A analytical tool application which extracts data from the FMIS, the FMIS Unit is also working on its users profiling to eliminate the accommodation of the inter-fund posting within the system 7.0 BORROWING FUND ACCOUNT The Minister for Finance is authorised under Section 59 of the Finance Management Act 2004 to raise overdrafts or short term advances locally or from overseas borrowings for the purpose of the government.
These borrowings and advances are recorded in the accounts as receipts from government borrowings as a note to the financial statements.

Public debt in 2014 totalled $4,083,194,826 and comprised of domestic borrowings of $2,698,317,500 or 66% of total debt; overseas borrowings of $1,254,277,326 or 31%; and treasury bills $130,600,00027 or 3%.

These are illustrated in Figure 7.1 below.


Figure 7.1 Composition of Public Debt in 2014 Overseas Loan, [31%] Treasury Bils, [3%] Domestic Debt, [66%] The government also receives short term advances from the Reserve Bank of Fiji (RBF) referred to as Ways and Means.

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

During the year, government had utilised $93,800,000 of this facility through RBF.
7.1 Trends in Government Borrowing by Category The total Government borrowings outstanding at the end of each year from 2000 to 2014 and its composition for the last 15 years are summarised in Table 7.1.
27 Treasury bills includes principal of $128,583,452 and discounts of $2,016,548 Whole of Government Financial Statements and Annual Appropriation Statement 25 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 7.1: Government Outstanding Borrowings (2000 – 2014) Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Domestic Bond ($) 1,158,595,650 1,302,595,650 1,501,095,650 1,682,718,650 1,986,515,650 2,121,422,650 2,300,672,650 2,196,208,150 2,346,258,150 2,505,092,150 2,759,292,150 2,627,382,087 2,631,565,650 2,641,564,500 2,698,317,500 % of Total Borrowing 81 77 79 79 87 88 80 80 81 80 82 74 72 69 66 Treasury Bills ($) 72,449,838 176,604,613 196,432,453 276,925,838 126,987,822 136,018,387 141,311,687 141,160,433 64,552,990 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 130,600,000 % of Total 5 10 10 13 6 6 5 5 2 3 2 2 3 3 3 Overseas Loan ($) 207,697,167 206,889,315 193,505,879 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,793 935,530,587 1,081,097,414 1,254,277,326 % of Total Borrowing Total 14 12 10 8 7 7 15 15 16 17 16 24 25 28 31 ($) 1,438,742,655 1,686,089,578 1,891,033,982 2,133,770,240 2,282,168,851 2,421,491,961 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,919 3,382,723,748 3,530,451,273 3,678,829,200 3,824,939,970 4,083,194,826 The government bonds mature between 3 to 15 years.
In contrast, the term of treasury bills range between 14 days to 364 days.

Over the last 15 years, the percentage of overseas borrowings constituted an average 16% of the total borrowings.

A graphical representation of the government borrowings position is provided in figure 7.2.
Figure 7.2: Government Borrowings Outstanding (2000 - 2014) Treasury Bills Overseas Loans Domestic Loans Total Borrowings 4500 4000 3500 3000 2500 2000 1500 1000 500 0 n o i l l i m ) $ ( t n u o m A 2000 2001 2002 2003 2004 2005 2006 2007 Years 2008 2009 2010 2011 2012 2013 2014 Government borrowings in 2014 have increased by 7% compared to the year 2013.

This is mainly due to an increase in overseas borrowings by $173.2 million in 2014 and domestic borrowing by $85.0 million.
Whole of Government Financial Statements and Annual Appropriation Statement 26 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Figure 7.3 shows the relationship between actual revenues and expenditures over the last 15 years.
Figure 7.3: Revenue vs Expenditure ) m $ ( t n u o m A 3,000 2,500 2,000 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year Revenue Expenditure Figure 7.4 reveals that government expenditure of $2,741,227,355 exceeded revenue $2,393,392,53128 during 2014 resulting in a gross deficit of $347,834,824 for the year 2014.
Figure 7.4: Deficit to be Financed from Borrowings ) m $ ( t n u o m A 400 350 300 250 200 150 100 50 0 -50 -100 -150 -200 -250 -300 -350 -400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year 7.2 Borrowings over the 15 Year Period The composition of the government’s borrowings over the last 15 years is summarised in Table 7.2 Table 7.2: Additional Borrowings per Year 2000 – 2014 Year Domestic Bonds Amount $’000 210,002.4 229,000.9 299,000.0 291,000.0 % Change 9 31 (3) 2000 2001 2002 2003 % Change Overseas Borrowings Amount $’000 14,997.6 10,247.0 26,196.7 28,745.3 (32) 156 10 Treasury Bills Total Amount $’000 129,129.1 424,654.9 437,465.8 580,634.6 % Change 229 3 33 Amount $’000 354,129.1 663,902.8 762,662.5 900,379.9 28 Excludes borrowing revenue Whole of Government Financial Statements and Annual Appropriation Statement % Change 87 15 18 27 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Year Domestic Bonds Amount $’000 449,218.2 319,967.0 356,778.6 100,536.3 341,266.9 404,239.8 452,734.1 81,470.5 192,102.0 172,822.0 233,405.8 % Change 54 (29) 12 (72) 239 18 12 (82) 136 (10) 35 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Overseas Borrowings Amount $’000 9,267.7 8,641.3 283,258.7 19,855.8 20,802.8 25,476.8 61,949.5 569,043.1 136,428.7 99,466.3 120,241.3 % Change (68) (7) 3,178 (93) 5 22 143 819 (76) (27) 21 Treasury Bills Total Amount $’000 189,256.7 326,951.1 528,715.4 685,889.2 391,725.9 253,821.7 687,313.1 411,970.9 306,664.5 138,122.1 306,883.4 % Change (67) 73 62 30 (43) (35) 171 (40) (26) (55) 122 Amount $’000 647,742.6 655,559.4 1,168,752.7 806,281.3 753,795.6 683,538.3 1,201,996.7 1,062,484.5 635,195.2 410,410.4 660,530.5 % Change (28) 1 78 (31) (7) (9) 76 (12) (40) (35) 61 Government borrowings in 2014 totalled $660.5 million of which $233.4 million or 35% were funded through domestic bonds, $120.2 million or 18% in overseas borrowings and $306.9 million or 47% in treasury bills.
7.3 Loan Repayments There is an annual obligation for the Government of Fiji to redeem the borrowings which become due for payment.
The terms and conditions of the borrowings are stipulated in the loan agreements between the Government of Fiji and the lending agencies The repayment of the borrowings of the Government of Fiji over the past 15 years is represented in Table 7.3: Table 7.3: Repayment of Borrowings per Year 2000 – 2014 Year Domestic Bonds Overseas Borrowings Treasury Bills Interest Principal Principal ($) ($) ($) Interest ($) 11,404,967 9,755,046 9,297,644 7,150,813 6,114,485 5,473,517 5,737,600 22,201,747 20,787,406 24,410,365 22,901,709 43,104,766 46,264,569 51,976,719 53,809,084 Principal ($) 173,910,978 320,504,093 417,637,927 500,141,175 339,194,733 317,920,558 523,422,114 686,040,488 468,333,380 220,653,349 710,064,626 416,019,281 265,852,974 147,577,053 280,578,003 Interest ($) Principal payments for 2014 on government borrowings totalled $482,744,707 whilst interest payments amounted to $264,182,910.
Whole of Government Financial Statements and Annual Appropriation Statement 28 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The interest on domestic borrowings for 2014 was $209.45 million compared to $53.81 million for overseas borrowings and $921,998 for treasury bills.

The interest rate on domestic borrowings ranges from 1% to 6% whilst interest rates for overseas borrowings range from 1% to 3%.
7.4 Domestic Bonds The total domestic bonds as at 31 December 2014 amounted to $2,698,317,50029 or 66% of total government borrowings.

Table 7.4 shows the amounts that are owed by the Government of Fiji.
Table 7.4: Composition of Outstanding Government Bonds Bond Holder Amount FNPF Insurance Companies Commercial Banks RBF Trust Fund (excluding UTOF) Unit Trust of Fiji Credit Corporation Merchant Finance & Investment Ltd Others Total ($) 1,921,081,500 476,529,000 93,840,000 86,131,000 31,591,950 23,660,000 1,400,000 9,250,000 54,834,050 2,698,317,500 % of Outstanding Debt 71.2% 17.7% 3.5% 3.2% 1.2% 0.8% 0.1% 0.3% 2.0% 100 Fiji National Provident Fund (FNPF) hold 71.2% of the bonds as at 31 December 2014; Insurance Companies 17.7%; Commercial Banks 3.5%; RBF 3.2%; the remaining 4.4% of the bonds are held by Trust Fund, Unit Trust of Fiji, Merchant Bank of Fiji, Credit Corporation amongst others.
The composition of outstanding government bonds is shown in Figure 7.5 Figure 7.5: Composition of Outstanding Bonds as at 31 December 2014 RBF 3.2% Others 4.4% Commercial Banks 3.5% Insurance 17.7% FNPF 71.2% 29 Include Inherited Fiji Sugar Growers Council loan of $3,150,000 being included as domestic borrowings Whole of Government Financial Statements and Annual Appropriation Statement 29 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 7.5 Borrowings & Interest Payments Details of outstanding borrowings over the past 15 years with the total interest paid and its budgetary provision is shown in Table 7.5.
Interest payments on bonds are made on a six monthly basis.
Table 7.5: Domestic Borrowings Outstanding, Interest Paid and Budgetary Provisions Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Domestic Borrowings $m 1,158.6 1,302.6 1,501.1 1,682.7 1,986.5 2,121.4 2,300.7 2,196.2 2,346.3 2,505.1 2,759.3 2,627.4 2,631.6 2,641.6 2,698.3 % Increase /(Decrease) 11 12 15 12 18 7 8 (5) 7 7 10 (5) 0.16 0.4 2 Interest Paid $m 81.8 88.3 95.3 102.0 108.6 120.2 129.5 148.0 147.4 165.3 190.7 213.2 210.5 207.5 209.4 % Increase/ (Decrease) (1) 8 8 7 6 11 8 14 (0.4) 12 15 12 (1.3) (1.4) 0.9 Variance Budgetary Provision $m 85.2 92.7 102.0 110.0 121.5 124.0 127.7 148.2 151.4 156.7 190.6 225.4 211.7 208.3 209.5 3.4 4.4 6.7 8.0 12.9 3.8 (1.8) 0.2 4.0 (8.6) (0.1) 12.2 1.2 0.8 0.1 Total domestic borrowings increased by $56.7m or 2% in 2014 compared to 2013.
The interest paid on domestic borrowings increased by $1.9m or 0.9% The Government had allocated $209.5 million for interest payments during 2014 of which $209.4 million was paid during the year.

The interest expense and the principal repayments over the past 15 years are shown in Figure 7.6.

The audit noted that 40 domestic bonds were paid in 2014.
Figure 7.6: Interest and Principal Repayments on Domestic Bonds ) m $ ( t n u o m A 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year Principal Interest Whole of Government Financial Statements and Annual Appropriation Statement 30 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ 7.6 Overseas Borrowings The total outstanding overseas borrowing of government as at 31 December 2014 was $1,254,277,326 which represents 31% of the total outstanding borrowings.
Majority of the overseas borrowings obtained were to finance capital projects.

7.6.1 Yearly Overseas Borrowings Figure 7.7 shows the trend of the yearly cash overseas borrowings over the past 15 years.
Figure 7.7: Yearly Overseas Borrowings: 2000 - 2014 600 500 400 300 200 100 ) m $ ( t n u o m A 0 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year The increased overseas borrowings in years 2006 and 2011 were due to the issuance of the $US150 million and the $US250 million in global bonds respectively.

The government had borrowed $120.4 million in 2014 in the form of interest capitalisation and direct disbursement.
Whilst loan repayments totalling $79,325,788 were made this comprises of $53,809,084 in interest and $25,516,704 in principal payments.

Refer to Table 7.6 for the details of overseas Borrowings raised in year 2014.
Table 7.6: Loan Raised in Year 2014 Loan Road Upgrading Project Fiji Road Upgrading Project III– Supplementary Buca/ Moto Roads Sigatoka / Serea Roads Nabouwalu/ Dreketi Water Supply Projects Suva/Nausori Water Supply Supplementary Flood Recovery Loan Emergency Flood Recovery Loan Housing Project Public Rental Housing Total Capitalisation Of Interest ($) Direct Disbursement ($) Total ($) --- --- --- --- 2,270,254 16,290,021 12,620,013 70,100,741 2,270,254 16,290,021 12,620,013 70,100,741 73,234 9,787,613 9,860,847 49,296 8,007,355 8,056,651 --- 122,530 1,165,254 120,241,251 1,165,254 120,363,781 Furthermore details of outstanding borrowings by Government as at 31 December 2014 are outlined as follows: Whole of Government Financial Statements and Annual Appropriation Statement 31 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ (a) Borrowings in relation to the road upgrading project comprised of $101.3 million or 84% of the total outstanding overseas borrowings.
The funds obtained for this project were to be used for road upgrading, rehabilitation, and the management of road assets and sector.

(b) Borrowings for water supply projects, namely, the Suva/Nausori water supply supplementary accounted for 8% or $9.9 million of the total borrowings, which were mainly used for improving the water supply services.

(c) Emergency flood recovery loan totalled to $8 million or 7% of the overseas loan outstanding as at 31 December 2014.
(d) Housing loan totalled to $1.2 million or 1% of the outstanding loan.

These are borrowings facilitated for rental of public housing project.

7.6.2 Overseas Borrowings Outstanding & Interest Paid Table 7.7 provides details on the overseas borrowings outstanding over the past 15 years with the total interest paid each year.
Table 7.7: Overseas Borrowings Outstanding, Interest Paid and Budgetary Provision Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Overseas Borrowing s ($)m 207.7 206.9 193.5 174.1 168.7 164.1 416.7 397.1 476.0 527.2 548.5 832.1 935.5 1,081.0 1,254.3 Increase/ (Decrease) Interest Paid Increase/ (Decrease) Budgetary Provision Variance (%) ($)m (%) ($)m ($)m 1 --- (6) (10) (3) (3) 154 (5) 20 11 4 52 12 16 16 11.4 9.8 9.3 7.2 6.1 5.5 5.7 22.2 20.8 24.4 22.9 43.1 46.3 51.9 53.8 (12.0) 14 (5) (23) (15) (10) 4 289 (6.3) 17 (6) In 2014, the overseas borrowings increased by 16% compared to 2013.
A sum of $63,420,378 was provided in the 2014 revised budget for interest expense whilst the actual interest payments on during the year totalled $53,809,084 resulting in a saving of $9,611,294.

The principal and interest payments are illustrated in Figure 7.9.

Whole of Government Financial Statements and Annual Appropriation Statement 32 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Figure 7.9: Interest Payments vs.
Principal Repayments Principal Repayments Interest ) m $ ( t n u o m A 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year Principal payment for overseas loans for 2014 amounted to $25,516,704.

This is an increase by $5.86 million or 30% compared to 2013.
7.6.3 Revaluation of Overseas Borrowings Overseas borrowings are revalued each year using the RBF exchange rate as at 31 December 2014 to recognise the balance owed in Fiji dollars.

Table 7.8 outlines the amounts attributed to overseas borrowings due to revaluation over a 15 year period.

These in turn has an effect on public debt i.e.

an increased revaluation increases the debt and vice versa.
Table 7.8: Revaluation of Overseas Borrowings & Unrealised Exchange Gains/Loss Year Revaluation Increase/ (Decrease) Overseas Borrowings 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ($) (19,589,702) (9,239,298) (18,905,125) (31,859,534) (3,554,545) (534,342) (17,120,505) (21,844,864) 70,352,312 46,988,862 22,885,617 1,537,285 14,895,650 65,287,541 65,340,835 ($) 207,697,167 206,889,315 193,505,881 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,104 935,530,587 1,081,097,414 1,254,277,326 Unrealised Exchange (Gain)/Loss as a % of Overseas Borrowings (9) (4) (10) (18) (2) (0.3) (4.1) (5.5) 15 9 4 0.2 2 6 5 Whole of Government Financial Statements and Annual Appropriation Statement 33 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The value of the overseas borrowings increased by $65,340,835 or 5% due to movement in exchange rates in 2014.
7.7 Treasury Bills The government through the RBF floats treasury bills to raise funds in the domestic market to meet its short term needs.

Treasury bills are sold at a discount on face value of which the investor will receive face value upon maturity.

During the year, the government raised $309,500,000 in treasury bills of which $306,883,399 constituted net borrowings to the government whilst $2,616,601 represented discount, as summarised in Table 7.9.
Table 7.9: Treasury Bill Holders For Bills Issued In 2014 Bank Face Value % Commercial Banks FNPF Others Total 236,600,000 72,000,000 900,000 309,500,000 76 23 1 100 Discount ($) 1,539,902 1,068,395 8,304 2,616,601 % 59 40 1 100 Net Receipts ($) 235,060,098 70,931,605 891,696 306,883,399 % 76 23 1 100 Moreover, 76% of the treasury bills raised were purchased by commercial banks, 23% by FNPF, and the remaining 1% was purchased by other entities that included Fijian Holdings Limited and Amalgamated Telecom Holdings Limited.
The treasury bills, which are issued by the government through the RBF, have a maturity period of 14 to 364 days.

Table 7.10 details the total treasury bills raised during the year 2014 together with their maturity dates and interest.
Table 7.10: Maturity of treasury bills issued in 2014 Maturity in Days Face Value ($) Interest ($) Treasury Bill Cost ($) 14 28 56 91 182 245 364 25,000,000 17,742.74 16,000,000 7,058.12 59,000,000 283,231.48 106,400,000 74,700,000 10,200,000 18,200,000 564,709.65 1,296,945.57 174,622.85 272,290.73 24,982,257.26 15,992,941.88 58,716,768.52 105,835,290.35 73,403,054.43 10,025,377.15 17,927,709.27 Total 309,500,000 2,616,601.14 306,883,398.86 The amount raised by the government through treasury bills with varying maturity dates were bought largely by the commercial banks and Fiji National Provident Fund (FNPF) as reflected in the Figure 7.10 below.
Whole of Government Financial Statements and Annual Appropriation Statement 34 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The interest expense has been fluctuating as the maturity date increases.
Refer to Figures 7.10 and 7.11 for these details: Figure 7.10: Interest Expense Based on Maturity Dates ) $ ( t n u o m A 1,000,000 750,000 500,000 250,000 0 Figure 7.11: Treasury Bill by Maturity 364 days 6% 14 days 8% 245 days 3% 182 days 24% 28 days 5% 56 days 19% 14 28 56 91 182 245 364 Days 91 days 35% 7.7.1 Treasury Bills Over a 15-year Period Treasury bills issued and redeemed over the last 15 years is summarised in Table 7.11.
Table 7.11: Treasury Bills 2000 – 2014 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outstanding 01/01/14 ($) 117,231,671 72,449,838 176,604,613 196,432,453 276,925,838 126,987,822 136,018,388 141,311,687 141,160,433 64,552,990 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 Issues Redemption ($) 129,129,145 424,654,868 437,465,767 580,634,561 189,256,716 326,951,124 528,715,414 685,889,234 391,725,937 253,821,653 687,313,133 411,970,874 306,664,544 138,122,146 306,883,399 ($) 173,910,978 320,500,093 417,637,927 500,141,176 339,194,733 317,920,558 523,422,114 686,040,488 468,333,380 220,653,349 710,064,626 416,019,281 265,852,974 147,577,053 280,578,003 Outstanding 31/12/14 ($) 72,449,838 176,604,613 196,432,453 276,925,838 126,987,822 136,018,388 141,311,687 141,160,433 64,552,990 97,721,294 74,969,800 70,921,393 111,732,963 102,278,056 128,583,45230 The trend for treasury bills issued, redemptions, the bills outstanding at the end of the financial year and the yearly deficit/surplus are shown in Figure 7.12.
30 Excludes interest of $2,016,548 Whole of Government Financial Statements and Annual Appropriation Statement 35 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Figure 7.12: Treasury Bills: 2000- 2014 800 600 400 200 0 -200 -400 -600 ) $ ( t n u o m A 2000 2001 2002 2003 2004 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year Issues Redemption Outstanding Deficit In 2014 a budgeted gross deficit of $385.4 million was recorded, with treasury bills outstanding totalling $130.6 million.
7.7.2 Treasury Bills Management Treasury Bills are short-term financial instruments used by Ministry of Finance to cover shortfalls during the year.
The analysis of budgeted revenue and expenditure as provided in the budget and the Treasury Bills for the year are as follows: Table 7.12: Revenue Variance vs. Treasury Bills Raised Revenue 2000 $m 2001 $m 2002 $m 2003 $m 2004 $m 2005 $m 2006 $m 2007 $m 2008 $m 2009 $m 2010 $m 2011 $m 2012 $m 2013 $m 2014 $m Budgeted Revenue Operating Receipts & 816.3 951.7 1,011.8 1,115.8 1,149.7 1,257.4 1,346.6 1,430.0 1,411.5 1,522.4 1,496.5 1,745.7 1,942.8 2,108.4 2,721.8 Investing Loan Receipts 234.7 253.1 338.5 315.2 461.5 370.0 394.5 371.0 370.2 522.5 497.5 734.5 338.4 398.9 385.4 Total 1,051.0 1,204.9 1,350.3 1,431.0 1,611.2 1,627.4 1,741.1 1,801.0 1,781.7 2,044.9 1,994.0 2,480.2 2,281.2 2,507.3 3,107.2 Actual Revenue Operating Receipts & 911.0 900.5 1,038.4 1,066.3 1,176.2 1,221.9 1,401.3 1,391.3 1,454.9 1,412.8 1,536.5 1,801.3 1,937.1 2,098.4 2,371.0 Investing Loan Receipts 225.0 239.2 325.2 319.7 458.5 328.6 633.9 118.9 345.6 405.4 463.0 693.4 192.2 173.1 353.6 Total 1,136.0 1,139.7 1,363.6 1,386.0 1,634.7 1,550.5 2,035.2 1,510.2 1,800.5 1,818.2 1,999.5 2,494.7 2,129.3 2,271.5 2,724.6 Revenue Variance 85.0 (65.2) 13.3 (45.0) 23.5 (76.9) 294.1 (290.8) 18.9 (226.7) 5.5 14.5 (151.9) (235.8) (382.6) Treasury Bills 72.4 176.6 196.4 276.9 127.0 136.0 141.3 141.2 64.6 97.7 75.0 70.9 111.7 102.2 130.6 as at 31st Dec Excess/((shortf all) 157.4 111.4 209.7 231.9 150.5 59.1 435.4 (149.6) 83.5 (129.0) 80.5 85.4 (40.2) (133.6) (252.0) Whole of Government Financial Statements and Annual Appropriation Statement 36 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The operating and investment receipts should pay for operational costs of Government which include SEGs 1 - 7, 11 & 12 and capital development programs.
Treasury bills are raised to cover operational deficits provided that they are no more than the estimated operating and investing receipts to be collected during the year.

The actual revenue collection in 2014 was less than the budgeted revenue by $382.6 million.

Government revenue and borrowings from the domestic and the overseas market were not sufficient to meet the actual expenditure.

In addition Government raised treasury bills amounting to $306,883,399 in 2014.
7.8 Ways and Means The ways and means is a short term advance facility provided by the RBF for Government where advances are given to Government for a day to meet immediate cash deficits.

The Ways and Means are replenished by Government during the year and are therefore not reflected as part of borrowings.

An analysis of ways and means balances for the past 15 years is illustrated in Figure 7.13.
Figure 7.13: Ways and Means Balances: 2000 - 2014 ) m $ ( t n u o m A 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year During the year 2014, Government utilised this advance facility from RBF to borrow during the year totalling $98,300,000 compared to 2013, where the government did not utilise this facility.
7.9 Flexibility Flexibility is an indicator of the degree a Government can increase its financial resources or revenue to respond to increasing financial commitments either by expanding the revenue or increasing its debt burden.

Table 7.13 contains data for the total revenue and the debt repayments of Government for a period of 15 years.

The revenue derived by the Government includes a significant portion which is derived from borrowings.
The revenue data included in the analysis of flexibility does include the loan component.
Whole of Government Financial Statements and Annual Appropriation Statement 37 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 7.13: Comparison of Revenue and Debt Servicing Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Revenue ($) 1,135,964,892 1,139,754,743 1,363,992,433 1,386,009,960 1,634,663,320 1,550,489,828 2,035,207,842 1,510,117,953 1,800,583,846 1,818,235,071 1,999,480,409 2,451,779,618 2,129,334,959 2,119,975,211 2,393,392,529 Debt Servicing ($) 387,869,552 528,250,835 647,020,349 737,597,477 617,152,850 646,463,603 857,682,649 1,091,633,056 896,317,497 683,801,800 1,155,094,117 1,176,866,114 775,194,479 576,915,467 746,927,616 Interest Bite (%) 34 46 47 53 38 42 42 72 50 38 58 48 36 27 31 The interest bite represents the percentage of debt repayment comprising the principal and interest components of the domestic and overseas borrowings as well as redemptions.
Figure 7.14: Percentage of Debt Servicing to Total Revenue e g a t n e c r e P 80% 70% 60% 50% 40% 30% 20% 10% 0% Interest Bite 2000 201 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years In 2014, the flexibility measure was 31% indicating that the total debt repayment was equivalent to 31% of the revenue received by the Government during the year compared to 27% during 2013.
Hence, only 69% of revenues collected were available for government programs during 2014 compared to 73% during 2013.

7.10 Vulnerability Vulnerability is the measure of the degree of dependence of government on sources of borrowing outside its control or influence.

A measure of vulnerability is the comparison of overseas borrowings to the total Government debt.

Table 7.14 compares overseas borrowings to total government borrowings for a period of 15 years.
Whole of Government Financial Statements and Annual Appropriation Statement 38 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 7.14: Comparison of Overseas Borrowings and Total Borrowings Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Overseas Borrowings ($) 207,697,167 206,889,315 193,505,879 174,125,752 168,665,379 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 548,461,798 832,147,793 935,530,587 1,081,097,414 1,254,277,326 Total Borrowings ($) 1,438,742,654 1,686,089,578 1,891,033,984 2,133,770,240 2,282,168,851 2,421,491,962 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,918 3,382,723,748 3,566,351,336 3,678,829,200 3,824,939,970 4,083,194,826 % 14 12 10 8 7 7 15 15 16 17 16 23 25 28 31 In 2014, overseas borrowings made up 31% of outstanding government borrowings which increased by 3% compared to 2013.
Figure 7.15: Overseas Loan Percentage to Total Government Debt 35% 30% 25% 20% 15% e g a t n e c r e P 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years The overall trend indicates an increasing reliance on overseas borrowings from 2006.

Another measure of vulnerability is the comparison of overseas borrowings to GDP.

Table 7.15 compares overseas borrowings to GDP for a period of 10 years.
Table 7.15: Comparison of Overseas Borrowings and GDP Year Overseas Borrowings Nominal GDP 2005 2006 2007 2008 2009 ($) 164,050,924 416,729,200 397,103,384 475,994,415 527,248,475 ($) 5,069,432,000+ 5,431,720,200+ 5,566,057,664+ 5,895,900,000+ 5,768,400,000+ % of Overseas Borrowings /GDP 3 8 7 8 9 Whole of Government Financial Statements and Annual Appropriation Statement 39 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Year Overseas Borrowings Nominal GDP ($) 548,461,798 832,147,793 935,530,587 1,081,097,414 1,254,277,326 2010 2011 2012 2013 2014 ($) 6,111,648,000+ 6,846,600,000+ 7,316,564,000+ 7,445,793,200+ 8,552,900,000+ % of Overseas Borrowings /GDP 9 12 13 15 15 +Forecasted Figure Source: Fiji Bureau of Statitsics Figure 7.16 shows that the percentage of the overseas debt to GDP increased by 1% to that of year 2013 Figure 7.16: Overseas Borrowings as a % of GDP e g a t n e c r e P 16% 14% 12% 10% 8% 6% 4% 2% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years Moreover, the comparison of the domestic debt to GDP is another measure of vulnerability.
Table 7.16 compares Domestic Borrowings to GDP for a period of 10 years.
Table 7.16: Comparison of Domestic Borrowings and GDP Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Domestic Borrowings Nominal GDP ($) 2,121,422,650 2,300,672,650 2,196,208,150 2,346,258,150 2,505,092,150 2,759,292,150 2,663,282,150 2,631,565,650 2,641,564,500 2,698,317,50031 ($) 5,069,432,000+ 5,431,720,200+ 5,566,057,664+ 5,895,900,000+ 5,768,400,000+ 6,111,648,000+ 6,846,600,000+ 7,316,564,000+ 7,445,793,200+ 8,552,900,000 % of Domestic Borrowings/ GDP 42 42 40 40 43 45 39 36 35 32 - Forecasted Figure Source: Fiji Bureau of Statistics.
31 Excludes Treasury Bills outstanding at year end Whole of Government Financial Statements and Annual Appropriation Statement 40 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ In 2014, the domestic borrowings as a percentage of GDP decreased to 32%, a decrease by 3 per cent and constitute the lowest debt recorded to GDP over the 10 year period.
Figure 7.17: Domestic Borrowings as a % of GDP e g a t n e c r e P 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years Figure 7.17 shows that the Domestic Borrowing as a percentage of the GDP has been fluctuating over the years and indicates the nation’s capability to meet its internal debt obligations when due.

Table 7.17 shows the comparison between tax revenue and the GDP.
Table 7.17: Comparison of Tax Revenue and GDP Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Tax Revenue ($) 1,065,808,942 1,227,220,772 1,230,363,366 1,243,057,337 1,209,223,648 1,302,130,578 1,512,378,397 1,722,147,578 1,879,295,170 2,117,742,442 GDP ($) 5,069,432,000+ 5,431,720,200+ 5,566,057,664+ 5,895,900,000+ 5,768,400,000+ 6,111,648,000+ 6,846,600,000+ 7,316,564,000+ 7,445,793,200+ 8,552,900,000+ % of Tax Revenue/GDP 21 23 22 21 21 21 22 24 25 26 +Forecasted Figure Source: Fiji Bureau of Statistics Table 7.17 shows that the Tax Revenue as a percentage of GDP over the last 10 years has been between 21% - 25%.
Whole of Government Financial Statements and Annual Appropriation Statement 41 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Figure 7.18: Tax Revenue as a % of GDP e g a t n e c r e P 25 24 23 22 21 20 19 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years Another measure of vulnerability is the comparison of tax revenue to debt.

Table 7.18 compares tax revenue to debt for a period of 10 years.
Table 7.18: Comparison of Tax Revenue and Debt Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Tax Revenue ($) 1,065,808,942 1,227,220,772 1,230,363,366 1,243,057,337 1,209,223,648 1,302,130,578 1,512,378,397 1,722,147,578 1,879,295,170 2,117,742,442 Debt ($) 2,421,491,962 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,918 3,382,723,748 3,566,351,336 3,678,829,200 3,824,939,969 4,083,194,826 % of Tax Revenue/Debt 44 43 45 43 39 38 42 47 49 52 The tax revenue as a percentage of debt it indicates that 52% of the debt can be met from tax revenue.
Figure 7.19: Tax Revenue as a % of Debt 60% 50% 40% 30% 20% 10% e g a t n e c r e P 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years Whole of Government Financial Statements and Annual Appropriation Statement 42 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The ability of tax revenue to meet the debt over the 10 year period was on a declining trend since year 2007 and gradually increased from year 2010 to 2014 due to increase in tax collections during these years.
Table 7.19 shows the comparison of government surplus/ (deficit) to GDP.
Table 7.19: Comparison of Government Deficit (Surplus) and GDP Year Gross Surplus/ (Deficit) GDP ($) (366,334,029) (346,769,675) (334,935,764) 120,093,824 (93,167,378) 99,398,751 49,027,101 (136,880,612) (37,583,667) (554,256,802) ($) 5,069,432,000+ 5,431,720,200+ 5,566,057,664+ 5,895,900,000 5,768,400,000+ 6,111,648,000+ 6,846,600,000+ 7,316,564,000+ 7,445,793,200+ 8,552,900,000+ 2005 2006 l2007 2008 2009 2010 2011 2012 2013 2014 +Forecasted Figure Source: Fiji Bureau of Statistics % of Gross Surplus (Deficit) /GDP (7) (6) (6) 2 (2) 2 1 (2) (1) (6) Figure 7.20:Gross Deficit as a % of GDP 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% e g a t n e c r e P 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years In 2014, the gross deficit as a percentage of GDP increased by 3% compared to a 1 % gross deficit in 2013.
7.11 Sustainability Sustainability is defined as the ability of Government to maintain existing programs and meet existing creditor requirements without increasing the burden on the economy.

It is measured by the ratio of Government debt to the Gross Domestic Product.

The total Government debt as a percentage of GDP as at 31 December 2014 was 48%, indicating debt sustainability relative to the production of goods and services.
Whole of Government Financial Statements and Annual Appropriation Statement 43 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Table 7.20: Total Government Debt to Gross Domestic Product Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Government Debt ($) 2,421,491,962 2,858,713,537 2,734,471,967 2,886,805,555 3,130,061,918 3,382,723,748 3,566,351,336 3,678,829,200 3,824,939,970 4,083,194,826 - Forecasted Figure Source: Fiji Bureau of Statistics % of Growth GDP % of Growth 6 18 (4) 6 8 8 5 3 4 7 ($) 5,069,432,000 5,431,720,200 5,566,057,664 5,895,900,000 5,768,400,000 6,111,648,000- 6,846,600,000- 7,316,564,000- 7,445,793,200- 8,552,900,000+ 12 7 2 6 (2) 8 12 7 2 15 Public Debt as a % of GDP 48 53 49 49 54 55 52 50 51 48 Table 7.20 shows that percentage growth in Government debt is 7% while the percentage growth in the economy is 15% indicating a slight decrease in debt burden of individuals in year 2014.
In 2014, percentage change in national debt relative to the GDP has decreased by 3% compared to year 2013.

Figure 7.21: Government Borrowings as a % of GDP e g a t n e c r e P 56% 54% 52% 50% 48% 46% 44% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years The Government needs to sustain adequate resources to fund existing programs, commence new projects as well as meet existing creditor obligations in order to maintain the level of borrowings at a sustainable level.
8.0 LENDING FUND ACCOUNT 8.1 Term Loans Receivable The Minister of Finance may, on behalf of the State, make loans of public money from the consolidated fund on such terms and conditions as the Minister thinks fit and whether within or outside Whole of Government Financial Statements and Annual Appropriation Statement 44 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Fiji.32 A total of $64.6 million was appropriated under the lending fund account33.
As at 31 December 2014, total outstanding loans owed to Government amounted to $198,915,267, an increase of $140,518,440 or 240% compared to the year 2013.

The significant increase was attributed to the subsequent recording of $138,316,930 being the amount lent to Fiji Sugar Corporation Limited during 2011 and 2012.

The term loans receivable balances for the past seven years is graphed and tabulated below.
Table 8.1: Trend of Term Loan Receivables Balance Figure 8.1: Term Loan Receivables 2008-2014 Year 2008 2009 2010 2011 2012 2013 2014 Balance Outstanding ($) 105,861,373 96,594,079 73,833,129 70,377,340 67,813,754 58,396,827 198,915,267 ) $ ( s n o i l l i M 250 200 150 100 50 0 Year 2008 2009 2010 2011 2012 2013 2014 Years In addition, of the $198.9million in debt owed, $13.7 million (7%) credit balance relating to Public Service Commission was recorded contrary to the asset nature of the account, reducing the balance for the terms loans outstanding.
Management Comments A meeting was convened on 19th August, 2015 between PSC Management/ Accounts Team, MOF Officials and officials of OAG whereby it was agreed that PSC will take a lead role in rectifying the anomalies in SAG 61.

PSC Team has given their assurance to correct the errors and rectify the figures before the end of 2015 fiscal period.
9.0 REVOLVING FUND ACCOUNT 9.1 Accounts Receivable & Prepayment and Accrued income Prepayments comprise of un-recouped accountable advances paid to civil servants to facilitate official trips and accommodation for both domestic and overseas trips.34 The repayment of these advances must be actively pursued to reduce the risk of losses from irrecoverable debts.35 These are non- expenditure allocations, however, can be used to raise payments as revolving payments awaiting clearance to the respective expenditure allocations.
32 Financial Management Act 2004, Section 61 (1) 33 2014 Budget Estimate – Page 375 34 Note 3.4 Significant accounting policies – Notes to the financial statement for Government for year ended 31 December 2014 35 Part 10 - 2013 Pro Forma Finance Manual Whole of Government Financial Statements and Annual Appropriation Statement 45 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ The Minister of Finance may write off losses in respect of public money, state assets and agency assets.36 Write off loses less than $50, 000 must be referred to the Permanent Secretary for Finance and that in excess of $50,000 must be referred to the Minister for Finance.
Losses include abandonment of claims, loss of livestock, assets and money.37 The accounts receivables for the year 2014 totaled $14,134,452 while prepayments & accrued income totaled $1,673,840 compared $18,712,196 and $4,274,677 respectively for the year 2013.

A decline of $4,577,744 or 24% and $2,600,837 or 61% respectively.
The audit noted the anomalies following the approval of write – off of balances in the general ledger:  The Ministry passed accounting adjustments in the accounts receivable ($4.81 million) and prepayments & accrued income (2014: $2.8million and 2013: $9.9 million) general ledger to reduce balances in the respective accounts as part of book cleaning exercise.
 These thus, cleared the unexplained balances in accounts receivable and prepayment & accrued income general ledger, however, increased without any justification the contra account balances to which the accounting entries are recorded to.

 Furthermore, after the write-off, a total of $14.1 million was outstanding in accounts receivable as at 31 December 2014.

Of this, $13.6 million or 96% of the accounts receivable was not reconciled.

Refer to Appendix 5 for details.


 Of the outstanding balances in prepayments, $1.65 million or 99% of the balances are un-retired accountable advances that were provided to civil servants for travel on duty.

 Further, in the absence of reconciliations and records, recovery action has not been instigated to retire and account for the advances provided.

Refer to Appendix 6 for responses from Ministry / department with large balances owed.
 Despite the substantial write offs, Ministries and departments continued to delay and are not robust to reconcile and recover advances;  Clear procedure guideline by Ministry of Finance across Ministry/Department for uniformity in retirement of accountable advances is lacking.

These observations reflect the laxity of Ministries and Departments to account for receivables and advances owed.
Failure to reconcile balances is catalyst to subsequent write-offs showing lacked ownership of revolving payments and its subsequent accounting to the respective general ledger.

Non-retirement and non-reconciliation of accountable advances not only understates expenditure recorded for the period and but could be fraudulently raised.
Recommendations  The Ministry of Finance should ensure that policy on the issue, accounting, reconciliation, clearance and its recovery is issued to all Ministry /Departments.
36 Financial Management Act 2004 – Section 34 (1)(a) 37 Finance Instructions 2010 – Section 57 (1) – (3) Whole of Government Financial Statements and Annual Appropriation Statement 46 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________  Regular review and monitoring of reconciliations for Ministries and Departments is carried out through the Ministry’s Internal Audit Division.
 Disciplinary action is instigated on accounting officers who fail to reconcile substantial accountable advances within the accounting period.
Management comments The Accountable Advance policy which was issued in June 2014 outlines the general penalties and disciplinary actions that may be imposed against officers that do not adhere to procedures for retirement of advances 10.0 CONTINGENT LIABILITIES Contingent liability is a potential liability that may or may not become due, depending on whether a possible event occurs, such as a claim for compensation, an indemnity or other legal claim.38 10.1 Contingent Liabilities for Government The government’s total contingent liabilities had a total of 14 entities under the government guarantee in year 2014.
Table 10.1 below show the trend in total contingent liabilities for the years 2006 to 2014.

Table 10.1: Contingent Liabilities - 9 year analysis Year 2006 2007 2008 2009 2010 2011 2012 2013 of on Number Entities Govt.

Guarantee Total Contingent Liabilities and Other Contingent Liabilites ($) 19 15 15 16 16 16 15 14 3,036,693,046 3,328,068,372 3,499,088,018 1,963,068,505 1,791,461,261 1,931,795,891 2,155,254,122 2,191,273,681 Government guarantee during the year covered both domestic and overseas loans.
The total contingent liabilities and other contingent liabilities as at 31 December 2014 amounted to $2,556,656,916.

Other Contingent liabilities for overseas loans are for the membership subscriptions of Government with overseas agencies namely the International Bank for Reconstruction & Development and the International Development Association.

The subscriptions represent callable capital that Government subscribes for shares as its membership contributions/capital holdings with International agencies.
The agencies would call on this callable 38 Financial Instructions 2010, Section 2 Whole of Government Financial Statements and Annual Appropriation Statement 47 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ capital if Fiji is proven not to be complying with the articles of agreement or if Fiji fails to honour its loan commitments under respective agreements with these institutions.
11.0 FINANCIAL MANAGEMENT INFORMATION SYSTEM (FMIS) UNIT 11.1 Unsubstantiated Inter Fund Transfer of Equity Charges - Operating Fund (Fund 1) and Trading and Manufacturing Accounts (Fund 4) The ledger reconciliation statement shall be forwarded to the Accounting Head.
The Accounting Head must ensure that all balances are accurate and adequately supported and any misallocations or outstanding balances from the previous month have been dealt with.39 A key feature of the FMIS Masterpiece includes the Query and Answer (Q&A) which provides exceptional reports that increases the accuracy of data related results and safeguarding against foreseeable errors.
Review of the year end TMA general ledger postings noted that the Ministry of Finance (Asset Management Unit) transferred balances from the Trading and Manufacturing Account (Fund 4) equity to the Operating Fund Account (Fund 1) equity.

In addition, there was no evidence of consultations with the relevant Ministry/Departments for these adjustments.

Refer to Table 11.1 for details of postings made at year end.
Table 11.1: Year-end equity transfer journals posted by the AMU Journal Narration Allocation TMA005/2014 To transfer balances in Fund 4 to Fund 1 (Ministry of Equity and Fisheries Forests, Ministry of Agriculture and Ministry of Works TMAs) TMA006/2014 Total Transfer balance in Fund 4 (DEW) to Fund 1 4-32251-77999-940377 1-32201-30999-910102 1-30101-30999-910102 4-30351-77999-940330 1-40501-91011-910102 4-40251-91011-940383 4-40263-91011-940383 1-40501-91011-910102 1-40501-92011-910102 4-40263-92011-940383 1-40501-93011-910102 4-40263-93011-940383 1-40501-92011-910102 4-40263-92011-940383 Debit ($) 6,366.91 643,100.74 23,693.70 71,072.80 35,820.12 51,911.09 5,505.39 Credit ($) 6,366.91 643,100.74 23,693.70 71,072.80 35,820.12 51,911.09 5,505.39 837,470.75 837,470.75 Discussions with the responsible officers at the Asset Management Unit noted that the transfers are done in order to balance the Trading and manufacturing accounts.
However, the explanations for postings of such nature could not be provided.

39 Pro-forma Finance Manual 2013 – Section16.3.1 Whole of Government Financial Statements and Annual Appropriation Statement 48 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ In addition, Query and Answer Module in the FMIS did not produce exception reports for such unauthorised inter-fund accounting entries.
Recommendations The Ministry of Finance:    Should ensure that accounting adjustment are carried out by Ministry/ Department; Should only take consultative and oversight functions to monitor the accounting of TMA operating as authorised; Should consider generating exceptional reports from Q&A on a monthly/quarterly basis as a means of increasing the accuracy of data related results and safeguarding against foreseeable errors.

Ministry’s Comments The recommendation suggested by OAG is well taken.
MoF has been assuming the TMA oversight and account adjustment function, in its bid to assist the TMA operators resolve their recurring audit issues pertaining to inter-fund entries.
Whilst AMU steps away from this operational task, the MoF is at the same time confident that there will be lesser queries on inter fund entries in future given the recent introduction and implementation of fund profiling 11.2 Involvement of Internal Audit Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.
It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

The audit noted that the Internal audit, Compliance and Good Governance Division (IACGG) have not been involved in the review of reconciliations of Ministry/Departments that are maintained with FMIS.
While the initial discussion with FMIS to involve IACGG to be part of the checking of write off submissions as a proactive measure did not eventuate, there are risks of incorrect amounts being written off from the books of accounts.

Failure to address the above, there is a risk that genuine account balances may be written off in error without being detected.
Recommendation The Ministry of Finance Internal Audit, Compliance, Compliance and Good Governance Division shall consider carrying out reviews of Ministries/Departments relating to the correctness and accuracy of the underlying accounts reconciliations.
Whole of Government Financial Statements and Annual Appropriation Statement 49 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Ministry’s Comments While the Internal Audit & Good Governance (IAGG) Section acknowledges and appreciates the OAG’s recommendation for the ‘due diligence’ processes of checking the reconciliations and write-off submissions to be strengthen, the IAGG Section wishes to advice that our function is basically internal auditing.
The Internal Auditing function is defined under the International Professional Practices Framework (IPPF) as: “Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.

It helps an organization accomplish its objectives by bringing a systematic disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes”.
Moreover, the function of the internal audit is mandated under the Finance Instruction 2010 section 72 which states the internal audit process as: (1) “The Permanent Secretary for Finance must authorize the conduct of any audit that he/she deems necessary to determine whether- (a) the operations or activities of all Budget Sector Agencies are being performed effectively, economically and efficiently and in compliance with all relevant written laws; (b) the financial affairs of all budget sector agencies is in compliance with all relevant written laws and with due regard to the principles of responsible financial management.” Furthermore, it is worth noting the ‘IIA standard 1130.A2’ on internal audit responsibility for other (Non – audit) functions which state that; “Internal auditors are not to accept responsibility for non-audit functions or duties that are subject to periodic internal audit assessments.
If we have this responsibility, then we are not functioning as internal auditors.
When the internal audit activity, Director Internal Audit or individual internal auditor is responsible for, or management is considering assigning, an operational responsibility that the internal audit activity might audit, the internal auditor’s independence and objectivity will be impaired.” Evaluation and provision of assurance on the process of write offs and reconciliation will be conducted by IAGG during their time of audit.
Lastly we wish to raise our concern that Director IAGG was not consulted prior to the issue being raised in the report.

IAGG would have provided a more constructive and value adding advice on the issue.

12.0 RECURRING AUDIT ISSUES The following anomalies were raised in the audit report for the year ended 31 December 2013 without any corrective action taken by the Ministry of Finance to resolve the issue as at 31 July 2015.

Issues Issue No.
Issues Issue No.

Recommendation Management Comments INVESTMENT Variance Ministry Investment Records and between Entity 7.5.1 (GR 2013) The Ministry should ensure records that of the investments government are regularly updated in line with decisions made by Cabinet.

Ministry The should investigate the variance of The issues raised are noted the and Ministry of Finance is currently liaising with concerned stakeholders to ensure that variances are identified.
Proposed timeline for resolving Recurring Issue 31 Dec 2015 Whole of Government Financial Statements and Annual Appropriation Statement 50 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Issues Issue No.

Recommendation Management Comments Proposed timeline for resolving Recurring Issue and ensure rectify $3,970,183 them that to amounts on the Whole of Government accounts are fairly stated.
Ministry of Finance should the inform Ministry’s/Departments to that Trust Fund ensure Accounts not overdrawn at any time and the overdrawn Trust Fund Accounts to be investigated and reconciled accordingly.

are 11.1.1 (Vol.

1 of OAG Report 2013) TRUST ACCOUNT (1) Overdrawn FUND Trust Fund Account As at 31/12/2014 the total amount overdrawn in trust to account $4,394,44440 contrary to the Finance Circular.

amounted Five of the Ministries and Departments with highest overdrawn balances.
December 2015 Ongoing The Ministry of Finance’s FMIS Unit currently is an undertaking Trust Operating to funding curb over payment.

initiative As for the True trust the FMIS Unit in 2014 managed to balance 11 of the 33 True Trust.

Majority of the 22 that unbalanced were than involved more one Project the in Bank Account and the this needed of assistance and Ministries Department as to which Project GL to adjust.
the The 22 Ministries were targeted in 2015 as part of the MoF Awareness Exercise and repetitive audit queries were the highlighted and need to utilize MoF’s willingness to assist and the Write Off exercise 40 SEG 86 - $3,213,240 and SEG 89 $1,181,204 Whole of Government Financial Statements and Annual Appropriation Statement 51 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Issues Issue No.
Recommendation (2) Writing Off Trust Account - in 2013 in Ledger Fund General $4.1million and $8.4 million 2014.

On March 2015, further write off of dormant and fund un-reconciled account balances in the general (FMIS) ledger totalled $8,434,818.98.

trust 11.2.1 (Vol.

1 of OAG Report 2013) The Ministry of Finance desk officers should ensure that and Ministries Departments reconciliations are verified with general ledger on a Any monthly basis.
the variances noted reconciliations are discussed with affected Ministries the to anomalies.

rectify in The Ministry of Finance must prepare monthly reconciliation of Trust Fund Account from the Ministries reconciliation at whole of government level.

A copy of the whole of government monthly reconciliation should be forward to the Auditor General for audit purposes.
The Ministry of Finance should always take regular review of accounts which and make static are with consultations Ministry/Department to ensure that these amounts can be fully supported and are valid amounts.

Proposed timeline for resolving Recurring Issue December 2015 Management Comments of The Ministry Finance’s FMIS Unit currently is an undertaking Trust Operating funding to curb over payment.
The adjustments that took place in the True and Operating initiative Trust was necessary as the entries have lost their meaning over the years and this was done after consultation with OAG.

Most of the entries have been carried forward for a number of years hence the need for Write Off..
Whole of Government Financial Statements and Annual Appropriation Statement 52 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 1: Appropriation Statement 2014 Ministry/Department Appropriation Head No and Accountability the Director of Public Office of the President Office of the Prime Minister Attorney General and Solicitor General Ministry of Finance Ministry of iTaukei Affairs Ministry of Defence, National Security and Immigration Ministry of Labour, Industrial Relations and Employment Ministry of Foreign Affairs, International Co-operation Office of the Auditor General Elections Judiciary Legislature Office of Transparency Office of Prosecutions Ministry of Justice and Anti-Corruption Ministry of Information Ministry of Strategic Planning, National Development and Statistics.
Ministry of Provincial Development and Disaster Management Fiji Military Forces Fiji Police Force Ministry of Heritage, Culture and Arts Ministry of Health Department of Housing Ministry of Social Welfare, Women and Poverty Alleviation Department of Youth and Sports Higher Education Institutions Department of Agriculture Department of Fisheries and Forests Ministry Lands Resources Ministry of Industry and Trade Ministry of Sugar Ministry of Public Enterprise, Communications, Civil Aviation and Tourism Ministry of Local Government, Urban Development and Environment Ministry of Works and Transport Education, National and Mineral of Savings/(Over- spent) % Revised Amount ($) 3,622,974 53,330,902 16,112,400 64,835,851 8,471,957 Actual Expenditure 2014 ($) 2,564,098 49,682,440 13,601,265 64,134,921 7,933,139 ($) 3,622,974 54,330,902 18,687,400 64,835,851 8,471,957 ($) --- (7,093,102) 37,536,731
1,306,561 40,004,125 40,004,125 37,536,731 2,467,394 27,317,112 22,749,604 19,018,640 3,730,964 55,970,851 55,970,851 52,244,520 3,726,331 41 7 18 1 7 8 --- 2 11 55 13 38 --- 23 31 25 13 15 8 9 (2) 4 211 11 15 0 9 10 34 14 7 7 20 7 Whole of Government Financial Statements and Annual Appropriation Statement Page 53 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Head No 41 42 43 49 50 51 52 Ministry/Department Appropriation Revised Amount ($) ($) Actual Expenditure 2014 ($) Savings/(Over- spent) % ($) Department of Public Utilities and Energy Government Shipping Services Fiji Roads Authority Peacekeeping Missions Miscellaneous Services Pensions, Gratuities and Compassionate Allowances Charges on Account of Public Debt Total 172,046,928 172,046,928 169,353,187 2,693,741 20,163,655 474,057,981 71,263,202 180,023,865 20,163,655 509,057,981 71,263,202 168,102,072 17,772,306 520,590,365 69,958,353 142,008,449 2,391,349 (11,532,384) 1,304,849 26,093,623 39,747,400 39,747,400 36,785,353 2,962,047 503,517,055 503,517,055 3,107,213,300 3,107,213,300 466,475,863 2,925,262,550 37,041,192 181,950,750 2 13 (2) 2 18 8 8 6 Whole of Government Financial Statements and Annual Appropriation Statement Page 54 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 2: vs General Ledger Variance in the Cash at Bank Account – Expected Balances Bank Accounts Audit Calculation of Expected GL* ($) FMIS GL Variance GL (Overstated) / Understated ($) ($) $67,901.00 3,766,819.00 3,466,217.00 20,443,682.00 171.00 --- --- 921,806.00 14,085.00 135,726.00 of Immigration (Immigration True Trust Fund Cash at Bank Account Ministry of Agriculture (Retention of funds LWRM) Ministry of Fisheries and Forests (WBC - fisheries bank account) Ministry of Fisheries and Forests Ministry of Lands and Minerals (Mining trust fund) Department of Cooperatives (Co-op small business institute) Department Communications (Telecommunications Development Trust Fund) Department of Environment
 (Environment trust account) Department of Environment (TF HUD litter decree publicity) Department of Housing (City wide trust account) Department of Environment (TF HUD litter decree publicity) Department of Bond trust) Public Prosecutions account) Fiji Corrections Service (Prison trust) Ministry (Provincial development trust account) Department of Energy (Rural Electrification Unit) Ministry of Lands account) Strategic Planning Office (IHRDP account) Ministry of Health (Cardiology services) Judiciary Department (judiciary fund trust account) Fijian Elections Office (Elections trust) Total Trading & Manufacturing Activities Cash at Bank Account Government Printing and Stationeries Ministry of Agriculture Ministry of Works (Divisional Engineer Central Eastern) Ministry of Works (Mechanical Suva) Ministry of Works (Divisional Engineer Northern) Ministry of Fisheries and Forests development trust bank Provincial (Lands (DPP trust fund trust of 79,609.00 367,452.00 2,010,339.00 2,519,955.00 4,495,818.00 127,841.00 512,669.00 535,910.00 39,686.00 91,453.00 804,536.00 493,861.00 1,230,567.00 55,065,194.00 1,440,569.00 793,224.00 14,155,197.00 877,651.00 44,155.00 Understated (25,965.00) 40,050.00 Understated 53,447.00 82,279.00 Understated 3,731,824.00 34,995.00 Understated 66,995.00 906.00 Understated 13,412,296.00 7,031,386.00 Understated 2,038,275.00 1,427,942.00 Understated 599,036.00 (599,036.00) Overstated 7,269.00 (7,098.00) Overstated 264,396.00 (264,396.00) Overstated 14,048,348.00 106,849.00 Understated 79,616.00 (7.00) Overstated 283,580.00 83,872.00 Understated 4,990,332.00 (2,979,993.00) Overstated 2,242,373.00 277,582.00 Understated 4,527,868.00 (32,050.00) Overstated 90,945.00 508.00 Understated (170,210.00) 974,746.00 Understated 492,090.00 1,771.00 Understated 1,228,035.00 48,838,201.00 2,532.00 6,226,993.00 Understated Understated 1,221,134.00 1,031,806.00 219,435.00 (238,582.00) Understated Overstated 978,340.00 (850,499.00) Overstated 1,012,179.00
 (499,510.00) 532,329.00 3,581.00 65,947.00 (26,261.00) Overstated Understated/Imma terial Overstated Whole of Government Financial Statements and Annual Appropriation Statement Page 55 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Bank Accounts Audit Calculation of Expected GL* ($) FMIS GL Variance ($) ($) Public Service Commission 1,429,258.00 1,429,251.00 7.00 Fiji Procurement Office Ministry of Health Total Overseas Missions Cash At Bank Account Fiji Consulate General Sydney Fiji High Comm.
Canberra Cogs Australian Bank Cogs New Zealand Bank Crown Agents London Fiji High Comm.
London Fiji Embassy Tokyo Dom Cash Fiji High Com Wellington Fiji High Commission Beijing Fiji Mission Brussels Fiji High Commission Un Fiji High Commission Un Washington Jp Morgan Jp Morgan Interest Account Fiji High Commission Geneva Bank In Kuala Lumpur Bank In Kuala Lumpur Bank In Kuala Lumpur Bank In Kuala Lumpur Closing Balance For PNG Fiji Embassy Indonesia Fiji Embassy Indonesia Fiji Embassy Indonesia Fiji Embassy Indonesia FHC New Delhi FHC New Delhi FHC New Delhi Total 2,002,060.00 512,856.00 7,394,073.00 1,935,495.00 488,827.00 8,695,308.00 66,565.00 24,029.00 (1,301,235.00) 446,635.17 116,811.54 (115.23) (168.90) 43,688.24 (15,428.29) 854,375.06 189,836.91 34,661.84 236,897.53 --- 182,678.39 559,517.23 2,654,988.65 29,535.18 218,437.33 --- 127,830.87 62,949.79 449,887.91 80,430.39 176,330.00 274,956.39 558,251.92 --- 31,031.95 32,625.14 87,492.51 7,434,137.52 422,813.25 135,819.53 --- --- 43,688.24 (647.64) 1,081,674.46 88,515.36 348,515.11 607,018.80 12,178.02 114,374.35 421,544.73 2,654,988.65 29,535.18 231,926.89 63,273.90 388,186.96 175,119.54 (2,372.76) 30,895.58 334,273.52 114,207.32 785,791.02 (45,486.39) 810,182.22 (92,135.37) --- 8,753,880.47 23,821.92 (19,007.99) (115.23) (168.90) --- (14,780.65) (227,299.40) 101,321.55 (313,853.27) (370,121.27) (12,178.02) 68,304.04 137,972.50 --- --- (13,489.56) (63,273.90) (260,356.09) (112,169.75) 452,260.67 49,534.81 (157,943.52) 160,749.07 (227,539.10) 45,486.39 (779,150.27) 124,760.51 87,492.51 (1,319,742.95) *Formula: Bank Certificate/Statement Amount less Unpresented Cheques add Lodgement not credited GL (Overstated) / Understated Understated/Imma terial Understated Understated Overstated Understated Overstated Overstated Overstated --- Overstated Overstated Understated Overstated Overstated Overstated Understated Understated --- --- Overstated Overstated Overstated Overstated Understated Understated Overstated Understated Overstated Understated Overstated Understated Understated Overstated Whole of Government Financial Statements and Annual
 Appropriation Statement Page 56 Arrears over 5 years as % of total (%) 36% 21% REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 3: Analysis of Arrears of Revenue as at 31 December 2014 Ministry/Department Total Arrears Arrears Less than 1 year Arrears 1 Year & Over Arrears 2–5 Years Arrears Over Years 5 Water Authority of Fiji Fiji Revenue & Customs Authority.-IRD Judicial Department Ministry of Lands & Mineral Resources Fiji Revenue & Customs Authority-Customs Ministry of Agriculture Ministry of Finance - Surcharge Fiji Procurement Office Ministry of Rural & Maritime Development & NDMO Auditor-General Ministry of Finance - Pensions Ministry of Labour Ministry of Health & Medical Services Fiji Police Force Department of Immigration Ministry of Education Office of the Attorney General Ministry of Communications – TAF ITC Services Ministry of Fisheries and Forest Ministry of Industry and Trade Government Printing Divisional Engineer Central Eastern (Works) Peace Keeping Missions Total ($) 32,348,574 50,502,452 ($) 11,323,636 31,868,710 ($) 3,528,389 --- ($) ($) --- 101,835 98,250 28,321 12,116 103,820 970 --- 12,005 --- 4,695,052 30 13,709 7,397 537,078.80 100,197 1,723 132,038 --- 226,165 11,000 19,095 6,710 70,992 767 --- --- 4,142,679 --- --- --- 97,266 --- 116,001 281,950 --- 340,810 54,700 56,410 110 28,854 1,431 2,100 --- 288 --- --- --- --- --- --- 1,587,290 150,840,875.91 1,587,290 --- 71,871,737.80 13,697,297 24,260,122 --- 688,334 347,075 113,548 87,758 72,155 56,057 11,407 5,134 2,402 1,214 175 --- --- --- --- --- --- --- 85% 41% 100% 12% 31% 35% 38% 2% 43% 37% 1% --- ---
 --- --- --- --- --- --- 41,011,720 --- 27% Whole of Government Financial Statements and Annual Appropriation Statement Page 57 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 4: Examples of Journals Postings between the Operating Fund Account (OFA) and Trading and Manufacturing Account (TMA) Allocation Period Journal ID Narration 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 4-40252-91011-260201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 1-40501-95991-530201 4-40251-93011-260581 4-40251-93011-863201 1-40501-97991-530201 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/003 2014/012 2014/012 2014/012 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP0553 AP2433 AP2433 AP2433 Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance Allowance Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally Paid normally A-4 Photocopy Paper A-4 Photocopy Paper Paid normally 4-40251-92011-070101 1-40501-96991-530201 2014/010 2014/010 AP4615 AP4615 22/10/14 - Unestablished 22/10/14 - Unestablished 44025191011260201 1-40501-95991-530201 2014/008 2014/008 AP5116 AP5116 TAX.
Paid normally 4-40251-91011-260202 1-40501-95991-530201 2014/002 2014/002 AP6449 AP6449 *AP Journal* Paid normally 1-30101-30101-560203 4-30351-30999-240201 2014/002 2014/002 AR3092 AR3092 445781-785 445781-785 1-30101-30101-560203 4-30351-30999-240201 2014/002 2014/002 AR3100 AR3100 445786-799 445786-799 1-30101-30101-560203 4-30351-30999-240201 2014/002 2014/002 AR3188 AR3188 445824-834 445824-834 4-30351-30999-540201 1-30101-30101-560203 02/2014 02/2014 AR7120 AR7120 Payment Journal Payment Journal Debit ($) 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 371.03 55.65 1,965.92 5.13 582.00 971.40 265.50 1,879.80 78.30 Credit ($) 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 147.00 426.68 1965.92 5.13 582.00 971.40 265.50 1,879.80 78.30 Whole of Government Financial Statements and Annual Appropriation Statement Page 58 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 5: Unsubstantiated Accounts Receivables Balances Ministry / Department Amount ($) Remarks Public Service Commission (1-02301-02999-560203) 10,591,153.33 No reconciliation was done for months of January to October 2014 as balances included prior year amounts.
Hence audit could not fully substantiate the correctness of the balance.

2,114,179.25 Supporting documents to support the balances were not provided by the Ministry of Works (4-40000-00000-560000) Ministry of Health (4-22000-00000-560000) Fiji Police Force (1-20101-20101-560103) Fisheries & Forestry (1-32201-77101-560102) RFMF (1-19101-19999-569902) (1-19101-19999-569903) Ministry.

Ministry.

Ministry.


98,344.77 Supporting documents to support the balances were not provided by the 14,688.65 Reconciliation for the Month of December was not made available for audit purposes.

Hence audit could not fully substantiate the correctness of the balance.

14,416.70 Supporting documents to support the balances were not provided by the 772,483.47 AR opening balance of $726,571.29 cannot be explained with the listing of debtors while the movements in the balances were ascertained.
Total $13,605,266.17 Whole of Government Financial Statements and Annual Appropriation Statement Page 59 REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC OF FIJI – SEPTEMBER 2015 _______________ Appendix 6: Accountable Advances Owed to Ministry / Department Ministry/ Department President's Office Balance for 2014 ($) 746,326 of % total Owing 53% Balance for 2013 of % Total Owing ($) 146,818 12% Strategic Planning Office 340,316 24% 139,963 12% Department of Housing Fiji Force Police 179,721 13% 163,694 13% 78,131 6% 697,909 57% Fisheries Forest & 58,641 4% 66,717 6% Total 1,403,136 100% 1,215,102.
100% Explanation for Outstanding Balances reconcile and Travel expenditures incurred by the Office was not reconciled and journalized to the travel expenditure allocations during the year and the Office has failed to maintain proper journalize record, advances to the relevant expenditure allocations.

The account balance is made up of the outstanding accountable advance issued to the officers for official travel as well as some purchases of goods and services.
Majority of these advances were issued to officers in relation to the Green growth framework assignment in 2014 which was not initially budgeted for in the approved 2014 budget of the Ministry, however being funded by the Asian Development Bank on a reimbursable basis.
The Strategic Planning Office did not maintain an Accountable Advance register nor did the Office clear the accountable advance on to appropriate expenditure accounts after seven days of completing travel through the submission of an acquittal report.

Accountable advance not Reconciliation not provided.

There was a write off done by MOF which reduced the amount of accountable advance.

However these outstanding advance yet to be retired.
The reconciliation for this account was only maintained from the month of August to December 2014.

From the reconciliation made available, it can be confirmed that these balances are outstanding advances yet to be cleared/retired.

retired at year end.

time Whole of Government Financial Statements and Annual Appropriation Statement Page 60